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Types of Creativity and Innovations

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Types of Creativity and Innovations

    ENT 440/540 2009 03:

    MANAGEMENT OF CREATIVITY AND INNOVATION

    Ozzie Mascarenhas SJ, PhD

    February 24, 2009

    Most executives and management leaders now look to innovation as a principle source of differentiation and competitive advantage (Brown 2008). Innovations in general provide unique and meaningful benefits to products and services. Creativity or innovation is defined in terms of meaningful novelty of some

    output (e.g., a painting, a chemical compound) relative to conventional practice in the domain to which it belongs (e.g., abstract art, adhesives). Thus, a creative product is that which differentiates, that is, evokes a meaningful difference from other competing products in the product category. A creative marketing program (e.g., advertising) represents a meaningful difference from marketing practices (e.g., media advertising) in a given product category.

Innovation does not always mean a new technology; for instance, it can imply market innovation.

    Market Innovation is one’s ability to meet changing market conditions by using innovation to drive the

    market intangibles (e.g., a new niche, market void, new fad, new need) become your weapon to conquer the market chaos, find your niche and succeed (Morris 2001). This is what Wal-Mart did in outrunning K-Mart, and what Michael Dell did in becoming number one in PCs, outpacing IBM, Apple, HP, Compaq and Gateway. Most of their innovations did not imply radical new technologies: they excelled in inventory management, distribution, logistics, customization and service.

Waves of Innovations

Kanter (2006) distinguishes four waves of innovation in recent decades.

    1. The dawn of the global information age in the early 1970s and early 1980s. This era opened new

    industries (e.g., polyester, software, electronic hardware, and telecommunications) and toppled

    old ones (e.g., iron, steel, rubber, paper), generated new products (e.g., microwave ovens,

    polyester products, synthetic fibers, videotapes, videogames, VCRs) and obsolesced old products

    (e.g., carbon paper, electric typewriters, long-playing records). Silicon Valley became the new

    base for product innovation in the USA. Total quality management (TQM) became a passion.

    2. The dawn of buyouts, mergers, acquisitions, corporate restructuring, and strategic alliances.

    Seeking to unlock the value of underutilized assets, “shareholder value” became a rallying cry. In

    Europe, restructuring was associated with the privatization of state-owned enterprises now

    exposed to the pressure of capital markets. The major innovation product of this era was software

    and other major IT products related to process innovation (e.g., airline reservations, travel

    package reservations). Financial innovations such as derivatives and other forms of financial

    engineering, financial supermarkets combining banks, leveraged buyouts, and some global

    products (e.g., Sensor Excel of Gillette, Microsoft software) emerged.

    3. The digital mania of the 1990s. The proliferation of PCs and global wired networks made

    Internet, extranet, intranet, and WWW ventures flourish. The promise (or threat) of the world

    wide web (WWW) and the Internet forced established brick-and-mortar companies to seek

    Internet marketing and other stand-alone Web ventures. Eyes were on the capital markets rather

    than on customers, and companies (especially, the dotcoms) got instantly rich without patented

    products, profits and revenues. AOL Warner was a venture that destroyed value for its customers

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    rather than create innovation. Some e-companies emerged successfully such as eBay,

    Amazon.com and MSN.com.

    4. The current wave of innovation started with a more sober mood with the dotcom collapse and

    belt-tightening of the global recession. Having recognized the limits of acquisitions and mergers

    and become skeptical about technology hype, companies refocused on organic growth. Survivor

    giants such as GE and IBM have adopted innovation as a corporate theme. Customers and

    consumers have returned to center stage with the emergence of videogames (e.g., Sony’s Play

    stations 1 & 2), DVDs, cell phones, organizers, Blackberry, and other palm-held devices.

    Signature innovations of this era include Apple’s iPod and P&G’s Swifter.

    Each wave brought new concepts. For example, the rise of biotechnology, bioinformatics, and biogenetics has revolutionized healthcare and medicine. IT and Internet has made outsourcing easy and profitable. Globalization of factor markets (money, capital, money, labor, technology) has globalized innovations, joint ventures and strategic alliances. Geopolitical events (e.g., 9/11, terrorism, Afghanistan, Iraq, Taliban, and regime-changes) have spawned safety and security products.

