Upon entering China, Shanghai in particular, you feel the hum of people working, hope growing and a nation moving forward at an incredible pace.  Upon entering New Delhi, you hear a different buzz.  You hear chaos- cars honking, people yelling, everyone in a bustle to get things done and keep up with and supervise the pace of India’s growth.  Both have inspiring tales of growth and both offer valuable lessons for fueling and maintaining growth.

Background on China’s Growth

China is the largest exporter, a top manufacturer, the second largest importer of goods and the world’s fasted growing economy. However, these are all recent successes as China’s influence in the world economy was minimal until the late 1980s. At that time, economic reforms initiated after 1978 began to generate significant and steady growth in investment, consumption and standards of living. Since the wide-ranging 1980s reforms to the communist system, China has managed its growth through a gradualist and controlled approach. China’s growth comes both from huge state investment in infrastructure, education, healthcare and heavy industry and from private sector expansion. China has emphasized raising the GDP per capita and shifts the society from a saving society to a consumption driven society. The government has also focused on foreign trade as a major vehicle for growth.

Background on India’s Economic Growth

The Indian economy has recently recording some of the highest growth rates in the world. But India’s economy has followed a completely new path to development. The economic liberalization in 1997 spawned a whole new breed of self-made entrepreneurs who have been the drivers of growth, unlike China’s top down approach. As Gurcharan Das, author and former CEO of Procter & Gamble India, put it:

“The Indian growth path is unique. That is really scary because we are not following a proven model.”

More than half of India’s GDP comes from the services sector but only employs about one-third of its labor force. The growth in services in India was a reaction to the opening up its economy when demand for services was growing.

“The emphasis on services was the result of serendipity,” says Dr. Sabir Gokarn, executive director and chief economist with CRISI. “There was no planned growth strategy to increase the share of services.” Agriculture still employs over half of the nation, as India veers from an export-led growth strategy, as most other nations in Asia have done. India’s effort at rapid economic growth with a coalition democratic government is without parallel anywhere in the world and highlights why India is still plagued by many inefficiencies and infrastructure issues.

Lessons For Growth

Both of these incredible growth stories highlight different ways of managing and sustaining rapid growth.  On the one hand, China uses its central plan to fuel its progress. India, on the other hand, has reacted to the opportunity of meeting the needs of its 1.2 billion-person population through organic growth via the service sector.  Both of these countries’ paths to prosperity offer three valuable lessons for business and growth.

1. Have a clearly articulated vision that all the key stakeholders buy into. This lesson may seem like a given, but it cannot be stressed enough, as it is the main driver of sustainable and consistent growth in China. Yes, it is a communist society with strict government control, but the government has an incredible marketing talent, which has contributed to the hundreds of millions of Chinese that share in the dream for a better, richer and more powerful China.  More importantly, this shared vision has allowed China to meet key milestones in record time, delivering on the promises they make each year about its growth.

2. Develop an easy to implement strategy and focus on executing one part of that strategy to reach sustainable growth. Again China offers a valuable lesson through its planned growth.  China does not try to address everything at once.  The government develops ten year plans focused on one or two key areas, whether it is infrastructure, healthcare, education, the banking system or growing the private sector.  Once the country has focused its attention and resources on the current plan, the Chinese mobilize, each knowing their role and how they are contributing, to execute on the plan until it is perfected. The Beijing Olympics were executed in exactly this way.

3. Keep your eyes open and be opportunistic. Although slightly contradictory to China’s lesson on vision and planning, India’s lesson is focused on not getting so bogged down by strategy and plans to miss the opportunities that exist at every turn.  India is the best place to experience this lesson because there is no plan there.  Its growth has been organic – fueled by the local entrepreneur and flexible corporations. At every street corner you see people leaping at the opportunity to sell you something, start a new business or get the chance to give you a ride in the Tuk Tuk (motorized rickshaw).  This opportunism and aggressive desire to their quality of life and tap the new sources of growth has contributed to the upward mobility of many Indians and the country in general.

