Law of Improvement
Jumping at several small opportunities may get us there more quickly than waiting for one big one to come along.
- Hugh Allen
The Law of Improvement states:
Flawless implementation of an outcome improvement goes step-by-step, avoids leapfrogs, and stops when it achieves 80% of improvement promised by New Paradigm.
Customers are “creatures of habit.” (See, for instance, Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers, by Geoffrey A. Moore. HarperBusiness, 1999). Only small percentage of customers are “techies,” “early adopters,” while vast majority prefers minor changes in their habits. Hence, the more novel elements and new habits the new product represents, the smaller portion of customers appreciates it with their hard-earned dollars. On the other hand, too small improvement of customers’ satisfaction isn’t appreciated at all. The Golden Mean is a sizeable improvement of satisfaction combined with incremental changes in customers’ habits. This type of improvement could be realized only in step-by-step approach that avoids “brave leapfrogs.”
Next, I would invite to our discussion on “how much improvement is enough.” Mr. Vilfredo Pareto, the talented Italian industrialist, sociologist, economist, and philosopher who discovered the 80-20 rule aka Pareto principle that states that “for many events, roughly 80% of the effects come from 20% of the causes.” Translation of this principle to the purposes of improvements suggests that “for many principles of improvement, roughly 80% of potential improvement consumes 20% of effort and encounters 20% of resistance.” Then, the principle of improvement, i.e. current paradigm, should be replaced with a new one.
This approach directly contradict to the principle “if it works, do it again.” Or doesn’t it? Actually, the comprehensive formulation of this principle says something different:
This is the Golden Rule of marketing. If you have done something before and it worked, there is no reason to change it. If it failed however, then review it before doing it again. Makes a heck of a lot of sense to me.
To me, too! However, experts prefer forgetting the second portion of this Golden Rule, probably, due to the same confirmation bias… “It worked before; it always worked. Why it should be different now?” Be careful to avoid this trap!
Law of Resources
A resource is any physical or virtual entity of limited availability, or anything used to help one earn a living. In most cases, commercial or even ethic factors require resource allocation through resource management.
The Law of Resources states the following:
Implementation is flawless if all tangible and intangible resources needed for improvement are already available and properly allocated; every improvement consumes resources prepared by previous improvements, and in its turn prepares resources for subsequent improvements.
When all tangible and intangible resources needed for implementation are already available and properly allocated, implementation goes practically flawlessly. Resources include infrastructure, expertise, knowledge, abilities, capacities, etc. These resources can come from previous history of industry, i.e. from previous Evolutionary Steps, as well as from other industries; they just need to be recognized before the implementation starts, be accumulated to needed level, and be allocated to implementation rather than to other “more important for the moment” purpose. Violation of this rule is one of reasons why leapfrogs cost a fortune and deliver either nothing or something of limited usefulness: some resources that could be developed and accumulated in course of realization of intermediate Evolutionary Steps are missed, and their substitutes developed in rush of leapfrog are… just poor substitutes.
Accumulation of knowledge at previous Evolutionary Steps is an intangible resource of paramount importance. This knowledge more often than not cannot be easily deduced without practical implementation of previous Evolutionary Step, but without this knowledge implementation of leapfrog might become a nightmare.
History shows that when industry evolves step-by-step, all needed resources become available “just in time” when customers are already ripe for improvement; those resources are sufficient for improvement that is “just right,” i.e. degree of improvement is within the range of customers’ expectations and switching cost between current and new products is not excessive; such implementation is usually “doomed to succeed.” Since this success happens without fanfare of another leapfrog and doesn’t look like a huge challenge being overcome, it doesn’t surprise the industry experts and goes rather unnoticed.
Probably, this strange effect ignited the automotive industry myth that “Toyota is not an innovative company, it is simply lucky to be successful.” I have different opinion: Toyota is successful because it brings its innovations to the market just in time, “naturally” using all resources developed before; as a result, Toyota has no need to leapfrog any competition to be successful.
