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Incremental Change vs. Radical Improvement

September 1, 2009 7 comments

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. 

Radical vs Incremental Change

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. 

Design-Driven InnovationThe 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.

Web 2.0 is Changing the Rules of Advertising

The fast growth of technology has exponentially changed how we use the Internet. It has made businesses take a serious look into how to take advantage of the new version of the WWW or Web 2.0. Companies are forced to adapt in order to make the most of internet-enabled channels. This article talks about how social networking sites and search engines have changed the rules of the advertising game.

Social networking sites such as Facebook, Myspace, and blog service providers (such as Blogger, Blogspot and Multiply) have created a new medium that has elevated “interweb interaction” to a whole new level. Facebook, for instance, boasts having over 200 million users, LinkedIn has 40 Million, and Twitter, a leading micro-blogging site, has almost 26 million.1

Google is arguably the most influential company of the decade. It has changed advertising more than any other business. Google has revolutionized the ad business by enabling marketers to pay for performance rather than space, time and eyeballs.  It has opened up millions more places to place ads, increasing availability of ad channels.

Google has a simplified approach to advertising. It uses Google Adwords for advertisers and Google AdSense for site owners. With Google Adwords, advertisers only pay when people click on their ads. Companies can create ads and choose keywords related to its business.  These ads appear when users search online—making specific information available to an audience looking for it. Google Adsense on the other hand enables website publishers of all sizes to display relevant Google ads and earn. It gives site owners access to Google vast network of advertisers, so they can show ads that are suited to the contents.

When Universal Studios first announced they were opening the Wizarding World of Harry Potter, they did so by telling just seven people. They invited seven avid Harry Potter fans to a top secret webcast to inform them about the plans for the new theme park. By word of mouth, these seven people told thousands through emails, internet forums and blogs. Eventually, mainstream media picked up the buzz and wrote about it in magazines, news, and TV reports. In a few days, the news reached millions of people.2

The concept of advertising spaces doesn’t quite apply anymore to the world of social networking because we are not talking about static space, billboards, newspaper ad space, and television spots. The internet, where billions of users (estimated to be 70% of total population) have spent some portion of their time viewing pages and exchanging information, is the new medium. Unknowingly, social network users have become natural channels for advertising. For example, while writing this article and simultaneously facebooking, I came across a recent post from Thiago Pierson, a Brazilian colleague of mine, talking about a great steakhouse in Fort Lauderdale. He wrote, “Chima Brazilian Steakhouse in Fort Lauderdale is the best one so far!!” Naturally, being the steak lover that I am, my tendency was to google it.  I read the review and checked the menu. Now I am already making plans to visit.

1 http://helixcommerce.blogspot.com/2009/06/social-sites-are-everyones-space.html

2 The New Rules of Marketing & PR, David Meerman Scott

Web and Advertising

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