Each country, incredible and unique in their growth stories, has interesting insights and lessons to share as they carve new paths and strategies to manage and sustain their growth.

Sources: Historical GDP of the People’s Republic of China, Culture, Civilization and Leadership Blog 2011, “Why India’s Growth Strategy is Different?”

We recently had the chance to sit down with author and expert on courage, Bill Treasurer. Bill’s latest book, Courage Goes to Work, focuses on building workplace courage. Bill’s own expertise in courage comes from his background as a high diver:

“I learned at a young age that I had a debilitating fear of heights. When I was a kid, my dad took me and my younger brother to the top of the Empire State Building. As the two of them were looking down at the metropolis below, I was pressed up against the building, petrified that I was going to fall. I remember being upset because my younger brother could do something that I couldn’t. It was the first time that I realized what a paralyzing effect that fear can have over a person.

“A few years later I discovered the sport of springboard diving. The sport took hold and I became quite skilled on the 1 meter springboard (i.e., the “low board”). I won the Westchester County diving championships three times. However, when colleges started to make scholarship offers, they would always ask what dives I could do on the high board. Because of my fear of heights, I had avoided the high board altogether. I knew that there would be no way for me to get a scholarship without confronting my fear of heights. So, through the patience of a coach, I started attempting dives at incrementally higher heights. My coach helped me move outside my comfort zone, but in an absorbable way. Eventually I got a full scholarship to West Virginia University.

“After college, I continued attempting higher dives, eventually from heights that scaled to over 100 feet. I became a member of the U.S. High Diving Team and traveled around the world performing in high diving shows at entertainment parks. The genesis of that experience is my fear of heights. You can think of me as the high diver who is afraid of heights!

“The experience was so meaningful to me, that years later when I started my business, I decided that the focus of the business would be to help people take whatever “high dives” they are facing at work. My company, Giant Leap Consulting, is a courage-building company.”

We asked Bill to elaborate a little bit more on courage and how it relates to both organizations and leadership in those organizations.

How do you define courage for leaders and organizations?

“Acting on what is right, despite being afraid or uncomfortable, when facing situations involving pain, risk, uncertainty, opportunity, or intimidation. NOTE: Courage is NOT fearLESSness. It is the opposite. When you are being courageous you are fearFUL, but you carry on despite being afraid.”

How important is courage in organizations to create real, lasting innovation and growth?

“It’s supremely important. It’s courage that fuels a worker’s ability to pursue stretch goals, step up to challenges, and assert ideas. It’s courage that gives innovation the backbone that is needed when new ideas have to be fought for. It’s courage that allows you to withstand the turbulence and naysaying that inevitably accompany new ideas in the early stages. And it’s courage that allows you to ditch a product that’s on its last leg but sentimentality is causing people to hold on too tightly to the past.

“Given the chance, where would you rather work, in a company where everyone’s behavior is directed by fear and anxiety, or where people were confident and courageous?”

What are the best ways to encourage more worthwhile risk-taking when it comes to innovation and growth?

“The single most influential determinant of a culture is the leader of its behaviors. So if a company wants its workers to take some innovative high dives, metaphorically speaking, then the leaders have to be the first ones up and off the platform. Leaders have to Jump First.

“Bertrand Russell once said, “All great ideas start out first as blasphemy.” So, if you really want to create ground-breaking ideas, you have to be willing to defy tradition. You have to encourage pushback, a collision of ideas, and spirited disagreement. All, of course, directed toward an outcome of a fetching and marketable idea. That means leaders have to explicitly encourage back-talk. Especially back-talk that is directed at challenging conventions, cutting through bureaucracy, and neutralizing organizational politics that hinder the implementation, or at least piloting, of good ideas.”

What organizations are good examples of fostering courage and focusing it into innovation and growth?

