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Commercial Management and Innovation

April 20, 2012

Following the release of the latest national rankings for innovation, Strategy+Business interviewed INSEAD professor Soumitra Dutta, who also studies corporate innovation.

Analysis of this type is always interesting, but as Professor Dutta explains, making comparisons (especially between countries) is difficult, so perhaps not too much should be read into the results. However, the rise of China into the top 30 nations is of note, as is the continuing decline of India (now 62nd).

Perhaps of greater relevance to commercial professionals are the comments Professor Dutta makes with regard to corporate innovation. As we all know, today’s markets frequently demand greater flexibility in commercial structure and business terms, often challenging the established contract models and traditional review and approval procedures. In that context, I found the following quote of particular interest and importance. It indicates the way that the contracts, legal and procurement community must start to open its mind to new ideas and ways of doing business

“Companies have to recognize that many key innovations will be coming from markets where there are large numbers of people who are becoming consumers for the first time in their lives. These new consumers have rising demands for products, and services such as education and healthcare, but at very different price points. Multinationals will have to innovate to satisfy these new demands in a sustainable and scalable manner.

At the same time, companies will be facing new competitors in these markets that may have a better understanding of the local markets’ needs. And some of these new competitors will soon be competing with the multinationals in global markets. So multinational firms face a challenge: to innovate by rapidly integrating their global knowledge with local relevance.

The whole idea that innovations can come from different places, that innovation can happen in different ways, and that it can move and travel in different directions is something that companies will have to adapt to, and prepare themselves for.”

The key questions that commercial professionals must answer are:

– When it comes to your contracting process, how effectively are you integrating your global knowledge with local relevance?

– Do you have the research and market intelligence mechanisms in place to know what your competitors (established and new) are offering to their customers and suppliers?

– Have you adapted your management and information systems to deal with a world where “innovation can happen in different ways, it can move and travel in different directions”?

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