Emerging Technologies and Emerging Innovations

    [See “Ten Emerging Technologies,” Technology Review, 108: 5, (May 2005), pp. 53-53].

    New technologies are emerging that could transform the Internet, computing, medicine, energy and more. Some of these are:

    1) Airborne Networks: An Internet in the sky could let planes fly safely without ground controls or

    controllers. Air traffic control technology has not changed very much in the last 50 years. The

    system is based on elaborate ground based radar systems, thousands of people watching blips on

    screens and who issue verbal instructions for landings, takeoffs, and course changes. The system is

    expensive, hard to scale up, and prone to delays when storms strike. Airborne networks offer an

    entirely different approach. Each plane in the sky could continually transmit its identity, precise

    location, speed and direction-destiny to other planes in the neighborhood sky via an airborne

    network. A software would then take over, coordinating the system by issuing instructions to pilots

    on how to stay separated, optimize routes, avoid bad weather, and execute precise landings despite

    poor visibility. Short-term benefits for consumers: saving time, reduce consumption fuel, and hence

    reduce prices. Long-term benefits: you could fit more planes in the sky, reduce landing or takeoff

    delays, additional safety, security and privacy, and avoid accidents. Currently, the US Air Force,

    NASA and the Pentagon are working on defining the architecture of an airborne network and hope

    to launch this project between 2008 and 2012

    .

    2) Quantum Wires: Power transmission wires spun from carbon nanotubes could carry electricity

    farther and more efficiently. Richard Smalley, a Rice University chemist, has embarked on a four-

    year project to create a prototype of a nanotube based “quantum wire”, a clear plastic tube that can

    hold thin, dark grey fibers comprising billions of carbon nanotubes. Cables made from quantum

    wires should conduct much better than copper. The lighter weight and higher strength of the wires

    would also allow existing towers to carry fatter cables with ten times more capacity than the existing,

    heavy and inefficient steel-reinforced aluminum cables used in today’s aging power-grids. Quantum

    wires would have less electrical resistance and would not dissipate electricity as heat. Smalley feels

    that quantum wires could perform even better than superconductors that need expensive cooling

    equipment. In fact, Jianping Lu, a physicist at the University of North Carolina at Chapel Hill has

    found that electrons could travel down a wire of perfectly aligned, overlapping carbon nanotubes

    with almost no loss of energy.

    3) Silicon Photonics: Optoelectronics making the material of computer chips emit light could speed data

    flow. The Internet lives on beams of light. One hair-thin glass fiber can carry as much data as

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    thousands of copper wires. However, inside the computer, copper still rules, and we have reached the physical ability of copper to carry more information. Hence, switching to fiber optics would be necessary. Getting silicon to emit light could be the solution. A light signal’s frequency is much than

    that of an electrical signal, and so it can carry information thousands of times as much and faster. Light overcomes another major problem: as transistors get closed together, the electrical signals passing through them start to interfere with each other, like radio stations broadcasting at the same frequency. Nevertheless, currently turning silicon into a light emitter is very difficult: there is an energy-level mismatch between silicon’s electrons and its positively charged “holes” (electron vacancies in its crystal structure). When an electron meets a hole, it is more likely to release its excess energy as vibration than as light. However, fall 2004, a team of scientists at UCLA, became the first to make a laser out of silicon. In February, Intel scientists reported a silicon laser that emitted a continuous beam instead of a pulsed one, a necessity for data communications. Intel has also created a silicon modulator, which allows them to encode data onto a light beam by making it stronger or weaker. Silicon photonics can be soon cost-effective in doubling computer speeds, possibly within five years.