For a long time, I enjoyed teasing people from automotive industry, especially from GM, with a bold statement, “I know your worst nightmare: the strategic secret why Toyota’s time to market is 12 to 18 months while GM needs 36 to 60 months.” Then, I suggest my explanation: Toyota plans for 50 years ahead; while GM’s long-term plans are for 5-10 years. “So what?” asks the person I’m talking to. I answer, “They know all innovations long before there is a need to implement them; they steadily research and develop them, prepare all necessary resources, and then flawlessly implement them. GM, on the other hand, finds out the next innovation just before it should be implemented; as a result, GM’s implementation process is more difficult and takes more time.” Then, I hear the same question, “Where did you read that?” My explanations that I “calculated” this secret, that Toyota is not that stupid to publish its strategic secret are totally useless. If it is not published, it is not so; hence, there is some more complicated secret behind this strange discrepancy. I am helpless in my attempts to “sell” my discovery to American automotive industry…
I call the phenomenon of timely development of all necessary resources in course of evolution, “Flow of Resources.” This flow, if properly understood, is the most important criterion in determining the proper, i.e. flawless, sequence of Evolutionary Steps.
Law of Multiplicity
A living thing is distinguished from a dead thing by the multiplicity of the changes at any moment taking place in it.
- Herbert Spencer
The Law of Multiplicity states that
Every concept of Evolutionary Step has multiple implementations: one outcome improvement could be produced by multiple alternative functions, one function could be performed by multiple alternative principles of operations, and one principle of operations could be realized with multiple alternative sets of resources; an improved outcome could be used for better satisfaction of multiple distinct needs and thus commercialized in multiple distinct market segments and markets; and any outcome could be “zoomed in” for multiple times, thus every its improvement could be conducted in step-by-step sequences at multiple levels.
This Law resolves an important “dilemma”: a very brief and simple FutureMap with limited number of concepts of Evolutionary Steps represents a huge variety of products and services that we observe in any market. There is no dilemma here: any single concept shown in the FutureMap could be – and always is – realized in huge variety of alternatives; every alternative represents a category of products that differ by non-conceptual signs and elements such as brand, package, name, shape, color, marketing, advertisement, etc.
The products that fit the “expired” concept, while a new one is already emerging or even unfolding are the “losers”: customers are expecting the new improvements, and outdated ones don’t excite them anymore. On the other hand, not every alternative product produced within boundaries of current concept is a winner: there are multiple factors that might “kill” a product, including wrong positioning, insufficient or excessive degree of improvement, and improper marketing. Conceptually proper product might lose the competition due to the non-conceptual factors, while conceptually improper product, even with best non-conceptual elements, never wins in the long run.
Division of sources of products for satisfaction of human needs into the industries, markets or market segments is artificial; it reflects our understanding of different aspects of individual and social life. Satisfaction of human needs, on the other hand, is an indivisible process with multiple aspects. Internal interrelations between these aspects are numerous, if not infinite, which is hardly reflected in interrelations between industries. As a result, some products designed to participate in satisfaction of one need are, actually, used for satisfaction of absolutely different needs. Sometimes, products are not used to satisfy a need simply because they are produced by “unrelated” industry and, accordingly, positioned for different purposes. Probably, the best illustration of this phenomenon is the book Extraordinary Uses for Ordinary Things [Reader's Digest and Marilyn Bader, Extraordinary Uses for Ordinary Things: 2,317 new uses for household items. Reader's Digest Association; 1st edition (December 2004)]. Isn’t this a clear and loud “hint” to market the same product in as many market segments and markets as you could imagine it would be useful to customers?
Another very important point of the Law of Multiplicity is “zoomability” of any conceptual improvement. Indeed, every improvement consists of several outcomes that should be accomplished. Improving each of these outcomes individually would improve, to some extent, the overall result. One could find out which sequence of these individual improvement would provide for flawless implementation. In this way, a conceptual improvement could be represented as a sequence of improvement steps. Then, each of these steps could be taken as a sequence of improvement steps, too. This process of zooming could be repeated as many times as necessary to provide with each individual improvement “just right” degree of overall improvement of satisfaction of customers’ need.