BusinessWeek periodically publishes a special section on innovation. It’s latest report was published in the March 23 & 30, 2009, print issue. The first thing that caught my eye in the section was the sidebar that briefly recounted “A History of Big Ideas.” In this case, “history” only goes back to the beginning of the twentieth century and the “Big Ideas” only relate to business. Here is the magazine’s list:
1910 — The Assembly Line — With demand soaring for his Model T, Henry Ford took cues from brewers’ conveyor systems and slaughterhouses’ overhead trolleys to build his assembly line, increasing annual production from 78,000 cars in 1910 to 2 million by the 1920s.
1920 — Market Segmentation — General Motors CEO Alfred P. Sloan managed GM’s car models through loosely monitored “divisions,” which operated as separate companies with Sloan’s oversight, laying the groundwork for today’s corporation.
1931 — Brand Management — After Procter & Gamble began targeting soap brands to different demographics, it set up brand management, an organizational structure that makes individual managers responsible for each brand’s success.
1943 — Skunk Works — To build a new fighter jet in just 143 days, Lockheed created an organization called Skunk Works, which used small groups and advance funding to work with little interference from its corporate parent.
1950s — Lean Manufacturing — After a 1950 strike, Toyota workers were given lifetime employment. Manager Taiichi Ohno developed ways to up efficiency without cutting jobs, leading to “pull production” in 1954 and “Total Quality Control” in 1961.
1969 — Scenario Planning — The practice involves envisioning multiple future events and developing plans for responding to them. Shell first experimented with scenario planning in 1967, helping it navigate the oil shock of the 1970s.
1973 — 360-degree Reviews — Getting feedback from peers, managers, and underlings may be the scourge of time-strapped managers. But when companies first adopted these reviews (DuPont was first in 1973), they were seen as a leap ahead.
1987 — Six Sigma — Invented at Motorola, the process, designed to reduce defects and increase efficiency, is most associated with General Electric. Widely used today, the jargon-laden tool has been the butt of recent jokes on TV sitcoms such as 30 Rock.
1989 — Outsourcing — While the practice of hiring outside tech services dates to the 1960s, outsourcing took root later. In 1989, IBM landed a deal to manage Kodak’s data-processing needs. By the 1990s, much of that work started moving offshore.
1990 — Reengineering — Technically defined as a radical rethinking of processes, the fad was often associated with the layoffs it spurred and with consultant Michael Hammer, who cited Ford in his 1990 article “Reengineering Work: Don’t Automate, Obliterate.”
2000s — Open Innovation — Many companies are ditching fears of “not invented here.” Instead, they are buying or licensing inventions and collaborating with companies and customers. Procter & Gamble aims to capture half of its innovations from outsiders.
I suspect the next big idea will have something to do with information sharing. I’m a big believer in the importance of information – obtaining it, using it, and sharing it. I almost live with a mobile phone in my ear, I rely on teleconference staff meetings, I write a blog, and I head a company that is inventing ways to share and use information [see my post entitled Persistent Ocean Surveillance]. Today being able to connect data is just as important as owning it. The communist system was inherently non-resilient because of its leaders’ penchant to horde information and foster secrecy. The same lack of resilience holds true for any organization that cannot easily share information. An organization that wants to become more resilient needs to share more information.
This idea is not new. A year before Macintosh hit the streets and forced Microsoft on a decade-long quest to match its user-friendly operating features, Harvard professor Rosabeth Moss Kanter was arguing that rigid, segmented organizations had to give way to more integrated organizations that took advantage of less formal lines of communication and were change-oriented. Kanter, according to consultant Matthew Stewart, was pursuing a line of argument going back more than twenty years to Tom Burns and G.M. Stalker who promoted a movement away from mechanistic organizations to more organic ones. “In language that eerily anticipated many a dot-com prospectus,” writes Stewart, “they described how innovative firms benefited from ‘lateral’ versus ‘vertical’ information flows, the use of ‘ad hoc’ centers of coordination, and the continuous redefinition of jobs” [“The Management Myth,” The Atlantic, June 2006]. Stewart further traces this line of argument to well before the information age to James C. Worthy who first celebrated the “flat” organization and to W.B. Given who coined the term “bottom-up management,” both of whom wrote in the 1940s. The difference today is that we can achieve what they only dreamed about. New technologies permit us to break through information barriers that once seemed impermeable.
What makes an object resilient? Two factors – its structure and its ability to draw quickly on every aspect of its structure in order to regain its original form or assume an even more effective form. All organizations – be they in the commercial or government sector – operate in an environment of extreme complexity and stress. On a daily – and sometimes an hourly – basis, they face:
- The ongoing demands of competition and performance.
- Compliance pressures, in the form of complex regulation, which creates its own set of performance requirements in the form of compliance demands. Since regulation changes frequently, and often varies from location to location, these demands are severe.
- Security threats – from terrorist attacks, cyber-intrusions, criminal activity, and natural disasters.
Leaders must ensure that organizations can meet these demands — i.e., that organizations can fulfill their missions in the face of any and all threats and risks, and that they can take swift advantage of unexpected opportunities. To accomplish that, they need organizational systems that provide a high degree of visibility, insight, control, and responsiveness. Systems ought to provide:
- Real-time information about external events and about internal processes (good intelligence).
- The ability to intervene in those events and processes as far as they relate to their organization (good planning).
- The ability to marshal information from any point in an organization and direct it to any other point (information flexibility – the ability to both push and pull information).
- The ability to redirect an organization’s resources as needed when a threat arises or an opportunity emerges (adaptability).
Most organizational systems fall short of this ideal. They were created to deal with a past environment, not the present one. Traditionally, organizations grow over time from a simpler, more focused set of operations to greater complexity, scale, geographic reach and interdependence. And over time, the world becomes more complex as well – i.e., more global, interconnected, and accelerated.
In his insightful book Pulse: The Coming Age of Systems and Machines, Robert Frenay goes into great detail about how people are quickly shedding the machine logic they have used in the past (i.e., industrial age logic) and are adapting a more biological approach to complexity. What I see in the business world, is what Frenay sees in a multitude of environments -– a complexity gap between emerging challenges and the industrial approaches that are being unsuccessfully used to address them. He notes that where biological systems were once viewed as big machines, they are now known to involve concepts such as self-organization, emergence, co-evolution, and succession. These concepts are the kind of information age concepts that will help make any organization resilient.
Businesses don’t need to be reminded that assets are finite. To the extent those resources are dedicated to security and compliance, they are unavailable to be deployed toward more profitable needs –- performance and growth. Meeting the demands of the environment translates directly into opportunity costs. Organizations need a fundamentally new approach –- one that takes into account current realities and takes full advantage of organizational best practices as well as the most advanced technology. Businesses face the same challenges that government agencies face when it comes to sharing information. The faster they can shed industrial age thinking the sooner they’ll be on the road to resilience. And the closer they’ll come to discovering the next big idea in business transformation.