    4) Metabolomics: A new medical diagnostic could spot diseases earlier and more easily. In their quest for developing more accurate and less invasive diagnostic tests, medical researchers are turning to metabolomics, the analysis of the thousands of small molecules such as of sugar or fat that are the products of metabolism. If metabolomic information can be translated into diagnostic tests, it could provide more accurate, faster and earlier diagnoses of most diseases, such as autism, ALS (amyotrophic lateral sclerosis or Lou Gehrig’s disease), Alzheimer’s disease, bipolar disorder, Huntington’s disease and cancer. Metabolomics is an off-shoot of recent advances in genomics and

    proteomics, which have allowed researchers to begin to identify many of the genes and proteins involved in diseases. Computers and software can enable doctors and researchers to study metabolites in the same systematic fashion as genomic research so as to get a complete picture of the body’s processes. Metabolites are best disease-markers, as well as give a comprehensive picture of

    complex changes underway in hundreds of molecules as a disease begins to develop.

    5) Universal Memory: Nanotubes make possible ultradense data storage. A circular wafer of silicon, about the size of a compact disc, sealed in an acrylic container, can store 10 billion bits of digital information. Each bit is encoded not by an electric charge on a circuit element, as in conventional electronic memory, nor by the direction of a magnetic field, as in hard drives, but by the physical orientation of nanoscale structures. This technology could eventually allow vastly greater amounts of data to be stored on computers and mobile devices. No existing memory technologies can prove adequate in the long run. Static and dynamic random-access memory (RAM), used in laptops and PCs, are fast but require too much space and power. Flash memory is dense but nonvolatile it does

    not need power to hold data, but is too slow for computers. Universal memory seeks to combine the advantages of both technologies. For this, we need a memory holding device whose cells are made of carbon nanotubes, each less than one-ten-thousandth the width of a human hair and suspended a few nanometers above an electrode. This default position, with no electric current flow between the nanotubes and the electrode, represents a digital 0. When a small voltage is applied to the cell, the nanotubes sag in the middle, touch the electrode, and complete a circuit storing a digital 1. The

    technology can be refined where each nanotube encodes one bit, thus storing trillions of bits per square centimeter, thousands of times denser than flash memory. A typical DVD holds less than 50 billion bits total, and flash memory about 15-25 gigabits. If developed, the universal memory could outdate both DVDs and flash memory as storage devices. Nantero (partnering with Milpitas, CA-based LSI Logic) is experimenting on the universal memory by integrating its nanotube memory with silicon circuitry. Currently, its prototypes store only about 100 million bits per square centimeter. Suspending nanotubes is not the only way to build a universal memory. Other strategies include magnetic random access that Motorola and IBM are pursing, molecular memory where HP is the leader.

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The Business Model: Innovation and Profitability

    Another factor that characterizes the competitive position of a product innovation is its cost: the lower the cost, the greater the potential for profits, either by setting higher margins or by penetrating the market with a lower price (Porter 1980).

Hence, a product is new in that:

     Its cost is lower (production efficiency opt better economies of scale),

     Its attributes are improved (product efficiency or differentiation), or

     It has now new attributes it never had before (product reengineering),

     The entire product/service is new (product invention/innovation efficiency), or

     It never existed in that market before (marketing efficiency; e.g., exports, imports).

    Lower costs for a given price mean more profits. Improved or new attributes command a price premium for a given cost and hence, also mean higher profits, all else being equal. That is,

    Profits = Revenues Cost = P(z, q).q(z) C(z, q) (1).

    Revenues are the function of the price the firm can charge for a product or service, and the quantity (q) it can sell at that price. Both price (P) and cost (C) of a product are a function of product attributes (z) and the quantity (q) being sold. Thus, firms would like to offer products with superior attributes for which they can charge higher prices while keeping costs low and competitors out. How does this happen? The answer is innovation.

    Figure 3.1 is a model of profit-innovation chain. The firms reaps profits from products and services that are produced at lower costs than the competitors, or by differentiating them from the competing brands such that they can be sold at premium prices that more than compensate for the cost of differentiation.

Low cost production and cost-efficient differentiation come about because of competences and

    endowments.

    ; Competences are skills that underlie low cost production and cost-efficient differentiation. These

    abilities could be anything from designing high-performance engines to finding attractive markets

    and locating the right product in the right positions in the markets.

