How we innovate

/How we innovate

Rapid Incrementalism > Quantum Leaps

 

Innovation is one of the most common buzzwords in the corporate world and more so in the technology industry than anywhere else. It simply means to introduce something new (and presumably better) to the currently established or accepted state of things, be it a new idea, product or method. Its appeal is easy to spot. Every organization wants to (and almost as important, to be seen to) make the world a better place in some meaningful way and innovation is generally considered to be the best way to do so.

By its very nature any innovation disrupts some established order and replaces it with a superior one, yet this word ‘disruptive’ is not applied to all innovations. It has become a widely accepted practice in recent years to use this as an adjective to refer specifically to innovations that have a particularly large impact. This makes ‘disruptive innovation’ the most widely glamorized kind of innovation and for most of us these words inspire thoughts of a giant leap forward in a particular arena. Apple for instance disrupted the mobile phone business to become the world’s most valuable phone manufacturer by creating a new, full-touchscreen phone that was easy to use without any specialized equipment like a stylus. This represents a massive shift in how things worked in that industry and its impact is indeed large, making it massively disruptive. However, while quantum leaps like this undoubtedly produce significant impact over a compressed period of time, the counterintuitive truth is that they do not always directly correlate to maximum impact over the long term. And if the amount of impact an innovation produces is the metric by which we decide whether or not it is noteworthy or disruptive, then it makes sense to understand what kinds of actions produce the most impact.

Say you’re talking to two different sales people about their performance over the last 6 months.

John says: “I focused on closing 2 large deals which took 4 months to close and on closing, they grew our revenue by a whopping 50% in the last 2 months alone.”

Jane says: “I focused on the smallest deals where I could close 1 new customer per day, which grew our revenue by 0.5% every day.”

Which of these two people had the most impact on your bottom line?

At first glance it may be tempting to pick John but while his 50% delta sounds far more impressive than Jane’s 0.5% delta, the numbers reveal a different story (yet another point in favor of relying on data over instinct).

Fig. 1: Area under the curve = Total impact.

It may not always seem or feel like it but in the long run, small, incremental changes delivered with high speed and consistency are actually far more impactful than large, perfectly polished ones delivered over a longer period. The math tells us that a 0.5% daily improvement beats a 50% surge in 6 months every time. In fact, Jane’s approach had 655% (6.5x) more impact than John’s approach, over the same period of time.

Also important is the fact that ensuring you deliver a simple 0.5% improvement for the day, every day, seems a lot more achievable, making it a lot more manageable in practice than the far larger project of ensuring you deliver a 50%+ improvement at the end of six months.

Below is the continuous software development process of most engineering teams illustrated in one diagram. However, the principle behind it can generally be applied to the innovation process in virtually any other enterprise.

Fig. 2: X loop cycles per day = X2 impact per day

Just like Jane, the shorter and tighter your loop, the more loops you will undergo over any given period of time and the more impact you will have over this period. In other words, the maximum amount of impact you can have is directly limited by the design of your processes so if you have an ambitious impact goal, design your processes accordingly.