This is a great Dilbert cartoon from Scott Adams earlier in January.
I have heard a lot of people or company’s say they need to act like a start up to get innovation. I find this to be alarming. At one time, the company had to be innovative or it probably wouldn’t be in business today.
Somewhere along the way, the company hit on a big innovative idea and migrated from innovation and trying new things to care and feeding of the big idea that put them on the map. It is an easy trap to fall into. It isn’t about acting like a start-up, it’s about never losing your roots as a start-up company. Innovation and care and feeding must happening at the same time. It isn’t one or the other. It should be both. The ones who do both well…win.
One last blog post I read that I am way behind on.
A recent article in the Wall Street Journal, which did not get nearly the attention it deserved, made the case that the word “innovation” has outlived its usefulness. “Companies are touting chief innovation officers, innovation teams, innovations strategies, and even innovation days,” the hard-hitting piece noted. “But that doesn’t mean the companies are actually doing any innovating. Instead they are using the word to convey monumental change when the progress they’re describing is quite ordinary.”
Innovation is used everywhere for everything today. I agree with the WSJ article. A lot of the “innovation” is a quite ordinary change.
Here are three examples in the post about truly innovative work.
Southwest Airlines never said, “We want to be the country’s most innovative airline.” Its leadership said, “We want to ‘democratize the skies’ and give rank-and-file Americans the freedom to fly.” They perfected a new way to be an airline by virtue of what they wanted to achieve as an airline. They did what made sense to them, even if their strategies made no sense to the legacy carriers.
Tony Hsieh and his colleagues at Zappos never said, “We want to introduce innovations to e-commerce and do a better job of selling shoes over the Internet.” They said, “We wanted to build the greatest customer-service brand in the world, a company whose mission is not simply to deliver products but to deliver happiness.” Thus Zappos created a special culture, a unique way of doing business, and an almost mythic status among its customers, who have given the company permission to sell all sorts of products above and beyond shoes.
Cirque du Soleil did not set out to make a few tweaks to the traditional three-ring circus, or market-test a few new acts as a way to offer innovations vis-a-vis Ringling Brothers. Rather, an immensely talented group of street performers set out to define a whole new category of live entertainment, a creative leap that made perfect sense to the artists who dreamed it up, but made no sense to circus veterans or to audiences who had never seen such shows before.
The common theme Bill points out is having a purpose. In all three cases, having a strong purpose that was communicated and believed in led to the innovative thinking. It was delivering to the customer that mattered. Not being “innovative”.
Have a purpose you believe in. Understand the customer. Deliver to the need. Innovation will come.
Here is a Domino’s commercial that has been running lately. I thought it was a good example of getting everyone in the organization involved in continuous improvement by listening to the customer.
The Parmesan bites were created by an employee at a local store. He is someone who interacts with the customer everyday as well as works hands on with the product. He is in the best position, even better than the test lab that is mentioned, to understand the customers’ needs and likes. He can quickly try the new product and get it out to customers and hear first hand their reactions.
I also applaud the Domino’s leadership for listening to the idea and spreading the new product to all of their stores.
What other lean like behaviors may be present from the commercial?
If you are a regular reader of Beyond Lean, you may know that I am a very big supporter of U.S. manufacturing. I believe it is the foundation for economic prosperity for our country or any country for that matter. Lean thinking and principles can help guide any business to success and overcome many economic and governmental situations.
Recently, the Harvard Business Review Blog has had posts talking about much of the same. Here are a few of the posts.
The authors break jobs into two categories.
But we were able to classify all jobs as either creativity-oriented or routine-oriented. And within the routine-oriented classification, there are three distinct types: routine-physical (e.g. an auto assembly plant worker); routine-service (e.g. an accounts payable clerk); and routine-resource (e.g. a coal miner).
The authors explain that creative-oriented jobs pay more and pose a great question.
…the real challenge for the U.S. economy is what to do with routine-oriented jobs in dispersed industries.
And their response to this:
There is no quick fix for this problem. But my view (and Richard’s) is that we have to rethink how we utilize workers in our advanced economy.
