President of the Strategic Board, Grenoble Ecole de Management; and Special Advisor of the President of AACSB for Europe, spoke about his own personal experience in industry and how he came to discover Peter Drucker. He began the discussion with his favourite Peter Drucker quote:
“The purpose of the enterprise is to create value and there are therefore two functions that matter… Innovation and marketing create value and all the others are costs.”
Following on that note, he jokingly apologized to the members of the audience who were not in those fields. Yet, this focus on innovation and marketing as key drivers of value is fairly recent, particularly in business school programming. As older and traditional methods, such as cost cutting, are shifting towards newer concepts in what we deem value creation, it is also up to industries to recognize and focus on these aspects, and primarily address the notion of complexity.
Three years ago, a study by Bain & Company demonstrated how complexity reduces value in a firm. This research outlines how complexity increases over a period of time, and highlights the reality that ‘simple solutions’ are not always going to be successful. This has been proven in the past as well.
Henry Ford’s Ford Model T was a game-changer. Being a disruptive innovation and transforming the entire automobile industry due to its affordability and simple design, it was a huge success initially. Nevertheless, due to this reduction of complexity, close to zero, Mr. Ford ended up being surpassed by GM in the mid 1920s, and he was unable to catch up. Sales eventually declined.
Throughout history, innovations may pave the way for a new product to launch to consumers or even create a new market-as in Henry Ford’s case. Innovations may even succeed due to an initially simple, yet effective, design. Nevertheless, the need for complexity, in face of competitors adding their own ideas and designs to that original product, is crucial. It is the only way to continuously stay ahead of the game, and make it difficult for others to compete with your “complex” product or service.
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