“Organizationally, it is easier to share specific instances of decisions that were courageous, versus labeling an organization a fully “courageous company”. I think Patagonia displayed courage when it decided to use only pesticide-free cotton in the production of its cotton clothes. It cost them a bundle to do that, but ultimately resulted in more sales. Likewise, the decision of Domino’s Pizza to advertise that their internal research confirmed that their pizza’s tasted lousy, was courageous. In a sense, they were inviting the public into the process of reinventing Domino’s image (and pizza), and it’s working. Dove’s decision to use real women in its commercials, instead of waif-like fairy princesses, took courage. Gore-Tex, of course, is widely admired for fostering a client of smart risk-taking and mistake-making. In terms of consistent, sustainable innovation, they’re the gold-standard.”

Over the past few decades the balance of power within retailing has shifted from the manufacturer to the retailer. The rise of Walmart and Target along with consolidation within the grocery and drug channels has significantly consolidated the US retail market. The practice of category management among retailers was a direct outcome this consolidation. Prior to category management, retailers most scarce resource – shelves - was often the battleground between competing brands and products with little or no gain for the retailer. For example, an advertising or price promotion of Crest could result in 10% increase in sales for Crest, a 10% decrease in sales for Colgate and no net gain for Walmart. There were also diminishing returns in price negotiations with manufacturers and a realization that profit growth for the retailer was linked to growth of the entire category.

This led to the modern practice of category management. All related or substitutable products in the portfolio are grouped together into a “Category.”  Each category is run like a mini-business, managed by both the retailer and suppliers, with its own joint P&L targets. The relationship between manufacturer and retailer becomes more collaborative and open where suppliers are expected to propose initiatives that add to the total category sales and the satisfaction of the shopper.

Over the last decade, major consumer goods organizations have reoriented their Marketing, R&D, Innovation and Sales processes to align with the retailer category management approach. This shift was in response to the increasing power of retailers but also a realization that contributing to category growth led to better performance than the historical zero-sum competitive battlefields on the shelves. Simply put, in the modern retail environment, category growth creates more ROI for both retailers and suppliers while, at the same time, enhancing consumer value.

We interviewed innovation and marketing professionals at Georgia-Pacific, Kraft, The Home Depot, Unilever, Colgate-Palmolive, Hasbro and General Mills to better understand the advantages for a manufacturer to reorient from the historical brand-centric approach to a category-centric approach. Each had a unique perspective but several common themes emerged:

•    Consumer Insight Capability. Developing a deep understanding of consumer needs across an entire category can lead to a portfolio of offerings targeted to the needs of diverse user segments, occasions and needs. For example, Georgia-Pacific manages both Quilted Northern and Angel Soft bath tissue brands. Rather than being cannibalistic, a broader understanding of consumer needs within the category has led to a portfolio targeted to specific needs.

•    R&D Capability. An investment into a category approach, with a broader, more robust understanding of the fundamental science behind the category and the emerging technologies that can meet consumers’ needs, leads to more effective R&D investment. For example, Colgate’s investment into understanding teeth and gum biology led to a pipeline of industry leading oral care products that closed the share gap with Crest.

•    Assets and Equities Development. Category-focused consumer insight and R&D also lead to a more robust development and management of brand equities as well as improved technology and the patents to create a sustainable advantage from that technology. Brand equity, as an asset, can be leveraged to create growth with a category. General-Mills recently introduced its Simple brand of cookie mix and has already built enough equity around the brand to leverage it to drive growth of multiple brands across the entire baking category.

•    Innovation and New Product Development. Capabilities and assets are only advantages if they translate to viable and sustainable growth. P&G has become an innovation leader by truly understanding consumer needs within the category, investing in R&D to develop (and patent) products and developing strong brands with appeal across categories. Swiffer is an example of a successful innovation that could only have been the product of a category approach to insights, R&D and asset development. P&G had several cleaning brands but it was a broader category insight and R&D capability that led to the development of an entirely new cleaning system – one that none of P&G’s individual brands would have developed independently. Within ten years of launch, Swiffer is likely to become P&G’s next billion-dollar brand.

