Continual Innovation vs. Economies of Scale December 10, 2009Posted by Graham Pingree in Design Thinking.
Over the course of the readings on Design Thinking, it struck me that one of the biggest challenges in managing the transition from ideation to implementation, ie knowing when to move towards execution of a particular idea. I think this decision is particularly difficult when balancing continual product improvements vs. economies of scale. This was one of the most frequent problems I encountered during my internship this past summer. The company I worked for made prefabricated, modular green building systems, so part of the business model relied on achieving scale efficiencies from our steel fabricators who manufactured the parts of the buildings. The tension in the model arose because of the continuous innovation of the product design team, who worked hard to come up with new ways to improve the design of the building. While these improvements contributed to some efficiency gains on the production side, the frequent changes made it difficult to generate enough of a single part to reach minimum efficient scale – each part could become obsolete before the necessary scale was realized. I think the concept of Design Thinking and the encouragement of continual innovation can be consistent with a model that relies on economies of scale, but the solution requires a move towards a “versioning” approach, where a design is frozen for a current version until the necessary volume is sold, and the next version that is released is more significantly differentiated.