Innovation in Troubled Times

I was doing some research at work today and had chanced upon the blog from Air Asia's CEO, Mr Tony Fernandes, and what I saw got me thinking. Why, you ask? The reason is simple. Mr Fernandes, who is a CEO of a highly successful CEO of a budget airline in Asia, was using his blog to connect with people. Here was an innovative man who was reaching out to his audience and connecting with them; he even had a live chat facility for people who wanted to speak to him.

What's the big deal about this? This aspect is significant because of the industry. Take a look at newspaper reports on the airline industry. The airline industry is a troubled industry since deregulation and has become a competitive space. With the introduction of budget airlines, the legacy airlines (traditional airlines like Qantas, United Airlines etc.) began to suffer and flaws were showing up in their business models. The rise of the budget airlines, though, has not been simple especially in Asia where, unlike North America and Europe, acceptance of such airlines has been slower. Legacy airlines have had a stronghold here in Asia due to their resources and regulations. However, one airline, Air Asia, has come forth and established a stronghold out of Malaysia and has grown year on year where they are currently offering flights to London. This growth is amazing considering that several dominant airlines with huge resources and established brands preside here.

The success of Air Asia can be easily attributed to entrepreneurship; the man at the helm is visionary and an entrepreneur. However, entrepreneurship is a broad term; there is no real meaning to what is entrepreneur. For example, if I decided to venture out and begin my business, I am entrepreneurial but it does not mean that I will succeed. My take on Air Asia and the success of similar companies though comes down to innovation and marketing.

So why is innovation important during these times? Innovation is actually key to business today. Innovation is the ability to create something new or develop a new process upon an existing process to improve efficiency. Continuous improvement, as such, is critical to a company's survival because this creates a competitive edge; the sooner and the cheaper we bring a product to the market, the higher the revenue will be for the company. For example, Henry Ford innovated the assembly line which allowed him to manufacture cars for less and in turn, increase sales and revenue for his company. Similarly, a company like Air Asia figured out the formula to attracting more customers for their flights through marketing and no frills flights, which, in turn, resulted in increased revenue and passenger traffic despite a lower per seat charge.

If we were to apply this view to the current economic situation, we can see that there are some critical lessons we can learn.

1. During an recession, let's keep our heads intact and not be reactionary, Take a look around you, there are still many companies that are figuring out how to succeed and are succeeding, so don't be down.
2. As a Manager and leader, stop being reactionary, instead be innovative. Think of new ways to improve your bottom line. Bear in mind, cutting headcount and reducing pay is only a temporary measure. Don't believe me. Consider the following. A reduction in your cost base (i.e. layoffs and salary reductions) only constitute a one time improvement on your balance sheet for the year; however, if the company cannot generate new revenue the following year, the company would be judged on the previous year's temporary reduction. In this case, no new revenue may be generated. However, in troubled times, if a company focuses on innovating itself, the results would carry through for many years because it is a core improvement to the efficiency of the company. This can account for improved sustainability of the company. This is the difference!
3. Having an MBA or a whole lot of credentials does not ensure success. Business is practical and not based solely on analysis. Learn to look at business realistically; sometimes looking at the simpler things like getting closer to your customers may be the simple key. No MBA will teach you that (mind you, I am not discriminating against people with MBAs or credentials but I am just advocating practcality and not theory).
4. Innovate...innovate...innovate and focus on improving processes and bringing your product to the market for less; this is long term improvement and not temporary improvement for shareholders.

Ovearall, I believe that we should stop solely worry about controlling costs. Yes, cost control is important but we need to balance it out with innovation in order to ensure that revenue comes in. Bear in mind, many companies (even well known ones) have disappeared over the years because they have failed to grow with the times and have failed to innovate.

Believe me, there are great companies out there that are surviving the recession and growing; in my view, Air Asia's upbeat outlook is testament that vision, innovation and a good leader can grow a small company into a powerhouse to be reckoned with.