Industry innovation must extend to business models

When most companies think of innovation, they focus on developing new technology or products - the process that is typically relegated to separate research and development departments where dozens of very expensive, highly qualified engineers rule.

This is an expensive and risky way to innovate: R&D budgets in some industries go as high as 30 per cent of sales while the return on this type of innovation remains elusive. Every company wants to be the next Apple but this Jobsian style of innovation is hard to pull off. Asian giants have attempted to replicate this model of innovation with limited success, often due to limited knowledge of markets, and the inability to find talented designers and engineers, who are concentrated in Silicon Valley.

But if we look at the history of disruption, there is much more than new technology that is behind the companies that disrupt and change industries.

Consider the history of the automotive industry as one example. It was Henry Ford's business model that brought the technology developed by Gottlieb Daimler and others to the masses. It was then Toyota's business model, the famous Toyota Production System, which ensured that we could trust the cars we had would always work, and now start-ups such as Uber and Tesla are disrupting the business model of the industry again.

Uber (and other similar taxi apps such as GrabTaxi and Easytaxi) have built platforms that match the demand for rides with service providers efficiently, eliminating the need for mass car ownership.

Tesla realises that electric vehicles need a business model to be viable and has broken many of the rules of the traditional automotive industry, eliminating dealership networks and focusing on providing infrastructure for charging cars and replacing batteries as much as on the car itself.