Seventy percent of modern economies are based on services, says Professor John Bessant. Yet until relatively recently, the service sector was applying models of innovation that originated in manufacturing 100 years ago. Is everything wrong with that approach? Why and how is the face of innovation changing? Is innovation the answer to the looming healthcare crisis? Those will be the topics of “Meeting the service innovation challenge,” a breakfast conference presented by the paperJam Business Club on Wednesday, October 26 at 8:30 a.m. The Professor Bessant is in the Grand-Duchy for the Luxembourg Innovation Masterclass, organized by Luxinnovation.

Professor Bessant, why do you say ‘innovation’ is a problem?

“‘Innovation’ is actually a problem for us because the word is everywhere. I give you about 30 seconds on any company’s website before you’re going to hit that magic word: ‘Innovation: driving the business, working for our customers.’ And these days the public sector is saying the same things: the way out of the [global economic] crisis is... innovation. It’s a problem because it’s one of those words that everyone uses without necessarily really knowing what they’re talking about.

More importantly, the challenge isn’t only what is it, it’s what do we do with it and how do we organise and manage it. My working definition would be that it’s the creation of value – which could be social or commercial – from knowledge. That might be knowledge that we create through research and development, or might be knowledge [we acquire] from outside, or knowledge we gain from experience. But really it’s [putting] knowledge into action. In that sense, it addresses any organisation, big or small, public or private, profit and not-for-profit.

Why are people so attached to this buzzword?

“If we don’t change what we offer the world – our products and services, and ways we create and deliver them – we might not be around [for long] and we certainly won’t grow.

It’s a challenge because it’s not just using the word as a slogan, but actually understanding what’s involved in turning knowledge into value.
Also it’s being able to repeat the trick. Anybody might get lucky once, but the smart organisation works out how to do this again and again and again.

Can you really force innovation to happen?

“Not easily. It’s not a simple slot machine where you put money or resources in the top, and out the bottom comes this wonderful set of innovations. We do know some things. We’ve studied innovation for a hundred years. There seems to be a reproducible pattern from which we can distil some recipes.

I wouldn’t say we can guarantee success every time, but we can certainly stack the deck in our favour. We can manage innovation.

How do you make it repeatable then?

“One way is knowing what you’re trying to do, [having] an innovation strategy. If you think about it, you can make changes in all sorts of directions. Whether they actually get you where you’re trying to go as an organisation is an important question. You can innovate all you like, but it can get you nowhere. It may even take you backwards.

That raises the question of where can we innovate. We can change: what we offer the world, our products and services; our processes, how we create and deliver those offerings; we can change who we offer them to, the markets and the story we tell about [our offerings] because a lot of innovation is about opening up new markets; and at the limit, we can even change how we think about ourselves, the business model, and if we can reframe it so that suddenly we’re in a different kind of business.

If we just place our bets randomly on a roulette table, we shouldn’t be surprised if we lose. If we have a clear strategy and a sense of purpose about where we’re trying to get to and we can answer the question ‘how do these innovation bets take us forward?’ that’s likely to be a big factor in succeeding.
So this idea of an innovation strategy is extremely important, particularly if you’re going to introduce a stream of innovation over time rather than just one big one.

What is an example of an organisation that has successfully done that?

“Sometimes it is about bringing something new to the world, and not necessarily being first but getting it the world first. A classic example would be Henry Ford. Not on his own, of course, he had a whole team of people. What he did was transform the business model of something that was new, but he wasn’t the first to do, the motor car. What he did was not invent that concept, but realise the really difficult thing was how you make it available to everyone. His phrase was ‘a car for every man at a price every man can afford.’ What he did was engineer the product so it was standardised. And what he’s famous for is the process. The whole notion of the assembly line -- the factory with a lot of different divisions of labour, that way of mass producing something -- that was a radical set of innovations, which created and established what is still one of the biggest brands in the auto industry a hundred years later.

What about more recent innovation?

“If we look at the business models that the Internet has enabled, they’re continuing to change the ways in which many of the products and services we consume are created and delivered. People like Amazon in book selling, eBay in auction process, many of the online retailers, the online travel business; it is all riding a wave and creating sometimes new markets, sometimes extending markets massively by hundred-fold or a thousand-fold.

