Improvement and Innovation

To stay current with market changes and society’s expectations—that is, to stay in business—it is necessary for companies to improve, and do so continuously. Business is changing on a daily basis and to respond appropriately, we have to inject a continuous improvement philosophy and spirit of innovation into the all-important company culture. To lead our businesses to a place of effective differentiation and to change our unique product and market position, we need to make things better all the time; complacency leads to decline.

Let us first look at making continuous improvements. In many companies, the main improvement process is driven by the target deployment or target agreements. The key performance indicators of a company should improve year by year. These improved KPIs are assigned to, or developed by, different departments, groups, and individual employees within the organization. If process or output weaknesses are identified, management will often define additional KPIs to monitor these weaknesses and related improvement initiatives. In manufacturing, employees, or sometimes consultants, define ways to achieve the specific production or profitability targets. As markets evolve or issues arise, we go back to the drawing board and look for ways to fix potential or perceived problems. This continuous improvement cycle is applied in most of our companies. In this way, we enable our employees to analyze situations as much as possible and offer input in order to distill from these analyses appropriate actions to put or bring processes back into control. To make the most of improvement efforts, it is important for employees at all levels to use a common language when addressing improvement efforts. Tools and methodologies like PDCA (Plan-Do-Check-Act), problem solving methods, TPM (total productive maintenance), and so on, should be carefully examined and adopted, as appropriate, to give employees a common system to use.

Sometimes, we have additional work to do to define cost improvement projects and quality improvement projects. To make broader end-to-end improvements that go beyond unit-specific changes, we focus not only on individual process improvements, but also on continuous improvement across a full production cycle. These larger projects assure—and require—interdisciplinary participation from different departments. These kinds of improvement projects are often driven by the engineering department, production, and purchasing divisions in an interdisciplinary setting.

To verify that the company is still on the right path with its improvements and is improving fast enough to remain competitive, from time to time, benchmarking to competitors is helpful and necessary. This should not simply be a comparison between the products of competitor and our own products; it should include all areas of the competitor’s activities. If we analyze the products of a given competitor, we find its design characteristics, its inputs (materials), and often the source of its components. Comparing competitors’ sources to our own gives us information about purchasing process improvement possibilities. Often, it is also possible to gain insight into competitors’ design and production processes. We can derive this from the products, or, in special cases, we can even engage information brokers. A complete benchmarking exercise with selected competitors gives clear insight into where we stand and in which areas we have to enhance our improvement efforts.

Direct benchmarking to competitors is not always possible, however. Sometimes, it may even be more helpful to benchmark to a similar branch within a company. There are also benchmark tools available that, for example, allow us to compare a refrigerator to a washing machine, the refrigerator producer with the washing machine producer, and the refrigerator sales channels with the washing machine sales channels. Both are household appliances, both use similar materials, and both are produced for household use. This kind of “apples-to-oranges-made-to-look-like-apples” comparison can be very helpful when two similar companies do not compete directly with one another, but share an interest in benchmarking to peers. Companies in this situation should have no real complaint about agreeing to the benchmark. This, of course, is contingent upon both parties providing accurate and reliable data for the benchmark project. Both companies can pick up plenty of improvement ideas without sharing data with a direct competitor. Non-disclosure would also be a prerequisite. The idea goes in the direction of developing and sharing best practices.

Benchmarking guides improvements, but does not lead directly to innovation. Innovation requires vision. There is a saying: If one is following his competitor’s footsteps, then he cannot pass him. To pass the competition, innovations are necessary.

I’ll give an example from the first landing on the moon. There was a long-standing dream to put humans on the moon. The vision to set that as a stretch goal coalesced and provided the alignment factor that people needed to apply collective intellect and resources to the challenge. At inception, visions like these can appear to offer negligible or non-existent economic advantage. Nevertheless, the vision had emotional currency and that pay-off was enough to make the dream happen in the U.S. in 1969. Americans (or, more specifically, the U.S. government) were willing to channel money from taxpayers to develop and test the necessary technology to make that flight. And the whole of the U.S. showed extreme pride of the end result and rarely even mentioned the cost.

The most recent example for the connection between a vision and great innovation in the manufacturing and consumer products world is Apple’s success. We have computers made to much more demanding specifications than an Apple computer or an iPhone. The vision for Apple was, however, to build products that were aesthetically pleasing, easy to use, and robust during usage. The development of the hardware, software, and the business model were built to this vision. This combination created a specific kind of high-end innovation which brought Apple to its current market position.

Some years ago, I participated in an innovation workshop for car radios. The question given to us was: How should a car radio look in 5 and 10 years? This is the right kind of question to develop a product road map. It is not the right question to develop the vision for a company. The question to develop a vision should demand broader thinking and create an emotional response capable of motivating people to make serious and concerted efforts to make stretch dreams come true. The question to develop the vision for a car radio producer 15 years ago should have been: You are sitting in your car. You have all elements available to drive. What else would you like to have in your car to make your journey comfortable and stress-free? From this kind of question, we can generate visions. These kinds of visions, in turn, inspire people toward the level of innovation we will need for the well-being of our companies—and ourselves—in this world.

Wilhelm Raabe offers these valuable words: “Look to the stars, pay attention to the streets.” This is great advice as we build our companies. “Look to the stars” compels us to develop a vision and inspire innovation. “Pay attention to the streets” reminds us to take care of what we have in front of us. We can—and must—do both.

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