•    Growth. Ultimately, the primary rationale for a category strategy is growth. Innovation and new product development lead to organic growth but a category is a defined space with a profit pool and set of consumer needs that can be satisfied through acquisitions as well. Mattel, the world’s largest toy maker, acquired American Girl as part of a broader strategy to dominate the doll category. Rather than building the equity of its Barbie brand or developing a new brand in the category, Mattel acquired the successful brand and made it immensely more valuable by folding it into Mattel’s existing distribution system.

A category approach is more holistic than a brand-centric approach.  It does not assume that a brand is well positioned.  It identifies a space – a potential profit pool and an area of consumer needs - and then develops innovations that meet both the internal financial hurdles and the consumer needs.

Innovating in categories does not constrain the organization to thinking narrowly about a brand’s equities, targets or distribution. Category innovation allows the company to find the best brands (internally or externally) and to build, buy or partner to deliver on consumers’ needs. A brand-centric focus leads to more line extensions and increasing brand affinity to drive sales. A category focus can broaden the thinking to developing new breakthrough products, capabilities or sub markets to grow share within the category, or grow the category itself.

In the end, marketing and sales must deliver on customers’ needs and, in the modern retailer environment, retailers are demanding an approach that aligns with their category management philosophy. So a category approach is increasingly a mandate rather than a choice. But it is a mandate within which manufacturers can develop the consumer insights capabilities, R&D capabilities, brand equity and IP assets to create organic growth by leveraging existing brand equities and/or new product development across the entire category. It can also lead to brand-adjacent acquisition to capture a greater share of the category.

The modern retail environment has shifted power from manufacturers and suppliers to retailers but this shift offers significant opportunities for growth by focusing on the consumer needs across entire categories and partnering with retailers to deliver brands and products to serve those needs.

Image source: SpringsBargains

20% of Rio de Janeiro’s population lives in favelas (Brazilian Portuguese for “slums”). And all over Brazil, cities such as São Paulo, Fortaleza, Guarulhos, and Curitiba have seen the growth of large favela populations. A favela is not simply a slum, but instead is marked by:

•    Illegal building on 3rd party land
•    Irregular, self-constructed, unlicensed housing
•    Little or no infrastructure
•    Residing on the urban periphery, many times on undesirable land (such as hillsides)

This combination creates a unique living situation, in which residents need to provide their own water and navigate steep, ad hoc dirt passageways instead of sidewalks and streets in a congested environment. In these highly compact, structurally deprived societies, the rules are different and both residents and governments have had to adapt. When examined, many of these adaptations reveal innovation best practices:

1.    Turn the problem on its head
2.    Incentivize correctly
3.    Learn from everyone

Turn the problem on its head

How do you bring community facilities to a place with literally no free space? Favelas are built organically without prior planning, and this creates problems when all the space is gone. Brazilian architect Jorge Mario Jáuregui has a solution. While there isn’t any free space to use for public facilities, there is space that can be used twice.

“In a project currently underway, Jorge is creating public space in the Manguinhos favela on existing train tracks that bound the community on one side. These train tracks will be elevated and the space below will become a linear park, defined by the conjugation of spaces, activities, buildings and vegetation. Facilities in the park will include sport, cultural, and income generating facilities, with a focus on providing children and teenagers with alternative attractions that will integrate them into the community. The space will also incorporate a new public transportation hub.

“This new metropolitan park will be an articulator, attracting favela residents as well as a larger public from the surrounding communities. As an integrated public space it eliminates the existing barrier and transforms the space from divider to connector. By directly intervening at the physical boundary of the favela, Jorge is directly confronting the deeper socio-economic divide that has plagued the city for decades.”

Jorge Mario Jáuregui realized that while there was no horizontal space left to plan public spaces, there was vertical space left. He turned the problem on its head and came up with a unique solution that meets all of the project’s objectives.

Incentivize correctly

Local governments and institutions are also approaching these favelas in new ways. While historically ignored, city governments are realizing that these favelas are not going away and are only growing. Unless all necessary parties have incentive to change, growth will continue in the same haphazard way as before. The city of Curitiba, in Southern Brazil, is working to integrate favelas into their society through innovative measures that incent residents in favelas to work alongside the government.

