Earlier this year, I co-attended the China Catering Industry Innovation Conference hosted by Can Yin Lao Ban Nei Can with strategy and marketing expert Mr. Hua Shan. When we met again later, Mr. Hua said to me, 'Xiao Ma Song, you are an internet celebrity with great influence (here I should modestly deny it, I'm not), and I hope you can appeal that in the future, when any industry holds an innovation conference, they should not do it casually. Just follow the innovation theory proposed by Schumpeter to arrange the agenda.'
The Schumpeter innovation theory Mr. Hua referred to was proposed by Schumpeter in his 1912 book 'The Theory of Economic Development' and was gradually refined to become the foundational system of innovation theory.
Schumpeter said that innovation is not exactly the same as invention or creation. Invention is the discovery of a new tool or method, while innovation is the application of a new tool or method.
If you are running a business, according to Schumpeter's innovation methodology, you can find innovative ideas by researching and exploring the following five directions.
Schumpeter summarized five modes of innovation. Of course, when these five modes were proposed, the enterprises at that time were mainly manufacturing companies, but we can analogize them to industries such as internet and services. The five innovation modes are listed below.
Schumpeter also said that innovation is a 'recombination of production factors,' which we can appreciate.
(1) Introduce a new product or a new product feature.
The iPhone is this type of innovation; it provides consumers with a new product. Tesla is also a new product innovation for the automotive industry.
LE PASTA Durian Pizza, because it offers a new flavor of pizza, is also a product innovation. In the milk tea industry, cheese tea, compared to the previous pearl milk tea, is a product innovation.
The Xiaomi MIX was the first to adopt a full-screen design, and the iPhone X introduced facial recognition, both of which count as providing new product features.
The Yiside carton provides a new form of carton. Xiaoguan Tea's packaging, which is one can per brew with nitrogen sealing, and the Dedao app, which offers a new knowledge content product between book publishing and training education, are all product innovations.
Toothbrushes going from DuPont bristles (hard) to Toray bristles (tapered soft) is product innovation. Bristles changing from a flat structure to a mountain-shaped structure is a product feature innovation. Dr. Bei's bus-shaped toothbrush, which uses double spiral bristles in a mountain-shaped structure, is also a product innovation.
From carbonated drinks (cola) to non-carbonated drinks (Fresh Orange), juice drinks (Huiyuan), tea drinks (ice black tea), functional drinks (Red Bull, Mizone), sugar-free drinks (Coca-Cola Zero), meal replacement drinks, fresh juice, and freshly brewed tea—this is a series of innovations driven by entrepreneurs.
(2) Adopt a new production method.
Traditional Shanxi knife-cut noodles are hand-cut by noodle masters, while using robots to cut noodles is a new production method (note: innovation is relative to the enterprise; some innovations are not perceived by consumers, but they can improve the enterprise's production efficiency and profits). If you want to experience the taste of robot-cut noodles, you can go to the Liuyueliu Datong Knife-Cut Noodle restaurant near Wangjing and Jiuxianqiao in Beijing.
Sanpangdan original-flavor sunflower seeds, in order to reduce moldy and spoiled seeds, adopt a method of cutting the sunflower head at an angle and then reinserting it at a 45-degree angle into the sunflower plant for drying, which reduces bad seeds (the previous harvesting method was to cut off the sunflower head and pile it for drying, which easily accumulated water and caused mold). This is also a new production method.
The natural-colored toilet paper that has become popular in recent years is actually paper that has not been bleached. This can also be considered a new production method (or a method that has been revived). Not only does it sell at a higher price, but it also saves the cost of bleaching (though the paper yield rate is slightly lower).
Elon Musk's reusable rocket launch operations, Jeff Bezos's exploration of drone delivery, and IBM's attempt at Watson robot diagnosis are all attempts at new production methods.
Henry Ford, founder of Ford Motor Company, changed the traditional manual production method to assembly line production, reducing the time to assemble a car chassis from 12 hours and 28 minutes to 1 hour and 33 minutes. This is a revolutionary production method innovation.
