Innovation is increasingly considered as an enabler of business competitive advantage. More and more organizations focus on satisfying their consumer’s demand of innovative and qualitative products and services by applying both technology-supported and non technology-supported innovative methods in their supply chain practices. Due to its very characteristic i.e. novelty, innovation is double-edged sword; capturing value from innovative methods in supply chain practices has been one of the important topics among practitioners as well as researchers of the field.
Analytical advice on how to improve company’s service and product innovation. Innovate:
• Better — create breakout products or services, not just “me toos.”
• Faster — reduce cycle times.
• More often and more efficiently.
Most companies try to achieve these urgent and important goals by sharing and adopting best practices in product development; re-engineering their research and development processes; improving cross-functional linkages; stimulating the creativity of their employees, and creating an innovative culture. And these efforts often yield large, measurable improvements.
Yet, consistently successful companies in the most innovation-intensive industries — those in which product life cycles are short and the need for breakout products is high — have pioneered a radically different approach to innovation. By thinking “outside the box,” these innovators
recognized that they couldn’t rely solely on internal sources of innovation.
Their new approach — unbundling innovation by leveraging the talents of superstars who are not employees — enables “breakout” in two ways: dramatically improving the likelihood of blockbuster products, and changing the rules of the game by restructuring the industry value chain.
We believe that this alternative innovation strategy is so powerful and will become so pervasive that all companies should ask: Is this alternative strategy likely to be advantageous enough that we should pioneer its introduction in our industry? Are competitors adopting this strategy and trying to change the rules of the game? Even if the entire strategy is not appropriate, should some of its elements be combined with a more conventional approach to innovation?
To unlock the hidden potential of any global logistics industry you need collaboration, innovation, and performance to gain insights into the current supply chain management approach. This dynamic capabilities can be achieved through Container Xchange.
KEY LESSONS FROM THE ENTERTAINMENT INDUSTRIES WHICH CAN BE APPLIED IN LOGISTICS INDUSTRY.
The industries with the shortest value life cycles and the greatest dependence on blockbuster value provide a unique window into the future of innovation. In our experience. the entertainment industries (e.g., sports, movies, television, radio, publishing and music) are the most demanding of innovation.
As Chris Rock quipped on an MTV Music Video awards show: “It used to be that music was here today and gone tomorrow. Now it’s here today and gone today.”
Despite some important differences in logistics industry, most industries share five characteristics:
• Success in the industry depends on a handful of blockbuster sustainable value (and brands), not only to gain market share but also to increase the size of the market. For example, in 1977 worldwide sales of video games were only about $400 million. The first blockbuster, the Super Mario Brothers characters, has alone generated more than $5.8 billion of revenue.
• The industries believe that only a small number of talented superstars create blockbuster products, although many people can produce pretty good products.
• Individual superstars move from company to company (or team to team) — sometimes on a project-by project basis (e.g., movies, books), more often after the expiration of a multi-year contract.
• Each of the superstar talents — whether entertainers, athletes, authors or even coaches — becomes a brand recognized by the industries’ customers.
• Since creation of a truly breakout product is always uncertain — however, great the past success of the superstar talent — contracts between talented individuals and companies increasingly involve risk-sharing. For example, although Stephen King originally asked for a $17 million advance for “Bag of Bones,” he ultimately received a $2 million advance plus 50 percent of the profits.
The value created and captured by a superstar increases with scope, i.e., with the number of people who benefit from his or her talent. For example, Michael Jordan’s $78.3 million of compensation in 1997 ($31.3 million from the Bulls and $47 million from endorsements) was nearly 100 times Babe Ruth’s 1930 compensation (about $800,000 in 1997 dollars). Michael Jordan benefited from much greater scope: The 160 million people who watched him during the 1998 National Basketball Association playoffs exceeded the number who saw Babe Ruth throughout his entire career.
The implications of superstar economics are profound. First, the best talent generally wins, like Lionel Messi, Michael Jordan’s Bulls and Babe Ruth’s Yankees. Second, when bidding for the services of free agent superstars, a company earns superior profitability only if it can leverage a superstar to create value better than its competitors can — generally by increasing the superstar’s scope more than competitors do.
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Hence, in the most intensely competitive, product-driven industries, the value chain is restructured into superstar individuals and small teams who compete on the basis of creating products, and large firms that compete on the basis of increasing the scope of breakout products (i.e., of commercializing and marketing).
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