“Most favelas receive transit stations shortly after being built, and the city runs a cleanup program for favelas, in which residents receive a bag of fresh produce in exchange for every bag of trash collected and turned over to the city.”

Through their trash for produce program, Curitiba is encouraging both clean living and healthy eating. The favelas get cleaner, the people get healthier. It’s a win-win for all parties.

Learn from everyone

Last, the world is starting to realize that the favelas have much to offer them. True, favelas are home to some of the poorest, most socially marginalized people in the world. But that doesn’t mean they don’t have good ideas. An Architect article titled “Cities of Tomorrow” reveals that favelas are showing many of the signs associated with sustainable development:

•    Compact footprints
•    High density
•    Low energy use
•    Little to no grading
•    Reclaimed materials
•    Humane scale
•    Vibrant social interaction
•    Self-determination

The most unique perspectives come from the most unique vantage points, whether that means talking to a child in a favela or involving all of a company’s pay grades in the innovation process.

They say that necessity is the mother of invention, so it’s no wonder that the favelas of Brazil are such fertile ground for innovation best practices. Sometimes the best ideas come from the most unlikely places, and the slums of Brazil are no exception.

Image sources: walker_dawson and Jorge Mario Jáuregui

“Honey, I swear—I saw black swans!” Byron was back from his journey exploring the Pacific, and was adamant about what he had seen. But his wife Patricia knew better. “No.  Everyone knows that all swans are white. It’s common knowledge.” Patricia was right because all swans in Europe were white and all empirical evidence supported her beliefs. But it turns out that everyone was wrong. Europeans couldn’t have predicted the discovery of black swans in Australia, but they had to immediately change their beliefs with one simple discovery.

So-called Black Swans - rare, unpredictable events - as described by author Nassim Taleb provide opportunities for massive gains or massive failures. Taleb describes these events as having three primary characteristics:

1)    Black Swans are outliers with low probabilities. These events lie outside the realm of normal expectations. They can’t be readily predicted, even using sophisticated models.

2)    Black Swans have extreme impact. These events change something fundamental about the world – either in terms of economic or social costs. Although the discovery of black swans in Australia might not have had this kind of impact, World War I and September 11th certainly did.

3)    In hindsight, Black Swans are very easy to explain. One example is the recent financial crisis of late 2008. As Taleb explains, today many people claim they saw the crisis coming, but these same individuals also held bank stocks, showing that indeed only hindsight is 20/20.

Black Swans are everywhere. These types of events define our modern history from stock market crashes to terrorist attacks to world wars to banking crises. But Black Swans don’t necessarily have to be negative, they can be positive as well.

Positive Black Swans might include new technologies – such as the Internet, runaway bestsellers or blockbuster drugs. Who knew that a communication protocol used by the military would transform into the World Wide Web and change the way society works? In the same manner, who knew that a potential hypertension medicine would change the love lives of millions of people around the world?

How do Black Swans factor in the business world?

Taleb is critical of many modern management and financial techniques in which companies fool themselves into thinking that they can control or predict their future with great certainty. He argues that it is impossible to predict or control Black Swan events, which are often the greatest source of value creation. Instead, he suggests organizations should try to optimize for:

•    Maximizing the chances for positive Black Swans to occur: Companies accomplish this through taking risks while minimizing the costs associated with those risks. Taleb would argue that companies should take all the “cheap” risk they can because being aggressive will ultimately create economic growth. In gambling terms, he wants to be that hyper-aggressive gambler who understands all of the best bets at the casino, always risking a small amount as long as the payoff is maximized. As Taleb says, “learn to fail cheaply, with pride, comfort, and pleasure – and do it often”.

•    Minimizing the chances for negative Black Swans: Since negative Black Swans can come in many forms such as economic crises, terrorist attacks, or even consumer backlash, it is difficult to be specific on this topic. Taleb would argue that companies should be hyper-conservative on downside risk, shying away from huge bets that have the potential to be very costly.

