• home

    Why Innovate?


    © International Trade Centre, International Trade Forum - Issue 2/2000

    Resources, initiative, partnerships: building blocks for innovation.

    Innovation is a key success factor behind all successful exporting firms. Being innovative means more than having good ideas. A serious, sustained commitment to innovation implies risk and investment. But the pay-off is tangible. In today's fast-changing trade environment, innovation is not just a matter of export profitability; it can be a matter of survival.

    In a nutshell, here are the reasons why services firms find innovation an essential part of successful exporting.

    Protect market share

    Most service ideas cannot be protected through copyright or patent. To remain competitive, services exporters must innovate continuously. Innovation is challenging enough in a domestic market. When cultural differences and international benchmarks are added, the process becomes even more complex.

    Expand market share

    Innovation can position your firm as a market leader and so make it easier to enter into the export market. As a services company, your competitive edge lies in your ability to acquire, absorb and apply new information on changes in the needs and frustrations of your customers, their ser-vice priorities, competitors' service offerings and the technologies available to support service delivery. In the export market, profitability is frequently linked to offering a new service because experience shows that customers will pay up to a 10% premium for services that address a previously unmet need. This premium will allow you to recover the extra costs of developing and servicing an export market without jeopardizing profitability.

    Improve export readiness

    Innovation links to export readiness in three ways:

    Stretch resources. You may need to introduce internal organizational innovations, so that new and different customer demands are met efficiently.

    Improve competitiveness. You will profit the most in an export market if you offer a service or service delivery process that is new to the target market.

    Meet cultural expectations. To adapt to the cultural norms of your target market, you will probably need to change certain features of your service or the manner in which it is delivered - again an innovative activity.

    More efficiency, less turnover, better image

    Economies benefit from innovation because it leads to growth and the creation of new jobs. But what about the firms themselves? Are there other benefits beyond maintaining or increasing market share? The answer is definitely yes. Additional advantages include:

    Improved operational efficiency. Well-chosen organizational innovations can help to decrease production costs and increase profitability.

    Increased staff retention. A commitment to innovation can help motivate and retain skilled staff. In many economies, finding appropriately skilled staff is a difficult task for services firms. The challenge of generating new ideas and the satisfaction of contributing to success can be highly motivating for staff and so help to attract and retain skilled people. As an additional benefit, customers are more likely to be loyal to a services firm with low staff turnover.

    Enhanced staff skills. An unexpected benefit that services firms report from innovation is that their staff learn new ways to collaborate with one another and/or interact with customers. This often includes a heightened respect for different perspectives, which translates into greater customer satisfaction.

    Increased recognition in the market place. As innovation becomes visible to customers, the company's reputation is enhanced and the likelihood of it being viewed as a market leader increases.

    Innovation defined

    The process of identifying unmet needs and designing services for them is what innovation is all about. Sometimes you can be innovative in an export market simply by offering services you already provide in your domestic market (country-first or market-first innovations).

    For example, you may provide specialized business support services in transition economies where there are as yet few business services, or you may offer training services in markets where speciality skills do not exist, or where new licensing regulations require certification of the level of skills. In other instances, you will need either to modify a service you usually provide or to design a new service offering.

    When is an idea an innovation?

    A new service idea is an innovation if it:

    • is an intentional change in the service provided;

    • is offered to customers for a price;

    • significantly improves the services firm's profitability; and

    • can be duplicated from customer to customer.