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Basic Business Cents: Innovate for success

Much has been discussed about product and service improvement, and the processes that make them. But what about the equally important factor of innovation of product, service, and processes? Equal investments in training and management focus must be given to continuous improvement in innovation.

Our first thoughts when thinking of innovation usually turn to technology, like the invention of automobiles, transistors, medical breakthroughs, and space travel. Technology innovation is acquiring new capability to solve problems. Engineering laboratories typically focus on incremental improvement, on doing better with what they know and have. By contrast, innovation requires thinking out of the box. A friend was hired at the Los Alamos Scientific Laboratory in the early 1950s and on his first day of employment, he was told they heard he was an expert on tunnel diodes. They said, "Here is your laboratory and your two assistants, go ahead." He was free to pursue where his research would take him.

Not every organization has the resources to pursue technology innovation in this manner, but all can pursue innovation in organizational capability or production. They need to ask how can the work processes be developed to produce products and services quicker, better, and cheaper? Reducing time to perform a function cannot only open up new markets but also cut costs and effort to get the same or better results. Finding ways to produce better products in a different way is always important. Cutting costs dramatically with the same quality and effort is critical. If the only reason employees can give for doing things the way they do is because that is the way they have always been done, it is probably wrong. There is usually a better way.

Innovation in marketing can be revolutionary by adding to the customer base and finding new markets. Examples are Sam Walton who created large change in retailing by the elimination of middlemen like distributors and wholesalers. He developed a system of warehouses and transportation to buy directly from producers and sell directly to users. Amazon made a similar giant stride in selling a large variety of products over the web allowing users to shop from home. Henry Ford revolutionized the auto industry when he developed the concept of mass production to reduce the cost of a Model T enough that his employees could afford to buy them.

Another revolution is emerging now with organizations moving from one-time income from sales of products and services to continuing revenue from monthly fees. Computer and auto manufacturers have long utilized leasing in this fashion. The insurance industry is another example of smoothing out income. Now we see cell phone manufactures moving to steady income by charging a monthly rate instead of selling the phones. Amazon is selling Prime membership in exchange for special treatment. This allows them to have a steady income beyond sales. These examples are large innovations, but opportunities of all sizes exist for innovations in your company, in your job, and in your processes. Can this process be performed better, quicker, or cheaper?

The July-August edition of the Harvard Business Review addressed the changing executive education. They said a survey of CEOs found that the top priority was developing leadership that could drive innovation; drop outdated approaches; and engage with a new generation of employees, partners, and customers.

The process of innovation must itself be constantly innovated in organizations. Leadership must set the tone. Are they focused on short-term profit or long-term growth? Are they focused on a commitment to serving the unserved, their existing customers, their community, and their employees as well as stockholders? Do employees have the freedom to pursue alternative processes?

A previous customer instituted a policy that authorized any employee to spend up to $1,000 on an idea once a year to improve the company without approval. A friend asked the CEO if he was not worried that this would be very costly. He replied, "No, my employees are more careful with company money than managers." What happened was many new ideas were tried and implemented that did in fact improve the organization.

Inertia and apathy are enemies of innovation. The organization needs to constantly and forever be searching for new opportunities to serve unmet needs, develop breakthrough processes to perform better, and find new ways to revolutionize the way of doing its work. It is not easy but it is exciting and rewarding.