In short, Taleb thinks most companies have it wrong. In a recent interview, he said “Be hyper-conservative when it comes to downside risk yet hyper-aggressive when it comes to opportunities that cost you very little. Most people have the wrong instinct. They do the opposite.”

Sources:

Webb, Allen. “Taking improbable events seriously: An interview with the author of The Black Swan.” McKinsey Quarterly, December, 2008

Taleb, Nassim. “The Black Swan.” Random House, Inc., New York, 2007.

Gladwell, Malcolm. “Blowing up.” The New Yorker, April 22 & 29, 2002.

Image Source: ianmichaelthomas

(r)evolution collaborates with clients to develop business solutions that enhance their existing business models. In addition, we create white space offerings that support new revenue growth models.  Often clients come to us in search of the next Swiffer, but they fail to realize that it is often the less exciting things (process, culture, leadership, organizational structure) that enable transformational change and breakthrough ideas.  Over the next few months, we will highlight case studies of innovative companies that have addressed such issues to transform their businesses.

For an industry that touches every consumer, healthcare is rarely described as consumer-centric.  Drug manufacturers traditionally view healthcare providers and insurance companies as their primary customers, not patients.  Hospitals are typically organized around the needs of nurses and doctors, rather than the needs of the patient.  This lack of attention to the consumer often transforms interactions with the healthcare industry into dreaded experiences.

One particular medical center has made it a mission to transform the patient experience, making it both more enjoyable and affordable.  The Cleveland Clinic has created a patient-centric culture that allows it to fully integrate patient needs into its various processes.  In 2007, Cleveland Clinic treated patients from all 50 states and 90 countries at a lower cost than many other hospitals. In fact, the Dartmouth Atlas of Health Care found that chronically ill patients cost Medicare only $55,000 when treated at the Cleveland Clinic, tens of thousands of dollars less than at many other top-ranked academic medical centers. Here are some of the initiatives that have helped Cleveland Clinic offer great care at such a low cost:

Redefining success metrics. Cleveland Clinic realized that patients care less about what constitutes a treatment and more about the outcome of that treatment. To that end, in 2000 the Clinic became the first hospital in the U.S. to publish its outcome measures, and by 2007, it had published outcomes for every department compared against the best available benchmarks. The Clinic also does informal surveys of post-op patients, realizing that the voice of the patient should not be lost just because he or she has left the hospital. All this data is then used to improve outcomes and lower costs for procedures—something valued by both patients and payors.

Restructuring Departments into Institutes. Hospitals are generally structured around the needs of doctors and nurses. This model often inconveniences patients, who have to go to multiple locations and see multiple specialists for one ailment. In 2007, Cleveland Clinic realized that if it structured its departments more broadly around diseases instead, it could improve patient outcomes while lowering costs—the nirvana of healthcare delivery. For instance, their Neurological Institute brings together 150 doctors of various specialties, from neurosurgery to psychiatry, as well as any therapists and equipment that patients might need. This reduces runaround time for patients, as well as allows doctors and surgeons to work together more collaboratively—limiting unnecessary procedures and tests.

Aligning the Patient Perspective throughout the Organization. The “Patients first!” message starts with Dr. Cosgrove, the CEO of Cleveland Clinic. It then moves throughout the organization, helped by a fully integrated Electronic Medical Record system. This system makes it easy to identify potential research recruits, flag patients at risk for hard-to-detect illnesses, among other benefits. Cleveland Clinic also surveys outpatients and creates advisory councils made up of patients and family members. The patient satisfaction ratings from this research are an important part of performance reviews for doctors, who are incentivized by a purely salary-based system. The “Patients First” message is even delivered by housekeepers, who carry business cards and introduce themselves to patients at the beginning and end of every shift.

