How to practise innovation in an evolving market

Michael Page, in conjunction with PricewaterhouseCoopers (PwC) China, recently conducted a seminar on enterprise innovation. At the seminar, Mr. Ken Luo, Senior Manager of PwC’s Consulting Practice for Innovation, shared the latest trends and ideas on the hot global topic.

In the current internet age, corporate enterprises are constantly presented with new challenges. In China, innovation has become a strategic focus for organisations. According to the 2014 China Innovation Survey, 77% of Chinese enterprises in China and 72% of foreign enterprises in China regard innovation as the first or one of the first three important strategic issues. The widespread use of social media such as WeChat, the successful debut of Uber (a popular transportation app), and the recent investment from Apple, Google and other technology companies in the development and research of new products have brought tremendous changes to the business and marketing models.

Traditional companies have started to strengthen communication and interaction with users in this internet age. However, most domestic enterprises are currently still at the early stages of innovation. PwC’s research shows that domestic enterprises are still accustomed to learn from their foreign counterparts. Copycat brands are prevalent in the domestic market, hence posing a challenge for domestic enterprises to be innovative. Even for leading domestic enterprises, implementing innovation is not always smooth sailing. As Lei Jun, CEO of Xiaomi Technology said, “Innovation is a word we all particularly like to use. However, over 90% of innovation will fail…”

Insufficient product management and user insights are two main factors affecting the performance of domestic enterprises. Enterprises must realise that the current relationship between enterprises and users has undergone a qualitative change. Looking back at how relationships have evolved:

How enterprises think, execute their mode of interaction with users, their development of products and services, and even how they market to their audience have all changed significantly. To adapt to market demand, enterprises have begun to realise that a user is not only an individual who exists, but is also a part of social culture and social networks. With this, enterprises invite users to develop a personalised experience together with them, and allow users to participate in a variety of product planning, development and marketing activities. At the same time, enterprises have active interaction and dialogue with users to create word of mouth.

Compared with the enterprise concept of regarding a user as a passive recipient, the business philosophy of regarding a user as an active participant complies more with today’s trend. Creating user insight and the ability to work together with users to create are the basis for future innovation of domestic enterprises.

Joint market research findings from PwC and the US-based Journal of Marketing Management showed that there is a high level of correlation between business performance of enterprises and user insights. Enterprises with sound performance have a relatively high degree of excellence in market insight and they will frequently adopt systematic methods to implement user insight. For most domestic enterprises which are used to following, it is not easy to acquire user insights and produce innovative products. The challenges of domestic enterprises face when working toward insights and innovation include:

The reasons leading to many of the above include failing to manage user surveys as a formal project (hence leading to arbitrariness); a lack of systematic methods and processes to guide the product team’s user survey work; an engineer type of inertia thinking; and/or a lack of professional training and guidance for product teams.

To gain user insight and the ability to innovate, enterprises should firstly understand what the users’ needs are. At the same time, a systematic approach should be adopted and relevant support systems and mechanisms should be established accordingly. Therefore, companies should:

Customers in the internet age are not satisfied with being merely product buyers. Changes in user needs pose new challenges for enterprises. PwC’s survey results show that more than 90% of business executives want to allow users to participate in groups and more than 50% of Fortune 500 enterprises regard this grouping process as an integral part of innovation strategy. In addition, enterprises should be good at learning from the world’s leading practices, and formulate detailed tools, methodologies, and guidelines to guide staff to obtain user insight and innovation. This may be achieved through the design and establishment of a variety of interactive platforms and systems, and learning from the practical examples of leading enterprises in product conceptualisation and planning, marketing and sales, customer service, user exploration, user evaluation and purchasing experience. Relevant teams, processes and governance models, as well as an employee learning and exchange mechanism, should be established concurrently for joint enhancement, to enable enterprise innovation.

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