…But I believe that America can influence the slope of the line of increasing creativity-oriented jobs by leaning toward creativity; giving workers the encouragement and space to innovate; utilizing the most of their brain, not the least of it. That would be the grass-roots way out of America’s economic doldrums that everyone is looking for.
I interpret this as engaging everyone in the organization, even those doing what is considered a routine-oriented job, in innovating the business. Innovating is also about how to change the process to be better. Engage the minds and hearts of the employees not just the hands and feet.
The U.S. competitiveness debate too often devolves into a cry for more Apples and more Ciscos on American shores, when what the country really needs is more Hospiras.
Hospira is an advanced contract manufacturer.
The author talks about the importance of manufacturing for innovation. Something I believe to be true and how we must open our mind to what the definition of innovation can mean.
In the U.S., “innovation” typically means just one thing to people: novel gadgets. Few policy makers realize that much of the innovation that has propelled China’s economy, for example, is of the incremental or process type. Many of us admire Apple for its originality but tend to forget the importance of its power-supply innovations, all of which were done in China by a Taiwanese company.
When it comes to process improvements, American companies are stagnating at best, and in many cases slipping backward. Policy makers need to appreciate the value of keeping incremental and process innovation in the United States.
I don’t agree that the U.S. needs policy makers to give tax breaks and help U.S. companies realize the importance of manufacturing to all types of innovation. There are U.S. companies that have realized that on their own. I’m sure even Apple has realized the importance of the innovations from their suppliers. It is the companies that need to realize the benefits of this and make the effort to change their thinking around this.
A growing number of executives of U.S.-based companies are repatriating their manufacturing capabilities — moving some production operations back from overseas.
Many companies have been moving manufacturing back to the U.S. In fact, enough have done it the movement has a name…reshoring or onshoring.
The post talks about governmental help to support this movement. While, the governmental help would be nice it is not necessary. There are plenty of companies that have made the move without help from the government.
Here are three bullet points the author says the governmental help recognizes:
- Companies compete on cost and responsiveness, and this balance shifts dramatically when labor costs rise and the locus of demand shifts.
Labor cost has nothing to do with responsiveness. Quick lead times and location has to do with this. When total cost is looked at from end-to-end companies usually find that cheap labor really isn’t lowering their cost either.
- Local talent and skills are essential to productivity and innovation. Long-term depletion of manufacturing skills will make it hard to reverse the trend.
I think this is right on. It will be hard to reverse the trend but I think with more companies bringing manufacturing back to the U.S. this is helping to keep the skills from depleting.
- Research and development incentives provided by the U.S. government must be tied to manufacturing operations. Otherwise, whatever is developed with taxpayer money could easily be moved to other regions associated with low-cost manufacturing.
I don’t agree with this. This comes down to a company’s morals and beliefs. If they want to move some innovation out of the country they will do it. Their are companies innovating and manufacturing in the U.S. It just may not be the high profile company like Apple.
It is great to see more and more discussion about the importance of manufacturing in the U.S. That was not the case just a couple of years ago. Especially on a high profile site like HBR. The authors there are still spouting off too much about how the government needs to change regulations. They need to start asking how all the companies that have already moved manufacturing back to the U.S. did it. If they did, they might start writing more about Lean and end-to-end value stream thinking.
Recently, I had an experience where I thought I had everything thought through and designed. I even ran my idea by a friend of mine that I trust. Everything was a green light to go.
I designing a soap cutter. My wife buys raw soap materials in 12 in x 12 in x 7 in blocks. The soap has to be cut down to small chunks so it can be melted and poured in to molds. Currently, it takes me an hour and a half to cut a block into the desired size chunks. It is not fun but it has to be done.
In the name of continuous improvement, I wanted to design a cheap way to cut the soap quickly and more easily. I also wanted to design and test in stages so if the design was not working it was not costing more and more money.
The first step was to get the tool to cut the block into 1 in. strips with one cut. I made a wood frame and then threaded steel wire through the frame. The idea would be to push the frame down through the block using the wire to cut the soap. The picture to the side is of the tool.
