Why not deal with Darwin?

Phuong Nhi, Le Thi ; Phuong Nga, Hoang ; Duong, Vu Anh 等

RESEARCH METHODOLOGY

The research methodology combines desk work information analysis, primary and secondary data collection.

The primary data was mostly (81%) collected by face-to-face and telephone interviews using questionnaire to 126 ICT firms in Vietnam. The remains of 13% of primary data were collected by mail. There are 106 feedbacks, accounting for 84% of the sample size of 126

The secondary data includes collecting information about the number and size of ICT firms in Vietnam; information about current performance of some big ICT firms in terms of how much money and effort spent on motivating people to contribute innovative ideas and best exploit these ideas.

INNOVATION UPON DEALING WITH DARWIN

Dealing with Darwin is about leading your enterprise's evolution. It seeks to address the fundamental question: How can we innovate forever? Because that is precisely what natural selection forces us to do. Evolution requires us to continually refresh our competitive advantage. To innovate forever, in other words, is not an aspiration; it is a design specification. It is not a strategy; it is a requirement.

With globalization, deregulation and commoditization, business is becoming increasingly competitive, thus all companies are under increasing pressure to innovate. That is because free-market economies operate by the same rules as organic systems in nature: (1) Competition for the scare resources of customer purchases creates hunger that stimulates Innovation; (2) Customer preferences for one Innovation over another create a form of natural selection that leads to survival -of-the-fittest outcomes; (3) Each new generation restarts the competition from a higher standard of competence than the prior generation.

Innovation comes from many forms, far more than management teams usually acknowledge. As suggested in Dealing with Darwin, there are fourteen types of innovation types relevant to each period of the category-maturity life cycle. The challenge for management teams is to choose the type of innovation appropriate to their current situation and explore the process deeply enough so as to create definitive separation from their direct competitors. This is the process of managing innovation which includes the seven steps as follow.

Socialize The Ideas

Socializing the ideas plays a very important role in managing innovation. As management teams have little enough time to strategy, so they may have to pay high opportunity cost of grabbing a novel methodology. Thus, you'd better mobilizing the ideas in the organization, with discussion in caucus to get whether this is worth pursuing in the current situation. This step also implies how to mobilize innovative ideas in an organization without bias in the most effective way.

Analyze The Portfolio

Assuming there is support to pursue the project, the goal of this step is to analyze the position of each of our primary product lines in the category-maturity life cycle and the forms of innovation your competitors are using to differentiate from you, and eventually choose one or more categories to target for an innovation project.

Analyze The Target Category

The goal of this step is to get a clear view of the target category's current dynamics and the nature of the company's opportunity to change the competitive landscape. In this step, the team should know how the category as a whole is performing, which business architecture that is having greater success & more appropriate to our company. In addition, you have to be well-aware of your competitors' performance operating on the same architecture as yours.

Out of this discussion, as if you are sure of the changing innovation strategies is a good idea, then proceed it. However, do not eliminate your current strategy until you have a good reason to do so.

Reduce The Number Of Innovation Types Under Consideration

At this stage, some innovation types would be excluded from further consideration. The goal is to get the candidate innovation types down to a manageable number. To avoid wasting valuable ideas, the process of elimination and preference should be carefully considered to figure out a minimum of one and a maximum of three innovation types to take forward as strong candidates for creating market-winning competitive differentiation. The chosen candidate innovation types would be consistent with the category's state of maturity and good fit with your core competencies. You should also consider whether any direct competitor has been deeply exploited such type of innovation, so as to create your market-winning competitive differentiation.

Develop Attractive Options

This step is very important as the fulcrum of the entire exercise. In this step, the company forms a coalition of executive sponsors who will support the cross-functional team. After discussing some successful examples and building a list of defining attributes of this type of innovation, brainstorm all the potential ways that can be applied to create distinctive competitive differentiation. Then, rate and rank all the ideas in terms of the attractive level to the customers and differentiated level to other successful competitors. Besides, it should be considered if the ideas give the customers a compelling reason to buy product or they're feasible for the company to execute or not. And at last, they must not be consistent with other tactics considered.

The next step is to ask each team member to rank each item on each criterion, scoring it from 1 to 5 with 5 being the best. With all the results prioritized by total score, the team will have to do a brainstorming program and a suite of program proposals that would bring these tactics to life with the involvement of al functions in your company. After you are done, all of your program ideas should be submitted to a financial analysis, seeking out the right balance of aggressive targets for in-market performance with realistic request for investment, and adapt your final proposal according to that.

Select A Prime Innovation Vector

At this stage, each of the cross-functional teams, or Darwin teams, have to report out to the coalition sponsors on its proposed set of programs. Based on these proposals, the executive sponsors will select one innovation program to be the prime innovation vector that much further out of reach of our direct competitors. Choosing one innovation type does not mean eliminating the others, but they should be kept on the shelf.

Engage The Entire Organization

Once choosing the prime innovation vector, every function in the organization involved as clearly stated in the previous steps should have high commitments to that proposal because you have just declared your core (1).

