Friday, August 15, 2008

Ideas to Concept – Small Ideas are better

Every time we conduct an idea generation workshop or a simple brainstorming workshop, people often like to come up with big dramatic ideas. For example, when I conducted a brainstorming session for a leading auto maker, people came up with big ideas – a new range of automobiles, Maglev trucks, a drastically different engine technology etc.

People like big breakthrough ideas. In fact, the bigger and sexier the ideas, the more people are drawn to them. During the idea generation sessions, even managers think about big ideas – its like everyone wants to hit a home run – a dramatic breakthrough that will alter the face of the industry.

In reality such big ideas rarely gets to the implementation stage. Most of the big dramatic ideas die quickly – and will not get past the first gate. The reality of innovation stories is that most innovations are all small ideas. There are few BIG ones – but they are as rare as a 10 carat color-A diamonds. (Which only governments can afford)

As innovation consultant, my advice is to go after small ideas. Small ideas are where the real action is.
Why do I recommend small ideas?
There are several reasons, but I will stick with just two:
1. Small ideas help build sustainable competitive advantage
2. Small ideas build performance excellence.

In the global economy, managers are hard pressed to give higher returns to investors. This implies that ideas with lower risks and maximum gains are the ones that should be implemented.

Sustaining a competitive advantage

Internet economy means that ideas implemented today will be copied by the competitor tomorrow. This means that BIG ideas of today will attract competition in droves and quickly erode the competitive advantage.
For example, Tata Motors designed & built TATA ACE – a breakthrough in mini-trucks for developing economies. But within one year of its introduction, three competitors have developed similar products: APE-Piaggio, Force Motors, and Mahindra & Mahindra. If Tata Motors were to rely solely on design innovation as a competitive advantage factor, that edge will be gone in a flash. (Imitation is also a form of Innovation, but the imitator has an advantage of avoiding costly mistakes)

Take the case of Motorola’s Irridium project: Motorola’s grand idea of anywhere communication system based on 66 satellites was supposed to provide instant wireless communication all over the world. It was one of the GRAND ideas. But implementing such a grand idea had so many challenges and in the end Motorola made so many design compromises - which made the final product unusable for most of the potential users. The handset was too big & bulky; the handset needed to have a line-of-sight communication with the orbiting satellite – which meant that these handsets cannot be used indoors, and lastly the cost of making a call was so prohibitive that it appealed to a select few.

The competition – in form of various telecom operators nibbled away the advantage of Iridium with lots of small ideas: digital cell phone communications, use of Dense wave multiplexing in Fiber Optics, CDMA, GSM etc – and in the end the operators could provide the same level of service as Iridium originally intended – at a fraction of the cost of Iridium.

In my study of sustaining competitive advantage shows that companies that implement a steady stream of small innovations enjoy significant competitive advantage over their competitors.
Take the case of Nokia for example, Nokia introduces at least 24-28 new handsets every year and with each handset Nokia introduces small innovations – which are usually based on the earlier innovations. All this together has helped Nokia build a significant competitive advantage over other handset makers.

If you are still not convinced about the futility of BIG ideas, see how many handset makers have competitive products to Apple’s iPhone.

My observation & my advice – BIG ideas sounds sexy, but implementing BIG ideas involves BIG headaches. Also success of a BIG idea will attract attention from competition and will soon flood the market with “me-too” products. Small ideas, on the other hand, are less likely to attract a direct competitive response. Also competition cannot really copy these small ideas as they are usually built on other small ideas. For example, Nokia introduced a series of business phones: E50, E51, E60, E61, E65, E70, E90, E91 etc. But the competitive response from Sony Erricsson or Samsung or Motorola has been negligible. Sony Erricsson has only one comparable model P1. Motorola has one: Motorola Q Even Blackberry has failed to meet Nokia headlong when Nokia is competing for Blackberry’s enterprise customers. Instead all the cell phone makers are working towards meeting the competitive threat of Apple’s iPhone.

My observation is that small ideas are less likely to attract attention from competitors, and often competitors will fail to respond to such small innovations till it becomes too late.

My advice is:
A large number of small innovative ideas implemented in measured steps through a detailed product development plan is the surest way to build a long sustaining competitive advantage.

Build Performance Advantage

In a recent innovation idea generation session, I used Lotus Blossom tool to help participants generate ideas. For this session, I had specifically asked the participants to generate ideas on “how to improve the product’s performance”. In the session 80+ ideas were generated and ~45 ideas were taken up for implementation immediately. The ideas taken for implementation were simple ideas that could be implemented immediately with little investment. The ideas generated in this session were specific to the company’s product and could not be copied by any competitor.
Employees always have ideas to improve the product or improve performance. By implementing large number of small ideas – one can drastically improve the performance or reduce the costs or both. Such ideas help in improving the market share and improve the bottom line.

A good example of this strategy is Bajaj Auto. Bajaj auto has implemented several ideas to improve the performance of its motorcycles – both in terms of fuel efficiency, handling performance and manufacturing costs. As a result, Bajaj Auto now enjoys a higher margin than its arch rival Honda motors.Another good example is Toyota. When Toyota entered US markets in 1970’s, American car manufacturers laughed it away. But Toyota persisted with small improvements in quality, fuel efficiency and reliability. By 2008, Toyota has become world’s largest car manufacturer. Today Toyota Prius has a fuel efficiency of 43 miles/gallon, while GM, Ford or Chrysler does not have one product that matches Toyota Prius in fuel efficiency.

Build Operational Advantage

Small ideas are often tough to imitate and almost impossible to copy – if the ideas are related to operations. Every company has its own unique operations, and operational improvements will result in increased efficiency which others cannot copy or imitate.

For example, Toyota’s new flexible manufacturing system allows it to build multiple types of vehicles with the same factory. This flexibility allows Toyota to rapidly change the product mix to suit the market conditions and increase profitability. Given Today’s high Oil prices, the demand in the US for Prius has gone up significantly while the demand for SUV’s & pickup trucks has fallen. To adapt, Toyota’s flexible manufacturing systems allows it to make more Prius cars instead of SUVs – thus gain market share even in a recessionary market. See: Autoblog
Also see: Toyota Adopts New Flexible Assembly System

Mahindra & Mahindra – an Indian auto major & world’s third largest maker of tractors has built an excellent reputation around operational advantage. Mahindra & Mahindra encourages innovations at the shop floor – which translates to incremental product development and improving manufacturing operations. For example, developing a chassis made of tubular steel rather than the traditional pressed steel for its SUV saved $17million/year in manufacturing costs for Mahindra & Mahindra. (See Harvard Business Review July-August 2008)

Small ideas – small innovations which lead to better operations are always tough to copy and thus it secures a strong competitive advantage in the long run. Japanese call it “kaizen” and have demonstrated to the world what such small improvements can do.

Closing Thoughts

Every company wants to out-innovate its competition. In this race, it is easy to get tempted to go after big innovations and managers tend to ignore small innovative ideas. But the business reality is different. Each small idea may not rake in big profits, but they build strong competitive advantages. When lots of small ideas are implemented, one can really build BIG competitive advantage and also BIG profits. Toyota, Nokia, Mahindra & Mahindra have shown how small ideas help. In my opinion, small ideas are like infantry while big ideas are like fighter jets. While the fighter jets make the big noise, it is the infantry that can really win the war.


EagleEye said...

a well written post.
You deserve a kudos for your bloglist...its informative.
A small err: The link to your book is incomplete


Amit Jain said...

I like ur way of posting ur ideas. But i would like to ask one thing " can u define "Taking idea to market". Hope u ll rely me very soon.
Thanking you
Amit Jain