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When I say 'Innovation' - I mean this!

Continued from: Wasn't Entreprenueship About Innovation

After Mohammad Yunus received his Nobel for microcredit - so many people have thought of starting up a micro-finance institution - its a simple idea, with minimal risk (if you know how to manage money) and what's more it in line with social justice.

But as I have discussed with some of you - no point entering a field unless you can bring in some innovation to it - could be technology, process or scale. And boy! there could not be a better example than this to illustrate my point ... Kiva!

Source: Kiva: Improving People's Lives

Like a social networking site, Kiva posts profiles of potential borrowers. Lenders then peruse the profiles and make loans to people whom they find appealing.

Once a lender makes a loan, Kiva sends the money to a microfinance institution, or MFI, in the borrower's home country. The MFI disburses the funds and works with the borrower to ensure timely repayment. In the language of the banking industry, the MFI services the loan.

[Kiva] won't take just any potential borrower in the developing world; a boot maker in Bolivia can't post his information directly on the site. Kiva only takes borrowers brought to it by MFIs that it has carefully vetted, and it will suspend loans to MFIs whose borrowers have high levels of delinquent loans or whose operations seem shaky.
Kiva is a splendid example of what I mean by technology and process innovation - they changed the process of micro-financing and also brought in technology to enable it. Just when everyone was thinking that micro-finance itself is a big enough innovation, here comes a startup which shows what more can be done.

Some other popular forms of process innovation can be found in India's BPO industry where processes have been broken down and converted into streamlined workflows enabling them to be offshored and being done by people far away from the heart of their operations. The third kind of innovation - scale innovation - is epitomized by Chinese manufacturers - the way they have demonstrated how adding scale to production can lead to reduction in its costs. There are others like Wall Mart who have shown us how scale can mean productivity.

My point - unless you bring in some kind of innovation - you become another "also ran" player in the market and competition with more experience or with innovation will beat you hands down. Unless you have some idea about what "difference you can make" - don't become an "also ran" in the market. And conversely, if you should startup - think hard about what kind of innovation you can bring in.

I rest my case - reactions are welcome!

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