TRIZ in small business - competitive advantage

© Rubin M.S.,

President of MA TRIZ,

Director of the Fund of Small Business Support

of the Republic of Karelia (Russia)

 

 

In recent years one of the main issues of developing TRIZ as a theory has been the following: does TRIZ belong only to technical field or the range of its application is rather broader. Altshuller G.S. and many other TRIZ authors wrote that TRIZ methods can be applied to a wide range of other fields of human activity.

 In the past natural resources were considered as the main basis of economical development. At present the basis is technology while in future this basis would become technologies of creating technologies, creativity technologies and strong thinking technologies. First of all this relates to the use of TRIZ in business.

TRIZ can be widely used together with other methods not only when solving inventive problems but at all stages of development and activity of business. Special significance TRIZ has got in the sphere of small business where rapid situation change, highly competitive environment, limited resources and many other factors provoke many problems. Experience of TRIZ application has shown the effectiveness of TRIZ methods for solving different problems of a small company: evaluation of business ideas, drawing out strategy and tactics of the development, drawing out marketing plan and carrying out marketing studies, pricing, business-planning, management, staff administering, holding negotiations, competitive struggle, establishing partner ties, market stimulation, financial management, etc.

First of all the peculiarity of small business is its need for rapid adaptation to changing environment. The staff is quite small, so employees should be universal specialists able to take bearings in new fields, take decisions with lack of information, etc. Small companies often can not turn to outside advisers because of limited resources. Small companies can’t afford serious mistakes in business since their activity is connected with high risks. All this shows the importance of the use of TRIZ methods in small business for developing technologies and solving management, marketing and other business problems. TRIZ use is most significant for small innovation enterprises in which typical problems of small business (risks, lack of resources, etc.) are very acute.

At one of the seminars we have discussed a typical business problem.

All known methods of business analysis are aimed at improvement of the existing situation. It is possible to compare sales volumes of different products, take a decision of stopping sales in time. Only TRIZ suggests methods of creating new products which provide qualitative change of price/costs ratio.

Another example from consulting practice.

One more example from small business practice of the Republic of Karelia.

A few years ago Petrozavodsk administration has set very high dues and fees for licenses for sale and fast food organization on the city embankment – one of citizens’ most favorite places for spending their free time especially on holidays. The action was aimed at replenishment of the treasury. Businessmen could do nothing to change the situation.

A well-known for his original ideas businessman has bought an old barge, moored it to the embankment and established fast food points on it. The barge does not belong to the city administration so it can’t make the businessman to pay dues… At the same time an additional consumer effect appears since cafe on the water attracts many visitors.

New ideas, which increase the degree of business-system ideality, increase profitability of this business as well. TRIZ is able to create the ideas which can be converted into additional income.

 

The sphere of TRIZ application mainly deals not with some fields of civilization activity (development of technologies, industry, business, science, art, etc.) but with technology of creating something new, inventing methods which had been unknown before.

Since ancient times civilization has developed on the basis of trial method according to the system of natural selection. For example, bad boats or ships have never come back; carts which could be broken easily have been never built again. This method is widely used in business till now – ineffective solutions lead to bankruptcy. At present models of large-scale objects are used to test some strategies. This method is rather cheaper and safer. A well-known method is modeling of business in business-plans. The next step is transition from real models to mental modeling on the basis of trial method again. TRIZ allows humanity to make another step forward in projection development. The idea lies in the use of manageable thinking (instead of trial method), qualitative change of business model on the basis of overcoming contradictions and coming closer to an ideal end result by means of the most effective use of resources.

In TRIZ two main groups of methods can be marked out:

- methods based on revelation, analysis and overcoming of contradictions in the examined system (Algorithm of inventive problem solving, contradiction matrix, etc.);

- methods based on revelation of laws and tendencies of development common for systems (lines of technical systems development, system analysis technique, su-field, etc.).

There are methods which unite both approaches for example these are the standards for solving inventive problems.

All basic TRIZ mechanisms which have been first created for solving technical problems can be applied to other fields including the one of business. For example, formulation of the contradiction of demands (CD) can be an analogue of formulation of technical contradiction. If speaking about the problem of opening fast food points in Petrozavodsk the following contradiction took place: it is good to set up these points on the embankment since there is an opportunity to increase profitability of business and it is bad as the administration makes businessmen pay high dues for the permit.

As about analogue of physical contradiction in business it can be contradiction of characteristics (CC). In the situation mentioned above this contradiction may be formulated in the following way: fast food points should be placed on the embankment to increase the income; at the same time they should not in order to avoid paying high tax.

