Businesses have been forced by the increasingly competitive global environment to change their business model and focus on innovation, pundits told a conference of their peers yesterday.

Speaking at the 2006 World Marketing Conference, Kan Trakulhoon, president of Siam Cement Plc (SCG), said the main challenge facing business today is learning to innovate. But innovation is not only about investing in research and development, he said. It is also about developing a new mindset of how to run a business.

The trick behind innovation is encouraging people - from the top to the bottom of the organisation - to think "outside the box" and be passionate about how to add value to products.

"The main motivation for companies to adopt business design innovations is to stay competitive in the world market," said Kan. Numerous changes had occurred in the marketplace, making innovation a must to sustain a competitive edge, he said. These include: emerging non-traditional business models and new industry structures; stronger retailers increasingly offering premium private label goods; knowledge and intellectual assets becoming essential parts of sustainable development; and the accelerating pace of change in the market.

Kan said the major drivers of innovations were the spread of global information networks, technological advances and globalisation.

Business design innovation, he said, involved a "customer-centric" rather than a "product-centric" focus, an expansive rather than a narrow view of business opportunity, a dynamic rather than a static perspective of the future market environment, and an emphasis on the multiple and interrelated strategic dimensions that drive shareholder value growth.

When it comes to innovation, the main challenge facing SCG, he said, was how to maintain cost leadership while creating top-line growth. The firm's key to success lies in its customer-centric approach, he said. The firm has changed the way its looks at consumers, and as the industry leader, must constantly be innovative, creative and quick to adapt.

David Haigh, chief executive of Brand Finance, said the key benefit of branding was in differentiating commodity markets.

Haigh said brands today were not primarily consumer focused, but affect all players, including consumers, traders, staff and stakeholders. Brands affect all business value drivers, he said, explaining that on the consumer side, "brand equity" created value through revenue, while on the supplier side, brand equity created value through direct costs. For employees, brand equity creates value through overheads, while in financial terms brand equity creates value through weighted average cost of capital.

Today's marketers have received a "wake-up call" and must be at least 50-per-cent focused on data and financial analysis, he said.

Brands, he said, could build shareholder value through trademark valuation and branded business valuation, which can be measured in technical terms through the balance sheet, taxes, litigation, securitisation and licensing. It can also be measured in commercial terms in the form of strategy formulation, budget allocation, portfolio management, brand translation, brand scorecards, mergers and acquisitions, initial public offerings and investor relations. Corporate brand reputation scores correlate with the stock price and brand value, Haigh said.

Haigh said Thailand should spend more money to develop the right research techniques, competitor analysis, and segmentation of target audiences to develop national branding.

Kwanchai Rungfapaisarn

The Nation