Incremental Change vs. Radical Improvement
Building an engine that generates a steady stream of innovations in processes, technology and product development is difficult, but companies that are able to do it, differentiate themselves from competitors. Innovation groups (other companies call it evolution committees or R&D groups) should focus their energy on:
- Incremental Improvements (streamlining, optimization, reengineering, cost reduction, reliability)
- Radical Periodic Improvement (New platform, new methods, new strategy, new philosophy, Enterprise 2.0, leap to Process Culture, etc)
Examples of two companies who have mastered innovation are Toyota and Google. Both are leaders in their respective industries. Toyota’s success is tied up to its well-known business model– the Toyota Way that has been duplicated by other companies in different industries. The Toyota business model has been so successful that the company has relied on it for decades now to run its global business successfully. Toyota, for a long time, has a strong process culture and its continuous dominance is driven by its focus on incremental process improvement that is tied up to its quality operations and production management.
Google, on the other hand, grew rapidly because of the radical rules they initiated that redefined the use of the Internet. Roberto Verganti in his book Design-Driven innovation compares this radical change to having a vision, and taking that vision to the heart of the customers. In the case of Google, this means the Web users. Think about it. This company has overturned our understanding of the use of information and networking. Jeff Jarvis in his book What Would Goggle Do?, talked about Google differentiating itself from the likes of Yahoo and AOL. Unlike the previous search giants, Google is not a portal; it is a network of platforms. Google, in a way, empowered the users of the internet, changed media and redefined the advertising rules. We as users have not asked for these new necessities, but when we experienced them, it was love at first sight.
It’s hard to imagine how already huge companies such as Toyota and Google can continue to improve and sustain growth well into the future. They have perfected the fuel that keep them competitive and well ahead of everyone else. They rely on the combination of continuous incremental changes and periodic radical innovations. I think it is mandatory for companies who aim for sustainable growth and continued primary industry position in the future to push for visionary innovation. There is no single scheme to follow. It is a transversal process that depends on combining industry experience and strong innovation methodologies that create new ideas, new technologies, new products and new processes.
Design-Driven Innovation- Book Recommendation
Last weekend, I came across a book entitled “Design Driven Innovation: Changing the Rules of Competition by Radically Innovating What Things Mean”. This recently-published book is written by Roberto Verganti — a professor of Management of Innovation at Politecnico di Milano. He is the founder of PROject Science, a consulting institute that provides consulting services on management strategic innovation.
The book caught my attention initially because of its title. I have a close affinity for design initiatives, having moved early last year across the Pacific from Asia to the company headquarters to join a Global Design Team. I have always believed that innovation from a well-thought out design initiative can radically improve a company and change the rules of competition in its industry — be it product innovation, organizational, technological, process and company philosophy.
From the front flap of his book, Professor Verganti presented his vision of a bold new way of competing. He wrote, “Until now, innovation studies have focused either on radical innovation or incremental innovation pulled by the market.” He explains that “…design-driven innovations do not come from new markets; they create new markets. They don’t push new technologies; they push radically new meanings.” His book talked about innovative products like Swatch in the 80s and as well as Nintendo’s Wii and Apple’s iPod – both of which are currently dominating their respective markets. In the fourth chapter of his book, Professor Verganti provided a comparison between the innovation strategies of Nintendo, Sony and Microsoft in the US$30 billion game console industry. Nintendo, after dominating the game market in the 80s, was experiencing a downturn, until they released their revolutionary Nintendo Wii. Meanwhile, Microsoft and Sony were focused on incremental improvements on their Xbox and Playstation products through better speed and graphics. Nintendo, on the other hand, introduced the radical idea of using game consoles as an active physical entertaining medium. It generated new meaning to game consoles and appealed to different consumers worldwide.
I think managers who are interested in innovation should get a hold of this book. This can be used as essential reference for all those interested in design and determined to make innovation the driving factor in their business and profession. In my case, the reason I bought this book is because I am interested in Processes and IT innovations. I believe this book will definitely provide me insights on methodologies that can drive process innovation initiatives. It is something that I want to write about and explore.
Book Cover Image Courtesy of Harvard Business Press.