Innovation is bringing creative ideas to life. It occurs in the organizational context when individuals and teams work to spark new product development, to implement new technology and even to transform the organization. Innovation is always linked to performance and growth through incremental improvements in efficiency, productivity, quality and services. On the other hand, it is also associated with radical improvement like inventions, new products and radical changes in the business model. It is a balance of incremental improvements and radical innovations that keep the company competitive in a changing world.
We are on the brink of important change in the world— and it is economic in nature. We have seen massive job cuts, company bankruptcies, budget reductions, etc. We are in a period of profit-focused cost cutting. Innovation may be a low priority for many companies in this period of recession but I think it is a big mistake. Innovation ought to be a crucial element in a firm’s recession strategy. It will allow them to do more with less and to generate profit by exploiting existing resources.
Two kinds of Innovation that are especially valuable in a recession:
Internal and External Collaboration
Greater internal collaboration– between departments and business units, as well as external collaboration– with customers and suppliers, are essential if companies are to stay healthy during the recession. For example, internal collaboration could result to a Cross Selling strategy that could increase sales to the existing captured market while lowering cost of selling. Collaboration can be a channel for transfer of best practices between operating units. Internal Collaboration can also result to inter-business-unit product innovation by creating new products and services from existing knowledge, technologies, products and brands. External collaboration, specifically with key entities of your supply chain network — from suppliers to customer, is vital to staying in business during a recession. The big challenge to firms is to reduce cost while maintaining service levels. Businesses need to have open communication with suppliers and customers alike and ensure a more effective and efficient supply chain.
It is also important for firms to use new technology and cheaper options for collaboration. Leveraging Web 2.0 in the enterprise can be one option. Let me give you a clearer example. It is critical for companies to understand how customers reassess priorities, reallocate funds, switch brands and redefine value of products and services. Web 2.0 platforms can be both a source of information and a channel to facilitate this kind of collaboration in a cost effective way.
Leveraging Shared Services
If it’s all about cost reduction and economies of scale, it’s probably the best time to implement Shared Services. In these demanding times, companies are challenging themselves to discover business processes and business models that will open undiscovered synergies. Shared Services could be the answer to companies keenly looking for convergence and streamlining of an organization’s functions.
Shared Services has to ensure that they deliver the services required of them as effectively and efficiently as possible. In a recession, this convergence enables the appreciation of economies of scale within the function and can enable multi-function collaboration where there is the potential to create more synergies. A word of caution though, a Shared Services implementation involves a large scale cultural and process transformation; it must come with a well-planned organizational transformation and change management strategy.
In a nutshell
Shared Services has been around for years and companies have always strived to collaborate — internally and externally. I think the emphasis this time should be precision, timing, and bringing the best ideas forward. Forward looking and innovation-focused companies are seeing the light at the end of the tunnel. I strongly believe that this is the best time for innovation, for breakthrough value and for paradigm shifts. This is the best time to position your company ahead of the pack when the economy regains momentum again.
Building an engine that generates a steady stream of innovations in processes, technology and product development is difficult, but companies that are able to do it, differentiate themselves from competitors. Innovation groups (other companies call it evolution committees or R&D groups) should focus their energy on:
- Incremental Improvements (streamlining, optimization, reengineering, cost reduction, reliability)
- Radical Periodic Improvement (New platform, new methods, new strategy, new philosophy, Enterprise 2.0, leap to Process Culture, etc)
Examples of two companies who have mastered innovation are Toyota and Google. Both are leaders in their respective industries. Toyota’s success is tied up to its well-known business model– the Toyota Way that has been duplicated by other companies in different industries. The Toyota business model has been so successful that the company has relied on it for decades now to run its global business successfully. Toyota, for a long time, has a strong process culture and its continuous dominance is driven by its focus on incremental process improvement that is tied up to its quality operations and production management.
Google, on the other hand, grew rapidly because of the radical rules they initiated that redefined the use of the Internet. Roberto Verganti in his book Design-Driven innovation compares this radical change to having a vision, and taking that vision to the heart of the customers. In the case of Google, this means the Web users. Think about it. This company has overturned our understanding of the use of information and networking. Jeff Jarvis in his book What Would Goggle Do?, talked about Google differentiating itself from the likes of Yahoo and AOL. Unlike the previous search giants, Google is not a portal; it is a network of platforms. Google, in a way, empowered the users of the internet, changed media and redefined the advertising rules. We as users have not asked for these new necessities, but when we experienced them, it was love at first sight.
