INNOVATION GOT a bad name in the dotcom years, being more about finding new ways of parting unwary investors from their money than customers. Since then it has taken a back seat as companies hunkered down to cost-cutting and efficiency drives. Now, according to an article in the November issue of Harvard Business Review , in the constant seesaw of fashion it has moved back to the top of the corporate agenda, with the same companies seeking to rediscover the forgotten secrets of growth.
But what kind of innovation? It would be nice to think that this time around, taking on board the lessons of the past, companies would focus on real needs, not least the urgent ones that they themselves have created in previous waves of capitalism: the greatly compromised health of the planet, the welfare of those at the bottom of the pyramid, and the desire of the better-off for personal rather than mass-produced goods and service and for relationships based on trust and honesty rather than rip-off.
Some hope. In another recent issue of HBR , the lead article proudly showcases the new-found ability to print pictures, jokes and trivia questions on crisps -that's right, crisps - as a triumph of worldwide innovation. Another business magazine shows how a credit-card company has harnessed new profiling techniques to sell cards to those who can least afford loans, boosting its profits through late payment fees.
A different reaction is for companies to persuade themselves that they are innovating by doing complex financial deals. Last week's extraordinary frenzy, in which a record $75bn was committed to takeovers in a single day, is a new high (or low) point in that respect. This year's transaction totals are likely to overtake the $3.4 trillion and $3.3 trillion notched up in 2000 and 1999 respectively. Driving them, commentators agree, are globalisation, a commodities boom, the availability of vast amounts of cheap capital and the incentivised zeal of investment bankers to keep the flow of deals going. Nothing here about customers, you notice, for whom most such deals are of stupendous irrelevance, simply creating an even wider gap and even more impersonal relationship between them and the ultimate management.
In some cases this will come to look like fiddling while Rome burns. Particularly where the internet puts power in their hands, customers are taking over the innovation process, bodily reshap ing industries that are resisting what they want. Take the so-called Web 2.0 phenomenon. It's not established companies that have pioneered the key businesses of the second-generation internet but geeks and customers who scorn the commercial offerings pushed at them by industry leaders and instead create new ones to meet quite different demands of interchange and self-expression.
The model was the music industry, at first dismantled by consumers using peer-to-peer networks to get what they wanted rather than what the music companies wanted to give them, and then put together again in a different form by a quick-witted computer company, Apple, using the smart integration and cute design of the iPod and iTunes software. Now customers are moving on to pick apart other industries that have failed to respond to their changing needs.
The media, for instance. Take the rise of the bloggers. This is no simple accident of technology, but the price newspapers are paying for having treated readers as passive consumers without bothering to find out more about them as news users. In the same way, artificial TV reality shows are being challenged by the mushrooming growth of permanent reality spaces like YouTube, MySpace, Etribes and others, and 3D virtual-reality sites such as Second Life.
No one knows where these trends will end. Of course, traditional media companies are pitching in to buy up anything with Web 2.0 pretensions, however remote. But as the AOL-Time Life debacle graphically showed, there is no necessary synergy between old and new media, and unless attitudes to customers change radically, they may find that the benefits of innovation are not easily bought.
The irony is that opportunities to make things better for customers are all around. In yet another recent HBR article, the owner of a noted restaurant explained that it had built its high reputation by carefully managing mood as well as food. 'We have to assess and understand how our customers are feeling right now & and then do whatever it takes to make them feel better'& not by hovering over the wine or asking how the food was at each taste but adjusting service - speeding up, slowing down, being conversational or leaving well alone - according to the mood of the table. The aim is that each table should score no less than nine out of 10 for mood, and as staff work discreetly to push the score up, 'they develop a wonderful confidence in their ability to handle difficult situations as a team'.
Not rocket science - but real innovation nonetheless.
The Observer, 26 November 2006