Business-systems as well as technical systems are based on realization of some functions. That is why formulation of an ideal end result (IER) is applicable: function of the system is being realized while there is no holder of the function; number of the functions increases while costs of their realization tend to zero.

It is a well-known fact that many principles and methods of solving technical contradictions can be applied to resolving contradictions of demands: division of conflicting objectives in space and time; principles of Blessing in disguise, “The other way around”, Dynamics, Merging, etc.

Analysis and application of substance-field resources (SFR) is an important instrument for solving business problems. In business as well as in technical problems it is necessary to find a conflicting pair, determine easy-changeable and difficult-changeable elements, operation time of the conflict, etc.

System analysis technique, su-field analysis as well as most of other TRIZ methods can be used when analyzing business problems taking into account peculiarities of this activity field. For example, when solving business problems various resources and effects can be used: economical, financial, administrative, social, psychological, etc.

When working on business problems some TRIZ methods should be changed, some should be added to the existing tool kit. This issue will be discussed in section “How business changes TRIZ”.

In business lots of different methods are used for analysis. Among them: SWOT-analysis, Boston matrix, FAB-analysis, etc. The use of these methods together with TRIZ allows us not only to analyze the development of business and evaluate a certain situation but also find absolutely new solutions.

One of TRIZ methods’ peculiarities lies in their ability to be combined with other methods of analysis. SWOT-analysis is a well-known method of business analysis and development strategies selection. It is simple and universal; however there are some disadvantages. Among them are the following: quite often not specific characteristics and weaknesses which are not attached to a certain object are formulated; there are no instruments for solving problems revealed by the analysis as well as reliable criteria for quick evaluation of the proposed solutions quality. An improved SWOT-analysis is suggested. Within this refined analysis these disadvantages as well as some others are partly removed due to the use of TRIZ methods.

The method consists of 7 stages:

1. Working out a list of the examined system (situation) elements.

2. Working out SWOT-table, determining connections between the elements over the period under view.

3. Choosing two clashing elements (conflicting pair).

4. Formulating contradiction of demands.

5. Analyzing contradictions and searching for solutions with use of TRIZ methods.

6. Formulating suggestions on development (resolution) of the initial situation.

7. Testing efficiency of the selected solution.

It is better to present the method by a concrete example.

 

Example. Description of the initial situation.

A well-known international program chooses the main executor of a large-scale consulting contract. Two companies pretend to perform the contract. One of them is a recently established small company (“Business development agency”). The other one is a strong and influential rival company which has got stable international contacts; however its activity field does not quite match the project. The rival company suggests companies uniting in order to use advantages of both of them. The one should analyze the situation and make “Business development agency” to get the contract. Otherwise small company which has just started working may go out of business.

1. Working out a list of the examined system (situation) elements.

Example. Important elements of the system (shorthand notation is in brackets): name (“ADB”), mission and company profile (“ADB-mission”), founders (“ADB-founders”), qualification of staff and governing body (“ADB-Qualify”). 

Important elements of the super-system: international program (“In”), technical task of the contract (“In-Cont”), competitor (“Comp”), current legislation and environment (“Leg”).

2. Working out SWOT-table, determining connections between the elements over the period under view.

 

3. Choosing two clashing elements (conflicting pair).

Example.

·       “ADB” agency clashes with “Comp”.

·       “ADB” agency clashes with representatives of the international program “In”.

Example. The first pair is selected as it includes more manageable elements – it is easier to control “Comp” than international program “In”.

“ADB” agency should agree to merge with “Comp” in order not to conflict with “In” representatives. At the same time it should not agree to be able to control negotiations when making the contract.

5. Analyzing contradictions and searching for solutions with use of TRIZ methods.

Example. In the present situation changeable (manageable) elements are “ADB” agency itself and partly “Comp”. “ADB” has almost no resources of its own; main part of resources belongs to the competitor. Ideally “Comp” should act so that “In” representatives dismiss “Comp” and prefer “ADB” agency as executor of the contract. “Comp” presses toward union. If “ADB” resists it then it certainly loses the game. The striving of “Comp” for merging is the main resource for problem solving. Analysis of subsystems shows that the merging itself consists of a number of elements: agreement, terms, decision-making procedure, etc.

6. Formulating suggestions on development (resolution) of the initial situation.

Example. It is necessary to work out such form of merging which would suit interests of “ADB”. There are two possible ways: first, “Comp” itself provides for entire transparency of merging and makes “ADB” a full partner, second, “Comp” acts as a conflict and incapable for cooperation organization and this makes “In” dismiss it.

