Chapter 5 Video Case: Where They’re Doing Something New
While many companies say they seek innovation, not all of them truly commit to it. For those who do, innovation can bring big rewards and growth, even in tough economic times. Innovative firms continually invest in research and development, value creative employees, fund many diverse projects, and take risks.
Innovation requires support and planning from the CEO on down through the organization. Companies must decide to cause change, says Seth Godin, a Web entrepreneur and business author who has marketed books through unusual methods, such as offering a complete book free online. Successful companies, he says, change the usual ways of doing business and end up changing entire industries.
Apple Computers is a prime example. A series of new products propelled Apple to the top of BusinessWeek’s list of 25 most innovative companies for several consecutive years. An industry-changing product has been the iPhone, which boosted Apple’s revenues almost 50 percent and reached number three in the global smartphone market after only 10 months on sale.
Nintendo’s Wii shows how an innovative product can help a company reach an entirely new market. With a controller redesigned so it can be aimed at the screen like a gun or swung like a golf club, Wii attracted players beyond the core market of young gamers. New customers included people of all ages who typically don’t play more than a few hours a week or spend $50 for a new game. Nintendo also shifted its strategy by collaborating with outside game developers to launch its WiiWare Channel for downloadable games in the United States. For the first time, the channel offers downloads of new games by independent companies as well as arcade classics. Both Nintento and the independent game creators gain from this low-cost development system. Startup costs for developers are low; they must buy the machine needed to program games from Nintendo but have no costs of disc production, packaging, or distribution. Nintendo gets an expanded games list for Wii users. “WiiWare is designed so a big idea can succeed without a big budget” says Tom Prata, senior director of project development at Nintendo of America.
Other companies recognized for innovation include Google, which increased research and development spending 72 percent in one year and started offering online office software; Toyota Motor, at work on a more fuel-efficient Prius and a plug-in gas and electric car; General Electric, which is investing heavily in green projects; Microsoft, which launched Surface, a touch-screen computer; and Tata Group, the India-based manufacturer of the world’s cheapest car, costing $2,500 and distributed in kits.
Questions
- What strategy do innovative companies use when responding to uncertainty in the environment? What is the cost of following this strategy?
- Why should a company wanting to innovate express that goal in a vision statement?
3. With Nintendo’s Wii gaming system as an example, briefly describe the three types of planning required to launch an innovative new product.
Source: Jena McGregor, “Most Innovative Companies: Smart Ideas for Tough Times,” BusinessWeek, April 28, 2008, pp. 61-66, and Kenji Hall, “Opening the Wii to Wee Game Developers,” BusinessWeek, April 28, 2008, p. 70.