The goal of this process is to extract resources from context (2) to repurpose for core. That's what makes innovation fundable.

INNOVATION SITUATION IN VIETNAMESE ENTERPRISES

In the past, most Vietnamese enterprises made and sold their products under assigned plans, paying no attention to investment, innovation, market research, advertising, marketing or competitiveness. Now, the presence of foreign invested enterprises has strongly affected and fundamentally changed their way of production and business, making them more active and adaptive to the market economy. In order to survive, Vietnamese enterprises have no choice but substantially renovating technologies, modes of production and business, in which innovation plays an extremely important role in gaining high competitive advantage and sustainable development in the global environment.

The trend of international integration and globalization, particularly the Vietnam accession to WTO, has forced us to think more about how and the extent to which innovation has been taken into consideration in Vietnam. That is the reason why we have conducted a survey to investigate the innovation situations in some Vietnamese enterprises specializing in ICT.

There are two main reasons why we chose ICT sector as the survey sample. On one hand, innovation is a common requirement for gaining competitive advantage and sustainable development, especially in ICT business which is extremely competitive and requires innovation day by day. "Innovate or die?" is a big question for those who have not paid much attention to innovation. On the other hand, ICT is one of the most developed sectors in Vietnam, especially the IT sector with the growth rate of 20%-30% in the last coming years (see more in Table 1). Thus, investigating the innovation situation at ICT enterprises in Vietnam may give us a picture of the whole current innovation situation of Vietnamese enterprises.

Based on the step one of managing innovation as suggested in Dealing with Darwin, the survey aims at deeply investigating the current situation of encouraging innovation in Vietnamese ICT companies.

The table below would show us in more details about the extent to what innovation has been paid attention to in some Vietnamese ICT enterprises.

Table 2
The percentage of Vietnamese ICT enterprises being aware of Innovation

Kind of companies based on scale Awareness of innovation role (%)

SMEs 87
Big companies 92
Total 100

Source: Our market survey

Upon our survey as shown in the table above, we observe that 91% of over 100 Vietnamese ICT companies pay attention to encouraging innovation in their organization. This figure shows us that today more and more Vietnam's enterprises, no matter how big they are, are much more well-aware of the significant role of innovation. In other words, encouraging innovation has been taken into account for gaining the new and innovative ideas, which is no longer the aspiration, but the requirement in ICT sector.

The way of doing such a kind of encouragement also varies as shown in table 3 below

Table 3
Ways of encouraging innovation in Vietnamese ICT firms

Kind of companies Free contribution Rewards for
based on scale to the supervised those who have
 managers/Board good ideas
 of Directors

SMEs (%) 86 63
Big companies (%) 92 81
Total (%) 90 71

Kind of companies Innovation Innovative team
based on scale competition to specialize in
 mobilize creating
 innovative ideas innovative ideas

SMEs (%) 5 0
Big companies (%) 37 8
Total (%) 25 5

Kind of companies Mentality
based on scale training courses
 to improve the
 innovative mind
 of the staff

SMEs (%) 21
Big companies (%) 38
Total (%) 33

Source: Our market survey

The two most popular and common ways, in both big enterprises and small and medium enterprises (SMEs), are to create a comfortable environment for freely contributing ideas to the supervised managers or Board of Directors, and the appropriate rewards for those who have good ideas. Among these two ways, the former is the most popular with a very high percentage (90%), and the latter is nearly 20% lower.

However, there is also a big gap between big enterprises and SMEs in Vietnam in the way of mobilizing innovative ideas except the two ways above.

In contrary of big enterprises, 21% of Vietnamese SMEs in this survey have applied mentality training courses to improve the innovative mind of their staff, and just only 5% of them have organized innovation competition to mobilize innovative ideas in their organization, and especially the survey found that there is no innovative team specialize in creating innovative ideas in these SMEs. The reasons may come from the lack of resources, particularly capital and human. "The capital size of most enterprises is small, with 90 per cent of total companies having capital of less than VND5 billion (US$319,000)", Director of the Technical Assistance Centre for SMEs in Ha Noi Ta Dinh Xuyen said.

The ways of mobilizing innovative ideas in big ICT enterprises is likely a bit better but not very good in terms of the three latter ways. No one can deny that fact that they are big with huge capital and resources, and the fact that they are playing in an increasingly competitive market. However, upon the survey, just only 8% of them have innovative teams, and around 37%-38% of them have encouraged innovation through competition and mentality training courses.

Under the view of the 7 steps of managing innovation as suggested in Dealing with Darwin, the above figures reflect that "socializing the ideas" has been paid more attention, but the extent still varies among big and SMEs in Vietnam.

As for the process of analyzing the relevant portfolio, evaluating innovative ideas until making decision on selecting the prime innovation vector, the survey just focus on investigating three main factors in this process (steps 2-7) including a team to focus on analyzing, evaluating and developing attractive options; selection process based on critical analysis of all the innovative ideas; and whether they investigate how other competitors innovate.

