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Disregard the sound of innovation passing you by

November 4, 2009

The number of US firms making horse-drawn vehicles dropped from nearly 5,000 in 1904 to only 88 by 1929 and shortly thereafter, it was just a handful of artisan shops.  By the early 1900’s, general availability of components made assembling a carriage at low cost very easy.  Was their means of production so nailed down (sorry for the pun) they couldn’t see they were actually in the people/freight vehicle business?

This is hard to say from someone who has spent the last 15 years implementing lower cost operating strategies and methodologies, including Six Sigma and Lean.  Problem is, like the early Business Process Redesign world of the 1990’s (the Dr. Hammer and Index era), you can make your production so finely tuned that innovation becomes a disruption. Case in point is Toyota, which produces great but mostly bland cars.  In a world where cars, particularly luxury cars, had spotty reliability, Toyota’s quality was their competitive advantage.  Now with virtually all cars reliable, quality is the new norm and Toyota was taken back a few months ago by the founding Toyoda family to put some passion back into it. How do you lock down proper process while still embracing innovation?

The knee jerk answer is listening to your customers, which is so intuitive it has to work.  Well, it does, but only under 2 conditions.  First, the fundamental way you use the product has not changed in eons, basically because the underlying biology or physics are unchanged.  Office chairs come to mind.  People have sat the same way since the African Savannas 200,000 years ago.  You can make the chair more ergonomic or stylized, but basically it has to have a seat and back.  Secondly, your product or service has to be so widespread no single group of vocal customers or power users/consumers can hijack the conversation and misdirect the product to suit their needs while you miss emerging markets. Twitter is well regarded for monitoring its millions of users, observing widespread use of new user-created features and adaptations.  Those with the most ‘legs’ are then built into future releases.  The counter example is a long defunct software company, ISSCO Graphics, which by listening to its few power users and largest customers missed the desktop graphics market transition from a select few customers on Sun workstations at $7500 per license to mass adoption of PowerPoint at $250 for the entire Office suite.

Innovation, the game changing new product/service or business model, is as much about intuition as it is about low cost, high quality production.  Steve Jobs realized his iPod was a game changer while walking in NYC shortly after rollout, noticing someone with the distinctive white ear buds, then turning a corner and seeing two more people and so on.  All during an era dominated by the Discman and it’s evolutionary competitors.  The safe bet was to develop a white (Apple’s signature color) Discman clone, produce it at low cost and high quality.  Design it, implement Six Sigma defect free production and let the units slide off the conveyor and right into the dustbin of history. Instead, Apple used intuition and imagination to take 70% market share and control of the future by defining the new market of listening to customized content rather than transporting at-home music to the outdoors. Similarly, Apple could not get shelf space, no matter what the slotting fees, at the big box stores where most people still buy PCs.  No doubt, these stores did the ‘on one hand vs. on the other hand’ equation and decided not to totally tick off Microsoft, Dell, Sony and HP.  Apple instead built their own retail stores, which sold both product and experience, and now Best Buy has Apples on their shelves.  Innovation creates new revenue streams.

To innovate, the culture has to be the antithesis of Six Sigma.  What, how can this be, Six Sigma is the default answer to every ill in business, or so goes the common logic.  In a fast moving product cycle or where an entirely new product is required, the focus has to be reversed from “how can we have no defects” to “what is the customer wanting to experience?”   This is less the land of quantitative analysis than it is based on a heuristic view of the world. There is a transition point where the innovated product becomes a ‘standard’, but first, there has to be that innovation.

This is not to say Six Sigma does not have a place.  If you are making the same thing for years, it’s a no-brainer to lock down a production line into a well oiled machine, forcing vendors into ever tightening quality parameters so assembly/integration/mixing is easier.  As example is a syringe, where the parts supplied by vendors have to snap together without rework so billions can be assembled each year.   Another would be food, where once the recipe and form are finalized, cranking it out for years becomes the norm.  Candy bars come to mind.  Take a look at how long these bars have been around:

  • 1900 Hershey’s Milk Chocolate Bar
  • 1916 Clark bar
  • 1923 Reese’s Peanut Butter Cups
  • 1923 Butterfinger
  • 1923 Milky Way
  • 1925 Kandy Kake (the original name of the Baby Ruth),
  • 1925 Oh Henry
  • 1925 Mr. Goodbar
  • 1930 Snickers Bar
  • 1932 3 Musketeers Bar
  • 1933 Kit Kat
  • 1938 Nestle’s Crunch
  • 1941 M&Ms

The point is someone had to invent each item, ex: innovate, and then ramp up production. Without the innovation, the ‘secret sauce’, each candy would have been just another flavor of some else’s product and probably failed.

Will your company survive by simply making what it currently does cheaper and faster?  Wonder how it felt to be in one of the 62 now defunct US locomotive factories hearing Charles Edgar Duryea’s horseless buggy and the Wright Brothers’ Flyer pass by?

Rich Eichen is a Managing Principal of Return on Efficiency, LLC, who’s website is www.growroe.com and is one of their senior turnaround leaders/CROs, Program and Interim Executives with over 25 years experience reshaping companies, Operations and key initiatives. He can be reached at richard.eichen@growroe.com

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