    ; Endowments are non-skill attributes such as brand names, patents, reputation, geographic location,

    client relations, and distribution channels all that allow a firm to leverage its competences and

    get more out of them.

For example, Intel’s competences were in manufacturing integrated-circuit designs and semiconductors

    that enabled it to invent the microprocessor. This ability in turn rested on Intel’s knowledge of semiconductor device physics, logic, circuit design, and semiconductor process technology. In the process of invention and commercialization of the microprocessor, Intel accumulated endowments such as

    patents, brand names, copyrights, reputation, and a huge installed base of (IBM and IBM-compatible) PCs that used its microprocessors.

    Intel not only innovated but also quickly protected its intellectual properties by patents. It brought next-generation products faster to the market than imitators while making sure they were compatible with previous generations. For a long while, Intel could ward off competitors such as NEC and AMD.

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    As indicated in Figure 3.1, competences and endowments reinforce each other to generate profitability. However, both are a function of the company’s technological, market and competitor knowledge, as also

    of corporate internal environment of resources, structures, people systems, strategies and chance.

    For instance, Intel’s early corporate strategy of licensing the use of its microprocessor to IBM played a role in IBM’s choice of Intel’s microprocessors for its PCs, a practice that other computer manufacturers

    soon followed, thus enabling Intel to develop its extensive distribution channel base. At the same time, Intel did not license the microprocessor design to other firms until its architecture emerged as the standard for PC microprocessors. It even sued NEC and AMD for violating its copyrights in this regard.

Thus, (see Freeman, C. The Economics of Industrial Innovation, MIT Press 1982):

Innovation = invention + commercialization

    Generating and adopting new ideas, new technological knowledge, designing new prototypes for new or improved attributes, … is the invention part of innovation; new market knowledge for championing

    the new product, communicating effectively to markets, packaging it attractive to customers, … is the

    commercialization part of innovation.

Note that Figure 3.1 does not incorporate the contingent environment (political, economic, legal,

    market, social and cultural) that enhances or constrains, moderates or controls any innovation process, innovation- commercialization, innovation-diffusion, or innovation-marketing strategy. For example, environmental turbulence marked by relatively underdeveloped and unstable government (e.g.,

    transitional economies as China and India), legal (e.g., lack of protection for patents and property rights, contracts and agreements), and financial institutions (e.g., forced local borrowing, high interest rates, lack of bridge financing) in the Third World countries can hamper the very process of invention and innovation (Li and Atuahene-Gima 2001). Dysfunctional competition defined as opportunistic, unfair, disruptive, or even unlawful competitive behavior is another major source of environmental turbulence. On the other hand, availability of venture capital, government sponsored bridge-financing for innovations, soft loans, tax-havens, strong industrial and economic infrastructure, strong market attractiveness characterized by expanding markets and buying power, and the like can stimulate, accelerate and diffuse new product innovations (Chandler and Hanks 1994; McDougall et al. 1994; McKee et al. 1989).

The Design Incubation Factory

    Innovation is also a numbers game. Out of 100 innovative ideas, only 15 may be worth prototyping and testing. Out of these 15, only five may be worth serious investment. Out of these five, one or two may produce game-changing or market-breakthrough results. That amounts to just about two percent success. Hence, in general, we need a large pool or “collection box” of innovations or a design incubation factory. Some companies (e.g., Royal Dutch Shell, W. L. Gore, Whirlpool) are pushing their employees to spend up to 10% of their time, or one day every two weeks, on the development of new ideas. Capital One, the credit card company, prototypes over 200 new products a year, but it is successful with at least ten percent of them (Neumeier 2009: 124).

    Leaders must lead. Managers must manage. Both do, but this does not mean, however, that creative and innovative ideas have to come from the top. Good leaders and managers know how to generate new ideas from the ranks and files. They enable and empower their employees to think big, to think far into the future, to redesign the company, and to reinvent and innovate the company. Richard Teerlink attributed his remarkable success of turning around Harley-Davidson to just this: “You get power by

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    releasing power.” Sheryl Sandberg asked her people to give frank feedback on whatever they see is or is not working. She learnt this lesson early at Google before moving into the company’s Facebook unit as its COO: “I thank every person who ever raised a problem publicly.” In this sense, a leader becomes a steward of organizational energy.

