Principle 8: Learning, innovation and continual improvement (Item 7)

Continual improvement and innovation depends on continual learning.

Why this is important

You must take a strategic approach to innovation, implementation and continuous improvement (eg, innovation and implementation objectives; resources provided to assist innovation and implementation -including seed funding and champions).

The turbulent marketplace suggests the need to:

• achieve viability faster – just to keep up
• reach further into the future
• seek predictability in your innovation activities

This means that you must think strategically about your innovation processes. Is the innovation proposal consistent with your direction; is your direction right; is your rate of innovation appropriate for you industry and market; are you being left behind?

A strategic approach to innovation [1]

• Borrow ideas from other companies that are successful at innovation. Exploit membership of your networks – especially the global ones. Exchange information on the development and diffusion of new and unusual technical solutions.
• Grow innovation alliances. Share information on how your innovation and change programs work, not just at the technical level pool. Share significant innovations and their seed funding. Which innovations should you pursue independently? Which innovations you pursue with established partners; which need establishing new partnerships?
• Enter the formal planning process every six months – not yearly. This provides a path for significant innovation proposals to enter the formal planning process without having to wait another year, by when the window of opportunity may be shut.
• Establish a seed-funding process to hold money aside specifically to explore innovations and get them under way. This accelerates commercial advantage and gives extraordinary motivation to individuals.
• Your innovation process should carry with it an on-line business case methodology that tests the proposal against your Key Result Areas and prepares cost benefit analysis.
• You need sufficient flexibility to accommodate product/service proposals that would fail strict test against KRAs. (KRAs describe the company's current thinking – eg "make buggy whips". The innovation may be a gateway to a whole future business. Five years ago, few companies had an `e-commerce' KRA.)
• Measure your rate of innovation. Compare yourself against other companies that are successful at innovation.
• Use one of the Business Excellence Frameworks as a basis for thinking about and measuring your strategic planning processes and cultural change. This demonstrates affinity with the strategic and cultural development implications of innovation.
• When you choose amongst competing innovations, think strategically. It is an investment decision. Choice should not be driven by the appeal of the innovation itself.
• Perseverance remains an important phpect of the innovation strategy - essentially every step will have issues to be decided. You need to resolve the issue of how busy people, when confronted by an idea out of left field, can cherish it and work with it.

Suggestions from Honeywell [1]

It is clear from the above that you need formal and informal processes to sustain the innovation effort – to encourage, support and coax the good ideas; to weed out the unsuccessful ones while encouraging the heart of the people whose good ideas were weeded out. In this section, we look at a few suggestions that company may wish to adopt. However, we also recognize that if Principle 8 were truly adopted, you would not need these props.

• Establish an Innovation Manager to institute an integrated approach to innovation, to lift awareness and to champion/support innovation efforts.
• Develop an improvement system `Opportunity For Improvement' (OFI) which enables all staff to notify improvement opportunities under four classifications: customer dissatisfiers; environment health and safety; procedural conformance/improvement; and suggestions for improvement. Importantly, this system should not collect ideas in some central repository. Instead, originators should send OFIs directly to the person they think is best placed to achieve a solution. Aggregations should be made of the data to identify emerging themes and assist in developing system-wide improvements. The improvement system is then both event driven and trend driven. It could also be Intranet based.
• The OFI should be available to all employees and could be extended to customers and suppliers. As a matter of principle, all OFIs should be accessible by all people.
• Use your Innovation Manager as a reference point for matters of uncertainty regarding the expression and treatment of ideas.
• Major unprogramed innovation proposals stemming from OFIs, workshops, business opportunities and customers should be supported or championed by the Innovation Manager. This is a coordination role but it also gives the idea a home where the process can start with some certainty.
• Direct individual contact often proves to be the primary method of championing an idea. Listening and the ability to integrate various views seem to be essential skills. Measure your OFI referral rate - the majority of OFIs should be resolved by direct action.
• Beware of the way you use extrinsic reward. Reward could include education, development or technical skills training associated with the innovation. It could include exchange tours to share knowledge. It could include recognition of all those who have actively participated in OFI - regardless of outcome.
• As a matter of principle, originators should remain influential throughout the life of their innovation.
• Place emphasis on the need for rapid (though considered) response to OFIs. Measure response and resolution times.
• Introduce an `empowerment card' which emphatically presents the CEO's personal message to "challenge the status quo and to innovate".
• Establish an Innovation Champions Network to provide local contact and support in each region and business unit. The Champions can be selected by peer review and carry this role as additional to their operational role.
• Procedures should be deliberately simplified to allow greater use of discretion during normal work.
• Introduce a `concept explorers' initiative.
• Workshops can be used to generate and build ideas.

Continuous Improvement

Continuous improvement can be small or large – affecting a small part of one process or reengineering of the whole company. Improvements could include:

• providing increased value to customers through new and improved products and services
• developing new business opportunities
• increasing throughput
• reducing errors, defects, waste, and related costs
• improving responsiveness and cycle time
• increasing efficiency in the use of all resources
• improving the company's performance in fulfilling its responsibilities as a good citizen
• reducing environmental impact or untended consequences

As Goldratt suggests, you should concentrate your efforts on improving processes that affect throughput. It is very common to see companies that work on `improvement', but fail to `improve'. This is an error. We discussed this in detail in BHA 4.10 Question 34 - Principle 4 ('To Improve the Outcome, Improve the System').

Sources of improvement include employee ideas; R&D; customer input; best practice sharing; and benchmarking.

A continuous improvement philosophy should be `embedded' in the way the company operates. That is, continuous improvement must be a regular part of daily work; practiced at individual, work unit, and company levels. It must be driven by opportunities to innovate, increase throughput

Footnotes

^[1] This section is based on a paper by Chris Russell who was Manager Innovation at Honeywell.