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THE NEW AGE OF INNOVATION
Driving Co-Created Value through Global Networks
By C K Prahalad and M S Krishnan
Publishers: Tata Mc Graw Hill
Reviewed by Deepa Mani,
Assistant Professor, Information Systems, ISB
In their book The New Age of Innovation: Driving Co-Created Value through Global Networks, authors C K Prahalad and MS Krishnan emphasise that  innovation and value creation in the modern competitive context hinges on two key strategies. First, fi rms must focus on co-creating unique, personalised experiences for their consumers. The authors call this phenomenon N=1. Second, in order to create these unique experiences, firms must build organisational capabilities that allow them to access a global network of resources. This idea is defi ned as R=G. The fi rst four chapters of the book demonstrate these two strategies in a variety of industries and describe specifi c organizational capabilities and managerial interventions that are integral to their realisation. The latter four chapters identify the challenges in the move toward an N=1 and R=G world and the “directionally consistent” steps that enable fi rms to make this transformation. The obvious brands – Apple, Google or Facebook – are described. In addition, a wealth of examples drive home that in the new competitive landscape, innovation is defi ned by creative construction of responsive business processes, sophisticated analytics and supportive technological capabilities. UPS’ business process capabilities have enabled it to evolve from requiring customers to drop off packages at a collection centre, to picking up packages from customers at times specified by them. Pomafrin’s technology allows for development of shoes that are custom fi t, coloured and shaped for its customers at low costs. ICICI Prudential’s technology and analytical models help capture and monitor dynamic risk profi les of diabetic patients to award differential lifestyle based insurance premiums. Examples of failures too are included to illustrate challenges in the new business landscape. For instance, a major auto supplier moved rapidly to source components from China. However, the standardised nature of the sourcing process could not accommodate the practice of informal contracts, whereby designers would submit last minute changes to the company’s suppliers. Ensuing additional manufacturing and logistics costs wiped out cost savings, providing a grim reminder that a holistic view of systems, strategy and capabilities is required to cope with the simultaneous needs of fl exibility and effi ciency in the new competitive landscape.
Prahalad has touched upon some of these themes in his earlier books - The Future of Competition: Co-Creating Unique Value with Customers (2004) and The Fortune at the Bottom of the Pyramid (2006). Yet, clearly, the learning in this space is not complete. On occasion, the book reintroduces management concepts such as business process management or strategic outsourcing. However, for most part, the many examples and themes provide a valuable primer for managers for creating an “ongoing innovation advantage” in a rapidly changing business landscape. For researchers, the book should bring rigor to their thinking about innovation, urging them to go beyond measures of episodic breakthroughs such as increase in patents or successful new products to include measures of continuous process improvement and technological change. Read this to help build your own innovation roadmap in the new competitive environment.
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