    Google has a huge innovation surplus and its “design factory” keeps expanding, and hence, it can

    very cannily expand into new areas with a wide array of innovations, all of which fit into the great mosaic of its master business plan. Google has a lofty vision and soul-stirring goal - it asks its employees to help “organize the world’s information and make it universally accessible and useful.” Google uses an “idea management system” that allows employees to email innovative ideas for products, processes, and even businesses to a companywide suggestion box. Once ideas are collected, all employees can comment on them, and rate their chances of success. This type of open organizational brainstorming is an

    inexpensive yet very effective tool to stimulate and build a culture of creativity and innovation. Little wonder, Fortune’s “100 Best Companies to Work For” recently named Google number one.

    Innovation is currently the holy grail of many companies, but too often, we treat it as an end and not a means. Innovation is just a tool, and as with any tool, we can use it effectively and ineffectively. Just having innovations in your company does not give you a competitive advantage. According to Howard Reinersten, each company seems to have a “design factory” in which product concepts are incubating like

    inventory on a company’s books until released to market where they can start earning back the investment (http://tinyurl.com/7jf3j). From this perspective, there may be an innovation surplus or an overstocked inventory of inventions in the U. S. corporations, especially among the Fortune 500 companies. So many thousands of inventions, patents and innovations are lying in the back burner of corporations, mostly held there to prevent the competition from exploiting them. At the same time, it is too risky to have “just in time” inventory of innovations – you need a sufficiently large supply of inventions to transform them to the next level of market-ready innovations.

    Alternately, if you do not have in-house generated innovations, you can buy them from outside sources, as Procter & Gamble does currently. The challenge now is less in generating new inventions and innovations, but identifying which of the available inventions and innovations best support new business opportunities, best challenge our execution abilities, and seeing how those opportunities support our customers as well as corporate goals (Sona 2006). In the feeding frenzy over innovation, the quantity of innovation has ramped up without being matched by an ability to identify the best/most appropriate innovations early, and bring only those to market-readiness. P&G until recently was not a particularly innovative company (they had many very good brands), but they executed better than anyone in the consumer products industry. Now they are ramping up their internal innovation capabilities, which when combined with their proven execution abilities, should make the company very effectively innovative.

    Creativity and innovation, however, are not enough. There is a big difference between being a creative firm and an innovative enterprise: the former generates much ideas; the latter generates much cash (Leavitt 1963). A failing company needs innovations that turn into good markets and good markets that turn into good cash and financial returns this is the innovation-to-cash chain (Andrew and Sirkin

    2003: 78). Creating innovations is not in short supply today, but the executive intelligence to monetize them.

    Often, new products turn out to be cash traps. Bruce Henderson, the founder of the Boston

    Consulting Group, warned managers over three decades ago: “The majority of products in most companies are cash traps. They will absorb more money forever than they will generate.” Most new products (almost 5 to 9 out of ten products) do not generate enough cash or enough financial returns despite massive investments in them. For instance, Apple Computer stopped making the striking G4 Cube less than a year after its launch in July 2000 as the company was losing too much cash on the

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    investment. Proctor & Gamble in 2002 made half of its sales and even a bigger share in profits from just 12 of its new 250-odd products of that year (Andrew and Sirkin 2003: 77).

Sustaining, Low-end Disruptive and

    New Market Disruptive Innovations

    In his Innovator’s Dilemma, Christensen (1997) proposes three types of innovations: sustaining innovations, low-end disruptive innovations and new-market disruptive innovations. Certain innovations disrupt the normal trajectory of life and organizations, and hence they are also called disruptive

    innovations. Disruptive innovations introduce a new value proposition either by creating new markets or reshaping existing markets. (Christensen 1997, 2003).

    ; Sustaining innovations: Most new product and service innovations are sustaining. They

    provide better quality or additional functionality for a firm’s most demanding customers.