It’s hard to imagine how already huge companies such as Toyota and Google can continue to improve and sustain growth well into the future. They have perfected the fuel that keep them competitive and well ahead of everyone else. They rely on the combination of continuous incremental changes and periodic radical innovations. I think it is mandatory for companies who aim for sustainable growth and continued primary industry position in the future to push for visionary innovation. There is no single scheme to follow. It is a transversal process that depends on combining industry experience and strong innovation methodologies that create new ideas, new technologies, new products and new processes.
Design-Driven Innovation- Book Recommendation
Last weekend, I came across a book entitled “Design Driven Innovation: Changing the Rules of Competition by Radically Innovating What Things Mean”. This recently-published book is written by Roberto Verganti — a professor of Management of Innovation at Politecnico di Milano. He is the founder of PROject Science, a consulting institute that provides consulting services on management strategic innovation.
The book caught my attention initially because of its title. I have a close affinity for design initiatives, having moved early last year across the Pacific from Asia to the company headquarters to join a Global Design Team. I have always believed that innovation from a well-thought out design initiative can radically improve a company and change the rules of competition in its industry — be it product innovation, organizational, technological, process and company philosophy.
From the front flap of his book, Professor Verganti presented his vision of a bold new way of competing. He wrote, “Until now, innovation studies have focused either on radical innovation or incremental innovation pulled by the market.” He explains that “…design-driven innovations do not come from new markets; they create new markets. They don’t push new technologies; they push radically new meanings.” His book talked about innovative products like Swatch in the 80s and as well as Nintendo’s Wii and Apple’s iPod – both of which are currently dominating their respective markets. In the fourth chapter of his book, Professor Verganti provided a comparison between the innovation strategies of Nintendo, Sony and Microsoft in the US$30 billion game console industry. Nintendo, after dominating the game market in the 80s, was experiencing a downturn, until they released their revolutionary Nintendo Wii. Meanwhile, Microsoft and Sony were focused on incremental improvements on their Xbox and Playstation products through better speed and graphics. Nintendo, on the other hand, introduced the radical idea of using game consoles as an active physical entertaining medium. It generated new meaning to game consoles and appealed to different consumers worldwide.
I think managers who are interested in innovation should get a hold of this book. This can be used as essential reference for all those interested in design and determined to make innovation the driving factor in their business and profession. In my case, the reason I bought this book is because I am interested in Processes and IT innovations. I believe this book will definitely provide me insights on methodologies that can drive process innovation initiatives. It is something that I want to write about and explore.
Book Cover Image Courtesy of Harvard Business Press.
Last August 13, I published an article entitled “Accelerating Process Culture” which talked about the four different levels of process culture maturity in a company. There are two underlying criteria used to qualify the different levels of process culture maturity– level executive management involvement and level of business process integration.
When executives exhibit a strong commitment to the process and technology evolution of the company, they always bring everyone on board. Executive management has the authority to push company-wide change as well as fund processes and IT initiatives. They are responsible for aligning the company’s structure to the business integration strategy; therefore, they enable the organization to advance to a higher process culture maturity. Let’s revisit the four levels of process culture maturity:
- Level 1: Individual heroes – dependence on individuals or a few company experts
- Level 2: Diverse Approach – initiatives per department but lacking in integration
- Level 3: Model Integration – business and IT align and model integration is achieved
- Level 4: Process Culture – executive passionately participates in process initiatives
This time, let’s examine closely the highest level of process maturity—The Process Culture. The final step of process culture maturity is when the organization achieves a high level of model integration by leveraging the consistent involvement of executive management as sponsors and facilitators of change.
There are three factors that determine the right approach towards process culture maturity. Let’s call it the “SIB factors”. S stands for senior management involvement, I for innovation and B for business model integration.
Senior managers and managers alike are the critical success factors in your organization’s process culture journey. They lead the way in building process culture and defining the operating model. Innovation in information technology is also a key component. Successful companies nowadays rely on an integrated set of electronic business processes, tools, information, and technologies. With proper support and funding, an IT organization should be able to provide the right platform and technology in which to build the foundation.
