The Hindu Business Line, a respected business newspaper in India, carries an interview of Rishikesha Krishnan (Professor of Corporate Strategy, Indian Institute of Management Bangalore) where he talks about innovation. Here are some gems…
Q. India, the back-office of the world. And China, the global factory. Do both the countries have a strategy to stay competitive through innovation?
Rishi> The unglamorous incremental innovation in all aspects of the organization is the lubricant of ongoing competitive success. Innovations that improve efficiencies in production operations or service delivery translate directly into improvements in the bottomline. Particularly for companies in developing countries that can be far from the productivity frontier of global leaders, efforts at continuous improvement are critical to catch-up as clearly demonstrated by successful companies from South Korea and Taiwan. Both China and India realize the need to build innovative capabilities.Q. Are our [Indian] top companies innovating?
Rishi> The Indica and the Ace from Tata Motors, the Pulsar from Bajaj, the global delivery model conceptualized by our leading software companies and the lifetime prepaid card for mobile services are all excellent innovations from our top companies. A recent report by Booz Allen Hamilton rightly points out that the innovative output of a company depends not so much on the amount it spends, but more on the company’s capabilities in ideation, project selection, development and commercialization. Many of our leading companies demonstrate these capabilities in increasing magnitude.
I like Rishi’s examples. They are substantive and relevant. Despite this, in a discussion in a follow-up email thread, thoughts quickly turned to the hype that has surrounded the word innovation. Sanjay Anandaram fired a missive asking…
a) When is a process improvement an innovation? After all, BPR has been around for years - so is re-engineering of a process to achieve cost reduction an innovation. Is process improvement not continuous improvement and by extension continuous innovation?
b) Is every new marketing strategy an innovation? So if a company in India decides to use the mobile phone to market a product by using a model prevalent elsewhere, would that be an innovation?
c) Can one equate the innovation around the Apple iPod to that of say, Wipro transplanting Toyota’s shop floor process flows to its process flows on the shop floor of its BPO business?
Rajdeep Sahrawat, VP of NASSCOM, felt the same way…
“our innovation aspiration tends to be quite low. Minor improvements in product/process often get touted as examples of innovation. Hence moving a water dispenser closer to the workers to save walking time for drinking water becomes an example of process innovation. The danger of this is that we end up in trivializing innovation to a passing fad. Perhaps a ‘land a man on the moon’ kind of national innovation aspirations need to be created which will galvanize the collective energies of private and public sectors and result in both disruptive and incremental innovations.
There is definitely a backlash underway against the overuse of the word innovation. Reena Jana wrote about this in BusinessWeek in mid-Feb. This led to a flurry of blogposts. Niti Bhan suggested that this ought to be viewed in terms of the Gartner hype cycle. Scott Berkun came up with six ways to diminish the hype.
My view is that taxonomy around innovation is slowly forming. Clayton Christensen has introduced the notions of disruptive and sustaining innovation. With the context of sustaining innovating, he has co-opted the labels radical, incremental and displacement innovation. This framework is pretty useful but hasn’t yet become commonly understood. Most people trip up on how “radical” innovation can be the opposite of “disruptive” innovation. Unfortunately Clayton Christensen didn’t pick terms that would be intuitive to understand.
So let me take a shot at proposing a layman’s terminology. Here is what I have in mind…
I am not even going to describe this 2X2 matrix. If it has legs as a layman’s taxonomy, it shouldn’t need a big description! Let me know what you think.
[P.S. An abridged version of my article on IT Innovation Landscape has been published in Indian Business School magazine, Insight.]
Hi Sharad
If people were honest with themselves, they would realize that there is indeed a lot of innovation hype resulting in everybody branding everything they do as innovation. I would say that process and incremental improvements are very very important in their own right. But we should not confuse them with innovation.
Instead these incremental improvements are COMPLEMENTARY to innovation. A company cannot move forward with innovation alone.
– Incremental improvements are the mainstay to extract most value (aka money) out of innovations
– Incremental improvements create more profits that can be used for more innovations
– Process improvements allow companies to scale their innovations efficiently.
Example:
1.) The iPod is a great innovation in simplicity. But Apple is rumored to have a top-class SAP ERP system that allows them to fine-tune and keep on lowering the cost of their iPod’s and get more and more $$.
2.) The hybrid engine in the Prius is an innovation, but Toyota keeps on chipping down the cost of the Prius with incremental improvements.