    These innovations move companies along established improvement categories. These are

    basically incremental innovations along an established product or brand on dimensions

    historically valued by customers (e.g., by changing brand’s size, speed, shelf-life, color,

    texture, flavor, package, bundle, financing, delivery, after sales service, usage). Typical

    examples are new flavors of ice cream, new family sizes and flavors for toothpaste, rental

    cars with added conveniences, airplanes that fly farther, computers that process faster,

    cellular phone batteries that last longer, and televisions with incrementally clearer images

    and resolutions.

    ; Low-end disruptive innovations: Low-end disruptive innovations occur when existing

    products or services are so transformed that they become “too good” that they can be sold at

    premium prices. Typical automotive examples are GM’s Geoprism and Saturn, Ford’s

    Escort and Focus, Chrysler’s PT Cruiser, and Toyota’s Toyota Corolla. Non-automotive

    examples include Nucor’s steel minimill, Vanguard’s index mutual funds, Dell’s direct-to-

    customer business model, and Wal-Mart’s everyday low price (EDLP) discount store. The

    all began by offering existing customers a low-priced, relatively straightforward product or

    service.

    ; New-market disruptive innovations: Disruptive innovations, by traditional measures, do not

    meet existing customer needs nor do they characterize existing products and services. They

    are typically simpler, more convenient, less expensive, and so they appeal to less demanding

    customers. Typical examples are: Southwest Airlines, personal computers, cellular phones -

    all these are low-cost, no-frill, less sophisticated products that served a large underserved

    market for their affordability, even though limited capabilities. These occur when

    characteristics of existing products limit the number of potential consumers (e.g., Harley-

    Davidson’s and PT Cruiser’s limited editions, Sony’s Walkman radio, Xerox photocopier) or

    force consumption to take place in inconvenient, centralized settings (e.g., Home Depot, Bell

    telephone, eBay online marketplace, Kodak camera). These products create new growth by

    making it easier for people to do something that historically required deep expertise or great

    wealth, and hence invite non-consumers.

    According to the disruptive innovation theory (Christensen and Bower 1995), organizations can use relatively simple, convenient, low-cost innovations to create growth and triumph over powerful competitors. That is established incumbents almost always lose to attackers armed with disruptive innovations.

    Christensen, Anthony and Roth (2004) identify three customer groups that provoke different types of innovations: non-consumers, undershot consumers, and overshot consumers. Each customer groups provides unique opportunities. Table 3.1 provides details. Companies can create new-market disruptive

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innovations to target non-consumers; they can launch up-market sustaining innovations to reach

    undershot consumers, and they can generate low-end disruptive innovations or modular displacements to

    reach overshot customers.

Fostering Catalytic Innovations

    Christensen et al. (2006: 96-97) describe a sub-category of disruptive innovation, called catalytic innovations. Catalytic innovators share five qualities:

    a) They create systemic social change through scaling and replication.

    b) They meet a need that is neither observed (because the existing solution is more complex than

    many people require) nor not served at all.

    c) They offer products and services that are simpler, less costly than existing alternatives, and may

    be perceived as having a lower level of performance, but users consider them to be good enough.

    d) They generate resources, such as donations, grants, volunteer labor, or intellectual capital, in

    ways that are initially unattractive to incumbent competitors.

    e) They are often ignored, disparaged or even encouraged by existing players for whom the business

    model is unprofitable.

    Catalytic innovations take place under all structures, pro-profit and non-pro-profit, private or public, big or small. Examples of catalytic innovations abound.

    Detroit Medical Center (DMC) extends its quality and comprehensive care to the inner city poor by training its nurses to begin offering care that doctors formerly had provided, but at a lower cost.

