Michael Porter on Innovation

Innovation: I am fascinated by innovation. I love the idea of pushing the boundaries beyond “what we’ve always done” into new territory. Innovation does not just have to happen in the area of new products or services (although that’s usually the first thought). Innovative ideas can also spring from changing how something is done.

Last year I went to Zurich Switzerland and attended a Harvard Institute for Strategy and Competitiveness course called “The Microeconomics of Competitiveness”. It was truly a highlight for me (partly because it was taught by a favorite author of mine, Michael Porter, and partly because it was in Zurich).

(Just for fun, here’s a pic of Zurich from the wall of an ancient Roman fort)
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During the class we looked at a case study outlining Costa Rica’s effort at getting Intel to set up a semiconductor factory. Then we saw a pre-recorded video of Costa Rica’s President Jose Figueres talking to Michael Porter’s class and he nicely encapsulated Costa Rica’s innovative thinking. He said (and I’m summarizing) that Costa Rica had recently worked hard to increase tourism to the country. They were seeing more and more airplanes arriving and departing that were filled with tourists. But only the tops of the planes were filled. Now Costa Rica wanted to see about filling the bottom of the planes (i.e., the cargo holds). So the Costa Rican leaders asked themselves “what is highly value added and is inexpensive to ship in the air?”

Semiconductors is the answer. And today, Costa Rica has a burgeoning industry in this area.

A little more on innovation: In talking about clusters, Porter says that countries (or regions) start by using their natural endowments (natural resources or cheap labor) but need to move beyond those things in order to be competitive. We see this in some examples like Swiss watches and Costa Rica’s semiconductor industry.

I thought this made sense, not only from a cluster perspective but at a much more granular level — at a the individual business level. Many businesses essentially sell a combination of time and talent. At some point there’s a ceiling that the small business owner can provide: only so much time and only so much talent.

So, how does a small business grow and increase its competitiveness? The common way is to outsource work. There are positive and negative arguments about this idea. How else can small businesses grow and differentiate? Innovation is the key here. I think that niche markets might help also. But there’s so much more… way more than I could ever type in one blog. But the important thing is to think about it. Look to resources like Blue Ocean Strategy or the Business Diamond Framework™ to help.

Here’s a pic of me overlooking Zurich
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About Aaron Hoos

Aaron Hoos writes about business, finance, and real estate. He is the author of The Sales Funnel Bible and he's a real estate investor and a copywriter for real estate investors. Connect with Aaron on Twitter, Facebook, and GooglePlus+

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