What I Learned: Reductive Innovation for Troubled Economic Times?

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.