The next thing that the company needs to do is to make sure that they select the right business process model from among the many tested disciplines and existing operating models. The underlying logic here is that a company’s business model is limited by the environment. In other words, it depends on several factors, such as the industry it operates, the products and services it sells, its size and geographical diversity. Using all these factors, you determine the level of business process standardization and the level of integration of the company’s different businesses — with profitability and competitiveness requirements in mind. Shared services, outsourcing, diversification, standardization, model replication are some of the most prevalent business models multinational companies have implemented.
The real question is: how close are you and your company to getting to the highest level of process culture? This is a guide on how to assess the level of process culture maturity of an organization. Again, the examples are outlined using the “SIB factors”. Observe the following points and evaluate how your company is doing right now.
Senior management involvement
- Top executives participate in the IT and Processes evolution committee.
- Requires thoroughly analyzed business cases and encourages measurement of acquired benefits.
- Pushes for post-implementation audit to evaluate project output and acquire lessons learned.
- Encourages collaboration across business lines and functional teams.
- Funds IT and Process initiatives and actively support training in the use of IT.
- Exhibits a strong sense of innovation, feelings of shared interest to continue to improve and be ahead of competitors
- Holds regular management briefings on the impact of new technology developments and process innovations in the industry.
- Establishes a consolidated IT operation that manages a standard IT platform to sustain day-to-day support functions to business areas.
- Encourages use of IT in the business. Users possess a feeling of empowerment and confidence in the effectiveness and reliability of the processes and systems.
- Strives to leverage new technology, platform and methodology with sufficient effort in research and development in the area of processes and IT.
- Defines a clear vision of model integration and process standardization.
- Uses a best-in-class enterprise resource planning software to run an integrated set of business processes
- Promotes implementation of end-to-end processes to ensure the efficient flow of activities and effective allocation of decision rights and accountabilities.
- Captures business information in one area and shares it to another business area. Possesses the willingness to share and use information to measure and improve key performance.
- Maximizes reuse of business processes and platform across different business lines.
Achieving a high level of process culture maturity presents a host of challenges to an organization. The SIB factors provide a structured framework where initiatives can be drawn and strategies derived. This will propel your company forward through its process culture maturity journey. Achieving the highest level of process culture maturity requires strong executive sponsorship and IT leadership in order to support the company through a change process. When achieved, the company is in a good position to leverage IT for profitable growth and gain competitive advantage in a global market that knows no boundaries. This leap begins with you and your company’s senior managers.
No two process implementation initiatives are the same. It varies in scope, objectives and limitations because of budget, time, resources, and complexities. Although process initiative projects may vary, there are four key elements which assure good results. These four critical items are: (1) Process Definition, (2) Process and Activity Roles, (3) Available Tools and (4) Training.
Plain and simple reality- these elements are inseparably linked. The absence of one element will hugely affect the result of the process initiative. On the contrary, if the factors all are well attended to, you can expect excellent results.
Many process initiatives fail because:
• Processes are not well designed and documented. People in operations were not involved in the design process.
• Processes are well defined but roles are not clearly assigned in the organization as to who is responsible and / or accountable for a certain process.
• In some instances, limitations in the tool or lack thereof make the organization resort to workaround and this is time-consuming and costly.
• All systems go but people are not well trained, resulting to inconsistency in process execution
To give a more tangible example, let’s say that you are implementing a logistics dispatch system. You have selected the platform and made sure that it is customized based on the needs of the operation. During the process design, different levels of the organization were involved and consulted. You came up with a clear and concise documentation of the processes and roles that will perform the activities. Roles are defined, assigned to personnel in the organization and was clearly communicated. System procedures and policies are in place.
Then you and your team decided to forego the well planned training program that you have scheduled to speed up the rollout of the initiative and reduce travel costs for people who will need to come from different dispatch locations. You are comfortable with the training manuals and the quick guides. Communication is already done and the operational support structure is in place.
Your decision to forego one key process initiative element will result to the following possible outcomes:
• Dispatch process will be executed inconsistently depending on the user’s personal understanding of the manuals and materials.
• You can be flooded with manual errors due to the user’s unfamiliarity of the system. This results to spending more time in correcting and stabilizing these errors.
• You risk affecting customer service delivery because of probable incidents like wrong orders and delayed deliveries
The project team in the example above seemed to have done everything correctly. However, they made one crucial and costly mistake. User training, as with the other elements, is equally important. Neglecting one of the key elements could result in project failure.
This does not mean to say, that the project team must focus solely on these four key elements. These cannot substitute existing important process and project implementation methodologies and practices. These key elements are only intended to complement whatever process implementation methodology you follow.