When a Latin American executive thinks about innovation, they almost always think about what they don't have: research and development labs the size of a global pharmaceutical's, proprietary patents, an engineering department capable of designing the next microprocessor. Measured against that yardstick, the usual conclusion is: "we don't innovate here, we execute what others invent."
Alejandro Ruelas-Gossi put a name to that false dichotomy: the Big T paradigm. He distinguishes between lowercase "t" innovation — improving the product itself, typically intensive in patentable technology, as in biotech or semiconductors — and uppercase "T" innovation: changing the business model, without necessarily touching the product. CEMEX is his favorite example. The cement it sells today is, chemically, the same cement it has always sold. What changed was everything else: a GPS and logistics management system (GINCO), inspired — with no irony intended — by the dispatch model used for emergency ambulances, which cut delivery time from three hours to twenty minutes and delivery cost by 35%. None of the individual technological pieces — GPS, routing software, information terminals — was new. The innovation was in the combination, applied to the business, not the product.
The real challenge, according to Ruelas-Gossi, is having clarity about which of the two T's is worth innovating in at any given moment. He illustrates this with the personal computer industry in the 1980s: Apple and Compaq bet on lowercase "t" — improving the product — while Dell understood before anyone else that the real opportunity was in the big "T": cutting out intermediaries between the factory and the customer. Compaq went on to lead the market thanks to a price-performance improvement, but by neglecting logistics — its big "T" — it lost its lead to Dell in short order. Neither Apple nor Compaq was wrong to innovate; they were innovating in the wrong terrain for that moment in the market.
For a Latin American company without the R&D muscle of a multinational, this is a concrete opportunity: it's literally where the playing field is. Kola Real conquered beverage markets in Mexico and Central America without inventing a new soft drink. Corona became the world's best-selling imported beer while always bottling in Mexico — a decision about the model, not the product. In neither case was the product the surprise; the business model was.
The useful question for a leadership committee, then, isn't "do we have R&D capacity?" but "which of the two T's should we be innovating in right now, given the state of our market and our product?" Having that answer clear — instead of trying to innovate in both at once without priority — is what gives the organization and the market clear signals about what the company's priorities actually are. And a priority with focus is, almost by definition, a priority that gets executed.
Based on: Ruelas-Gossi, A., "The Big T Paradigm" (Harvard Business Review, 2007).