Real Innovation
AIT Group - Competitive Strategy and Innovation Inventioneering - Innovation is in our DNA Valeocon Management Consultants - Value Innovation Click To Learn More About PremiumLinks
Home  >  Real Innovation Commentary
Search:
  • Free Newsletter!
  • What is Innovation?
  • Theories & Strategies
    • Breakthrough/Disruptive Innovation
    • Incremental Innovation
    • Open Source Innovation
    • Closed Source Innovation
    • Sustainable Innovation
    • General
  • Methods
    • TRIZ (Theory of Inventive Problem Solving)
    • TILMAG (Transformation of Ideal Solution Elements with a Common Associations Matrix)
    • Brainstorming (BrSt)
    • Brainwriting (BrWr)
    • Heuristic Redefinition Process (HRP)
    • General
  • Tools & Tactics
    • Breakthrough/Disruptive Innovation Tools
    • Incremental Innovation Tools
    • Culture
    • Leadership
    • Joint Ventures/Partnerships
    • Acquisitions
    • Outsourcing
  • Metrics
    • Research & Development (R&D)
    • Patent Creation
    • Other
  • Best Practices
    • General
    • Software, Innovation and Creativity
    • Consultants, Innovation and Creativity
  • Method Selector
  • Dictionary
  • Events
  • Jobs
  • News
  • Commentary
  • Discussion Forum
  • Related Topics
  • Business Process Mgt
  • Outsourcing
  • Six Sigma
  • TRIZ
  • Quick Access
  • Help
  • Search
  • Advertising
  • Article Archive
  • Newsletter Archive
  • Reader Feedback
  • Editorial Panel
Cass Pursell

Commentary by Cass Pursell

Email and RSSSubscribe via Email or RSS   |   Cass Pursell's Biography Biography
March 31, 2008
Print | Email

A Vote for Process Innovation

Think of the most innovative companies in the world. Better yet, pick one. Focus on it. Get it firmly in mind.

How much of that company's annual revenue is represented by new products? If it's a young company you're thinking of, that percentage may be quite large. If it is an established company, however, it's likely that the percentage of revenue represented by new products has gotten smaller each year. Even in companies where new products still represent 40% of revenue each year, that leaves 60% that is represented by existing product lines. Sixty-percent of revenues, conservatively, that stand outside of the innovation intentions of organizations which have not employed a systematic process innovation strategy.

I've argued recently that the goal of an innovation program should be to assist in creating and driving sustainable growth. If we can agree on that as a goal, then I would further argue that process innovation is the most important innovation strategy of all in terms of sustaining growth and creating value.

If product innovation strategies are the engines that drive an organization up a steep growth curve, then process innovation strategies are the brakes that prevent the organization from slipping back down. Companies that employ systematic process innovation strategies have focused on improving the speed, reducing the cost, and enhancing the quality of the processes that support the delivery of their products or services. If they have been successful in implementing this kind of strategy, then this approach is built-in to their organizational cultures.

Process innovation strategies are so powerful because the resulting competitive advantage lasts longer than the competitive advantage derived from product or service innovation, which competitors are relatively quick to copy. Process innovations are comparatively difficult for competitors to duplicate, and are therefore arguably more disruptive than a new product or service. For an easy case-study, look at what happened to the automotive industry when Japanese manufacturers innovated their production processes - the then-dominant Big Three US car makers were caught flat-footed, and were not able to replicate the process innovations for nearly three decades, causing a complete realignment within the market.

Here's a little thought experiment that can act as an acid test that anyone can take when comparing product innovation strategy to process innovation strategy. If Warren Buffet were to present you with a choice between two stock portfolios, one consisting exclusively of companies focusing on product innovation, and the other consisting exclusively of companies focusing on process innovation, which would you choose? It's not an easy decision, and that in itself speaks volumes.

Comments [3] | Permalink
Categories: Strategy

COMMENTARY COMMENT
ADD A COMMENT

posted by  Lynda Curtin  [ http://www.deBonoForBusiness.com ] March 31, 2008 at 3:36 pm
You ask a question which I think Warren Buffet wouldn't pose - chose between two stock portfolios - one process innovation, the other product innovation focused companies.

