Friday, September 11, 2009

What is systematic innovation?

When we hear about “Systematic innovation”, it is mostly like blind men touching different parts of an elephant and mistaking it to be the complete elephant. Some say it is primarily about managing research or R&D, some say it is about using technique like TRIZ, some say it is about managing change systematically, others say it is about taking new products to market systematically. Well, what kind of a beast is this “systematic innovation”? Let me attempt to present my view using an example of Tata Motors.

Let’s look at Tata Motors situation from three perspectives:

  • Year 2009 would be a year of contrasts in the history of Tata Motors. On one hand, it is proud to roll-out its already-iconic product Nano to the masses. On the other hand, it has suffered a massive quarterly loss of Rs.2,505 Crores in quarter ending June, primarily due to its expensive acquisition of Jaguar and Land Rover (JLR). Swaminathan Aiyar in his swaminomics blog says, Tata Motors is already in a survival mode.
  • Seeing a family of four riding a scooter and deciding to create a 4-wheeler which is affordable to the family is a story that will be told and re-told in India for generations to come. The manner in which Tata Motors went about transforming Ratan Tata’s insight into developing Nano is a matter of pride for the nation. It involved rapid prototyping, it involved out of the box thinking, it involved massive collaboration and much more.
  • When Tata Motors engineers met its partners and talked to them about the small car project and the critical role they will be playing, nobody believed them. There were two reasons: (1) They thought it to be a crazy idea, good for prototyping but not for real business. (2) They knew that engineers at Tata Motors hold car design close to their chest. With 75% of the design of cars like Indica and Ace done internally, partners thought Tata Motors engineers will never relinquish the control. As it turned out, Nano has less than 20% design done internally in Tata Motors. This was a huge transformation in mindset.

I view “systematic innovation” as a three-legged stool.

First leg rests on the theory of business which obeys laws of capitalism and creative destruction. At the end of the day it is the return of capital employed that matters and how you protect your competitive advantage or what Buffett calls business moat. And cost of capital like JLR acquisition makes a huge difference to the game you are playing.

Second leg rests on the process of idea management. It operates at the intersection of creativity and discipline. And it involves research not just in technology but also in marketing like immersive research and it involves business model exploration (see CEO model).

Third leg rests on the theory of human psychology especially social psychology and the laws of gravity associated with it. We humans don’t like change and we suffer from what Edgar Schein calls “learning anxiety”. In fact, unlearning is more difficult to us than learning. Letting go is even harder, like Tata Motors engineers letting go of their design control.

For building an innovation engine that is sustainable, you need to look at all the three legs and their relationships. When addressed in isolation, it can take you to a place worse than where you already are.

Related articles:

1. Organizational innovation eco-system

2. How innovative are you? A simple innovation dashboard

1 comment:

  1. In your view on mentioned idea management, often this term is taken as creativity and collection of idea which is far from enough.
    Innovation is the result of the adoption of a solution which reduces the "pain" of the users (to simplify)and therefore is an exploration of new territories, which as mentioned should satisfy some economics criteria. To do so some experiments should be conducted involving new business models, technologie etc this goes further than idea, for example it involved new project management methodology.
    The construction of a prototype, which test an assumption, is already a product on the way. It means that the organization should have a management system which supports risk taking, gives time and space. Rather that management of ideas I will call this "leg" the exploration system. System, which is implemented using some change methods as you mentioned.