Recent, obesity has been a large problem for the UK and has been a large problem for fast food companies like Mc Donalds and KFC. Discovery has launched a new service, PruProtect, which has taken advantage of this and seen it as an opportunity to launch their new service. “The system has proven successful since its launch in 2004, helping PruHealth to increase its subscription income by fourfold in 2006. (Pru adds Vitality to protection market, 2007.) This shows that if social trends are analysed well, a gap in the market and innovation can be very successful and profitable.
Changes in lifestyle provide firms with more ways to do business as well as providing new products. Recently, the environment has been in the news and the importance of being economic friendly has come to our attention. Companies like Dyson have taken this into consideration when developing new products. “The Dyson Airblade uses up to 83% less energy then other dryers, benefiting companies in that it costs less to run.” (Appendix 1) This shows that an innovation can both help the environment and also companies which invest in it. Time is also a vital factor, which Dyson have recognised, as they realise that people want to do things as soon as possible.
Another area of recent interest has been recycling. With recent worrying statistics, the government and other industries have taken steps towards greener businesses as their unique selling point as well as looking more environmentally friendly. A company has seen this as a business idea and developed the Greenbottle. These are bottles “…composed of a cardboard outer manufactured from pulped, recycled cardboard, which is lined with an inner sleeve of biodegradable plastic made from corn starch” (Mintel, 2007).
Coca Cola has also tried to be more eco-friendly. “Coca-Cola has reduced the weight of the bottle in a bid to make them more eco-friendly. The lightweight version of the famous hourglass bottle will cut glass usage by 3,500tonnees and C02 emissions by 2,200tonnes a year.” (Metro, 2007.)
Recently, there has been an increase in the amount of innovation, especially in the drinks industry. Pimms is a prime example of this. Having fallowed from competitors, rather then led this trend in drinks, Frecco & Diageo now created flavoured ice cubes. “This innovation will also provide a good boost for Pimms, who are under serious pressure from the dramatic success of Rosé and cider (over ice) as an ideal summer drink.” (Appendix 2) This tells us that Pimms have recognised innovation as a necessity to keep up with the growing market, rather then an optional way of getting ahead.
Many companies now have a department for research and development. The R&D Society have recognised that “Innovation, the key driver of wealth creation and progress in society, is vital to the UK and Europe…” (, 2007.) This gives companies more reasons to develop ideas further to keep up with companies worldwide.
However, investing in invention or innovation is not cheap, so a company needs to establish whether innovating a product or service profitable or not. To begin with, a PRESTCOM analysis is always useful. Regardless of the type of product being innovated, a company needs to recognise the external environment it is in. Political factors, regulations, economic indicators and competition are just some of the important factors that need to be taken into account when a product or service is being innovated. The macro-environment can show the firm whether there are external limitations or other precautions that need to be considered. Once these are known, the product launch can be either pre or postponed or other contingency plans can be developed.
There are several statistics showing the importance and success of company innovation. “Companies that are better able to meet product development targets, are also more likely to have centralized data and product knowledge then the industry” (New Product Development: Profiting from innovation, December 2005.) With the increase in competition of new product development, there are a lot more new products coming to the market place, which can decrease profit margins for firms.
Some products are innovated, and are very successful, however they are copied very soon and sales fall dramatically when the replica is released. Patents can be taken out but there are loopholes that can allow very similar products to be legally sold. An example of this is the Apple iPod and Creative. Creative are known to release products of a similar nature to Apple only cheaper. This reputation could decrease Apples sales and shorten the product lifecycle of their future products. With increasing consumer debt in the UK, if people know that waiting for a few weeks will make the price of a product fall dramatically, they are more likely to wait now then in the past. New fashion trends are a strong reason to buy products and this is one reason why product lifecycles are getting smaller and smaller.
Conclusion
In conclusion, a lot of factors need to be taken into consideration before deciding whether it is worth innovating or not. For some companies this has been a very profitable venture, whereas for others it can be very costly and a waste of time. Also, we could say that some companies choose to over-innovate, and the product that can do one too many things may not be necessary. This can be very expensive. Innovation success can also be very hard to predict and very risky, as the targeted market may not know the capabilities of modern technology and could be reluctant to change. For all companies, the process of weighing up pro’s and con’s needs to be completed before any decision is made.
Appendix 1
Dyson's innovation fuelled by green-thinking
Source: Mintel 12-07-2007
Dyson have launched a more environmentally sound hand dryer
Twice the speed
Dyson Airblade is the latest commercial hand dryer from a manufacturing company famous for its innovative vacuum cleaners. Retailing at £599 the device uses a high velocity blade of air, moving at 400 mph, to dry hands more hygienically and at least twice as fast as anything else on the market. Other hand dryers blow out warm air and rely on evaporation to remove moisture – often leaving the user with hands that aren’t fully dry.
Going green can boost profits
Dyson’s latest product highlights the potential commercial advantages of innovation fuelled by environmentally friendly thinking. The Airblade uses up to 83% less energy than other dryers, benefiting companies in that it costs lest to run, with the added bonus of being better for the environment. Dyson claims that the average washroom (using 200 paper towels per day) costs £951 to run a year - almost double the price of its new product. A spokesperson for the Royal Institute of Public Health said the Airblade was a "significant step forward in hygienic electrical hand dryer technology".
A growing number of companies are committing themselves to sustainability goals and are finding that going green doesn’t always mean higher costs and can in fact even boost margins.
Appendix 2
Innovations are rife in the drinks industry
Source: Mintel 07-06-2007
The drinks industry is on fire at the moment, with numerous innovations (particularly in Rose and Cider) that are keeping consumers highly engaged during a difficult period for the market - now it is Pimms' turn.
Ice is the spice.....
Frecco has teamed up with Diageo to create an ice-cube for Pimm’s. Each cube contains a slice of fresh orange, cucumber and mint and will be available in packs of 10.
Assuming the product quality is good, this is a brilliant idea and is bound to be popular. It is the ultimate in convenience, and will add a significant number of potential usage occasions to Pimms drinkers (particularly those who like the Ready to Drink Pimms).
This innovation will also provide a great boost for Pimms, who are under serious pressure from the dramatic success of Rosé and cider (over ice) as the ideal summer drink. Furthermore, it will add some interest to those just drinking water, so the product meets multiple consumer needs.
Simple, fun and effective
Frecco and Diageo appear to have come up with an outstanding idea, and have the capacity to give it the support it needs to become established in consumers minds......success will be hastened by a return to hot sunny weather.
Appendix 3
Boston Matrix
References
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Innovation defined: Trott P, Innovation, management and new product development, Third development, Prentice Hall, Page 15.
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Metro, Cut glass bottles go green, 04/12/07, page 7.
New Product Development: Profiting from innovation, Aberdeen Group, Business Value Research Series, Released December 2005, page 10, accessed 05/11/2007,
Pru adds Vitality to protection market, , released 28/09/2007, accessed 01/12/2007.
R and D Society, , accessed 05/12/2007.
