The Antidote to Today's Crisis

To paraphrase Dr. W. Edwards Deming from Out of the Crisis. “The aim of this book is transformation of the style of management.  Transformation of management is not a job of reconstruction, nor is it revision.  It requires a whole new structure, from foundation upward.  Mutation might be the word, except that mutation implies unordered spontaneity.  Transformation must take place with directed effort.  The aim of this book is to supply the direction. “ The “Crisis" Dr. Deming was referring to in the early 80’s was the unprecedented decline in sales and profitability experienced by the western world as a result of the advantage Japanese companies had in designing and manufacturing products with meaningfully higher quality and reliability.

Dr. Deming, a statistian from Powell Wyoming USA, knew the antidote to the quality problems facing the western world.  He knew the antidote because he was the one who had taught the Japanese the transformation of thinking that was the source of their quality advantage.  Japanese industry was so thankful for his role in rebuilding Japan after WWII that they named their national quality award the Deming Prize in his honor.  The Japanese people were so thankful the Japanese Emperor awarded him the Second Order of the Sacred Treasure in recognition of his contributions to Japan.  Shoichiro Toyoda, President and member of the family that founded Toyota described Dr. Deming’s impact on the company this way, “Everyday I think of what he meant to us.  Deming is the core of our management.”

The “Crisis” in 1980 was quality. Today’s “Crisis” is the speed that the internet powered global marketplace turns products, services, organizations and careers into price driven commodities.   Today,  “If you’re not Meaningfully Unique you better be cheap.”  And of the two options, Meaningfully Unique is personally and professionally more profitable.

The antidote to today’s crisis is innovation 

The antidote to today’s crisis is innovation.   However, as currently practiced, innovations take a long time to get to market and are very risky to the organization.  Survey’s find an 85 to 95% failure rate for innovations.  Even worse than the economic damage is the damage to people and culture.  A survey we conducted with over 12,000 managers across industries found that 8 out of 10 felt their culture had lots of fear when it comes to pursuing innovations and 9 out of 0 were pessimistic about the chances that their company would take action on accelerating innovations that were meaningfully unique versus their competition.

When a leader is ready to confront the reality that: 1) they need meaningfully unique innovations to compete in the marketplace and 2) that their current system for innovation management doesn’t work they often turn for help.  Frequently they turn to one or more Common Cures that sound promising but that in the long term often cause more damage than good.

Common Cure #1:  More Rigid Gate Review Meetings.  The hypothesis is that greater discipline and inspection innovation speed will increase speed and risk decrease.   The truth is inspection of quality as Dr. Deming taught the Japanese doesn’t work.   Quality must be built into the culture through training, tools and techniques.   Inspection is even more impossible with innovations because they are consciously created to have meaningful differences versus the existing standards.

Common Cure #2:  Metric Management & Bigger Rewards.   The hypothesis is that if we manage by metrics and reward people for hitting the numbers then innovation speed will increase and risk decrease.      In truth, this results in “gaming” to hit the numbers and it destroys the intrinsic motivation that is required to create real innovations.  Leading new ideas requires a passion and dedication that can only come from within.   As Dr. Deming and others have taught, the “beating of workers” and “bribery of workers” only serves to increase fear and decrease intrinsic motivation.

Common Cure #3:  The Big Idea Hunt.   The hypothesis is that if the organization just had bigger ideas innovation speed would increase and risk decrease.   In actuality, more “big ideas” into the front end of a broken system results in death by a thousands cuts.  As one company leader said recently, “Every “big idea” that we put into our system comes out looking like a minor variation of something we currently offer.”

Common Cure #4:  Skunk Works teams.   The hypothesis is that the only way to make sure that real innovations survive is to manage them outside of the existing culture.   The truth is all ideas will eventually need to use the infrastructure - and when they do the “culture strikes back” resulting in disruption, chaos and the dissolving of the Skunk Works.

