Dipankar Chakravarti, Director of the Marketing Doctoral Program, Leeds School of Business

This is the second post about presentations given by speakers at the YPO Inventing Your Future Markets event.  To see other posts about this event just look for the Category "YPO Inventing Your Future Markets, March 2005" in the Categories section on the right.

Dipankar Chakravarti is like many of the Professors at the CU Leeds School of Business.  He's an experienced business person first who at some point in his career discovered his passion for teaching others and researching the problems of business in the real world.  He's a Ph.D. now, but he started out as an electrical engineer and worked in a factory in India.

Like Frances Hesselbein before him, Dr. Chakravarti is a fan of Peter Drucker, and recommended two of his books specifically.  They are Innovation and Entrepreneurship and Practice of Management.  He also quoted Clayton Christensen several times and said that "The incumbent's road to failure is paved with good management."  I know from experience that it is so hard to find the balance between "fast and loose" and "process and procedure."  The problem is that "innovation undermines established resources, processes and value systems."  In other words, innovation is a threat and established businesses become very good at eliminating threats of any kind.

The financial deck is also stacked against innovation because "ROI criteria breeds fear of small early numerators and large early denominators."  ROI means big returns over small expenses, so a focus on ROI is going to make it harder to innovate.  (Of course if the returns over expenses equation is less than one for long, it makes it hard to stay in business!)

Dr. Chakravarti says that if you are trying to innovate, the focus should not be on management or measurement.

There are three main areas where innovation can be successful.

1. Simple new products or services to attract new customers that could not play before.  Lower prices or new channels or new communications modes are used to get to these customers.
2. Upmarket innovations to attract under served customers.  Broader, more complex functions and price premiums get to these customers.  Who knew that there was a group of coffee drinkers that wanted more than a cheap cup of coffee?  Starbucks figured that out.
3. Low-end innovations that serve previously ignored customers with simpler, more affordable offerings.  Similar to number one, but this is delivering the same products as before but cheaper.

Dr. Chakravarti cautioned us to avoid a couple of typical mistakes.  When you are innovating you're going after an incumbent.  You might be introducing a totally new product or concept, but you are taking revenue from someone who's gotten used to getting that revenue.  Competing on price with the incumbent is a bad idea unless you've found a way to create a much better margin for yourself.  In a pure price war, the incumbent wins.  Also you must resist the urge to malign the incumbent's image which will only provoke a predatory attack. 

He suggests we look for ways to transcend industry and market boundaries to get to different elements of the buyer chain and different user groups.  He suggested tying in complementary product and service offerings.  In other words, expand what you're doing before going after entirely new markets.

Most people would probably say that the market loves innovation, but it doesn't.  Markets resist new ideas.  The market is a foe of initial adoption, but because our world is becoming highly networked, once an idea starts to take off it can spread faster than in the past because the network effects kick in.

I liked one of his quotes - "Innovation is difficult because it tries to change things."

Once again I feel like I haven't done this presentation justice.  Dr. Chakravarti made great points and did it in a way that was often funny and clever.  Innovation isn't easy and the market actually works against it in the early stages.