Choosing to put resources toward innovation is hard even in the best of times. Innovation can take years to show a return on investment and therefore challenging to justify in today’s budgets. This challenge is particularly strong when external forces are putting pressure to not innovate. We see four major currents working against innovation:
- Pricing pressure. When costs shift out of your favor, as many in the O&G sector have been experiencing, it’s easy to circle the wagons around your core revenue-generating business and wait, or lay off a portion of your workforce to cut costs.
- Regulatory hurdles. Whether due to murky regulatory policies, geographic differences of opinion, or rapidly shifting rules of engagement, regulatory pressures can be enough to keep companies out of entire regions and markets.
- Consumer misinformation. Modern consumers are vocal and engaged, but often uninformed when it comes to science and technology forcing companies in areas like GMOs and vaccines to scramble.
- Supply chain uncertainty. Forming new supply chains around innovative solutions is hard enough, but the risk of a supply disruption can be too much to bear.
While innovating against these currents is so hard that many just look to cut innovation out altogether, solutions around these issues can be found in nearly every industry, from energy to food to electronics. Below we highlight examples of companies using new technology solutions to improve their bottom lines while swimming against these currents:
- Pioneer alleviates pricing pressure by cutting costs with innovative well completion technology. While most headlines read budget slashing and lay-offs as a primary source of pain-control during the current oil and gas price slump, Pioneer Resources has been testing completion strategies that optimize stage length, clusters per stage, fluid volumes and proppant concentration to drive down the cost per BOE.
- Reebok avoids regulatory hurdles with device claims. Rather than push directly against medical regulations, Reebok designed CheckLight (client registration required) to provide warnings about impacts that could cause concussions, but stops short of diagnosing a concussion, giving the company a toehold in a hot-button medical issue without needing any regulatory approval.
- General Mills develops the “best” product by avoiding consumer misinformation. Food companies like General Mills are learning to meet consumer demands like a desire for whole over fortified grains, using cooking and packaging innovations like vacuum and steam treatments for products that incorporate whole grains.
- Silver nanomaterials alleviate ITO supply chain instability. Foxconn, amongst others, has invested in indium tin oxide (ITO) replacement technologies (client registration required), creating legitimate alternatives that keep device production moving regardless of intermittent supply disruptions that occur when Samsung or Apple needs to scale up production on a new device and exhausts the industry’s supply of ITO temporarily.
These examples set a roadmap for innovating in challenging waters. Rather than considering all factors combined, focus on specific pressures you can mitigate. No single approach solves for every current pushing against an industry, but each offers a path forward in spite of the strongest current against them. Take a look at the sum of the pressures you face. Break them down into individual currents, and then develop an innovation strategy to match.