Common Cure #5:  Buy an Innovation Culture.  The hypothesis is that if we just buy a small entrepreneurial company a miracle will occur to transform our people and system.   This is a more expensive variation of the “Skunk Works team” approach.   And like many of these approaches it gives a message to the Culture that they are “stupid” and the new company/team is “smart.”    This creates even discontent and disengagement with the existing culture and as a result eventually the death of the entrepreneurial spirit at the small company.

Common Cure #6:  Tweak Existing Offerings to Follow the Industry.  The strategy is to be late to market but in so doing face less risk.  The truth is the majority of profits go to the pioneer.  It’s also not very exciting being an employee of a company that is a follower and not a leader.  People, in particular today’s younger generations want to have an impact on the world.  In truth, a strategy of being a copier of others is usually a result of leadership not having confidence in the ability of their culture and systems to lead their industry.

The Antidote 

To address today’s “Crisis” a group of pioneers, some 30,000+ strong as of this writing, are applying the system mindset of Dr. W. Edwards Deming to innovation.   The mission of the Innovation Engineering movement is:

To enable a culture of innovation by everyone, everywhere, every day 

resulting in increased innovation speed to market (up to 6X)  

and decreased organizational risk (30 to 80%). 

Innovation Engineering is a new field of study based on a combination of academic research, industry research, and thousands upon thousands of trial and error experiments.  It’s taught at two dozen colleges and universities as an Undergraduate Minor, a Graduate Certificate and or as an Executive Education program.

To ensure reliability, Innovation Engineering is grounded in statistical analysis of the world’s largest innovation database: test results on 20,000+ innovations, measurement of 15,000+ innovation teams and week-by-week project data on over $8 billion worth of real world innovations as they travel from idea to market.

Dr. Deming’s work has been most commonly applied to improvement of factories.  His teachings live today in parts and pieces of 6 Sigma, LEAN, Toyota Manufacturing and ISO standards.

However, Dr. Deming felt that the factory was just the start.  He felt it offered only 3% of the opportunity for company improvement, predicting in his book The New Economics, that 97% of the opportunity for company improvement lay in applying system thinking to strategy, innovation and how we work together.

IMPLEMENTING The New Innovation Operating System

In the language of today, the new innovation management approach requires a new Innovation Operating System for how we manage and lead our organization.

Step 1 is EDUCATION in the true science of how to create, communicate and commercialize what we call Meaningfully Unique innovations.   We have found that the corporate infrastructure (finance, legal, regulatory, manufacturing, etc.) is not against innovation.   When they object to innovations they are simply doing the job they’ve been charged with i.e. to help reduce risk to the company.   How could they know anything else to do? And, when they are educated in a scientific and reliable system for innovation as well as their roll in in the system - a cultural transformation occurs resulting in BOTH Increased Speed & Decreased Risk.

Step 2 is WORK SYSTEM & TOOLS improvements so to enable:  Alignment, Collaboration, Fail FAST Fail CHEAP Learning and Patent ROI.    Work Systems and Tools amplify the impact of the workers and help turn the training into sustainable culture change.   Best practices exist for each of these work systems and tools.  However, the most important best practice is to customize the best practices themselves.  Every culture, company and industry has unique values, challenges and opportunities.  To be successful with Work Systems and Tools they must be customized and continually improved by the culture itself.

Step 3 is MENTORING by leadership and system educators on real world projects.   The classes teach but to make it real and sustainable it must be applied on real world challenges.   Sustainable culture change occurs when the culture personally experiences the impact of the new way of working.   To be successful diffusion of innovations must be followed by engaging innovators, then early adopters, then early majority, late majority and finally the laggards.  A common mistake is to rush the diffusion celebrating the efforts of a team of innovators as representative of the entire culture.

To learn more about the movement of pioneers known as Innovation Engineering sign up for a 30 minute webinar at 1PM ET on Monday, Oct. 20.

I will be leading a 30 minute webinar on the latest research and principles for improving alignment. Like with all Innovation Engineering programs you will leave with practical, tactical ideas that you can implement immediately - and a vision for how to make a broader systemic change to the system. CLICK HERE to register for the webinar.

Rock and Roll

Doug Hall