„the problem is that good management is at odds with innovation”

Inteview with Vivék Pundír, instructor of Innovation Management.

You’re a growth strategy consultant. Can you explain very simply what growth strategy consultants do?

Very simply, a growth strategy consultant’s job is to help companies grow their revenues. There are usually three ways to achieve growth that benefit from the external expertise of a growth strategy consultant: developing new products, entering new markets, or finding new uses for existing products. The bulk of my work focuses on the first two of these. When launching new products, companies often target their most developed markets. While this strategy may work in certain situations, following it as a rule of thumb is a mistake. For example, I helped a client in Asia develop mobile payments, and the client was eager to launch it in Singapore. Singapore was already heavily banked and relatively cashless with a very high penetration and usage of credit cards (including contactless cards). To my client, that indicated a high probability of adoption. However, I advised the client that the new mobile payments product offered very little advantage over contactless credit cards, and therefore getting consumers to change their behaviour to adopt mobile payments would be hard and slow. I was able to demonstrate this through focus groups. Thereafter, I convinced the client to launch the product in the Philippines, which was grossly underbanked. The rationale was that mobile payments provided a large enough benefit to entice customers to change their behaviour. The launch in the Philippines was extremely successful and quickly achieved high penetration in the market. This phenomenon of less developed markets leapfrogging technologies is well-known in academia, and unfortunately often ignored by businesses to their own peril.

In your experience what are the main mistakes managers commit when they fail to develop an innovative idea?

There are several commonly discussed examples of inventing companies missing the boat on commercializing their innovations. For instance, the digital camera was invented by Kodak, but the company was a complete and utter failure in the digital camera marketplace. It is easy to ridicule Kodak’s managers for that, but the truth is more complicated. Kodak’s managers weren’t stupid, they weren’t doing anything egregiously wrong in terms of management - the problem is that good management is at odds with innovation. The goal of management is keep the company stable (with nominal growth). Management models and corporate structures are not built for uncertainty and disruption. That’s why sometimes companies set up Skunkworks operations, which means creating a dedicated team for developing products outside the processes, procedures, hierarchy and sometimes even the geography of the main organization. That’s why when a team came to Kodak managers and told them they had invented a product, which if failed would be a loss in time and resources used to launch it, and if successful would be a fraction of the existing chemical film business but would kill the existing business, it was not a hard decision for them to shut the project down. The mistake is for the managers to not understand that if they are unwilling to cannibalize their own products, competitors might. And then, they’d be out of the existing product as well as a future market opportunity.

Given that you have lived in and worked in several countries, what do you find unique to Hungary?

I have lived and worked in America, Western Europe, Northern Europe, Central & Eastern Europe, South Asia, and Southeast Asia. Hungary is an interesting market, with an openness to innovation, so I find that in my discussions with senior managers at even large organizations that they are willing to experiment. However, there is a serious aversion to risk. This means that the experimentation has to be free or very cheap. There is not an appetite for risk similar to, say Silicon Valley. This is challenging. It is easier for smaller organizations and micro-enterprises with smaller stakes to experiment, iterate and innovate. Yet, necessity is the mother of invention, and the country is teeming with incredible talent, so I remain hopeful.