Thursday, November 27, 2008


What happens when you innovate and move out from your comfort zone?

Ikea: Competition with mail-order firms led to its first showroom. Boycotts by suppliers led to designing and building of house brand furniture. Problems with transportation? They came out with the flat pack concept. Lack of sales staff? The self-service concept was brought in.

Intel: Constantly innovating to encourage consumers to change computers. How? Intel makes its products twice as good by having the corporate target of doubling the speed of computer chips every two years.

Samsung: 40% of its employees are employed by R&D, looking for the next breakthrough. Deadlines are never changed, design teams volunteer to live and work 24/7 in their Innovation Centre. Perfection is pursued until results delivered. No wonder Samsung has over 1,600 patents each year, the industry’s lowest costs, highest profits and weekly announcements of the “world’s first” or “world’s best”.

What happens when you do not innovate and stay in your comfort zone?

GM, Ford, Chrysler: Renowned for building fuel-thirsty SUVs in a high fuel cost climate. Little efforts were made in developing fuel economy engines. They did not come together to stop unions from setting the minimum US$70 hourly wage. They waited for crisis to appear and sought help very much later, in their private jets. Their fate and 10% of US employees are extremely bleak due to lack of foresight and innovation by the management team.

Creative: Did not come out with innovative products after its legendary soundcard. Unable to compete with Apple in the MP 3 market due to its outdated and clumsy product design.

OSIM: Similar fate as Creative, except that it has to contest a lot of cheaper imitations which produce equally good health products. Moreover, massage chairs have lost its appeal as the initial allure of it fades.

Companies attempting to innovate:

SPH: Spent large amount of money to integrate its print media with the virtual media platform. Initiatives include: Classifieds portal ST 701, search engine rednano, Razor TV, STOMP, OMY and has hardware zone as its subsidiary. Bought over to enhance its reach to investors and compliment its business times online. It diversified into property development instead of simply selling its freehold land to developers.

Singpost: Started to leverage on its extensive network to provide pawn, remittance, financial, loans and insurance services. It has recently started offering child care, restaurants and retail services in its larger branches. Mail services are innovated to cater to different consumers’ needs.


It is definitely costly and risky to innovate. SPH went through an extremely rough patch when it tried to take on Mediacorp in the TV market. However, the failure did not stop them from innovating and keep in tandem with the changing market. Instead, they went on and diversified continually from their core operations and have never looked back. Failure to innovate will likely to result in eventual closure of a company. GM, Ford have more than 100 years of operating history; Creative and Chartered shares cost the sky, years ago, yet these companies are brought down to their knees because of their stale products.

So you see, innovate!


Ah goh said...

Hi, this is off topic from your current post. But I was just wondering. Do you think there's a chance STI will test 1390? Now its about 1730. And markets have been showing some strength. But I hope to enter when STI drops below 1500 again

Sgbluechip said...

I think there is a chance to hit 1000. But it is just a wild guess.

Ah goh said...

wow...ok. Thats a first. I did read a report by one brokerage predicting that 1000 was the worst case scenario. I personally don't think we have seen the worst of it yet. However, the US seems to be taking bad news pretty well lately. Obamanomics seems to be working. Like you i'm looking at Midas and Tat Hong holdings. I bought them a bit ex though but hope to average down.