Wednesday, October 11, 2006

How to improve innovation in rapidly-changing markets

In the most recent issue of the Journal of Product Innovation Management, Dr. Tommaso Buganza and Dr. Roberto Verganti studied the traits that make companies more or less successful in turbulent markets (abstract here). Such a market is characterized by rapid changes in technology or market needs, which greatly complicates the new product/service development process. Buganza and Verganti write:

As a result of this dynamic in highly turbulent industries (e.g., software industry), the development process is continuous, and it is hard to identify whether a new output is an incremental innovation (i.e., new version) or a whole new product.

The professors, faculty of the Milan Polytechnic Institute, performed a statistical analysis of the Italian on-line stockbroker industry, which they selected based on its large number of competitors (nearly thirty) and history of rapid change.

The study found companies that successfully managed their turbulent environment shared several traits:

  1. They maintained control of their own applications, yet utilized standard off-the-shelf operating systems and middleware. This allowed them to adapt their applications quickly, yet leverage improvements made by the platform companies. (An interesting conclusion for those considering technology outsourcing.)

  2. They used open and standard technologies.

  3. Their new service delivery procedures were not highly formalized, yet their organizational approach to new service delivery was highly formalized. In other words, they were not held up by a rigid process, but they built teams the same way for each project, so there was consistency that allowed them to work effectively despite that informal process.
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