Business Model Innovation: MAERSK
Innovation and Maersk
Innovation is defined as the act or instance of making changes. Also, the introduction of new things, techniques and ideas is known as innovation (Fuglsang, 2008). Innovation in business means the implementation of new techniques and ideas in the marketplace. This is done by introducing new services, products or features. Due to increasing competition in the market, innovation has become a crucial and vital part of corporate strategy for existing and emerging companies, to gain market shares. The bottom line of the business innovation plans is to move forward or block the competitor from succeeding.
The innovation market model suggests a few steps for the innovation process, namely:
The innovation challenge
Collaborative idea generation
Combination of complementary ideas
Testing and development
Indication of new need(s) and inspiration(s)
It seems difficult for a company to survive without innovation. To attain the level of competitiveness, companies require technology and the management skills and corporate vision to implement the technology successfully (Branscomb and Auerswald, 2003). One such market leader company is a.P. Moller Maersk. It is one of the worlds leading shipping companies and has activities in many business areas, including oil and gas exploration and production, shipbuilding, industry, supermarkets and it services. The company has over 110,000 employees in more than 125 countries around the world, with the head quarters in Denmark (Maersk, 2012).
Innovation Strategy and Company Customers
At Maersk, innovation is seen as a key to improving virtually every aspect of their business. Innovation doesn’t mean science fiction projects or directionless creativity but it’s a highly focused discipline that enables the company to simplify its processes, improve the results and build a better company for all concerned — the employees and the clients and above all, the world. This is emphasized by the strong focus towards energy efficiency, which goes hand in hand with improved environmental performance.
The innovative team at Maersk has come up with solutions that aims at reducing fuel consumption by approximately 20% — and that , too. The innovation department works with all vessel types — from container ships and tankers to smaller supply vessels.
The innovation department also solicits ideas from elsewhere in the company and beyond. In projects, the spirit of common ownership is strongly supported and everyone is encouraged to take part in the exciting process of bringing good ideas to life. To further impose this thought, the company often works with its customers and partners to develop new ideas — frequently in special pilot projects.
Innovation Strategy and Business Processes
Maersk is a company that believes in a dynamic innovation process and has been on the move since. Their motto is
If you do not innovate you stand still, Maersk will always keep moving
For this, Maersk has a purpose built “innovation department” with the responsibility of coming up with new, out of the box ideas for the innovation process to continue. The prime area of concern for Maersk is energy efficiency. Also, they let ideas flow in the organization, encouraging innovating thoughts and ideas at all levels. A unique practice that is observed in Maersk organization is that they welcome ideas and suggestions from their clients, partners and individuals, too.
The innovation process is based on the strategies formulated to implement and make the change successful. At Maersk, innovation is taken as a critical tool for improving the services offered to the customers (Ulwick, 2005) and for boosting efficiency — which is believed to be the best way for the company and its partners to move towards more sustainable technologies, operations and business practices. The innovation strategies adopted are:
Prioritizing and encouraging
Allow free flow of ideas
Timely introduction of the innovation in the market, i.e. It is not introduced too early that it does not catch much significance nor it should be brought in too late that no one cares.
Innovation Strategy and Company Staff
Diversity in workforce at Maersk, adds to the benefits of the innovation and innovation process on the whole. This is due to the fact that mixed workman force means an integration of people from different cultures with different level of innovative activity in mind. Thus, it creates a balance in innovation and management process (Ramus, 2003). The demography may be classified or categorized into three groups, namely,
1. Risk takers, the innovators
2. Care takers, the managers
3. Under takers, the resistors
Effects of Innovation on Company Internally
It is to be kept in mind that innovation many a times begins with trial and error process in the organization, internally. The main internal stimuli active at Maersk are:
Unexpected mishap or accident — the discovery of the Penicillin is a great example to support this point.
Difference in company’s perception and reality — this states that the company might be perceiving things about the market trends, demand and competitors’ strategies where as in reality, things could be entirely different.
Innovation inspired by need — are usually the ones in support of other ideas or existing strategies.
Maersk looks at innovation as vital, critical, crucial and essential for growth, advancements, existence and survival in the world of cut throat competition. Although, it is the world’s largest shipping company, and can be termed as the market leader, it stresses in having a dynamic innovation process. Internally, it aids in keeping the employees mentally alert and active. Although they have a separate department set up for innovation, they encourage and welcome new innovative and challenging ideas from employees at all levels. Regular brain storming sessions also let the top management observe and know the satisfactory level of their employees and hence, the company keeps moving ahead, crossing every hurdle with success (Gawarzynska, 2010).
Effects of Innovation on Company Externally
The following stimuli are considered to be external factors and affecting the Maersk from external perspective.