Agreement on joint activity of the companies is chosen to become an instrument for realization of this strategy.

Strategy which implies that “ADB” agrees to unite with “Comp” was suggested. At the same time work on the unification should be divided into two parts. This means that “ADB” drafts an agreement on joint activity while “Comp” works out all basic clauses.

7. Testing efficiency of the selected solution.

Example. The described situation is a real fact. After “ADB” agreed to merge the situation became less tense. “ADB” did not have much to do since there are samples of joint activity agreements in all law reference books. “Comp” felt sure that the situation would be settled successfully. That is why it did not take any steps, neither attracted additional resources. At the same time acuteness of the conflict moved to it. “Comp” could not work out clauses of the agreement as it did not want to declare its aggressive intentions or because of inability (there was not enough competence) to depict future allocation of functions, responsibilities and expenses of the parties to the agreement. Several months passed “Comp” started irritating representatives of “In” with inactivity. They did not have enough time to continue the talks. “Comp” failed to fulfill its part of work. “In” representatives had to give preference to “ADB” agency since there was no agreement on merging.

There is another example of effective and successful strategy in the situation which seemed to be desperate.

These examples show that even small companies with lack of resources always have an opportunity to win competitive struggle if they use correct strategy and all possible resources even those ones which first were against them. TRIZ gives competitive advantage in business even if there is a minimum of resources.

 

Matrix by “Boston consulting group” allows to determine prospects of goods (services) which a company sells, to analyze assortment of portfolio and prospects of this or that good (service) of the company. This method is well-known and widely used for planning strategies of business development.

Vertical axis shows market share of each product; horizontal axis reflects tendencies of the rate of market share growth in this market:

·     “Difficult children” – huge investments are needed to turn the product into “Stars”

·     “Stars” – the product can bring enough profit to maintain its own existence; however some financial difficulties may take place

·     “Milkers” – the product brings lots of money which may be used to turn “difficult children” into “stars” but in the near-term outlook only

·     “Dogs” – demands great attention from administration, a decision to stop producing these goods may be made. “Dogs” can turn into “difficult children”.

“Boston matrix” has some disadvantages: only two indicators of the product’s market position are used; there are no mechanisms for working out qualitative changes of the product/service or promotion strategy, etc.

The method can become more effective if used together with TRIZ mechanisms. Each point of “Boston matrix” has typical contradictions which are connected with either keeping present market share or necessity to move to another position.

As an example one of the most complicated situations will be used. It is characterized by small market share and low rate of development (segment “Dogs”).

The development of Karelian Leasing Company (Russia) may serve such an example. KLK started its operations in 2002. The basic service is leasing equipment and cars for small companies. Owned and debt capital was not enough for stable functioning of the company. Some other leasing companies worked in Karelia. They were attached to banks and disposed of cheap credit resources. KLK was close to the bankruptcy because of low turnover and yield. Such problems are typical for this position of “Boston matrix”.

A contradiction appeared. On the one hand, KLK needed to attract additional means to the authorized capital stock, for example the company could invite some bank or financial corporation to become a new founder. On the other hand, this could lead to great difficulties in future. If a new founder comes to the company, acting owners lose control and possible benefit.

At the same time KLK may be deprived of a quite unique service. Usually banks lay down additional conditions for clients of leasing companies attached to these banks. According to the demands clients of the leasing companies can establish accounts only in these banks. Such a situation can frighten many people away and especially representatives of small business. This way KLK may lose many of its clients.

Finally, it may happen that the bank, having a large share in the leasing company, starts establishing special conditions of credit granting; it can also limit use of financial resources of other banks or introduce some other limitations.

Contradiction of demands: KLK needs to attract additional investments in order to increase turnover of the company; at the same time it should not do this because otherwise KLK may become totally dependent on the investor. Ideally it should be leasing services of KLK that would make financial resources increase and this way help the company to avoid attracting investors. Thus an absolutely special idea appeared – to make micro-leasing the core service of KLK. This means leasing of very cheap equipment. The leasing companies which are attached to banks are not interested in such services since they are not profitable, they strive for large-scale expensive deals. So, KLK entered a rather free market of small business. Representatives of small business usually do not turn to big leasing companies as they can not afford this or find it inconvenient. Micro-leasing allowed the company to increase ratio of capital turnover and profitability of deals. For the last year sales volume of the company increased 323%, profitability grew up. This means that the new market strategy and service allowed the company to move to the next segment of “Boston matrix” – “difficult children”.