    Minute-Clinic, MN: Minneapolis-based Minute-Clinic has 87 for-profit clinics located in ten states in CVS stores and other retail locations and provides fast, affordable walk-in diagnosis and treatment for common health problems, as well as vaccinations. Minute-Clinic employs quality nurse practitioners armed with software based protocols and applies strict rules of quality care. Patients that have complaints or problems outside the range of Minute-Clinic (MC) issues are referred to doctors or to a nearby emergency room. Underserved, uninsured and underinsured patients find Minute-Clinic very convenient, adequate and affordable. Recent surveys of MC’s more than 350,000 patients indicate 99% satisfaction. MC was recently acquired by CVS because of its growth and profit possibilities. Other similar healthcare systems are RediClinics, Take Care Health Systems, and Wal-Mart’s in-store health clinics.

    Freelancers Union, NY: FU is a nonprofit labor organization providing low-cost health insurance and other services to independently employed contractors, consultants, pro-temps, and other insurers in the New York area who could not otherwise afford insurance. FU offers comprehensive health group insurance at prices that are 30% to 40% lower than competing large insurance companies that often cater to large corporate clients, and would not serve the poor segments. FU discovered this “blue ocean,” has enlarged its services and numbers to other parts of the state. The catalytic innovation model whereby FU acts as a marketer and broker while partnering with an established insurance carrier, is replicable, and FU is now expanding to pother states.

    Online Schools: For-profit Apex Learning and nonprofit Virtual High School and Florida Virtual School, among others, provide specialized classes (e.g., certain language courses, advanced placement courses that count for college credit) online to thousands of students from public schools in poorer areas that do not or cannot afford to offer these courses. Online learning curricula offer such courses at a fraction of what landline courses would cost. According to the U. S. Department of Education, there were 40,000 to 50,000 secondary school students in 37 states participating in online curricula in 2005 offered by around

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    2,4000 online charter schools and state and district virtual schools. However, students enrolled in online courses experience online learning as technically challenging and which require much higher levels of self-disciple and self-motivation than regular schools. Future catalytic innovations should try to make online education user-friendly and attractively self-motivating.

    Community Colleges: These have dramatically changed the shape of higher education in the U. S. by expanding access to and redefining the goals of higher learning. Community colleges offer a lower-cost alternative to four-year over-priced universities, are more easily and locally accessible and report higher placement rates. Community Colleges now enroll around 44% of all undergraduates in the United States. Most students pursue community college education for the first two years and then move to universities that allow the transfer arrangements.

    Grameen Bank: Conventional banks are typically unwilling to lend to entrepreneurs or people without collateral, and the latter are forced to seek informal loans that could be exorbitantly expensive (with interest rates 300% to 3,000%). Grameen Bank is a microlending or microfinancing organization that makes such loans possible with no collateral and with low interest rates. At the end of 2005, Grameen operated more than 1250 branches, serving over 5.6 million borrowers in nearly 60,000 villages throughout Bangladesh. Since its inception in 1976, the bank has lent more than $5.2 billion with a recovery rate of more than 98%. The bank is owned 93% by its borrowers, 5% by the Bangladeshi government, and 2% by other private Bangladesh banks. The bank has been profitable almost every year since its inception.

    Muhammad Yunus, a professor of economics, founder of Grameen Bank, and Nobel Prize winner for developmental economics in 2006, believes that the poor have skills that remain under-utilized, mainly because existing institutions and policies fail to offer the support these people require. He founded the Grameen Bank in 1976 to supply credit to those who would not qualify as customers of established banks. Grameen Bank grants unsecured loans to the poor in rural Bangladesh. It differs from other lending institutions on three counts. First, priority is given to designing the system so that the loans can be repaid, and on time. Second, only the poorest villagers, the landless, are eligible. Third, the bank makes efforts to lend primarily to women, who are not only economically but also socially impoverished.

    The loan disbursal design is unique. To qualify for a loan, a villager must demonstrate that her family assets are below a certain threshold. She is not required to put up collateral; instead, she must join a five-member group and a forty-member center, and attend a weekly meeting. She must also share responsibility for the loans granted to the other members of her group; it is the group, not the bank, which initially evaluates loan requests. Defaulters would spoil things for everybody, so group members must choose their partners wisely. The Grameen Bank has been profitable from the outset, and has inspired a global micro-credit movement that has spread to 65 developing countries, reaching 17 million borrowers.

