HBS Managing Innovation Winter 2012 Course

16Apr/11192

Less is More: How Resource Constraints Can Spur Innovation

Let me ask you this: when you see a glass with water filled halfway – is it half empty or half full? Call me an optimist, but when I hear about resource constraints, I actually see an opportunity for innovation to thrive in such circumstances.

Let’s take a step back. Oftentimes, resource constraints are cited as a problem in the context of innovation – that is, they are viewed as inhibitors of true product innovation. In most organizations, the pervasive mentality is that procuring more money correlates directly with more innovation and the production of better products. Organizations emphasize the importance of gaining more resources to put behind R&D and tremble at the idea of losing headcount or funding for projects tagged as “innovation.” But, the reality is that resource constraints can play a powerful role in determining new paradigms and ways of thinking.

For one, resource constraints can actually force companies to be disciplined and make hard decisions about what product features to exclude. In particular, when resources are scarce, companies are motivated to focus on cost-cutting initiatives and aggressively assess what features are really necessary in their products. As we have learned in many of our cases, product innovation is not just about what features a company incorporates into its products, but about what it chooses not to include. Companies like Apple (despite having access to plentiful resources) excel at this task, demonstrating the success of products adhering to a “less is more” design construct. Perhaps the rest of the corporate world could use a little more of this type of discipline.

From a competitive context, there are real benefits to focusing on a streamlined product approach. In her book, “Different: Escaping the Competitive Herd,” Young Me Moon notes that firms often attempt to differentiate themselves through product augmentation. The irony of the situation is that the pursuit of “relentless, incremental augmentation” has resulted in a world with products that are less differentiated than before because of the proliferation of meaningless (and costly) features. In this context, the benefits of resource constraints are clear – they induce companies to reduce or even withhold certain product attributes, thereby focusing only on the ones that really matter and increasing the chances for true differentiation.

Resource constraints can also expedite the process of innovation and new product development. The best example of this is reflected in Internet start-ups that quickly release versions of their products. The sense of urgency that most start-ups feel due to their capital constraints (at least, in the initial stages) is a real motivator for them to develop and release their products as quickly and efficiently as possible. Despite financial and time constraints, successful start-ups are able to launch quality products quickly out of sheer necessity – they need to secure their next round of funding and “prove” their models based on these beta versions. Contrast this with many traditional consumer products companies, where new product releases (from ideation to launch) can take up to two years, because leadership continues to agonize over the results of the latest quantitative consumer testing. Essentially, resource constraints can force companies to be nimble and quick and prevent them from falling into the trap of analysis paralysis – they simply don’t have the resources to put behind re-testing a new product concept. Lean companies are required to focus only on the most critical, essential aspects of their products, thereby forcing them to make difficult decisions up front about product criteria. As such, resource constraints tend to encourage the adoption of “good enough” as a standard for product innovation, which can result in a more efficient and timely product development process.

Thus, resource constraints in many contexts can act as a facilitator, rather than a barrier to, innovation. As antithetical as it may seem, their presence can generate value and spur innovation. Taking it a step further, imposing false constraints and targets could force companies to be more innovative with respect to existing products and processes.

Oftentimes, in innovation, we ask ourselves to imagine a world of limitless resources to get our creative juices flowing. In this context, we ask the age-old question: what would you do with $1 million dollars? I would propose a different question: what would you create with $1? Which would produce more interesting answers?

Posted by twie

Comments (192) Trackbacks (0)
  1. Great post, Tina. Near the end, you allude to innovation “with respect to existing products and processes” which got me thinking about the whole idea of “frugal innovation” that companies like Mahindra & Mahindra (and Tata from our Tata Nano case last year) view as key competitive advantages in the global economy. In addition to preventing feature creep and lowering the threshold to profitability, putting hard ceilings on overall cost (for example, promising a “people’s car” costing one lakh…) pushes engineers, managers, and everyone in the development process to innovate along nontraditional dimensions to achieve lower costs at acceptable quality. For example, this could come in the form of developing new supply chain practices to minimize inventory costs, re-engineering product design and manufacturing to lower the amount of wasted materials, reconfiguring or creating new sales channels or completely rethinking what a product should be in order to fulfill the needs of the consumer. Analogous to Bang & Olufsen engineers innovating whatever it takes to realize the design ideals of the designers, I envision “frugal engineers” innovating whatever it takes to realize the cost ideals of the company (hopefully without cutting unsafe or unethical corners.) Setting hard constraint on costs could shake up the traditional view of innovation within a company (bigger, better, more!) and open up new dimensions of the business for innovation to take hold.

  2. I completely agree with the obviously intelligent person who posted this (as well as the first comment) and will attempt to add a strong example of how a non-resource constrained company can completely miss the mark.

