Encouraging innovation for growth

LAHORE: Pakistani entrepreneurs lack the insight and will to innovate, which is the key engine for growth in all enterprises around the world, particularly in the SME sector. Their reluctance to innovate has impeded their potential for growth both in domestic and foreign markets.

Innovation is about coming up with solutions to customers’ problems. Imported products fascinate local buyers due to their innovative designs, packing, colour or finish.

Successful firms prefer incremental innovation under which the existing product is regularly improved by adding new features, removing a feature, combining two products into one, separating one product into two, substituting components or materials, reducing component size, embedding the product into another, or adding complementary functions.

Innovations in 21st century through technology have uprooted many sectors like photographic cameras, photographic papers, and films as all these features and many more are available in a handy mobile phone.

We may not be able to innovate through high technology, but our SMEs can improve the designs and features of the products they market that usually lack the finish that consumers find in imported versions.

We observe that when car makers change the model each year, they mostly make changes in design and look of the car, while the basic engine remains the same. Sometimes they also replace the engine with better efficiency through innovative application of technology by their workers.

The SMEs enlarge their markets through these small innovations in design and ease of use. To achieve this, the SMEs should first strengthen themselves by exploring both domestic and foreign markets that are not occupied by other companies.

Pakistan’s narrow export markets reveal that all entrepreneurs small or big are concentrating their efforts in already discovered markets and are competing. The SMEs could find better response for their products from clothing to home appliances in low developed economies.

Pakistan’s textile industry has failed to make its mark in the global textile market because the exporters do not make their own design nor fashion clothing, they simply produce clothing for big chains at a low price.

We do not have popular textile brands for the global market. It is rare that entrepreneurs come out with an efficient technology through research.

The benefits of research are numerous – Nishat for instance introduced dying of fabric through a spray machine. It reduced the use of dye and water and heat. The carbon print was reduced.

The idea attracted the foreign buyers as they support any measure that reduces the carbon footprint. Such examples are few. Startups in Pakistan have just started making their presence felt globally and have attracted finance from abroad for their innovative ideas.

The absence of innovation is the malaise that has plagued the local industries. Most of the entrepreneurs believe that innovation is to make exact replica of a popular product.

Innovators must realise that any innovation must meet customers' needs or wants. Any innovation addressing a stronger need or want desired by many people stands a higher chance of success. However, many innovations that met either a strong want or need still failed. Successful innovations additionally require triggers, specifically, a market shift and the required technology.

Innovators must ensure that both the technology and markets are ready. Companies that want to innovate also need to create a culture of innovation within the organisation.

Local home appliance industry wiped out foreign competition at the start of this century by introducing innovative designs and new features in television sets and refrigerators. However, foreign competitors have now started regaining their market by improving on the features introduced by local manufacturers that failed to continue innovation.

Many companies, particularly those eyeing export markets are adopting certifications such as Six Sigma or ISO 9001 which put in place standard processes for people to follow. These procedures do facilitate companies to achieve operational efficiency. However, these certification systems often end up stifling innovation.

If the core management and staff are required to follow rules all the time, the entrepreneurs should forget that they would create innovations. It is by responsibly breaking some rules that you can think out of the box and innovate.

All companies have to balance between improving operational efficiencies and providing an environment and culture for creating innovations. Companies that find the magic balancing formula will certainly emerge as winners in the innovation game.

Pakistani entrepreneurs should take cue from experience of the developed economies. Around 60 percent of Fortune 500 companies disappeared from the list between 1975 and 1995 and the key reason for the high attrition rate was that those companies lacked sustained innovation. In the 21st century those that survive for two decades are considered highly successful.