Due to social economic challenges, businesses will need to innovate in order to survive. They will need to come up with new ideas, new products, and new services to meet the changing needs, financial situations, and expectations of their customers.

Changing economies

The economies in most of the wealthier countries of the world are quickly changing from manufacturing-based to service-based. Manufacturing-based companies who are not changing into service-based companies are choosing to move their operations to countries with lower labor costs. This brings with it a number of economic challenges. First of all, it results in people who were factory labors in developed companies either losing their jobs or working for much less. Due to the fact that most factory laborers do not have the knowledge, skills, and experience to move into the service-based economy, many of them are left without jobs. As a result, people do not have as much money as they did before and can therefore not buy as much as they did before. The small group of consumers who do have some money choose to save it. Due to the economic challenges, there is a small group of consumers who are able to afford anything they want; however, not every business is able to cater to the needs and high-quality demands of this group. This results in the need of innovation. Companies need to be innovative to meet the needs of the small group who are demanding high-quality and the masses who are not capable of spending as much as they did before due to changing economies.

The evolution of customer value

The economic challenges we are currently facing require companies to be innovative so that they can offer consumers value and affordability. Before jobs were abundant, borrowing was easy, and salaries were good thus allowing consumers to spend on improved products with new features based on delivering convenience and luxury to consumers. This was not a problem since that cost was not much of a concern. However, the current economic challenges are changing this. Cost has become the deciding factor. Companies that are selling expensive luxury products and services are facing problems with their sales. These companies need to find innovative ways of developing new products or services that offer value but are affordable. In order to save money, consumers who had no problem paying for convenience are not choosing to do things for themselves.

Emerging economies

In spite of the worldwide economic challenges, several countries such as India and China are thriving economically. The main reason for this is because labor costs in these countries are still very low. Manufacturers in these countries have the innovative edge in producing low-cost products and services.

The Solution

Most businesses in developed countries need to change their innovative strategies so that they are able to reduce cost and improve value. They need to recognize the fact the due to the economic challenges; people have changed their shopping habits. They need to understand the even though it might be cheaper to buy larger quantities, people might no longer be able to afford large quantities. For example, companies in India who understand this fact are selling tiny packs of shampoo sufficient for one or two washes. Once companies understand this, they would better be able to improve their innovative strategies to reflect this thus giving them a distinct advantage.

The changing face of global innovation

Businesses in both developed and developing countries will need to learn from each other in order to overcome the economic challenges. Countries such as China and India are successful in innovation in that they have learnt how to meet the needs of low-income consumers. They have found innovative ways of selling to theses consumers. This is something that many companies need to learn. Companies need to invest in research and development to gain the advantage in scientific and technical innovations.

Companies need to:

• Improve value and reduce costs
• Understand the needs and the shopping habits of those with low income
• Find ways of encouraging innovators in emerging economies to share their ideas with developed economies

It might seem as a big challenge but it is necessary. Do you agree? Please share your opinion with us.