Innovate NOW to Thrive After the Recession

Most companies recognise that they need to continue to innovate if they hope to have even half a chance of thriving after the recession is over (assuming they survive it that is). That means that they have to find a workable balance between small-i incremental innovation and BIG-I radical innovation. Obviously, it is much easier to concentrate on small-I innovation rather than BIG-I innovation. But that isn't always enough to ensure success.

Small-i innovation can be very successful. Just look at Toyota. Toyota came #3 in the recent BCG/Business Week survey of The World's Most Innovative Companies. It took the #3 spot for its process innovation though, not for its product innovation. Although Toyota is perhaps most famous for its Toyota Production System process, it gets just as much value out of its Kaizen incremental innovation process. Toyota managers reckon that it has made over 20 million incremental improvements to its business using Kaizen over the past 40 years! Indeed, at Toyota Kaizen is daily business for the majority of staff. For example, when I was Head of CRM for Toyota Financial Services a while back, the team made as many as 50 incremental innovations a year to some of the marketing programmes. Each incremental innovation only had a small effect by itself, but together the innovations were enough to lift results by as much as 50% in some cases.

Maybe small-i innovation is enough for most companies to survive the recession. But I don't think that it is enough if you hope to thrive once the recession is over. And that means investing in innovation now so that it is ready to go to market when the recession is over. For that you need the oomph that only BIG-I innovation can bring. The challenge with BIG-I innovation is that it has a rotten record of success. For most businesses, inventing new products fails on average 80% of the time. According to Harvard Business School's Professor Clayton Christensen, 75% of this is due to not really understanding customers' real needs; in terms of the jobs they are trying to do and the outcomes they desire from doing them. And according to Strategyn's Tony Ulwick, understanding customers needs in this way can increase innovation's success rate up to 80% or more. That is quite a difference.

BIG-I innovation is a difficult but necessary investment for companies even in a recession like the one we are just entering. As Wharton Business School’s Professor George Day wrote in a recent article, Sustaining Corporate Growth Requires 'Big I' and 'small i' Innovation. The real challenge is increasing the odds of BIG-I innovation being a success in the market. For that you need to really understand customers’ needs. It’s time to find out what jobs customers are trying to do and what outcomes they desire. It's time to harness customers to drive BIG-I innovation.

Graham Hill
Customer-driven Innovator
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Further Reading:

George Day, Sustaining Corporate Growth Requires 'Big I' and 'small i' Innovation