    Low Cost Eye glasses.com: Over one billion people need glasses but do not own them. People who have correctable vision problems are often handicapped as a result as the lack of correction. Without glasses, simple tasks become more difficult or impossible, productivity slows, and accidents occur more frequently. Based purely on the lack of productivity and enjoyment, the lack of eyeglasses is one of the largest solvable problems in the developing world. In fact, it is significantly more common than often-cited problems such as cataracts or glaucoma. Glasses could correct the majority of vision problems encountered in the developing world, reducing the impact of presbyopia, myopia, hyperopia, and astigmatism.

    The surprisingly low penetration of glasses on a global basis is a result of the fundamental structure of the eye care industry. The current commercial eye care system is designed for the wealthy of the developed world, and espouses its customers' values. The system is characterized by extreme product diversity,

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    customized product combinations, highly trained specialists, and a fashion focused product design and buying processes. As a result, prescription glasses are unaffordable by the majority of people in the world, and access is severely limited. In most developing nations, there are few optometrists, and those that are present live primarily in capitol cities. Any solution must be: available, low cost, scalable, and wearable.

    To be available, glasses should be easily purchased from a convenient local location. To be low cost, they should cost a few days' wage. In most situations, prices starting at $5 are low cost. Cheap Eye Glasses project does exactly this.

    Operational Innovation

Hammer (2004: 86) speaks of operational innovation. It is the invention and employment of new ways

    of doing work. It is not the same as operational improvement or operational excellence. These terms refer to achieving high performance via existing modes of operation (e.g., reducing errors via total quality management (TQM) or Six Sigma; reducing costs via scale economies. Operational innovation invents entirely new ways of doing normal operations such as filling order, developing products, providing customer service, or doing any other activity that the entire firm performs. Thus, operational innovation is by nature disruptive, so it should be concentrated in those activities with the greatest impact on an enterprise’s strategic goals (Hammer 2004: 88). Operational innovation has been central to some of the

    recent greatest success stories such as Wal-Mart, Toyota, and Dell.

    Wal-Mart pioneered many operational innovations in relation to purchasing and distribution. One of the best known Wal-Mart’s operational innovations is cross-docking from truck to truck, in which goods

    trucked to a distribution center from suppliers are immediately transferred to trucks bound for stores, without ever being placed in storage or warehouses. Cross-docking and supplementing operational innovations led to lower inventory levels, lower operating costs, and every day lower prices (EDLP). Between 1972 and 1992, Wal-Mart grew from $44 million in sales to $44 billion (an annual compound growth of 41.25%), powering past Sears and K-Mart with faster growth, higher profits and lower prices.

    The Dell Business Model (also called the Dell’s Triangle) is another excellent example of operational innovation. With online sales running over $20 million per day, Dell is pioneering many other operational innovations. Customers arrive at the online site, check out possibilities with a product “configurator,” and order their computers. The business model has different levels of services for customers depending upon whether they are business or household, big or small accounts. But all get customized personal service. Dell’s online approach is a powerful and flexible way of handling and retaining customers that create value for all. Dell has also online information policy based on customer importance. Different classes of customers receive different amounts of information. The Dell Triangle reflects the typical inverse relationship between the number and importance of customers in each class and the level of value they bring to all. At the top of the triangle is “all customers class, a broadest

    category and applies to anyone who visits the Dell Website. Successive classes refer to more customer value and importance, and hence, more in depth information sharing, personalization and long-term relationships. Dell’s market dominance in the PC market is phenomenal and lasting. Its operational innovations dominated or dislodged some of the biggest corporations in the PC world (Hammer 2004: 85).

    Other companies have made enormous gains by similar operations innovations. For instance, in the late 1990s, IBM developed a new product development process that resulted in 75% reduction in new product development time cycle and 45% reduction in developmental expenses, and 26% increase in customer satisfaction with the new products. In 2002, Shell Lubricants reinvented its order fulfillment process by replacing a group of people who handled different parts of an order with one individual who does it all. Consequently, Shell reduced cash cycle time by 75%, operating expenses by 45%, and boosted customer

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