Real Innovation versus Continuous Improvement

Stephen DeAngelis

September 21, 2012

“Six Sigma, Kaizen, Lean, and other variations on continuous improvement can be hazardous to your organization’s health,” writes Ron Ashkenas, a managing partner of Schaffer Consulting. [“It’s Time to Rethink Continuous Improvement,” Harvard Business Review, 8 May 2012] Ashkenas readily admits that continuous improvement initiatives turned Japan into an economic powerhouse; but, he writes, “In the past year Japan’s major electronics firms have lost an aggregated $21 billion and have been routinely displaced by competitors from China, South Korea, and elsewhere.” He continues:

“Looking beyond Japan, iconic six sigma companies in the United States, such as Motorola and GE, have struggled in recent years to be innovation leaders. 3M, which invested heavily in continuous improvement, had to loosen its sigma methodology in order to increase the flow of innovation. As innovation thinker Vijay Govindarajan says, ‘The more you hardwire a company on total quality management, [the more] it is going to hurt breakthrough innovation. The mindset that is needed, the capabilities that are needed, the metrics that are needed, the whole culture that is needed for discontinuous innovation, are fundamentally different.'”

Govindarajan hits the nail on the head. Management methods specifically aimed at improving quality are also intended to ensure that failures don’t occur. Most innovation gurus will tell you, however, that you can’t innovate if you have a low tolerance for failure. Does that mean that Ashkenas in recommending dumping continuous improvement? “Absolutely not,” he writes. “It has created tremendous value and still drives competitive advantage in many companies and industries.” As the title of his article suggests, Ashkenas recommends that organizations rethink how they implement continuous improvement. To help them do this, Ashkenas offers three suggestions: Customize how and where continuous improvement is applied; question whether processes should be improved, eliminated, or disrupted; and, assess the impact on company culture. Concerning his first suggestion (customize how and where continuous improvement is applied), Ashkenas writes:

“One size of continuous improvement doesn’t fit all parts of the organization. The kind of rigor required in a manufacturing environment may be unnecessary, or even destructive, in a research or design shop. Sure it’s important to inject discipline into product and service development, but not so much that it discourages creativity.”

It simply makes sense that different departments involved in different functions require different approaches to be successful. More to the point, within an organization, different departments have different objectives and, therefore, require different approaches to be successful. The trick is matching the right approach to the right function. As Ashkenas notes, not every department needs to (or should) be innovative (even if they strive for continuous improvement). Concerning his second suggestion (question whether processes should be improved, eliminated, or disrupted), Ashkenas writes:

“Too many continuous improvement projects focus so much on gaining efficiencies that they don’t challenge the basic assumptions of what’s being done. For example, a six sigma team in one global consumer products firm spent a great deal of time streamlining information flows between headquarters and the field sales force, but didn’t question how the information was ultimately used. Once they did, they were able to eliminate much of the data and free up thousands of hours that were redeployed to customer-facing activities.”

Don’t be lulled into thinking that eliminating or stopping a process or project is an easy thing to do. Projects normally get approved because someone has championed them; however, being passionate about a bad idea can hurt rather than help a company. Isabelle Royer asserts, “The failures I’ve examined resulted, ironically, from a fervent and widespread belief among managers in the inevitably of their projects’ ultimate success. … The result is what I call collective belief, and it can lead an otherwise rational organization into some very irrational behavior” [“Why Bad Projects are So Hard to Kill,” Harvard Business Review, February 2003]. For more on that topic, read my post entitled Killing Ideas as Part of the Innovation Process. The same thing can often be said about organizational processes (i.e., that’s the way we do it around here). I agree with Ashkenas that sometimes you have to step back and ask, “Why?” Concerning his final suggestion (assess the impact on company culture), Ashkenas writes:

“Take a hard look at the cultural implications of continuous improvement. How do they affect day-to-day behaviors? A data-driven mindset may encourage managers to ignore intuition or anomalous data that doesn’t fit preconceived notions. In other cases it causes managers to ask execution-oriented, cost-focused questions way too early, instead of percolating and exploring ideas through messy experimentation that can’t be justified through traditional metrics.”

It might surprise some people how often organizational culture takes center stage in discussions about innovation. In past posts, I’ve noted that culture can be used as a platform for progress or it can become an anchor that keeps people mired in the past. The Victorian Scottish historian and essayist, Thomas Carlyle, once wrote: “Culture is the process by which a person becomes all that they were created capable of being.” He was only half right. Culture can also be a tether to the past that keeps someone from being all they can be. The same holds true for organizations. In a previous post on this subject, I wrote:

“Annually, Booz & Company analysts issue a report about corporate innovation. This year’s study focuses on corporate culture. [“The Global Innovation 1000: Why Culture Is Key,” by Barry Jaruzelski, John Loehr, and Richard Holman, Strategy + Business, 25 October 2011]. The authors of the study write:

‘The elements that make up a truly innovative company are many: a focused innovation strategy, a winning overall business strategy, deep customer insight, great talent, and the right set of capabilities to achieve successful execution. More important than any of the individual elements, however, is the role played by corporate culture — the organization’s self-sustaining patterns of behaving, feeling, thinking, and believing — in tying them all together.’

“Despite singling out corporate culture as the most important trait of innovative companies, the study concludes that ‘only about half of all companies say their corporate culture robustly supports their innovation strategy.'”

Ashkenas’ point is that there are likely to (and should) be sub-cultures in an organization that foster the success of the various business functions — including innovation. He then draws this conclusion: “Continuous improvement doesn’t have to be incompatible with disruptive innovation. But unless we think about continuous improvement in more subtle, nuanced, and creative ways, we may force companies to choose between the two.”

“Innovation: everyone is talking about it,” writes Sam Shuttleworth, “everybody want
s it. It seems these days since you can’t open a newspaper or conference without falling over the word. Innovation is held up by our politicians as the key to a successful economic future, it’s on the lips on most CEOs.” [“When it comes to innovation, deconstruction is the ‘new black’,” Procurement Leaders Blog, 2 April 2012] She then adds something to the discussion that I believe was missing in Ashkenas’ article — types of innovation and timing. Shuttleworth writes:

“Part of the innovation debate stems from how … the term is defined as it has many, and sometimes conflicting, interpretations. Geoffrey Moore, a reputable academic and consultant in the innovation field, provides some clarity; he identified eight types of innovation ranging from the more radical disruptive, application and product innovations (i.e., products and services never seen before) through to process, experiential and marketing innovations (i.e., incremental improvements to existing products and services) to business model and structural innovations (i.e., changing the company value proposition or industry relationships). Moore also used his innovation types to overlay on a market life-cycle – disruptive innovations in the early phase, marketing innovations during the mature phase, and structural innovations in the decline phase – a helpful framework for organisations to determine what type of innovation to deploy and when.”

It should be clear that there are no magic formulas for making a company (or departments in it) innovative. In order to make the right choices, a company needs to have a fundamental understanding of itself and its functions. Companies would do well to carve the ancient Greek aphorism “Know thyself” over the entrance of corporate headquarters just like it was inscribed in the forecourt of the Temple of Apollo at Delphi. Knowledge is the beginning of wisdom and wise companies will follow Ashkenas’ advice and take a more nuanced approach to continuous improvement and innovation.