Growth through innovation through Estin & Co

1. A big break

Innovation supports six types of breakthroughs.

―――― Pure invention, Create new features or combine old features in your own way to create new products or services: Smartphones (Apple). Social network (Facebook); Search engine (Google).

―――― Technological progress (Transposition of new technology or technology developed in another field) Rather than modifying existing functionality, it radically changes its scope, efficiency, or cost: a car with an electric motor (Tesla). A messenger RNA technology developed for cancer and used as a vaccine against Covid-19 (Pfizer / BioNtech and Moderna).

―――― Market subdivisionIt modifies the structure of offers and compromises made to best meet the needs of different types of customers, while increasing costs. Finer or different segmentation, or segment integration: Special distribution of fresh products (GrandFrais) that fits between the frozen food chain and the distribution of early vegetables. Development of low-cost payment methods for independent businesses (squares) with related services (installment financing, booking systems, payroll systems, etc.).

―――― Creating a new market Important for new price positioning to capture new classes of consumers and needs:

> Very expensive: Premium vacuum cleaner (Dyson); iPhone (again);

> Or conversely very low: hypermarkets (Wal-Mart) in the 60’s, 70’s and 80’s. A low-cost model developed in many industries (Ikea, Ryanair, etc.).

―――― Development of new business model : Value chain positioning changes, value chain phase consolidation or disassembly, customer access mode changes (e-commerce with Amazon, online movie distribution, series with Netflix, business model changes: subscriptions and sales ).

―――― Invention of new designIn particular, everyday consumer products (automobiles, appliances, phones, clothing, etc.) that promote functionality and enable strong differentiation and strong identification from brands (Jeep with SUV).1 Since the 1980s).

These six logics can be combined for certain major innovations (such as the iPhone).

Each of the new major innovations creates major changes and opportunities for new innovations. The development of the hypermarket has reduced the proportion of households devoted to food in France from 31% in 1960 to 17% in 2000 in 40 years. An explosive increase in spending on portable media and telecommunications (iPhone) would not have happened.

Teams thinking about the big potential innovations in the industry have a classic question. What are the consequences of recent major innovations in my business environment? Do they create the opportunity to practice it differently?

A company’s innovation strategy needs to be based on exploring these potential breakthroughs, choosing the most compelling ones in the short and medium term, and coherence in the means (technology, positioning, business model). Relationship with this burst.

2. Conditions for success

Beyond the initial design, the success of innovation depends on three simultaneous levers.

―――― Meet high enough market potential It is due to the acceptability or desirability of innovation and the acceptable level of cost to the target customer’s budget. If these two factors are not homeomorphic, innovation will not be able to find its market.

―――― Large-scale and rapid developmentNot only will it reach an economically acceptable scale, but it will also be the basis for structuring in the market before competing copies.

―――― Strong enough and resilient competitive barriers in the short and medium term (Trademarks, patents, know-how, speed of deployment, impact of scale) Protect competitive positions, ensure long-term full development and generate cash flow greater than your investment.

3. Do you want to use or avoid the organization?

Innovation goes far beyond research and development. They cause bursts that change the logic of transactions according to at least three perspectives: market structure, competitive structure, and internal organization of the company.

That’s why they often come from entrepreneurs and new entrants rather than big companies.

For large groups, the biggest obstacle to innovation is often organizational and cultural. An organizational unit always produces results within its scope and business model. This allows the group to outsource innovation to small and agile companies (Pfizer and BioNtech), acquire cross-functional entities that report to the top of the organization, and create separate subsidiaries for new activities. That’s why.

The development and market deployment of key innovations also requires non-consensual, high-risk group-level fund arbitration and resource reallocation (growth priorities, talent, financial resources, etc.).

Finally, the structure of resources deployed between innovation, R & D, sales, brands, and customer access networks must enable rapid and large-scale deployment without bottlenecks or friction. Budget allocation is important. In addition, large groups often separate innovation and R & D on the one hand and systematically deploy with different organizations and management methods on the other.

4. Role of CEO

Great innovation is a big step forward. These can only be initiated by entrepreneurs, or the CEOs of large groups who can question their dynamics, their position in their business and their organization, and want to question.

Innovation model selection (suspension, copy, update), identification of the axis of interruption, and related investment across the company’s comfort zone (six key categories), management modes and corresponding organizations, and innovation deployment in the management market. There are four important success factors.

For large groups in Europe, growth over the last decade has been driven by either innovation or China (and often both).The main area of ​​innovation was mainly digitization2.. What will they do in each profession over the next 10 years? How to predict them or how to create them?

According to President Jean Estin. Estin & Co

About the author: Estin & Co is an international strategic consulting firm based in Paris, London, Zurich, New York and Shanghai. The company supports general management of key groups in Europe, North America and Asia in its growth strategy and supports private equity funds in the analysis and valuation of investments.

footnote :
1 Sport utility vehicle.
2 Includes e-commerce.