Why New Zealand firms do not realise their potential to shape and innovate markets

Why New Zealand firms do not realise their potential to shape and innovate markets | Insurance Business

Why New Zealand firms do not realise their potential to shape and innovate markets
Instead of gradually creating new products and services, businesses now need to look at everything that impacts what they make and how it is used – and shape that wider ecosystem, according to a latest study from the University of Auckland Business School.

The study suggests that companies need to practice “market-shaping” or “market innovation.” This will involve collaborating with other firms and players, sometimes even with competitors.

According to the study, market innovation means deliberately shaping existing markets or creating whole new ones – it often involves tech innovations, but not necessarily.

New Zealand firms seem to have the fundamentals of what it takes to shape markets, but very few are doing it – which is likely resulting in many lost opportunities and product failures, University of Auckland researchers Suvi Nenonen and Kaj Storbacka said.

“People are beginning to realise that, with the pace of change and digital disruption, you can no longer predict the market, but you can innovate and shape it,” Nenonen said. “You can reconfigure the playing field. The old rules say you have to reactively adapt to the environment that you are part of. The new playbook says: seek to proactively adapt that environment to yourself, so it works better for you and others.”

Neonen said that creating a “minimum viable product” is not enough to create new markets. “Firms now need to identify the ‘minimum viable system’ their product needs,” she said.

The findings show that market innovation pays and leads to sales growth, improved financial performance and market share –  and that it can “grow the pie” across sectors.

“Our call to shape markets represents a 180 degree turn for those with a traditional business education,” Storbacka said. “It requires a profound shift in mind-set about how the market works and therefore how to best grow your business. That shift is from fighting for a bigger market share, or piece of the pie (zero-sum game), to baking a bigger pie for everyone (positive-sum game) via systemic innovation.”

Traditional innovation is still in the picture but firms need to recognise when to use each approach, the researchers said.

The three-year research project was conducted with 21 companies that had a market-shaping innovation from New Zealand, Finland, Singapore and Sweden. Half of the market-shapers they analysed were SMEs, the other half larger companies.

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