From an innovation standpoint, there are three working models through which an organisation can gain an advantage over its competitors - by driving for performance, through incremental innovations, and by using game-changing innovations. An analogy with the world of Formula One racing is useful in understanding these three working models; using them effectively can make the all the difference between a pole position and a crashed bumper.

The business environment around us is not unlike a Grand Prix - full of fiercely competitive duels, hard fought twists and turns and, sometimes, nail-biting finishes. In a Grand Prix, the race is as much about the larger team as it is about the skill of the driver. The final result is governed by hundreds of people like mechanics, computer specialists, and managers. Similarly, the world of business is undoubtedly a team game - depending as much on how well-organised the enterprise is, as on the skill of the CEO. In fact, the CEO is more like a mechanic than a driver; he ideally seeks to build a vehicle which will find its own direction when it's time to steer.

With this metaphor in mind, the question of getting superior business performance then boils down to - how do you get more out of your car in the long term? You have three options:

First, you can put your foot down on the accelerator.
Putting your foot down is about getting more out of the same system. It is about efficiency, about the driver being told: "All right, this is what we've got in terms of machinery and fuel, now I want you to stretch your limits of performance and drive harder."

That's the attitude commonly seen in industries that compete on cost parameters. There is little else to differentiate them, so they continually strive for efficiency, by heightened quality consciousness and process orientation. Non-adaptive implementation of tools like Six Sigma, CMM levels, and ISO certifications are all targeted at squeezing the last drop of performance out of existing systems.

This often happens at the expense of employee satisfaction. Quite often the strict process orientation leaves little scope for creativity and individual space, with project managers driving their subordinates to increase working hours. Higher stress levels around the world are invariably a result of attempts at putting the foot down on the accelerator.

This working model is reminiscent of factories in the first half of the 20th century. Working conditions on automobile assembly lines were bad. One of the reasons was the long working hours extracted from unskilled labour, to enhance efficiency.

Just as pushing a car too hard over a period of time can seriously damage it, pushing employees too hard can degrade the human capital of a company. Talented and creative people may leave your company, while the rest of the workforce may have little space or incentive to demonstrate their full capability.

An example of this kind of working model is found in most Business Process Outsourcing (BPO) companies in India. Their high profitability is achieved by tight cost control and process orientation. Quite often, these companies compete on price and basic performance parameters like reliability of service.

Second, you can use a better quality fuel.
Using a better fuel is about incremental innovation - making small changes in products and services - within the boundaries of how the industry conducts business. It is about effectiveness, with the driver being told, "I think your machinery can be driven much better by changing the way it is run." This is the attitude of companies that are willing to take an alternative route to achieve the industry's common goals. The popular Japanese system of Kaizen is a system for encouraging and implementing incremental innovation.

Incremental innovation can provide a respite to employee morale, inasmuch as it is dependent on the expression of personal creativity. It provides an outlet for one's drive towards constructive change. In his book 'The Goal', Eliyahu M Goldratt talks about the drive of a person to improve the performance of his plant by changing the way things are done, using incremental innovations in processes.

An example of incremental innovation is the 'Everyday Low Price' strategy used by giant retailer Wal-Mart. This strategy is made possible owing to a combination of incremental innovations, like a superior inventory management system.

Back home in India, Tata Motors is working on an exciting project these days: a 'people's car', apparently to be called the Tata Compact, which would sell for around $2,200 (about Rs1 lakh). A number of incremental innovations mark the project, like the possible use of bolted or glued panels instead of welded bodies.

Quite often incremental innovation is inherently limited in what it can achieve. You cannot overtake a Ferrari with a Honda, just by filling the latter with high-octane fuel!

In such cases, one is left only with the final option: