Friday, September 08, 2006

The Innovation Sandbox

C K Prahalad talks about the Innovation Sandbox in the latest edition of S&B. Prahlad presents an interesting study on the low-cost, people, process centric, bottom of the pyramid approach towards innovating public health care system and showcases the emerging low cost effective health care services in India.
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They (organizations) must radically rethink the entire business model — technology choices, distribution, pricing, scale, workflow, and organization. Fine-tuning the existing business models will not work. That is why the bottom-of-the-pyramid customer base is the best friend that a company focused on breakthrough innovations ever had. This unfamiliar market with very low discretionary income provides sufficient distance from the current top-of-the-pyramid customer base to force institutions to change their practices.

Resource Constraints and bottlenecks do not necessarily have a negative impact on innovative practices. More than the constraints he feels:

The zone of comfort drives away the zone of opportunity. If managers believe that 80 percent of humanity is “too poor to pay for our products and services and is not part of our target market,” then a new offering at one-fiftieth the price of the current offering, made without sacrificing quality and at the same time ensuring the company’s profitability, looks at first glance like an impossible task. So those managers assume that the idea will be impossible; instead, they make minor changes to existing products and business models, start endeavors that often fail, and conclude from those failures that success was indeed impossible.

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