Building went well except the wire broke so I only threaded it three quarters of the way through pulling the wire tight. I went to give it a try and needless to say, I only cut maybe an 1/8 of an inch through the soap. The wire was being stretched and even standing on the darn thing, I did not have enough force to push it through the block of soap.
It was almost a complete failure. I didn’t get through the soap but I learned quite a bit. For one, I am glad that I was building the device in stages. I had planned to cross thread the wire which would have taken another hour do to form something that didn’t work. The last stage was to add a mechanical way use the device. Now I know I have to move the mechanically driven portion up in the timeline in order to get enough force to drive the wire through the soap. I also figured out I will have to weave the wire to make it stronger when I add the crossing the wire. Think of stringing a tennis racket.
This is just a small home project but by breaking the design up and not spending a lot of time building it to complete specification, my feedback loop was quick and added learning to designing the device quicker and at a much lower cost. I spent less than $5 on the first version and about 3 hrs including my trip to Lowe’s (what’s a project without a trip to Lowe’s). If I would have built the entire think as I picture it in the end, it probably would cost around $100 and taken me a good 25 hrs plus to build. I would have been severely discouraged if that didn’t work and who knows if I would have tried again, because i wouldn’t want to make that invest twice. Now I shrugged off the failure, took the lessons learned and will apply them to a second version.
When designing a product or device, take quick less costly iterations and test and make but do it with a long term vision in mind. Streaming TV is a good example. It started with DVDs on the computer. Then slow choppy video over the internet that got faster and smoother and then to HD. Then boxes where designed to connect to your TV to receive an internet signal and view video on your TV. Now TVs are built with internet connection built in and apps to watch video from Netflix, Hulu, Crackle, etc… Next will be selecting a menu of things you want to watch and subscribing to it and watching live over the internet eliminating Cable TV. Pick NBC and FOX and pay $10/month and the shows stream to your TV.
What failures have you learned from?
A few weeks ago, Ultimate Factories on National Geographic premiered an episode about LEGO. My son is a HUGE LEGO fan and seems to have almost the whole LEGO City setup. So this episode really caught our attention.
My son loved watching the artist/builders design the new Police Station and seeing all the sets being made in the factory. What caught my attention were the things that seemed lean like.
Here is the full episode. It is 45 minutes long. Below are some highlights I picked out with time markers as to where they are at in the video.
(1:15 – 4:10 in video) Right off the bat, the show describes how the artist/builders go about designing a product. The product manager takes his team out to real life sites of what they want to build to study them. They look at what the site has and needs to feel authentic. It is truly direct observation of what the team wants to build.
(6:40 – 10:00 in video) LEGO takes full advantage of standardization as much as possible. The Police Station turned out to be a 700+ piece set, but none of the pieces are new and require tooling to be made. Because the designers were able to build the Police Station out of existing pieces they were able to use that budget to design a police dog that is brand new adding to the experience. My lean lens sees this as cost management in order to reinvest in innovation. The innovation leads to a better experience and more revenue.
(36:12 – 36:20 in vide0) The video does not talk about 5S but there is some evidence of it. In this clip, you can see the tape outlines on the floor for the staging of finished product.
(36:20 – 38:10 in video) In the 1990s, LEGO went through a period when sales were declining. LEGO decided to go and see why this was happening. They discovered their products were not meeting the needs of the adult customer, which is 50% of their market. People were hacking the Mindstorm systems and creating bigger sculptures with the robotics. They didn’t try to shut the hackers down. LEGO embraced them and created new products. They still invite customers to come in and help with designs. They are focusing on customers needs. Everything starts with the customer.
These are some of the quick examples I picked out. If you notice, nothing I saw focused on lean manufacturing although I believe I saw some lean like things in manufacturing and distribution too.
I would highly recommend watching the full video because it touches on every aspect of business. From customer focus to product development to manufacturing to logistics. It is very complete. If you are a LEGO fan, this video is a must see.
In the comments below, tell me what you saw from a lean perspective. What did I miss?