If we think about public service, they too are beginning to change quite radically. We are beginning to think quite hard about how we live with rising demand in education, healthcare and other public services. How we deliver them with limited cost-base, because we can’t keep paying more and more taxes. That’s going to demand and drive some radical innovation, which I think we’re beginning to see at the edges some very interesting things emerging.

What is the most interesting thing in the public sector that is beginning to emerge?

“We had [following the Second World War] in the UK a radical innovation in the National Health Service, which was a wonderful social innovation for its time. But now the UK is reaching its limits with the current model. So we’re seeing a lot of experimentation, a lot of exploration of potentially radically different ideas.

There is the example of Aravind Eye Clinics in India. The Aravind clinics treat cataracts, which in terms of medicine is not rocket science. It’s a fairly well proven procedure. The problem is an economic one. It costs about US$3,000 to have that operation done in London. Even in Mumbai, in urban India, it would cost about $300.

An eye surgeon who retired and wanted to give something back to his community said he wanted to bring this kind of cataract care to the pockets of the very poor in India, which is a large proportion of the population. In order to do that, he’d have to come up with a way of delivering quality cataract surgery for about $30 per operation. That’s a massive shift even from $300 down to $30. In the conventional medical world there’s just no way of doing it. You can do what you do better, but you’ll never get that kind of scale.

So how did he do it?

“He actually found the answer under McDonald’s golden arches. Whatever you think of McDonald’s as a product, you actually have a system that pretty much anywhere on the planet will deliver a reliable, consistent product at a low price, mainly using unskilled labour who, in Henry Ford fashion, are trained to do small pieces of a puzzle.

What the Aravind clinic does, essentially, is take that model to eye surgery. It looks nothing like any conventional hospital you or I might be familiar with. It’s largely done outside in a tent. Most of the preparation is done by trained-but-relatively-unskilled people. These are not traditional theatre nurses or clinicians, but they’re trained to do this job extremely well.

The surgeon, who’s the key person, only operates for a matter of seconds on each eye, and then turns his or her attention to next patient who’s been wheeled in on the other side. You have something that’s almost like a factory. It challenges many of our assumptions about healthcare, but what you get is something that is as good as the treatment you’d get at a Western hospital, but at a fraction of the cost.

Thirty dollars was his target. The average cost of these operations is now $25, which means he can give a lot away for free. There are hundreds of thousands of these operations done every year, so you have a learning curve effect. Probably one of the best places in the world to learn about cataract surgery would be in the Aravind clinics, as they do about a quarter of a million operations per year.

If you take all of that, it’s hugely relevant in India, but it’s interesting for the problem we’ve got, that is to say how we deliver good quality healthcare, at a low price, for a high level of demand.

Would that approach work in the West?

“It’s a model which if you just transplanted it as it is, it probably wouldn’t work. But there are some very strong ideas there that radically challenge our views on healthcare. That kind of thinking is beginning to come into our National Health Service in the UK and I suspect into many other healthcare agencies across Europe.

Will Western health systems really undertake such drastic reforms?

“Many people I’ve spoken to and many published papers suggest, yes. I’m not saying this is the only kind of innovation [that will happen]. But this kind of radical thinking is on the table. Nigel Crisp, who used to be the chief executive of the NHS, recently wrote the book Turning the world upside down: the search for global health in the 21st Century and he does use this example. But I think the answer really is: there is no option. If you think about the healthcare challenge, it’s a conundrum we’re unlikely to solve by doing what we do better.”

 

Biography - Innovative chemistry

Originally a chemical engineer who received his doctorate for work on innovation within the chemicals industry, Professor John Bessant has been active in research, teaching and consultancy in technology and innovation management for more than 25 years. He currently holds the chair in innovation and entrepreneurship at Exeter University, where he is also research director.

In 2003, he was awarded a fellowship with the Advanced Institute for Management Research and was also elected a fellow of the British Academy of Management. Bessant has been a visiting professor and researcher at universities in Australia, Canada, Denmark, Germany, Ireland, Sweden and across the UK. In addition, he has served as an advisor to various national governments and to international bodies including the United Nations, the World Bank and the OECD. He is the author and co-author of more than 20 books, including Managing Innovation and High Involvement Innovation, both published by John Wiley and Sons.