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A primer on Incremental Innovation

January, 2020

The ant nest is a den of channels dug in the ground. The loose earth from the channel heaps in a little hill. The ants build it by moving the soil, crumb by crumb in constant pace by the worker ants. The same idea when applied by organizations to further develop products, services or processes is termed as incremental innovation.

Incremental innovation* is a series of improvements or upgrades made to a company's existing products, services, processes or methods. The changes implemented through incremental innovation are usually focused on improving an existing product's development, efficiency, productivity, and competitive differentiation”

Kaizen

Kaizen – “a Japanese philosophy of continuous improvement” is a traditional Incremental Innovation framework to bring evolutionary change in the existing processes by adding new capabilities or process refinements. Kaizen entails continuous efforts to improve ongoing processes resulting in small, often imperceptible, changes over time. These incremental changes add substantial process improvement over the long term, without having to go through radical innovation.

Toyota Production System

The kaizen philosophy was developed to improve Japanese manufacturing processes to achieve high quality at low costs. However, we can gain benefits by applying the kaizen approach in other industry too. The most notable example is the Toyota where Kaizen functioned as a core pillar of The Toyota Production System (TPS) to improve its processes. The result is a value-creation ecosystem where the customer always wins. TPS is a philosophy developed by Toyota leaders from 1948 through 1975. Today, Kaizen has been widely adapted as the basis for Lean manufacturing. Kaizen lays out an action plan for innovation and provides steps for solving problems and empowers the workforce to use them. Kaizen encourages healthy habits such as curiosity, problem-solving skills, persistence, challenging the status quo, and workforce engagement.

Today with Kaizen culture, the digital transformation at Toyota includes using mixed-reality technology on the factory floor. The company has adopted technology that superimpose graphic or textual data over the real world. The AR technology is expected to change the pace and speed of processes, such as checking the thickness of a car’s coat of paint. A process that once took two days can now be completed in two hours. Kaizen has the power to transform companies, but it takes a commitment to change and the leadership to support.

Design Thinking

IDEO is often credited with inventing the term “design thinking” and its practice. IDEO has been practicing human-centric design since 1978 and coined the phrase “design thinking” to describe the elements of the practice namely —empathy, optimism, iteration, creative confidence, experimentation, and an embrace of ambiguity or failure.

“Design thinking is a human-centric approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” —Tim Brown, Executive Chair of IDEO

Design thinking uses creative activities to foster collaboration and serves in human centric solutions. The approach adopts a “beginner’s mind,” with the intent to remain open and curious, to assume nothing, and to see ambiguity as an opportunity.

Apple used design thinking to fuel innovation

When Steve Jobs returned to Apple after being fired, the company’s share was worth US $5 with future uncertain. Today, Apple’s share price is around US $270, and the company achieved revenues of US $259 billion in 2019 with net income of US $55.5 billion.  

Steve Jobs applied design thinking principles by focusing on:

  • People’s needs and wishes
  • Design to desire Apple products
  • Creating user-friendly products

In this duration, Apple executed a series of continual improvements that supported their success in the market. Some examples are

  • Launch of website for direct sale of products to consumers
  • Rationalized the product portfolio based on the speed of the market’s robustness and its share.
  • Customers involvement in design and development by participating in usability testing
  • Focus on Materials and manufacturing process

Airbnb walked into the customer shoes to revolutionize tourism

During 2009, Airbnb was on the brink of Bankruptcy wherein the revenues barely reached 200 dollars a week. One of the Founders Paul Graham began to analyse their Ads in NY and saw a repetitive pattern in all the pictures. The pictures did not give the consumers the look and feel of the room in the home and poor picture quality, as the owners captured the pictures on their smartphones and the same were posted on the website.

The Airbnb founders took a decision to solve the problem by travelling to New York, renting a camera and spend time with the owners to take great pictures of their home. The Airbnb founders put themselves in the shoes of the customers and used the design thinking principles to understand the user’s needs. A week into the release of the enhanced pictures, the team began to make 400 dollars a week. Given the success, the team decided to follow the design thinking framework – Empathize, Define, Design, Prototype, and Test to come up with improvements for the product. One of the notable examples wherein one of the Airbnb designers was told to study the function of the stars given to the Homes. After spending a day, the designer decided to replace the star with a heart, thinking that users rewarded the service coldly with the stars. The heart, however, went deeper. He got it right. The simple fact of replacing a star with a heart increased business by more than 30%. Airbnb has gone from making 200 euros a week to revolutionizing tourism: Airbnb is available in more than 190 countries and has listings in over 80,000 cities around the world. The technology of Airbnb can support 1.9 million bookings at any given time today.

Summary

Today majority of the SaaS software companies introduce changes into the systems on a daily or hourly basis. “Amazon changes product prices 2.5 million times a day, meaning that an average product's cost will change about every 10 minutes” – an excerpt from the book "Swipe to Unlock: A Primer on Technology and Business Strategy" goes to show the dynamic change cycles inherent in the business models to improve the sales of their products. Amazon can achieve this based on incremental changes by analyzing customer data and buying patterns.

Innovation in business is exciting, but the truth is all innovations are not revolutionary. Many innovative ideas in business are small, but they drive forward a new and improved way of performance. If a company encourages continuous innovations, then it paves the way for path making breakthroughs and succeeds in establishing an incremental innovation culture. Incremental innovation means you’re continually launching better versions of your product or service. We tend to associate with radical or disruptive innovation but, most growth is achieved through a steady stream of incremental innovation that is more frequent and economically predictable. The success rate of radical innovations is less than 15%. Small improvements can add significant change over time, and Incremental change is the key to growth. The Success of innovation management lies in achieving a balance between the evolutionary and revolutionary initiatives that will sustain the growth of both the short-term and the long-term business goals.

Reference:

  1. https://searchcio.techtarget.com/definition/incremental-innovation
  2. https://www.ideo.com/about
  3. https://en.wikipedia.org/wiki/Kaizen

About the Author:
Sharad is an experienced product management professional with a penchant for ideation, product development and launching products for High Technology, Public sector, FMCG and Travel & Transportation industry. Sharad is working as a Deputy General Manager with BIAL where he is building the customer experience platform and enterprise data platform for the 30 million customers. Follow my twitter handle @sharadskatwa for posts and trends on product management and Digital.

The views shared are my own and not endorsed by my employer