In the past, I have contributed on topics like innovation management and open innovation. I have always been a big fan of innovation. But then recently I stumbled upon the term “fabrication”. I was talking to this friend of mine who works in the R&D department of an IT company. We were debating about product lines and how to expand or diversify them. As the debate heated up, he very passionately announced, “I would rather innovate than fabricate!”
What threw me off was not his intensity. I have always known him to be that way about his work. What had caught my attention was the term he had used – “fabricate”.
So what does fabrication mean for IT industry? It means you take a lesser known technology or application which is still rough around the edges. You then polish it, add some IP to it, and present it as a fairly new product. It’s something like taking a song from the yesteryears, adding synthesizer beats to it, and marketing it as a new piece. And what makes it more interesting is that the audience reacts the same to both, whether it’s music or IT. They get excited by it.
So how long product fabrication has been going on? Hard to say. But yes what we can be certain about is that it’s a growing trend. How come? The answer is mergers and acquisitions. When a larger IT player acquires an industry counterpart, they acquire it along with its applications and technology. After the acquisition the technology becomes stagnant for a while. But then it is revived with a new lease of life. The applications are taken and analyzed by a fresh pair of eyes. Conclusions are drawn and value addition is done. And then finally new IP is added and the applications are set afloat in the market again.
Now when you weigh fabrication versus innovation on a common scale, fabrication does have justifiable causes. It has its own set of pros and cons.
First and foremost, innovation is a complex and lengthy process. It’s a process that demands extensive R&D, detailed market research spanning across years, and budgets running, at times, into millions. And with all this, factor in the changing market conditions. There is usually a time gap between when a product is conceived and when it is actually launched. You might have done all your research and analysis during a certain period. But when you actually launch the product, the market might have moved on to other things. In this case, your innovation becomes less meaningful. The time lapse between conception and launch can tip the scales for a product. But fabrication – it takes comparatively less time. You already have the base ready. You have to find out where you can add value to it and polish out the rough edges. This becomes a faster way for companies to cash in on an opportunity.
Secondly, we know that innovation in and of itself is not cheap. But then how costly exactly? Well there is the basic cost of innovation which includes R&D, market study, analysis, actual development, and testing. In addition to this, there is the cost associated with managing the product in the launch pipeline. This includes the cost of marketing the product and setting up a sales and distribution channel for it. And with all these overheads, there is no guarantee of success. The innovation might or might not see positive market response.
So it makes sense when the innovator firm steps down and hands over the product to a bigger industry player. These big names already have an established sales channel. Thus, they are better positioned to draw out widespread product adoption. Their deeper pockets also allow them to undertake bigger marketing campaigns for the product. They can take bigger risks and manage them better.
So far what we have discussed is from the innovator firm’s angle. Now let’s consider the buying firm’s point of view. A company undertakes product development for two purposes – to meet market need or to meet internal needs. It makes sense to invest heavily in innovation when you are trying to innovate for the sake of the market. But when the internal processes demand a product, it’s better to buy out a ready application and mold it to meet specific requirements. Enterprises don’t need to pick the brains of their product champions for it. They can acquire a ready technology, modify it, and make it ready to use. This saves the buying firm a lot of time and resources. On the other hand, the innovator firm can rapidly recover the dollars invested in developing the product. Thus, fabricating a product plays out as a win-win situation for both.
So is fabricating products going to be the way forward? Well, in the coming years we shall see a lot more of product fabrication taking place. More and more technology acquisitions shall happen in the coming years. And by the way the economy is going currently enterprises are completely justified in trying to account for every single dollar that they spend.
But this does not mean innovation shall lose its place in enterprise strategy. What we shall see in coming years is that enterprises shall undertake innovation where it matters the most. They shall back their product innovation projects with lot more strategic level thinking and planning. They shall have better innovation management practices in place. And hopefully, some niche enterprises shall promote product innovation as a systematic discipline.
And let’s not forget, without innovation fabrication is not possible. Somebody has to innovate a product before it can be fabricated by others!