Upon the survey, most Vietnam's ICT enterprises do not pay much attention to this process. This implies the fact that most Vietnam's ICT enterprises are likely to waste innovative ideas at any minute.

SUGGESTIONS FOR VIETNAMESE ENTERPRISES

The market survey collection shows that Vietnamese ICT enterprises have paid much attention to encouraging innovation in their enterprises, however the extent to what innovative ideas have been mobilized in their organizations is still not very high.

The major thing that all Vietnamese ICT firms need to be well-aware of is to create an appropriate environment to encourage innovation in their organization. Such environment could be built up based on many factors.

Upon our survey, it should be created based on the three main elements including democracy, rewards and communication.

Firstly, democracy environment is where people can suggest whatever they think it could be valuable for the company, even crazy. Creating a democratic environment also involve a bottom-up instruction system, not only a top-down structure as usual.

Secondly, a reward system corresponding to valuable innovative ideas is also an important factor. Such an appropriate and adequate reward system could encourage people contributing more ideas for the company. The reward system also involves organizing innovation competition, which has not been paid much attention in most small & medium ICT firms in Vietnam. The point is that organizing such a kind of competition is a good way to mobilize the best ideas while spending not so much money, which is suitable for SMEs with limited capital and resources. In contrary, with a vast capital and resources, big ICT firms should create an innovation team to exploit their innovative mentality, together with mentality training courses and innovation competition.

Thirdly, there should be a good communication system so as to best mobilize and communicate the ideas smoothly in the organization.

In addition to mobilizing innovative ideas, how to exploit them in a most effective way is also an extremely important matter.

Upon the survey, most Vietnam's ICT enterprises are likely to waste innovative ideas at any minute due to the lack of a specific process of analyzing, evaluating and selecting innovative ideas. In order to avoid such a waste as much as possible, all the innovative ideas' collection should be critically considered through a process of analyzing, evaluating and developing attractive options conducted by specialized teams relevant to these ideas.

In conclusion, under increasing pressure of competition specifically in ICT sectors, Vietnamese ICT enterprises have no choice but substantially spending more resources on innovation, in other words to extract resources from context and repurpose for core. The above process requires a deep engagement in just such an effort.

REFERENCE

Moore, Geoffrey A. (2005). Dealing with Darwin. How great companies innovate at every phase of their evolution. Portfolio, a member of Penguin Group (USA) Inc.

Review of Geoffrey Moore's "Dealing with Darwin" book. Retrieved 01 Jan 2008, from http://www.businessinnovationinsider.com/ 2006/03/a_review_of_geoffrey_moores_de.php

Seven principles of small innovations. Retrieved 08 Mar 2008, from http://sbinformation.about.com/ od/bestpractices/a/innovations.htm

The role of innovation in economics. Retrieved 08 Mar 2008, from http://economics.about.com/ library/weekly/aa060204a.htm

Vu Xuan Nguyet Hong (Mar, 2007). Promoting innovation in Vietnam: Trends and issues. Presented to the Forum on Innovation in the African context, Dublin, Ireland

Why is creativity & innovation important? Retrieved 07 Mar 2008, from http://www.cyvee.com/Modules/Group/ ViewSubject.aspx?gid=176&did=3919

ENDNOTES

(1) Core is that which differentiates your company to create sustainable competitive advantage

(2) Context, which is everything else you do, stands in contrast to core.

Le Thi Phuong Nhi, Hanoi School of Business, Vietnam National University

Hoang Phuong Nga, Hanoi School of Business, Vietnam National University

Vu Anh Duong, Hanoi School of Business, Vietnam National University

Tran Thanh Thao, Hanoi School of Business, Vietnam National University

Hoang Ngoc Linh, Hanoi School of Business, Vietnam National University

Table 1
The growth of IT market of Vietnam, 2000-2005

Year Software market Hardware market
 (USD million) (USD million)

2000 50 250
2001 60 280
2002 75 325
2003 105 410
2004 140 545
2005 198 630

Year General (USD Growth rate (%)
 million)

2000 300 -
2001 340 13.3
2002 400 17.6
2003 515 28.8
2004 685 33
2005 828 20.9

Source: Vu Xuan Nguyet Hong (Mar, 2007). Promoting innovation in
Vietnam: Trends and issues. Presented to the Forum on Innovation
in the African context, Dublin, Ireland

Table 4
The percentage of Vietnamese ICT enterprises paid attention to
some major factors in the process of analyzing, evaluating and
selecting innovation vector

Kind of companies A team to focus Selection process
based on scale on analyzing, based on critical
 evaluating and developing analysis of all the
 attractive options innovative ideas

SMEs (%) 2 8
Big companies (%) 34 31
Total (%) 25 21

Kind of companies Investigate
based on scale how other
 competitors
 innovate

SMEs (%) 13
Big companies (%) 67
Total (%) 50

Source: Our market survey