New Zealand exporters face significant constraints on their activity through distance from markets, which adds difficulty and expense to all aspects of market research and entry, and the small domestic market which reduces the ability to create capacity and funding for expansion.
Innovating within constraints such as these is the focus of the innovation sandbox, an idea from the late great C.K Prahalad who created the concept in 2004 to help think about innovation issues in the ‘bottom of the economic pyramid’ market of approximately four billion people existing on less than $2/day.
Prahalad’s key insight was that the bottom of the economic pyramid was a sandbox for innovation as ‘selling to the poor is a uniquely powerful way to achieve breakthroughs in products and management practices’. Skill learned in this arena could then be transferred to more profitable arenas with good effect.
An example of this could be RocketLab, the 2007 New Zealand startup from Peter Beck, which took out two awards in the 2014 NZ Innovation Council competition, and released its flagship product, the Electron rocket in mid 2014.
The Electron and RocketLab are disrupting the global rocketry market with a 95% cost reduction per launch, and a 95% time reduction in launch preparation, for low orbiting satellites in the 10–120kg range.
This is definitely breakthrough innovation in action and has some of the hallmarks of the sandbox method.
Affordability (a low price tag) and flexibility (rapid launch preparation) has come from a modular approach in which the rocket repeatedly uses the same basic electronic components for stage control, and the same engine for both sea level and space through simple mechanical changes.
Design ’from the ground up’ and a vertically integrated process of components and rocket manufacture through to launch gives RocketLab a high level of creativity and control, and freedom from the traditional industry mindsets. The novel use of 100% carbon fibre for construction and the Rutherford engine (patent pending) reflect this.
The traditional rocket industry is based on much larger weapon delivery or moonshot devices and brings with it a legacy of high cost and narrow technological focus, which RocketLab has neatly sidestepped through focusing on a new way to serve a highly targeted market.
How could any of this apply to exporting from New Zealand?
At the source of the Prahalad model (and shown by RocketLab) is the focus on total delivery of value to the client, and the ability to get away from product based thinking, which Prahalad characterises as shifting from the four ‘P’s to the four ‘A’s of marketing, which are;
Awareness – consumers need information about the product (eg what it is and how to use it).
Access – consumers need access to the product through relevant (to them) channels.
Affordable – world class quality (not luxury) must be achieved at much lower price levels.
Availability – there must be an uninterrupted supply for consumers to build trust and loyalty.
While the four ‘A’s are probably not new ideas to NZ exporters, it is both exciting and inspirational to see the New Zealand space industry ‘take off’ by innovating around constraints through freedom from legacy thinking.
Makes you think we could all learn something from these rocket scientists.
Nick Kearns teaches Operations Management and Innovation at the Unitec Institute of Technology. email [email protected]