    As much as it pains me to say, it is fairly well known that Microsoft is not very resource constrained. More than that, they do not attempt, as the brilliant post suggested, to impose false constraints in order to foster a streamlined path to product. The most glaring example of how too many resource with too much freedom to go down too many barely-related paths is the launch of Windows Vista.

    Yes, I know, we all think it was a horrid flop. I get it. But many of the additions were quite innovative – and have been praised in the more functional Windows 7. Where Microsoft failed was to create any sort of constraint to get teams aligned around a single purpose. Simply releasing a new operating system was not enough to get the troups in line. So what happened was individual teams with unlimited resources worked in the utopian world Tina described. I mean, it took over 5 years to launch the dang thing. And what they got was individual functionality that, while interesting, did not solve the ultimate customer needs.

    Added to the fact that each of these multitude of mini innovations was held together by little more than dental floss (on the back end, I mean) not only was the end product ‘too much’ but it was held together too loosely. Which is why anyone who ever ran on Vista can tell you it was slow and would crap out all the time.

    With Windows 7 the company fixed a few critical things. First and foremost, they completely re-engineered the backend to make a cohesive and entirely new OS (that the functionality and appearance remained the same, but the guts were completely different). But more importantly, I believe, the stress of having a below-par OS on the market forced the company to move quickly and numbly toward the replacement. The existence of a real resource constraint -time- spurred focused innovation. And most agree the result is far superior.

    Now don’t get me wrong, Microsoft still has plenty of issues around innovation to figure out. And it remains to be seen whether the end positive result of having such a crappy OS on the market will be a learning experience for the company around forced constraints. But all in all, it was a good learning lesson for me, at least. Thanks Tina, for the insightful post :)

  3. Great post Tina. This reminds me of the introduction of Honda motorcylces in the US Professor Christensen talks about in his book The Innovator’s Solution. Due to Japanese regulatory constraints, Honda only had $110,000 in cash and $140,000 in inventory available in their effort to sell 6,000 motorcycles in the new market. After technical problems with the bigger motorcycles led Honda to spend most its funds on repairs, the cash-strapped company was forced to find another opportunity to sell their cheaper 50cc Super Cubs. This strategic innovation would likely have never been found if the company had been willing to simply repair and re-engineer the bigger bikes that they were originally trying to sell.

    It would be interesting to see how innovation fluctuates due to macro-economic trends. For example, I would imagine that over the last 3 years, R&D spending and product development has decreased as companies and individuals seek to hold onto reserves and preserve liquidity. Did this era of “The Great Recession” lead to a greater-than-average number of product or business innovations?

  4. I really like the way of framing resource constraints as a potential opportunity to discover more innovative (efficient, different, etc.) ways of achieving an objective. Many examples of innovations at the Base of the Pyramid exemplify the power of this. For example, One Laptop per Child’s constraints around customers’ ability to pay and therefore its acceptable material costs led it to help develop a novel screen technology among other features. However, it got me thinking – wouldn’t it be even better to be unconstrained by resources yet still come up with the same type of innovations you would have had you been resource constrained? I’m not entirely sure if I can think of such a company, but Apple may share some characteristics of such a company. Apple has a huge pool of resources (access to capital, talent, and technology) – yet just as many resource-constrained companies, it emphasizes a simplicity and distillation to core characteristics from which to build upon. While it may not be a perfect example, I do think there is something to be said for how powerful (yet understandably difficult) it can be when a resource unconstrained company can still innovate with the discipline of a company that has to scrutinize the justification of every product component.

  5. Tina – your post really resonated with me. Actually, seemingly oddly, it brought me back to my days working on public policy and the education portion of the stimulus bill in Washington, D.C. In the midst of the recession and state budgetary crises, government agencies like public schools were forced to cut back dramatically. For the most part, the education portion of the stimulus bill promised to plug the holes from the cutbacks temporarily so school districts could better weather the recession. It was a bandaid approach, aimed at preventing layoffs and cutbacks. I remember wondering at the time whether an opportunity was lost with this approach. While obviously we would prefer not to have resource-constrained schools, we hoped that this forced fiscal discipline might provide the impetus for agencies to be more scrappy and innovative about how they were leveraging their resources. We also hoped savvy managers could use cutbacks as a scapegoat to push forward with politically unpopular but innovative reforms. In both good times and bad, the default position of government agencies is to claim they cannot move forward with new programs because they are thoroughly cash-strapped. Yet, as your blog pointed out, humans are resourceful when forced and when they decide to approach problems with an opportunity-driven mindset. I think this lesson might apply in both the private sector and public sector.

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