He looks to invest in companies: that offer products and services he understands; where he can completely trust the management team to run the business; he believes will be profitable over the long term. Perhaps by nature they are process innovation companies. Often his deals are done very quickly and with a hand shake.

The owners that sell to Berkshire stay on to continue running their companies because they love what they do, have a passion for their work, are very focused on the customer, and have a very high level of integrity. They know he isn't going to mess up their companies.

I love this quote of his in his 2007 annual report - "I've reluctantly discarded the notion of my continuing to manage the portfolio after my death - abandoning my hope to give new meaning to the term 'thinking outside the box.'" Humor is important!

Berkshire is currently number 2 on the list of America's most admired companies - the top 20.

I think he models the "softer side of innovation" which can't be quantified very easily - integrity, trust, invest in good people, stay out of their way - after all you hired them to do a job, take the long view.

From a leadership perspective many executives could learn a lot by reading his annual reports.

Innovation is a people process - one of the keys that is easy to drop.
 


posted by  Cass Pursell April 1, 2008 at 11:40 am
Hi Lynda - thanks for the comment. Great quote from Buffet! And I completely agree with your take on his style and process.

I didn't intend for that line about Buffet to be taken literally, and on reflection could have made my point more clearly. I was using Buffet as an iconic symbol of ridiculous wealth, and could just as easily said "your rich uncle Ned" or something of that nature.

Thanks again!
 


posted by  fiona  [ http://lovermus.com ] April 6, 2008 at 2:04 pm
I agree most of the successful companies has undergo innovation. When it is constant (innovation) there is progress.
 

ADD COMMENT
(*) indicates required fields
author (*) :
email address :
url :
 
  bold italic underline add hyperlink add email hyperlink centre unorder list order list add image quote emoticon smiles
 
comment (*) :

max characters : 1500

characters remaining :
remember me :
To help us prevent spam-generated submissions,
please enter the summation of 3 and 3 below:
 
 
 
RECENT ENTRIES
RSS
  • A Vote for Process Innovation
  • Structure is a Good Thing
  • You Measure What Matters
  • The Decline of the Corporate Lab Rat?
  • Where's My Return on Innovation?!
  • Wal Mart Saves the World

LATEST COMMENTS
  • Why Is Innovation a Competition? by Ellen Domb
  • Why Is Innovation a Competition? by Andrei Golidze
  • The Customer-Centered Innovation Map by Ellen Domb
  • All Solutions Are Not Equal by Ellen Domb
  • Teaching Innovation by mike Lafond
  • The Customer-Centered Innovation Map by Navneet Bhushan

COMMENTATORS
Katie Barry [40]  RSS Katie Barry's Biography
Ellen Domb [36]  RSS Ellen Domb's Biography
Praveen Gupta [34]  RSS Praveen Gupta's Biography
Michael S. Slocum [33]  RSS Michael S. Slocum's Biography
Cass Pursell [27]  RSS Cass Pursell's Biography
James Todhunter [17]  RSS James Todhunter's Biography
Jack Hipple [13]  RSS Jack Hipple's Biography
Michael Cyger [10]  RSS Michael Cyger's Biography
Lynda Curtin [7]  RSS Lynda Curtin's Biography
Bob Carter [4]  RSS Bob Carter's Biography
Guest Commentator [3]  RSS Guest Commentator's Biography
All Commentators

CATEGORIES
About Commentators [10]  RSS
Buzz/Press [40]  RSS
Companies [16]  RSS
Conference [37] RSS
General [96]  RSS
Leadership [4]  RSS
Management [45]  RSS
Methodology [61]  RSS
Strategy [60]  RSS

ARCHIVES
RSS
  

* Current Month
* Full Archive



Ad Links
Design for Six Sigma eLearning

TRIZ training, business & technical applications

Innovation programs from BMG

Business Innovation in the 21st Century (eBook)


Legal Information. © 2006 CTQ Media LLC. All rights reserved. v1.0, 0.1 Submit an Article • About Real Innovation • Contact Us • Privacy Policy • Site Map