(Foshan, July 6th) On the afternoon of July 6th, 2012, Professor Jay Lee, DeTao Master of Product and Service Innovation, attended the 2012 Foshan Wealth Forum in his capacity as an expert. The forum was sponsored by Foshan Media Group and organized by Foshan Daily. The theme of the forum was Upgrading Strategy for China’s Globalized Manufacturing Industry. Participants exchanged views on the world’s most cutting-edge dominant innovation ideas, delivering a feast of thinking to more than 400 entrepreneurs. As was proposed by Professor Lee, enterprises were encouraged to adapt their thinking. Innovation shouldn’t be confined to products and visible fingers. The invisible customer demand also counted.
DeTao Master Professor Jay Lee addressing the forum
(A) Innovation warning: the decline of Nokia for lack of protein
According to Professor Lee, the key to innovation lays in creating value for customers. This came down to the theory of omelette. Any innovation shouldn’t be confined to products (egg yolk). It should also cover ancillary service (protein). In the case of little product variety, the difference in ancillary service turned out to be the key to success.
Why are so many companies suffering from total losses despite their millions of dollars worth of investment in innovation? The reason is that what they have is only egg yolk, rather than protein. Professor Lee said jokingly that Nokia had only egg yolk, without any protein, which led to its fiasco. The labor cost of an iPhone in China was only $ 6.5, and its spare and accessory parts cost $ 179. However, it could be sold as much as $ 500. Its success in sales was attributed to its protein – ancillary service.
(B) Path to innovation: reverse thinking to find out potential customer demand
Professor Lee cited an example. John Deere was an American agricultural machinery manufacturer. He had been exploring what farmers wanted all the way. Finally he figured out that farmers were wondering how crops could grow fastest at the lowest cost. He analyzed the composition of soil before planting and worked out the amount of NPK on every piece of land. He identified the spots that required supply of potassium and nitrogen respectively and informed the farmers of these findings. It could also be figured out by sensor coupled with certain software as how one square meter of soil could be turned fertile and how much fertilizer was required. Information about fertilizer suppliers was also made available to farmers. With such full service, John Deere could made 6 dollars worth of money as service could be charged out of every 100 dollars earned by crops.
(C) Mapping the future: individualized value-added service
According to Professor Lee, pine trees didn’t have to grow in soil. All the pine trees on Huangshan Mountain were growing in the cracks of rocks. Therefore, real innovation took its natural course and sought room for innovation in nature. Customers were human and human needs were subject to cultural, social and environmental changes. The course “from innovation to value” also varied from person to person. As Professor Lee indicated, consumers used to be served by people in the past, but in the future they would be increasingly dealing with network and information conversion. Many network platforms and individually customized information would be providing consumers with more innovative service models.
“In the future, Chinese enterprises will be exposed to a major problem: customers of every single piece of hardware are rather consuming the value of its software service than otherwise. Chinese enterprises are still performing poorly in software development,” said Professor Lee. “Product R&D by future enterprises and its value to the company is one thing. The value it creates for customers is another thing, which outweighs the former. Value-added service, apart from brand and sales service, matters the most.”
Professor Lee also interacted with the audience at the forum, giving wonderful replies to the questions they came up with.
Professor Jay Lee is Ohio Eminent Scholar, Director of Research Center on Intelligent Maintenance Systems (IMS) in the US, Special Member of the Japan Society for the Promotion of Science, Visiting Professor of EFFL in Switzerland, and Visiting Professor of Cheung Kong Scholars Program of China’s Ministry of Education. In addition, he is a Fellow of ASME and SME. He is a frequently invited speaker and has delivered over 100 invited keynote speeches at major international conferences. He has been awarded Outstanding Young Manufacturing Engineer by the Society of Manufacturing Engineers (SME), Outstanding Young Scholar Award by the National Natural Science Foundation of China, Science and Technology Award by Mayor of Milwaukee, andOutstanding Contribution Award by US China Engineers Association.