As traditional innovation – the development of new products and technologies – moves relentlessly from the old economies to the new ones, there is something of a transformation in the focus of innovation efforts in the developed world. Increasing importance is being placed on the creation of new business models and services, including the service build-outs of tangible products, as well as social or public-good innovations. In many cases there has been such a move away from products that traditional manufacturers (like IBM and GE, to name but two) can earn more from their services than from their tangible products.
Service innovations can improve the way in which products may be delivered to consumers, increasing perceived value and customer loyalty, and also in many cases reduce costs. They can make the purchase experience fun, and help consumers to make better decisions. Prada’s new ‘epicentre’ retailing concept introduced interactive dressing rooms with glass that becomes transparent or opaque at will and cameras that can show the clothes from behind as they are being tried on. This initiative explicitly focused on designing a new type of experience for the customer, through a novel application of technology (not necessarily especially innovative in itself) to a traditional retail environment.
Some of the most interesting recent examples of innovations are public services that make our lives easier and more rewarding - concepts such as the Vélib bicycle rental system in Paris, or the Streetcar car share scheme in London. Few of Vélib’s components are novel in themselves (bicycles, rentals) but it is the scope and scale of its activities that makes it significantly different from anything that has gone before. It has required the collaboration of many different government agencies, from road planners to most of Paris’ local authorities. Especial attention had to be paid to the design of the bicycles and the building of cycling lanes in order to attract new, non bike riding, customers away from their cars. Equally important has been the need to ensure the availability and reliability of the bikes; service technicians work at night to repair broken bikes and the bicycles have won design prizes for their robustness and reliability (necessary given the levels of vandalism prevalent in Paris). All these elements have to work in concert for the scheme as a whole to work. The Vélib scheme has also been funded differently from traditional government initiatives, being sponsored by JC Decaux a private sector firm which provides the bicycles in return for publicity.
And innovation in business models can disrupt an industry such that the rules of the game change so significantly follower firms find it almost impossible to catch up. Probably the best examples of this in recent years are the low cost airlines, which changed expectations about the level of profits that airlines could attain and attracted new price sensitive customers; online book retailers, which increased the range of books available to customers and which also were able to reduce prices through their increased buying power and logistics economies ; and downloadable music, which has the potential to make the major record companies obsolete.
All of these have the potential to contribute hugely to the economic wealth of a country, yet they are barely recognised in innovation statistics, which is principally based on patents, or in academic research. They deserve more attention.