Key takeaway:
You cannot come up with an iPod with incremental improvements. And lowering the cost of the iPod thru careful ERP and supply-chain optimization is not innovation; unless Apple came up with a revolutionary component that replaces an existing component at 1/2 the cost
Now let’s look at why most firms in India are more of cost and concept arbitageurs rather than real innovators. I would say that the reason is that there is no reward motive. You make much more money thru cost arbitrage that management doesn’t need to innovate or promote such a culture. Indeed the Indian firms do well thru operational and execution excellence more than anything else.
This is the same reason why customer service is absymal in India. Because there are so many new customers breaking down the door that the RoI on customer service is negative.
Sharad,
Leap-frog instead of “catch-up” as the term for the quantum reactive? iPod I would characterize as a leap-frog given we’ve seen mp3 players before. I would characterize this as the most common category of what we commonly (lay terms) call “innovation”.
On the proactive quantum, “category creators” could be a term I can suggest. World wide web, open source software are examples. Quantum innovations I presume are not just radically different ideas but also successful ones in terms of adoption, business models etc.
I presume your scale on quantum-incremental is more in terms of adoption and impact, hopefully not in terms of how innovative the solution is? If so, I wouldn’t bucket process innovations into the incremental — TQC, Six Sigma, JIT could be significant?
Vijay’s comment has given me an idea. Actually there is a simple way to categorize true innovation - based on the zero-sum principle.
Innovation - NOT a zero sum game. As Vijay said, these create new categories and create a whole new ecosystem that is worth much more than whatever it replaces.
Improvements - Incremental improvements are mostly zero sum games. if you can do something for 10% cheaper, you have 10% more profit. Or if you can achieve very good JIT inventories, usually the inventory costs are moved to the supplier who has to take care of warehousing to meet Dell’s JIT contracts.
I have no experience with TQC and JIT. But looking at Six Sigma and CMMI, I would be right in saying that these have not added value into software development. CMMI level 4 and 5 usually means the PM spends time inventing metrics to get the SQA out of range. Six Sigma is another manufacturing metric that everybody has happily imported into software development. As I keep on telling my colleagues, CMMI doesn’t write great software; great developers do.
Dear Sharad,
I like your simplified matrix.
Some thoughts:
1. With the opening up of the Indian economy, we have been suddenly exposed to an array of new things of all sorts, akin to a toddler’s first visit to the toyshop. That creates more potential for innovation.
2. The ‘race for recognition’ is what causes people to club both significant and not-so innovations together. I like Arun’s test (above) - innovation must not be zero sum.
3. There is more scope for innovation in the local context than when the end customer is geographically distant, simply because the problem can be understood more deeply.
4. Quality processes may or may not be innovations by themselves, but are enablers for sure. For example, better effort estimation ability may be an incremental improvement to an organization’s process, but is an enabler for the innovative estimation tool possibly developed to achieve that improvement.
Regards,
Vijay, I agree that leapfrog and category-creators are better labels. I’ll use them in the next version.
Arun, The zero-sum idea looks promising but I have to think more about it. Somehow I don’t look at relentless continuous improvement, say the Toyota Way, as having only zero-sum outcomes.
Atul’s point about a toddler is applicable to companies as well. Indian MNCs are just discovering what they can do. Its an exciting phase of growth. Right now they feel that anything is possible. They are still trying to find their limits.
Sharad,
here’s a different perspective on innovation. Everyone talks about being innovative, ideating (whether big or small). I think there’s another side to it - the ability of absorbing and deployment innovation within the system. It might be as simple as rolling out best practices or as complex as coming up with a startup that disrupts the incumbents. This ability is a cultural thing, every culture has it to a differing extent.
Deployment is as critical since innovation/ideas/inventions have no meaning if there wasn’t a system to absorb them. This is the reason why some patents become so valuable. Another way to look at it. 15 years ago, it used to take 3 years or more to get a new phone. Now, you are starting to get 2 MBPS broadband with your phone and IPTV is perhaps a few years away. The rate of deployment is accelerating and hence ideas are becoming more and more important. This is extremely visible in India. I remember as a child, new ideas were not as important as “conforming” was.
There was an article from McKinsey that looked at the productivity of nations. US was on top. I am wondering if productivity of an Organization / community / society / Country is not directly linked to it’s capability of absorbing innovation.
I submit that while ideating/innovating is the sexy thing to do, it is the capability to absorb and deploy innovation deeply is where the real payoff happens. While new ideas, patents generate revenue. The real money lies in identifying the right ideas, absorbing and deploying them deeply. And yes, the ability to create and deploy are very closely linked together (but not always - e.g. I consider myself quite innovative but I’m actually very conservative in trying out new software or new equipment - I usually stay behind the curve).
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