Article written by Erica Connelly and Jeff LaFlam
Image source: noraohio

During WWI, the German U-Boat revolutionized sea warfare. For the first time, battleships had a hidden enemy beneath the surface of the water. And these battleships were being sunk at an alarming rate. In open water, traditional wartime camouflage was ineffective. The sea and sky were constantly changing a ship’s “natural” environment as weather fluctuated.

So what was to be done? Rethink camouflage, obviously. British naval officer and artist Norman Wilkinson pioneered a new camouflaging technique based not on blending in, but on standing out. Blending in was impossible. Standing out was possible, but why was it useful?

Torpedoes were slower back then, and radar and sonar weren’t as advanced. U-Boats had to fire torpedoes based on where they thought a ship was headed. This involved determining a ship’s bearing and speed. Anything that disrupted these two metrics was also effective at camouflaging a battleship in the open sea. Thus was born a form of camouflage termed “Razzle Dazzle.”

Norman Wilkinson used bright, loud colors and contrasting diagonal patterns painted on boats to confuse U-Boat captains and make their bearing and speed less apparent. Examples of this Razzle Dazzle are below, but try imagining them in bright colors like purple, orange, and yellow.

Camouflage is often thought of as a way to conceal an object. However, if the object cannot be hidden, as in the case with a WWI ship on the open sea, the purpose of camouflage then becomes to disrupt those trying to find the object. Case in point: zebras. Alternating black and white stripes doesn’t seem like an ideal camouflage, but when a bunch of zebras are hanging out, the stripes all blend together in a predator’s vision. This makes it difficult for the zebra’s primary predator, the lion, to hone in on one particular zebra, increasing safety for all.

Razzle Dazzle camouflage is a prime example of innovation through design research. Design research is an investigation into the process of product design. In the case of Razzle Dazzle, coming up with an effective means of camouflage meant revisiting the goals of camouflage and the constraints on an enemy’s weapons. In commercial examples of new product innovation, many times this means revisiting how consumers are actually using your products.

Consider the Whirlpool Duet front-loading washers and dryers. Whirlpool observed one woman who had placed her front-loading dryer on cinderblocks to make loading and unloading easier. This kind of design research led to the pedestal and storage unit, which is now prevalent with front-loading washers and dryers. New innovation opportunities can often be uncovered by going back to the basics:

•   What problem are we trying to solve?
•   What are the parameters?
•   How are products currently being used to solve this problem?

As Microsoft Ethnographer Tracey Lovejoy said, “In today’s competitive and global market, companies are finding it necessary to deeply understand their customer and build their product accordingly.” Though in the case of Razzle Dazzle, one could easily substitute “customer” for “enemy” and “product” for “battleship.”

The lethality rate of combat wounds has steadily decreased since the Revolutionary War, due to innovations in battlefield medicine. But what exactly is the nature of this innovation? And can these learnings be applied to a business context?

Atul Gawande first examined the lethality of combat wounds in a 2004 New England Journal of Medicine. He noted that despite the invention and use of even more devastating weapons, the wounded-in-action lethality rate (that is, the rate of death among those wounded in combat) had fallen in every major US war until “settling” at roughly 25% after WWII. Even the Persian Gulf war in 1991 had a lethality rate of about 24%. But then, somewhat inexplicably, the combat lethality rate in Iraq and Afghanistan since 2001 dropped to just under 12%.

The notion that the lethality rate “settled” at 25% after WWII is somewhat misleading. The rate actually follows a somewhat predictable, logarithmic path. If you were a military planner in 2001 asked to estimate the combat deaths of a long war in Iraq or Afghanistan, you would have used this logarithmic model. It would have predicted a lethality rate of 20.5%. The exact rate, of course, could not be predicted with much precision. So it would have been useful to know the range of lethality rates to expect. The model would predict that the actual rate would likely be between 14.2% and 26.8%.  This would have been consistent with an ongoing improvement over the most recent experience in the Persian Gulf in 1991, when the lethality rate was roughly 24% (albeit on a very small base of wounded). It turns out that the rate for the current war, as of January 2010, is only 11.7%, which is much lower than the 20.5% expected and even well below the range of what would be expected. Why?

