Category Archives: Innovation

Lean Hoops

I am on record as saying that I’m not a fan of sports metaphors being used in business.  I really have no rational explanation for not liking them.  Even though I’d rather not see them, I still use them in conversation when I’m trying to teach or make a point.  The simplest reason is that sports are so popular that they can create a common starting point to connect from.  I see the same upside in using other popular culture aspects like music, TV and movies.  They create a framework that people can relate to.  As a way of sharing some of what I find, I’m going to add some pieces here that I’m calling Pop Culture Lean.  The danger here is that I’m going to stretch too far and point out to something that doesn’t really relate, but hopefully I can share some things that may be off the beaten Lean path and draw some insights in different areas.

The first example I’m going to use on this topic is a fantastic article by Chuck Klosterman on the Triangle offense in the NBA.  Anybody who has even marginally paid attention to the NBA over the last 20 years has heard of the offense.  As Mr. Klosterman points out, 11 of the last 20 NBA champion teams ran the offense. Outside of referring to man to man or zone defense, it’s probably the only ‘strategy’ that a casual fan would know by name.   If this happened in football, 8 other pro teams and a couple dozen college teams would already be running the offense.  But for this strategy, nobody in the NBA or major college basketball is on the bandwagon.

Why isn’t this proven strategy much more widely implemented?  I think part of the answer lies in Phil Jackson’s thoughts in the article.  Success depends on a dedication to teaching “very, very basic fundamentals”.  It requires individuals to function within the flow of the system as opposed to the standard of seeking individual glory.  It is also a system that outsiders ignore because they may not like the person giving the message.  It all sounds way too familiar to me.  I almost feel like I could strip the basketball statistics out and use the ‘Find and Replace’ function a few times in Word and make a story asking why so few companies truly practice Lean as well as Toyota and TPS have shown it to work.

I don’t really think that the answers are exactly the same for the lack of widespread adoption of the two different systems.  But I do think there is enough of a parallel there to give me more than a short pause.  I also think that there is enough common ground in that article that I have already printed off a couple copies to hand out.  Maybe it won’t help, but I have to be willing to try to look in different areas to find new ways to communicate.  I can’t keep the Triangle offense alive, but I can try to keep the Lean journey alive.

Standardization Enhances Innovation

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.

Innovation and Learning

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.

Who Drives the Price? Consumer or Customer?

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

What’s implied is the consumer sets the price.  The company has a cost and can work to reduce the cost or leave it but that is what determines the company’s profit.

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?

The Math Behind the Innovation Process

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.

Asking the Right Question to Create Innovation

This is part of my reflections from the OpsInsight Forum in Boston.

One of the breakout sessions that I attended at the OpsInsight Forum focused on innovation.  David Silverstein from BMGI led a great discussion on how to ask a different question in order to stir new innovation.

(Side note: He had innovation in his presentation…be didn’t use any slides.  It was a per discussion.  Almost like you ran into him in the hall.  Very well done.)

Here is the simple question that David presented to stir the creative juices: “What are wee hiring the product/service to do?”

David then gave a couple of examples to drive home his point.

Example #1:

In the 1880s, candle makers wanted to be more innovative.  If they wanted to improve, what were they working on?  Making candles that don’t drip?  Scented?  Candles that burned longer?  Burned cleaner?  Easier production processes?

Now ask the question, “What are we hiring the candle to do?”

Answer: Create light.

Asking that question, allowed others to invent the light bulb.  Unfortunately, the candle makers were not part of that innovation and their business was significantly effected.  Had the candle makers asked that question, maybe they would have invented the light bulb.

Example #2

Today if you go to a lawn mower producer and ask about what innovations they have you will get different responses.  Some of them might be: Developing a cleaner fuel engine, self-guided mowers, or mowers that run like the Roomba vacuum.

What if the lawn mower producers ask the question, “What are we hiring the lawn mower to do?”

Answer: Cut the grass because it keeps growing and we want our lawns to look nice.

So what if the grass didn’t grow?  There would be no need use a lawn mower and our lawns would still look great.  Well, scientist have already designed no mow grass.  (Links to articles here and here.)

The candle makers and lawn mower producers are focused on the product and not what the product is hired to do.  In one case, candle makers became a rare breed.  For lawn mower producers it is a matter of time.

The other significant thought David talked about was connecting the dots to create something innovative.  He referenced the phrase, “Connect the dots.”  When you connect the dots you have thought of something in a new or innovative way.  The more dots you have in your head the easier it will be to connect dots.  Dots in our head is information and learning.  If we continue to keep learning, it will be easier for us to eventually connect the dots.

The best time to connect the dots is between 10pm and 6am.  During our sleep.  At that time, our brain is accessing everything we have learned, read, been taught over the years trying to connect dots.  The brainstorming session is just the extraction of those connections you have already made.  That is why so many times when we are relaxing or sleeping “something just hits us.”

It was a very interesting presentation/discussion around innovation.  A new question to drive innovation.