Te Pūnaha seminar – The need to complement R&D with market innovations

08 Apr 2015
@ Ministry of Business, Innovation and Employment, 15 Stout St, Wellington

In the international race to innovate our way to growth and wellbeing, the fact that New Zealand lags behind the OECD average in R&D investments has reinforced the argument that firms and government must invest more heavily in R&D. This view assumes investments in R&D will lead to technology and product innovations that in turn generate economic growth for firms and nations alike. Minds differ on whether governments can pick winners in the R&D race, but few policymakers or businesses question that this is at least the right race to run.

Unfortunately, the path from R&D expenditure to GDP growth is not a straight one, and there are many crucially important intermediating factors that are conveniently left out of the public debate. In fact, New Zealand is among the top countries in the world when it comes to filing patents: third or fourth, depending on whether you compare the number of patents to the country’s GDP or population size. So even with moderate R&D expenditure, New Zealand is punching above its weight in inventing things. What happens after that – turning these inventions into international commercial success stories – is the problem.

The idea that investing in R&D and product innovation generates immediate value originates from a time very different to today – when there was a shortage of everything and the business networks were relatively simple. Now, fast-forwarding some 200-300 years to the current day, and you see a very different reality. There still are unmet customer needs, but the complexity of business networks has increased exponentially. And herein lays the problem.

Customers buy those products that create value to them, and generally this value creation is completely dependent on the market ecosystem in which these products are being used. Let’s for instance consider cars as an example: how much value would a car create to its owner if there were no tyres, petrol stations, service shops, roads, insurances or even traffic laws? All these elements of the car ecosystem did not magically materialize overnight, but entrepreneurs, governments and even activists came together to build them over several decades.

In our research we have focused on investigating this phenomenon: how innovative companies create new market ecosystems around their inventions – or leave out the technological innovation altogether and focus on improving their market ecosystems. In the seminar we also open the floor for a discussion on how public policies could support this crucial piece of the GDP growth puzzle better in the future.

Suvi Nenonen

Suvi Nenonen is Associate Professor at University of Auckland Business School and Associate Professor at Hanken School of Economics in Finland. Her research interests are in markets, market shaping strategies, business model innovation and customer asset management. Prior to entering academics, she has had 10+ years of experience as a strategy consultant to major European companies in several industries such as financial services, manufacturing, healthcare, construction, utility, telecommunications, fast-moving consumer goods industries, and non-profit organisations. Her research has been published in journals such as European Journal of Marketing, British Journal of Management, Industrial Marketing Management, Marketing Theory, and Management Decision.

Kaj Storbacka

Kaj Storbacka is Professor, Markets and Strategy at the University of Auckland Business School’s Graduate School of Management. He has previously been a Professor at the Nyenrode Business Universiteit and at Hanken School of Economics in Finland. His main research focuses on market and business model innovation, market shaping strategies and solution business transformation. Dr Storbacka has made a career out of working on the borderline between academic and applied research within marketing and strategic management. He has 30 years of background as a strategy consultant to European and global companies – in finance, media, travel, retail, utility, manufacturing and telecommunications. His academic research has been published in journals such as Journal of the Academy of Marketing Science, Industrial Marketing Management, Journal of Business & Industrial Marketing, European Journal of Marketing and Market Theory.

Suvi and Kaj are currently conducting a three-year research project for the Royal Society of New Zealand, funded by the Marsden Grant, titled ‘Is New Zealand betting on the wrong horse in the international innovation race? The importance of market innovations for small open economies’.

Their managerial book on the same topic, “Designing Markets: Are you Market Driven or Market Driving” was awarded as the best business book in Finland in 2010.