Fast Company Design has a great article about the importance of standardization in leading to innovation. The article mentions 5 ways that standardization can help.
One way is the standardization of processes. Having everyone doing the same thing the same way. Baptist Healthcare System in San Antonio, TX had physician led improvement councils around their hip and knee replacement procedures.
Where previously each one of the system’s 40 orthopedic surgeons had their own particular way of doing things, the Council developed a single model of care for all five of the hospitals in the system. New standards included everything from pre-operative tests, radiology, operating room instrumentation, supplies and other equipment, to post-surgery medication, food and nutrition, physical therapy and physician consults. Within a few months the results were dramatic; BHS cut its readmission rate in half, and infection rates dropped.
Standardizing the process led BHS to new and innovative care reaching quality levels not before acheived.
The article also talks about how Black and Decker’s tool division made a turn around by standardizing the parts used to make their various tools.
By 1970, Black & Decker’s consumer power tool portfolio was a hotchpotch of 122 different models, which between them had 30 different motors, 60 different motor housings and 104 different armatures. Each of these variants required separate tooling.
The results were amazing.
A concerted effort by the business over the next three years saw a massive reduction in variants, leading to just one motor, a huge reduction in space, facilities, resources and time needed to manage parts and equipment, faster production cycles and retooling times. Motor production labor costs were cut by 85%, armature costs by 80%, and failure rates fell from 6-10% to 1%. New products were introduced to the market in weeks rather than months and prices to the consumer were slashed by as much as 30% while maintaining 50% margins.
Not only the reduction in cost and space, but the standardization led to improved time to get new innovative products to market. This breaks the dam open on innovation because ideas aren’t sitting around like they might have before because it took so long to get to market and out of the innovation pipeline.
Innovation can happen when parts become standardized like on a rifle. The Picatinny Rail was part of the rifle that became a hot spot for rifle innovation.
The Picatinny (Pic) Rail allows soldiers to attach and detach weapon accessories like optics, lasers, bipods, and other hardware to the M-16A1 assault rifle. Since its introduction in 1995, it has helped to more than double the longevity and functionality of millions of the Armed Forces’ standard issue weapons. The common interface provided by the rail has reduced the costs and simplified the logistics of equipping and supporting 1.5 million soldiers and 1.5 million reservists, and increased the rate of innovation and growth in the small arms and accessory industries. For example, Aimpoint Inc., a manufacturer and supplier of high performance optics to the U.S. Army and Air Force, has seen a fifteen-fold increase in revenues since 1997, since the rail makes it possible for more soldiers to be deployed with, use and service advanced optics and other accessories in the field.
Without standardization these innovations may not have happened or may have not reached as many people as they have.
Standardization is not a bad thing, but like anything else when it is not used properly or with the right intent it can cause people to fear it. Standardization is not put into place to turn people into robots. They are there so we don’t have to waste our energy thinking or reacting to the basics. We can spend our energy thinking about new and better processes, products and ideas to improve our company or our life.
Earlier this week I had a post about how learning is essential to the lean mentality. A video from the Born to Learn website on the My Flexible Pencil blog got me thinking about this subject.
The subject is still on my mind as I work with some of the innovation groups at my company. These are groups that are coming up with new product ideas for the company. One process I have been working with the group on is how to collaborate with our suppliers to modify and create better and more cost effective products.
The company has had relationships with the suppliers for 20+ years. These relationships have strictly been about execution of product manufacturing. The company would design a product and tell the supplier to build it. Over the last couple of years, the company has gotten more behind innovation and re-organized its structure to support the new behaviors that are wanted.
Now, the innovation groups would like to have the suppliers’ collaboration in designing new products, defining what technology could be used to meet the consumer insights and how to make it more cost effective. This is great. Except there is one catch. The suppliers have been trained to not make mistakes and just execute. They have not had the experience of bringing up ideas and even failing with them. How will the customer react? Will they be unhappy? The suppliers are accustomed to having to execute to the specs or receiving lashes for not delivering on time and within cost.