This example shows that the use of “Boston matrix” as well many other well-known methods of business analysis together with TRIZ methods allows not only to reveal business problems but also to work out absolutely new and effective development strategies.

 

TRIZ mechanisms can be effectively used not only together with SWOT-analysis and Boston matrix but also with many other methods of business analysis. The way cinematography has turned static photography into permanent motion, TRIZ turns methods of business analysis into methods of analyzing the development of business.

Enlargement of the field of TRIZ use requires broader understanding of its basic mechanisms. The word “invention” should be taken not only as some technical invention but also as an administrative invention, business invention and so on. Sometimes it is impossible to determine the field to which the initial situation belongs: it may be techniques, economy, law, interpersonal relationships, etc.

When using TRIZ methods in business it is necessary to take into consideration a number of peculiarities. We will list just a few of them.

When solving business problems one should understand that elements of the initial situation are subjective. It is essential to find out from whose point of view you solve the problem from the very outset. Sometimes this division between “we” and “they” promote significant progress. In some situations carrying out such an analysis is an inventive problem itself. For example in the problem of “ADB” agency the selected tactics allowed to determine if another company is a partner or a competitor which is incapable of cooperation. Of course, such situation can’t appear in technical systems.

The term “field” in business-systems differs from the one in technical systems. Any interaction between elements (psychological, juridical, functional, etc.) of the system involved can be the field. Typical example of field in business-systems is a set of consumer qualities of some good or service. That is why when selling a washing machine sometimes in fact such its quality as “silence” is being sold; speaking about sale of a car the producer may sell its “status level”. In business determining quality of such a business field can be an independent problem. For example, at FAB-analysis (Feature; Advantages; Boon), which allows determining consumer characteristics of a good or service.

Nature of the interaction field in business-systems predetermines different characteristics of conflict space and zone. It is not a physical space like in technical systems but rather a topological space which is comprised of conflicting elements and connections between them.

In business it is very important to determine the rank of the problem in time (century, long-term, momentary) and space (world, state, city, district, company) properly. The level of the used resources and tools must correspond level of the problem.

One of the most important business resources is time. In some cases simple inactivity can be a solution even in the most conflict situations.

In financial systems we can see that ideality level is increased not by means of reduction of costs but by means of gradual increase of the number of the functions performed. For example, in the course of time a simple bill of debt turned into a bill of exchange - one of the main elements of the modern financial system. The same situation we find in leasing - common rent became a financial instrument with many economical and financial functions and effects. It is typical for non-technical systems that ideality is increased first of all by means of enlarging the number of functions.

In contrast to techniques, there are no invention databases in business. Not all methods which are applied in technical field can be applied in business. Some other effects can be used: not only technical and physical but also psychological, social and some others. In technical sphere there is often a plenty of time for solving some problem while in business time is limited and there are only some hours or minutes to take a decision. There is also a difference between the notion “novelty” in business and in techniques. Some other differences and peculiarities can be mentioned which should be taken into consideration when developing TRIZ in business.

 

Transition from technical analysis to analyzing the initial situation from various points of view (economical, legal, financial, administrative, etc.) enlarges the number of possible search directions and resources for solving the initial problem. This may be compared with transition from search in one-dimensional space to search in multidimensional space.

Here is an example. In 1992 we faced the problem of control of coal quality at Apatity heating and power plant (Murmansk region, Russia).

This example shows that initial situations which are formulated like technical problems may have solutions on different levels: in this case on the legal one. Some other situations may take place when an organizational or business problem may have a technical solution.

 

It is obvious that it is not just an occasion that TRIZ methods which have been worked out on the basis of technical systems analysis, can be effectively applied when solving business problems. There are some laws of development that are more general if comparing with techniques and business. The author has carried out research in this field in the context of developing Theory of Material Systems Development (ÒMSD).

Most of TMSD concepts can be easily applied to business development. For example, in TMSD “substance” is regarded as any system, which is represented as a single unit (substance) with a certain characteristics set, in the model involved. So, the substance can be: an employee, subdivision of a company, single companies or even a number of companies united by common functions and characteristics. Such unified substance can be an element of the model in the analyzed development process.