Demographic changes — this is supported by urban migration, off shoring trends, increase in the number of multi-national companies all over the world. The thought is further strengthened by the advent of technology that has turned this world in a global village.
Shifts in perception — this can be exemplified by a fact that the business strategies in work might not be fulfilling the targets set. For example, Maersk innovation was to launch shipment is smaller quantity so that they draw less attention from pirates and become time efficient.
New knowledge and technology — any development and advancement in technology draws attention from the world over. Highly innovative companies like Maersk, get the first hold of it and utilize it to their need and requirement (Zerzan, 2010).
Maersk has many success stories to narrate and relate to inviting ideas from clients and customers for innovation. It is the key success point of Maersk. It not only gives an insight of what the exact market demands and trends are but also helps establish a personal relation with the customer, a necessity in today’s marketing strategy for customer holding and customer retention. With such a huge business volume, extended in almost the entire world, the customer services offered by Maersk are mind blowing. Not all shipping companies offer a personal touch to their customers as Maersk does. Involving the external minds in the innovation process is a strategy that in market studies and research — an intelligent and innovative move indeed!
Innovation is also a critical tool for improving the services offered by Maersk to its customers and for boosting efficiency. By improving their business, the company intends to make it easier for their customers to extend their own reach, leading to more sustainable growth and development around the world.
Benefits of Innovation
The impacts of innovation on a company are numerous. Some major ones observed are, modular innovation — it is the process of improving only the components and sub-systems without addressing the system architectural innovation — effects the way in which all products are interlinked, without changing the core concept about the product and its components sustaining innovation is a predictable, conservative and risk-averse strategy allowing firms to reap maximum benefits out of the top end of existing markets (Andrew, Sirkin and Butman, 2007)
increased interdependence between different facets of the societies increase in the research and development to meet competitive challenges affect and impact on the environment product or service innovation means relating directly to the needs of the customers process innovation refers to process or production improvements that lead to greater efficiency and lower cost business model innovation represents innovations that relate directly to the design of operations to respond to customer needs
Risks of Innovation
Apart from the benefits that the company gets out of the innovation process, there are risks associated with the implementation. However, it is thought and applied that no risk means no innovation and no innovation means no advancements. Hence, companies willing to excel, dare to innovate and take the risks involved with innovation since innovation is nothing but “thinking outside the box.” The foremost risk involved with implementation of the innovation is its rejection and for that matter, its failure.
What if it does not work?
What if it is not accepted?
What if a better alternative is available?
What if it is not cost efficient?
What would be the correct and most suitable time to make the innovation public?
There are many such questions associated with the implementation of innovation process. The risks involved are, namely, excessive perceived economic risks uncertain demand for innovative goods or services dominated market by established businesses high direct innovation costs
lack of information experiencing extraordinary situations higher than expected competitive pressure trademark or copyright problems
It would not be wrong to say that Maersk is a company that has its strategies based on innovation or that innovation is an integral part of its strategy. Although innovation is essential in today’s world market, it has its pros and cons. It is not enough just to encourage employees to take risks. The organization’s culture must communicate clearly how the innovators who take intelligent risks will be supported and rewarded. Too many organizations say that they want employees to take risks but reward only final success or worse, punish those who fall short because they moved beyond the boundaries of the known, safe choices. Maersk focuses on modifying aspects of the culture so that the employees receive consistent and positive messages about initiating change and innovation (Hanekamp, 2007). Skills are developed to stimulate, support, encourage, and coach employees to take thoughtful, intelligent risks.
List of References
Andrew, J., Sirkin, H. And Butman, J., 2007. Payback: Reaping the Rewards of Innovation. USA: Harvard Business Press.
Astebro, T. And Michela, J.L., 2005. Predictors of the survival of innovations. Journal of Product Innovation Management, 22 (4), pp. 322-335.
Branscomb, L. And Auerswald, P., 2003. Taking Technical Risks. USA: MIT Press.
Fuglsang, L. 2008. Innovation and the Creative Process. UK: Edward Elgar Publishing Limited.
Gawarzynska, M., 2010. Open Innovation and Business Success.
Hanekamp, G., 2007. Business Ethics of Innovation. USA: Springer
Maersk, 2012. Working With Innovation. [online] Available at: < http://www.maersk.com/Innovation/WorkingWithInnovation/Pages/WorkingWithInnovation.aspx > [Accessed 24 September 2012].
Ramus, C., 2003. Employee Environmental Innovation in Firms. England: .
Ulwick, 2005. What Customers Want. USA: McGraw Hill.
Zerzan, a. 2010. New Technologies, New Risks. USA: World Bank Publications.