It is similar to telling your kids to sit still and not touch for years. They become really good at it. Then all of a sudden telling them they can run around and touch and play with things. Could you imagine the look of horror on their faces after having the opposite pounded into them until they were incredible at it?
Even in business we have to continue to give outlets and experiences for people to try new things and be accepting of failure. This doesn’t mean to try anything at anytime and be reckless about it. But having a plan and trying things that haven’t been done before or even retrying things that were attempted in the past when business conditions were different.
Innovative products, ideas, and processes come from experimenting. Experimenting is about learning. So, without learning innovation is not possible.
In the lean community, many times we talk about how the consumer drives the price of a product or service. The price is not driven by some sense of entitlement we have to a certain profit margin.
Traditionally, the thought was:
Price = Cost + Profit
We find out what our cost is and add our profit to it and that will be the selling price. Things have not sold because companies price things higher than what the consumer is willing to pay for it.
The lean mindset is:
Profit = Price – Cost
Over the last couple of weeks, I have worked with a large group of people on their innovation process. How new ideas are presented to leadership and the decision making process on whether to proceed with the idea or not.
What I was pleased to hear was all the division agreeing that the consumer sets the price of the product. Not what profit we want to make. Finance to Supply Chain to the Creative directors and staff all agreed on this. Yet, there were times when the decisions being made on a product were only pursued if the price could change or the cost cut more. I understand wanting to hit a pre-determined profit margin but raising the price when the consumer is not willing to pay for it is just a waste of time. It generates zero revenue if not sold no matter what the cost is.
All the divisions agreed with this but knew they needed to put it into practice.
There was an example that was tricky that came up. In our business, we make consumer goods and then sell them through mass channels (CVS, Walgreens, Walmart, etc….). Our research says the consumer is willing to pay price X for a product, so we design and innovate around that knowledge. Then we show a retail partner, like Walmart, and the say they like the product but their customers will only pay Y which can be 50% less then what consumers told us directly.
So now what? Sometimes that makes the product unfeasible to produce without losing the integrity of what the consumer insights have told us it is they love about the potential new product. It can put us in a predicament because we can sell the product without Walmart but we feel we are losing revenue if we go by their insights.
All the divisions agree that we don’t get to set the price, but who does? The consumer (person buying the product off the shelf)? Or the customer (Walmart, CVS, Walgreens, etc…)?
What do you think?
This is part of my reflections from the OpsInsight Forum in Boston.
One of my favorite presentations was done be Dr. John Evans, Vice President of Business Innovation, from Lockheed Martin. The presentation wasn’t only about innovation but how to look at the innovation process and the math behind it.
Dr. Evans displayed the graph below.
The graph shows a high uncertainty of success means a larger hurdle rate to clear for the innovation to be profitable. Companies should work towards removing uncertainty as much as possible to lower the hurdle rate for the innovation to be successful. This does not mean that all uncertainty can be removed. Companies need to be acutely aware of the uncertainty in new innovation in order to give the idea the best chance for success.
Dr. Evans discussed the typical stage gate process for innovation.
(click on image to enlarge)
What the graphic shows is a classic Marchov Chain.
As an idea moves through the stage gates it has an 80% chance of passing. The costs are split evenly between the stages. This means there is only a 51% chance the idea will pass all the stages and $10 million will have been sunk into the idea.
Dr. Evan’s point was the innovation process should be very light on cost on the front end but very hard to pass Stage Gate 1. This allows companies to save resources on ideas they believe will actually deliver. What innovation process tasks can be moved to the front so the cost is under $1 million (compared to the $3.3 million above) but only have 20% chance of passing the stage gate.
The best is front load the process with high risks, but low costs. As the idea moves through the process, the gates are easier to pass. This helps to prevent adding a lot of cost to ideas that don’t make it to the market place. The idea has a higher chance of success in the market place and removes more uncertainty from the equation, moving the idea more to the left in the first graph.
The innovation stage gate process and how a company evaluates ideas adds value more than the idea itself. The innovation stage gate process is critical to removing market place uncertainty from an idea.
I probably did not due Dr. Evans justice in his thoughts but I tried. It was very interesting and provide a lot to think about.