In this interview with the PEX Network, Brad Power describes why he believes the world is shifting from continuous improvement and episodic innovation to a need for continuous innovation. Despite the need to devote more resources to disruptive innovation, In the internal competition for scarce resources in most large traditional companies, almost always today’s performance engine wins the lion’s share.
How do some leading organizations continuously innovate? How do their management systems protect money and people to generate, incubate, and commercialize disruptive innovations?
There is a transcript of the interview at http://www.processexcellencenetwork.com/innovation/articles/move-from-continuous-improvement-to-continuous-inn/
Synopsis: Instead of mapping workflow in detail with “boxes and arrows,” managers should focus on the “diamonds and arrows” of decision flows. In our transformed information economy, improving the decisions of knowledge workers can have a much higher impact on business performance than fixing daily workflow inefficiencies.
Example: Materials managers reoriented themselves from process details to business goals and operational performance by brainstorming a list of 47 decisions in 6 categories that they were responsible for, then prioritized and analyzed 12 decisions that were key to performance. They then focused on these critical 12 for immediate training, performance management, process improvement, and longer-term IT systems improvement. With this re-focusing, they improved the company’s operational and financial performance significantly over the next months.
Question: Have you seen examples where focusing on better decisions drove better outcomes than focusing on workflow improvement?
Synopsis: The uber challenge for process improvement in organizations has always been to make improvements across functions. In the absence of a significant disruptive event, or obvious proof that the world is changing, the gravitational forces in organizations pull strongly towards the performance engine: functional, hierarchical, command-and-control, rigid. Few organizations have assigned people to manage their major end-to-end processes — and been successful.
Example: A U.K. bank is making continuous improvement part of their standard work. It has gone well, but only at a functional level. Trying to get end-to-end improvements has proven to be virtually impossible.
Question: Have any sizable organizations assigned people to manage their major end-to-end processes — and kept them in place over the long term?
Synopsis: The focus of your process improvement activities should depend on the needs for change in the business, and I see three possible objectives: (1) fine-tuning the “performance engine”, (2) process innovation, and (3) making your organization “anti-fragile”.
Examples: GE uses “Belts” and Lean Six Sigma to fine tune the performance engine. Toyota develops problem solving skills to make themselves “anti-fragile”.
Question: If your organization is confronted by a critical need to improve your operations, how do you focus your process improvement activities?
Synopsis: Culture change is a bear. The conventional wisdom is that it takes years to change a culture, defined as the assumed beliefs and norms that govern “the way we do things around here.” And few organizations explicitly use culture as a way to drive business performance, or even believe it could make sense to do so. The logic usually works the other way — make specific changes in processes, and then hope that, gradually, the culture will change. Yet some leading organizations are turning this conventional wisdom on its head.
Example: By focusing first on changing their culture, Trane, the $8 billion subsidiary of Ingersoll Rand that provides heating, ventilating, air conditioning and building management systems has been driving results — and quickly.
Question: Can you change culture to quickly drive results?
Synopsis: Many large, successful companies are creating offices in California’s Silicon Valley to spot big new trends and learn how they can transform their organization in ways they couldn’t otherwise imagine. It’s no longer good enough to wait for change to come to your industry; you need to be out there where it’s happening. And a lot is happening in Silicon Valley. Companies are using “idea scouting”, venture investing, and product research and development to tap into innovations.
Examples: General Motors established a corporate innovation group in Silicon Valley in 2010 to look at advanced technologies related to the Internet and mobile connectivity, “infotainment”, and self-driving cars. Swisscom’s Silicon Valley team scouts for the very best ideas from the giant marketplace of mobile innovations and introduces them to headquarters in Bern, Switzerland. American Express invests in innovative ventures. Honda launched Honda Silicon Valley Lab (HSVL) in 2011 to partner with talented entrepreneurs and tech companies to create cutting edge products and services.
Question: How can you build your organization’s ability to sense and respond to rapid improvements in technology?
Synopsis: Some organizations which have competed successfully for decades by focusing primarily on creating unique solutions for each customer are now embracing operational excellence to drive even more customer value. I see a shift in the coming decade to combining operational excellence with tailored solutions for individual customers based on a deep understanding of their needs.
Examples: L.L. Bean has had lots of information about customers for many years that they have used to tailor offerings and services. But while such customized services used to be enough to compete effectively, these retailers are now finding they need to improve their operational reliability too. L.L. Bean is embarking on a major investment in its systems infrastructure to improve its reliability.
No industry is closer to its customers than healthcare. Doctors are driven to understand each patient deeply and to deliver a unique solution tailored to the patient’s specific needs. In 2003 ThedaCare (a health delivery system with five hospitals, 26 clinics, and over 6,000 employees, based in northeast Wisconsin) leaders decided to focus on designing processes that consistently work better, reduce waste, and enable staff to better meet the needs of patients.
Question: Have you seen organizations which have simultaneously been world class at operational excellence and customer intimacy?
Synopsis: How “IT Changes the Way You Compete” is the same in many ways today as it was 30 years ago, as new waves of innovative technology wash over organizations. What’s different today is that these successive waves of tech applications have left every organization with a critical core of digital capabilities. Now that IT is essential to the execution of nearly every job, as we move into the future, managing IT will be an even bigger part of yourjob.
Examples: ING puts business managers in charge of system projects
Question: Has your role in managing IT changed during your career?
Synopsis: GE’s “insourcing" of appliance manufacturing to the U.S. has been trumpeted as a major reversal of the trend of sending jobs abroad to lower cost locations. I see it differently: as a "NUMMI deja vu" story. NUMMI was a joint venture of Toyota and GM, where Toyota took over one of GM’s worst plants and turned it around with a new management system — using many of the same people and the same unions. At its core this is really a process and a culture story. GE Appliances is proving once again that the balance of process and people, aligned with a clearly articulated and understood purpose and vision, is the source of improved performance and capability development.
Question: Have you seen a new management system dramatically improve an organization’s performance and capabilities?
Synopsis: Start-ups tend to be anti-fragile; large, successful organizations tend to be fragile. Most successful organizations do not like volatility, randomness, uncertainty, disorder, errors, stressors, and chaos. Yet we are in a world where disruption and randomness are increasing. Organizations that gain from randomness will dominate, and organizations that are hurt by it will go away. Crises and major disruptions are not an abrupt departure from what anti-fragile organizations do continuously — solve problems.
Examples: Tesco has developed and maintained mechanisms for listening to customers and a brilliant problem management system that quickly identified needed supply chain and other improvements. Toyota’s reputation took a major hit in 2009 and 2010 with the largest car recall in history followed by a massive tsunami that wreaked untold damage on its international supply chains. After both crises, Toyota recovered because of its extraordinary ability to solve problems.
Question: Will Tesco follow Toyota and prove it is anti-fragile too?