Jim Brown

What I Learned: Reductive Innovation for Troubled Economic Times?
August 25, 2008

What I learned this week ... came from an article called "Facing recession? Reductive innovation can help"  by Jeffrey Baumgartner. His key point is that reductive innovation (cost cutting) can use many of the same innovation techniques as "additive innovation" which is more focused on new products and growth. It's an interesting argument and makes a lot of sense as part of an innovation strategy, but the opportunity for additive innovation shouldn't be overlooked. Taking advantage of the slow period to innovate ahead of the curve for the recovery as I discussed in a previous post. Innovation shouldn't be limited to just revenue growth or cost reduction - the strategy can address both sides of the "profit equation."

What strikes me in both of the underlying articles is that during tough economic times it isn't enough to hide in a cocoon and try to survive, companies need to develop a business strategy that addresses the current difficult time and beyond. Product Lifecycle Management (PLM) as a tool for innovation is used in both ways - to increase the top line and decrease cost - and therefore well aligned for tough economic times. Perhaps that is why the PLM market is doing well despite a tough economic climate?

Reductive Innovation
I don't know Jeffrey, but his article makes a lot of sense. It is a quick read, and worth the time to review. He points out a number of practical ways that innovation can help reduce cost:

• Removing steps in business processes
• Combining steps in business processes
• Turning things off
• Re-using items
• Simplify your products
• Reduce energy consumption

As I read "re-using items" the author makes a great point about saving money by reusing items like note paper.To me, I think of re-use in terms of sourced materials and parts. When I hear reuse I think about reusing existing designs to we can leverage existing design deliverables such as CAD drawings or formulas, analysis or test data, and even product documentation. As I read "reduce energy consumption" I agree with reduced travel, but I am thinking more about designing products that require less energy to produce. I realize that this is my frame of reference because I research how to improve product innovation, product development, and engineering so I am not disagreeing with Mr. Baumgartner. But I put his suggestions into the context of how can we design products in way the reduces material cost, product development cost, and manufacturing cost. That is a leverageable way to reduce cost that can be repeated every time the product is produced.

Growth
Most companies I talk to feel they have cut costs significantly over the last decade. While continuous improvement should always be a goal, many companies feel they have cut as much as they can. PLM addresses an area where cost cutting typically hasn't been as effective, R&D and Engineering. Not that those budgets haven't been cut, but the cost savings haven't come from sustainable strategies for reuse and design for cost (as often as I would like to see at least). Too frequently, the cost cuts turn into fewer product development programs or reduced head count. As the article on reductive innovation points out, there is also opportunity in removing or combining steps in business processes. Many companies still have room for improvement in their new product development processes, if nothing else by standardizing best practices. A business process-oriented PLM solution can go a long way to help achieve standardization. But to me, the real power in reductive innovation is reducing product cost, and the real power of innovation is enabling top-line growth - using PLM and innovation to impact both sides of the "profit equation."

So during tough economic times, companies can take advantage of innovation strategies and enabling PLM technology to prepare for future growth and reduce costs in the near term. I hope you found it interesting. Who knew? I didn't, if you did let us know about it.

Posted by Jim Brown on August 25, 2008 | Comments (0)