From this, it can be seen more clearly that innovation is the main source of profit for enterprises. Schumpeter even believed that a company's excess profits can only come from innovation.
(3) Open up a new market.
For a company, its new market might be someone else's old market, so when we talk about innovation, it is based on a specific company. Of course, there are also entirely new markets.
Sunflower Pharmaceutical's development of children's-specific medicines not only provides a new product but also opens up a new market.
Huadian Shijian left the traditional gift flower market and opened up the daily flower market. The 8848 phone opened up the security and luxury phone market from functional phones. Xifu Cake grew in the birthday cake market and then expanded to the afternoon tea market. Yingding Education left the college entrance exam tutoring market and opened up the new market of college application tutoring. Chaos Innovation Camp emerged from traditional MBA education and opened up the market for CEO cognitive system upgrading.
Opening up a new market sometimes involves launching a new product to create a new market, and sometimes it involves an old product entering a new market. In 2012, when we did the Ninth Class, we launched an advertising copywriting training course, which was both a new product and a new market. Nongfu Spring's advertisement suggesting cooking rice with Nongfu Spring water is an example of an old product opening up a new market.
There are currently companies in the United States dedicated to space mining, but their first goal is to mine water from the ice cores of asteroids, because water is scarce on the International Space Station and the cost of transporting water from Earth is extremely high. So the first market for space mining companies might be to supply water to the International Space Station.
The catering industry has gradually developed from the original main market of banquets and gatherings to multiple new markets such as group meals, casual dining, daily dining, breakfast, lunch, afternoon tea, dinner, late-night snacks, and company cafeterias.
(4) Adopt a new raw material.
This raw material includes semi-finished products, which may already exist or may be created for the first time.
Some of these raw material innovations may bring significant performance changes to the product, while others may not change product performance much but bring significant cost savings to the enterprise.
In the swimming competition at the Sydney Olympics, Australian swimmer Ian Thorpe wore a black one-piece tight swimsuit and won three gold medals. The sharkskin swimsuit he wore was made of a new polyurethane fiber material that increases buoyancy.
Boeing aircraft wings and fuselage are already 50% made of carbon fiber reinforced composite (CFRP) instead of aluminum alloy, and Japan is developing aircraft engines made of carbon fiber materials, which would greatly reduce aircraft fuel costs.
Even non-high-tech companies can innovate by adopting new materials.
The reciprocating blade of the Xiaomi ecosystem company Smate razor uses Anlai steel, a material traditionally used to make Japanese swords.
The current consumption upgrade in the catering industry, in addition to the upgrade of environment and service, is the upgrade of ingredients, which can also be considered a new type of material. The fillings and flour of Xijiade dumplings, the Musang King durian, rice-shaped pasta, and eel of LE PASTA, and Grandpa Zhang's hollow noodles from Xibei are essentially material innovations and upgrades, bringing about upgrades in taste and quality.
(5) Adopt a new business model.
In recent years, the internet has been the core area of business model innovation. Shared bikes, known as one of the new four great inventions, is a business model originally created in China.
Internet giants often develop through new business models. Google, Amazon, Tencent, Alibaba, etc., are all achieved through new business models.
The iPhone is an innovative business model because it not only makes money from hardware but also from the App Store.
360 is an innovative business model because it acquires customers through free antivirus software and then makes profits through traffic business.
Business model innovation can also be approached from the various transaction and connection relationships between enterprises, between enterprise departments, between enterprises and customers, and between enterprises and channels.
For example, WeChat business (micro-commerce) is an innovation in the transaction and connection relationship between enterprises and channels. Alipay is an innovation in the transaction and connection relationship between enterprises and customers. VIPKID is an innovation in the relationship among enterprises, teachers, and customers.
Finally, let's summarize a few viewpoints about enterprise innovation:
1. Innovation is the driving force for enterprises to obtain excess profits.
2. Innovation may be unrelated to customer value or experience, but it must improve the enterprise's profitability.
3. There are only five modes of innovation to follow.
4. Schumpeter's innovation refers to enterprise innovation, not other fields.