Such TMSD terms as system ontogenesis (development of an individual concrete system) and system phylogenesis (development of generalized abstract systems) can also be important for business. For example, when analyzing some business problem it is necessary to determine the level to which it belongs. If the problem relates to a certain type of business generally (all trade organizations, all grocery stores, all stores of the city or a certain street, etc.) then it is a problem of the system phylogenesis. Vice versa if the problem relates only to your business then it belongs to the system ontogenesis. After determining the level of the problem it is necessary to find a method for solving it. One should keep in mind that instruments for solving the problem and the problem should belong to the same class. For example, if the problem of fast food points was related to problems of all Petrozavodsk companies working on the embankment then it would be a complicated social problem. At the same time if the problem is formulated as an individual problem (mini-problem) then it is easier to solve it.

The main TMSD laws allow examining rules of systems development in various spheres of human activity from a single point of view. So the law of tendency to seizure of surrounding and keeping of own resources (substance – energy – space – information - time) can be used for business systems analysis directly. In the situation dealing with holding company seizure (section 3 of the article) processes of seizure through different resources were analyzed.

Another law of simultaneous development on a few system levels is necessary for business analysis as well. For example in the problem of cascade electric boiler-house it is important to see several system levels at once. These are: level of all electric boiler-houses of the world; level of a single subdivision of hydroelectric power stations cascade of Tulomsk; level of the boiler-house as an independent organization, etc. There are certain rules on each level. Sometimes they may be adjusted with each other; sometimes there may be some contradictions between them.

General laws of material systems development form single principles of creative thinking for different activity fields of the human being. For example, the main principle lies in the statement that any thinking is the process of creation and changing (development) of mental models. One should understand that any business starts with its mental model, a so-called business idea. General principles of thinking of a businessman, engineer, scholar, artist or housewife are common. They are always based on mental models transforming.

Any mental model is comprised of its elements, connections between them, aims and/or functions of the system involved. One should strive for creating the simplest models which reflect the system best. It often happens that there is the need for two or more models at once (principle of two-model or multi-model) for representing the same system or process in order to provide deep understanding of processes and decisions. For example, when developing strategy of interaction with business partner one can proceed from two different models at the same time: the partner is really willing to cooperate and build a joint company or he just uses the mask of partner to seize and destroy your business. This took place in the situation involving “ADB” agency: the situation was created in which the competitor could not show itself as a real partner and thus lost the game.

In the most complicated and conflict situations of your business development it is essential to be able to conceive the situation as an independent and, if possible, simple model which can clarify the problem. You can do whatever you like with this model even most terrible and reckless things such as to make friends with competitors, fire irreplaceable employees, produce unprofitable goods, etc. Experience shows that such style of thinking allows drawing out tactics for escape from deadlock and thus creating business development strategy for the next years. TRIZ promotes strong model decision which is essential for taking effective business decisions.

When developing mechanisms of business-systems development and solving creative problems different laws and principles, which have been discovered while researching various spheres of material world development (techniques, biology, economy, ecology, sociology, etc.), can be used.

 

Taking into consideration the effectiveness of TRIZ methods and their ability to be combined with methods of business analysis it seems very important to introduce some TRIZ elements into training programs for businessmen and business advisers. The author started working on TRIZ training program for businessmen in 1992. Representatives of different spheres of business have underwent these course – bankers, insurance companies employees, exchange employees, managers, representatives of small business. Training courses for 40-60 hours have been worked out. They include basic TRIZ elements, simplified version of ARIZ, independent tasks. Such seminars are in popular demand among representatives of small business. Since 2000 TRIZ seminars are being organized for the representatives of small business of the Republic of Karelia in the framework of the state program of small business support. TRIZ becomes an important instrument not only for engineers but also for businessmen.

The use of TRIZ in various spheres of human activity (techniques, business, science) makes it an essential part of thinking and culture of the human being. 

 

Literature.

 

1. Altshuller G.S. To find an idea. Introduction in TRIZ. / Novosibirsk, “Nauka”, 1991

2. Altshuller G.S., Rubin M.S. What comes next to final victory. Eight ideas on nature and engineering. Chance for an adventure. – Petrozavodsk, “Karelia”, 1991.

3. Rubin M.S. On Theory of Developing of Material Systems (TDMS). ETRIA World Conference “TRIZ Future 2002”, 6-8 November 2002, Strasbourg, France.

5. Rubin M.S. Principles of model thinking in TRIZ. The scientific - practical conference MA TRIZ “Development of system of preparation of the teachers, experts and researchers TRIZ”. The theses of the reports. Petrozavodsk, 2003.

6. Training programs for entrepreneurs TACIS Project “Strengthening and Consolidation of the SMEDA Network” SMERUS 9802.