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To innovate, managers must personalize each product
C.K. PRAHALAD
New principles: C.K.
Prahalad, professor at the Ross School of Business,
University of Michigan.
Companies can no longer bank on episodic breakthroughs but
will have to constantly interact with customers and create
total experience
Seema Singh
Bangalore: C.K. Prahalad,
professor at the Ross School of Business at the University
of Michigan, is known for his creative, radical ideas on
corporate strategy and business transformation.
From the classic Competing for the Future in 1994, to the
groundbreaking Fortune at the Bottom of the Pyramid in 2004,
to the New Age of Innovation in 2008, Prahalad has impacted
the way many chief executives think and act. In his latest
book, co-author M.S. Krishnan, professor of business
information technology from the same school, and Prahalad
argue that the two new pillars of strength in an
organization are the value it creates for individual
customers, and the resources it garners from a global
network.
In Bangalore for a seminar on innovation, Prahalad spoke to
Mint, saying that, increasingly, he’s finding more examples
of business innovation in India. Edited excerpts:
Innovation is an overused word today. How is your idea of
business innovation different from others?
We are not talking about the usual reduction of cycle time,
costs...We say that technology will not be a differentiator
between rich and poor consumers; personalized experience
will be. Companies can no longer bank on episodic
breakthroughs but will have to constantly interact with
customers and create total experience. And, since no company
can create the total experience alone, it’ll have to access
resources from a global network. Our view of innovation is
philosophically different from others as we operationalize
it, we tell how to do it inside a company.
You’ve been talking of companies that already follow the new
principles of innovation. Which companies or industries do
you think ought to co-create but are not doing so?
All companies ought to do it; there’s no getting away from
it. I cannot name those who are not doing it, but as for the
industry, I think financial services ought to do this most.
By definition, financial services should be N=1 (one
experience at a time) and, at the same time, if you want to
provide credit and asset products, liabilities and balance
sheet management of the individual, you need to source
products from a wide variety of sources (R=G, resources it
garners from a global network). Most of them are not doing
so yet; they are trying to have the same standard products.
But I think they are moving towards that; it’s true of ICICI
Bank Ltd and ING. But, sooner than later, all industries
will get here. Examples from India show that it happens
among the rich and the poor. It cuts across the entire
pyramid.
Give an example that you haven’t included in the book.
Jaipur Rugs Co. (Pvt. Ltd). It produces carpets one at a
time and resources come from all over—wool comes from China,
Mongolia, Australia and New Zealand, and is blended with
Rajasthani wool. Some 40,000 weavers and spinners, all
underprivileged women from the villages of Rajasthan, are
involved in this.
You talk of shifting from a product-centric view of
innovation to process-enabled personalized experience. But,
the former is done by a limited group of people where
financial resources needed are less; processes are difficult
to innovate. That’s why small and medium enterprises use
standard processes. How do you justify the cost?
It’s just the opposite. Google lets you make your own page;
how much does it cost you? Amazon does something similar but
books cost less there. If you do not do personalized
co-creation of experiences, if you do not try to get the
same efficiencies then it’s not going to work. If ITC Ltd’s
e-Choupal can do it with farmers and attempt to make money,
that means it can be very low cost. So, the assumption that
personalization increases cost is exactly like the
assumption you have that if you approach quality it’ll
increase cost. But, we know that quality reduces cost.
Two years ago, you conducted a research “boot camp” here
where you looked for generalizable principles in Indian
industry that could be transferred to other businesses. Have
you found some?
Yes, a lot of them—like how to reduce dramatically capital
intensity, how to adapt and synthesize new technologies, how
to use advance science, like brain studies and human
cognition.
You often say Indian companies innovate but don’t realize
their own innovation. Any example?
There are several. For instance, the human resource
practices of the information technology industry,
particularly in Infosys, TCS (Tata Consultancy Services Ltd)
and Wipro, involve innovations in recruitment, training,
intercultural competencies, expatriate management, et al.
They do it somewhat differently, but they all do it. They
have scaled up four-five times in as many years but their HR
personnel have not increased in the same proportion. It’s
not easy to process 1.5 million applications.
Seeds for this book were sown when you wrote ‘The Future of
Competition’. Has any big idea generated from the present
book?
I don’t know yet. I do know that three-four years from now
I’ll have something new. It takes a long time to find a big
opportunity; it takes about six months before you start
formulating an idea. So, next time you see me, I’ll probably
know.
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