There are two ways to think about this. The first, explored by Gawande, is that the improvements prior to 2001 were the result of a process of discovery that led to incremental improvements year-over-year. This explains the near-constant decrease in the lethality rate every year since the Revolutionary War. Gawande attributes the significant improvement in the 2001-2010 rate in Iraq and Afghanistan to a change in the basic principles of R&D used by the military. After all, there have been no advances in medicine since the Persian Gulf War in 1991 significant enough to explain the transformational improvements suggested by steep decline in the lethality rate. But what if this seemingly smooth process of improvement is really the result of a series of big breakthroughs? These would lead to significant reductions in lethality followed by relatively flat periods of lethality.

This explanation is plausible. Antiseptics and anesthetics were more widely used after 1800, the use of combat medics was pioneered in the Civil War and amputations were more widely used in the Napoleonic period before WWI. During and after WWII, fields hospitals and MEDEVACs became regular features of combat. These inventions could explain a step-function pattern rather than a smooth process of continuous improvement. In this context, the recent improvements in lethality are simply a result of a significant innovation. Without a significant improvement in medicine to explain the lethality declines, the step-function improvement must be in the systems and processes rather than the quality of the medicine or surgical techniques. Indeed, Gawande outlines several reasons for the recent improvement, which include:

•  More widespread use of body-armor and eye-protection
•  The development of Forward Surgical Teams (FSTs) of leaner and more mobile units of 20 surgeons, nurses, medics and other support personnel who are farther forward, closer to battle
•  A military surgical strategy focused on damage control, not definitive repair:

“Whatever is necessary to stop bleeding and control contamination without allowing the patient to lose body temperature… Surgeons seek to limit surgery to two hours or less, and then ship the patient off to a Combat Support Hospital (CSH), the next level of care.”

These are examples of improvements in the systems and processes rather than the invention of new medicines or surgical techniques. Gawande’s thesis is that the recent improvements have been driven by a focus on systems and process performance. But this transformation is a step-function breakthrough in a series of step-function breakthroughs.

There are two general conclusions from Gawande’s observations. First, true innovation and improvement in disciplines like R&D and Product Development are more often the result of step-function breakthroughs than from continuous improvement. Second, a focus on performance can lead to further breakthroughs as the process of discovery reaches diminishing returns.

Sources: Military Care for the Wounded from Iraq and Afghanistan and Better: A Surgeon’s Notes on Performance

With new product failures exceeding successes, is it surprising that the rate of failure is not declining over time? As innovators, are we learning from our failures? John T. Gourville, of the Harvard Business School, may have part of the answer. He argues convincingly that the answer may be the psychological costs created when new products force consumers to change their behavior. Essentially, he argues that new products must not only provide a significant perceived benefit (i.e.- less costly, faster, stronger, etc.) but also provide minimal behavioral change.

An illustration of this idea is the difference in adoption between the dishwasher and the microwave oven. The microwave reached 60% household penetration in 15 years while the dishwasher required almost half a century. The behavioral change from using a conventional oven to using a microwave oven (i.e. -open door, press button and cook) was minimal compared to the change in behavior required to use dishwasher.

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Open innovation, by definition, requires that a company understand and assimilate highly specialized information from diverse inputs outside of its traditional competencies. That sounds scary. It requires the company to develop a new set of capabilities. That sounds even scarier to anyone who has tried to teach an old company new tricks.

Among the most important of these new tricks is how to quickly and effectively triage information. To accelerate this process (and do it right) many companies have learned to use external subject matter experts to quickly and inexpensively synthesize information and assess innovation opportunities. It may be tempting to find the expert with gravitas but those having the most success are not using the big name HBS authors. They are tapping the “everyday” expertise of disciplines as prosaic as pharmacists, chefs and even auto mechanics. This “innovation triage” is a capability that tomorrow’s best-in-class innovators are mastering today.

Image source: safoocat