Necessity is the mother of innovation! Or so the adage says.

Currently the hire industry and rental industry are facing tough times, creating the business circumstances that foster necessity.

These are the times when innovative ideas, whether market solutions, business models or technology will be created, they can be a dream period. But the question is by who?

Will such innovation originate from the Hire and Rental Industry Corporations or the smaller hire and rental companies and/ or suppliers?

Let’s look to what has happened over the last thirty years as an indicator of what may happen.

Background

Consider this, that since 1980, Corporations have completely lost their monopoly on new ideas.

This change in innovation sources ended the era of IP monopolization. We are no longer in the era when “feudal lords” (i.e., a small handful of large “old economy” companies) controlled all the (intellectual) property and those who were without property had no rights. [1]

In 1980, Corporations accounted for 80% of all innovation (research and development outcome), they now account for under 20%. The beneficiaries have been small to medium sized companies who now account for 80% of innovations.

A key trend emerging in the knowledge economy is the change in the sources innovation. Prior to the 1980’s, large corporations dominated US research and development, with over 80% being undertaken by companies with more than 5000 employees. However since 1980, this has completely inverted, with small companies accounting for almost all the growth in R&D. [2]

This leadership position of small companies is not just driven by the fact that they out number large companies, that fact is they are just far more innovation efficient. Data shows that small businesses generate 13-14 more patents per employee than large firms. [3]

Innovation Sources in the Rental or Hire Industry

Certainly hire and rental companies rarely produce patents, but they do produce innovative market ideas and business models. It will be during this current economic period that we will see some great innovations.

Why are we confident that the new ideas will emerge from the small to medium hire and rental companies? Because that is where the intellectual talent and drive now resides!

The reason is that when corporations began down-sizing and out-sourcing in the 1980 and 1990’s, it was often their best talent that put their hands up to leave. Why because often these talented people could see opportunity. Opportunities such as supplying back temporary roofing solutions (products and services) to building companies who had downsized. Or providing back event management and event hire services to the marketing departments of major corporations. This loss of talent can be directly correlated to the loss of innovation from the corporations.

Secondly this talent in the small to medium sector is driven not only by necessity but by aspiration driven by ownership or equity rewards in the success. Furthermore, they have the freedom of action denied to corporations, who from experience are often held back by meeting shareholder expectations and competing internal interests.

Here is a really good quote from 1978, in a Time Magazine article. Reading it, even though its over 30 years old, you realize it still applicable today to the Corporate world.

Why did the trends begin to shift? Arthur M. Bueche, senior vice president for R. and D. at General Electric, which remains the most research-oriented of big U.S. companies (862 patents won last year), is concerned about a change in the American character. Says he: "We've gone from an expansive, gung-ho attitude to a defensive, 'What's in it for me?' attitude." Faced with a challenge, Americans are now more likely to say, "Let's not risk it." Among factors behind the U.S.'s "innovation recession": [11]

Contrast this to the attitude of smaller companies with talented driven people. Necessity, freedom of action, aspiration and rewards will mean that this defensive attitude is not likely to be as prevalent amongst the small to mid sized companies.

Decline of the Brand

Finally the power of the brand is no longer protection for a downturn. The power of “the Brand” is also in decline.

Previously Corporations traditionally invested heavily in their brands, as a form of insurance to carry them through when tough times, what the Nokia CEO Jorma Ollila, called mis-steps. [4] However as Nokia also found out, it is insurance than no longer guarantees results. Nokia estimated brand value in 2002, was $30bn, next year (2003) they failed to produced want customers wanted and so Nokia lost $6bn in brand equity. [5]

Building brands meant focusing on building customer loyalty. However Jean-Noel Kapferer, Professor of Marketing at HEC Paris, Graduate School of Management makes the point that marketers have sort the holy grail of customer loyalty by restricting their choices . The problem is customers are no longer loyal. [6,7]

Things may not be quite as bleak as Kevin Roberts, CEO of Saatchi & Saatchi describes it, but things are certainly harder.

“Brands have run our of juice, they’re dead”. “Now the consumer is boss. There’s no where for brands to hide”. [9]

If Corporation no longer have a monopoly on new ideas nor count on their reputations to carry them through, they’re forced to innovate to stay alive” [10]

So if you are small to medium sized hire or rental company, it may be time to take hope and back your judgment and consider implementing innovative ideas.

We have! We invest heavily in creating a culture of innovation and the confidence to back our judgment. That is why we are the innovation leaders in the hire industry and rental industry markets. For more information or to talk to us, go to www.makinglifeezy.com.au Hire and rental business software solutions to the world.

[1]Jarboe, K.P. Furrow, R. Intangible Asset Monetization, Athena Alliance April 2008, p3

[2] Nakamura, L. The rise of US intellectual capital: A trillion dollars of intangible investment annually, Federal Reserve Bank of Philadelphia

[3] Millien, R. and Laurie, R. Op. Cit.

[4]Surowiecki, J. The Decline of Brands, published in www.wired.com/wired/archive/12.11/brands_pr.html

James Surowiecki is the author of “The Wisdom of Crowds”

[5] Surowiecki, J. Op. Cit.James Surowiecki is the author of “The Wisdom of Crowds”

[6] Kapferer, J-N. The roots of brand loyalty decline: an international comparison. Ivey Business Journal, March / April 2005

[7] This concept of restricting choice parallels the IP monopolization

[8] Surowiecki, J. Op. Cit.

[9]Surowiecki, J Op.Cit

[10]Surowiecki, J Op.Cit