The only sustainable competitive advantage is your organization's ability to learn faster than the competition

Good Morning Pioneers Again apologies for the length - I remain in "book writing mode."

The quote in the subject:

"The only sustainable competitive advantage is your organization's ability to learn faster than the competition." is from Peter Senge - of MIT. He's the author of many books on learning and system thinking.   I connected with him through some volunteer work we are doing in Cincinnati to help stop violence.

A quote like Peter's is something that we can easily agree with.  In fact who wouldn't see the need to learn faster?

However actually DOING it is a different thing.

The quick test of this is to ask yourself:

Over the past 6 months what have you learned? Over the past 6 months what are you doing differently?

I'm not asking tactically - such as "working harder" or "making less mistakes"

I'm asking from a SYSTEM perspective - "working smarter"

Make a list.  Then ask yourself - are you proud of how you've spent your time over the past 6 months?  If not then it's time to get started.

So that you don't think that this is simply the rant of a bare foot guru who "preaches but doesn't practice" - here's three system learnings we've come to over the past few month.   I should note that when I say "we" I mean the collective we of the community including myself, Ranch staff, U Maine and the thought leading IE Practitioners on and off campus.

System Learning #1:   "Meaningfully Unique" is a Goal for All Projects

We used to define change projects as either "Improvements" or "Innovations."   Improvements were smaller incremental projects.   Innovations were Meaningfully Unique concepts that changed the trajectory of the company.


What we've learned is that we were to restrictive in our definition.   In today's world of limited resources every project needs to be as Meaningfully Unique as possible.

The new names are:

• IE CORE Innovations - that  keep us competitive.  By definition they have less uncertainty.  That said - we need to work to make them as Meaningfully Unique as we can.


• IE LEAP Innovations - that create our future. In an innovation pipeline they often represent only 15% of projects (85% being IE CORE) however they often deliver 50% or more of the profit growth.



 System Learning #2:  System Innovations Are MORE Important than we thought

Organizations are initially attracted to Innovation Engineering for it's ability to bring discipline and reliability to the front end or "fuzzy front end" as it's called of their innovation process.  Companies feel their development system is fine - they just need help finding and filtering ideas to put into it.

The reality is - after about 12 months - when their people, using Innovation Engineering accelerate the front end they realize that their development system is not nearly as agile, effective and productive as they thought.

A first instinct is to reduce the number of development projects through a more severe selection process.  It's not uncommon for "kill rates" to grow as high as 90% for ideas moving from discover to development. This approach destroys motivation to innovate on the front end.  Motivation dies when it becomes obvious that no matter what is done to address death threats there is simply no time, energy or money to develop anything else.

The smarter choice is to reinvent the development process so that it too works with increased speed and decreased risk.

Another first instinct is to blame the various departments - R&D, Marketing, Finance, Legal, Regulatory, etc..   While it's easy to do this it's wrong.  What we've learned is that blaming departments is blaming the workers who are responsible for "6%" of problems.  The smarter approach is to focus on "the system of how we work" that represents 94% of the challenge.

Recall: Dr. Deming defined a system as “A System is two or more parts that work together to accomplish a shared aim.”  

As Clare Crawford Mason the producer of The Deming Library explained, "The key idea is “working together” or interacting.  An organization viewed as a system is not the sum of its departments. An organizational system is the INTERACTIONS between departments, customers and or suppliers."

As an example. Instead of "blaming" market research for being slow - focus energy on the company's DECISION SYSTEM.  The Market Research managers are only doing what it's "collection of customers" have requested it to provide.  i.e. Management has requested a level of independent review, Product Development & Finance a level of statistical significance, etc.

Another classic example is the check lists for gated decision system. Often the gates are designed for CORE innovations - where we have lots of knowledge.  The result is we never get LEAP Innovations because as they are "Meaningfully Unique" we have less certainty because we can't calibrate versus our past experience.

Gate System.005However - as responsible managers - and followers of Innovation Engineering - we still seek to decrease risk as we increase innovation speed.   We accomplish this by looking at the "broader system."  We create "gate check list" for IE LEAP Innovations that are Meaningfully Unique and instead of a national launch we go to a Learning Lab or small market test instead of national roll out.

If our organization has a significant Brand - we often go to market without company branding to reduce risk of embarrassment.  I always prefer this.  My thinking is simple if an idea can only succeed with the company's valuable Trademark on it - then it's taking from the company equity.  Alternatively, if it can succeed without the company Trademark then when we add the mark the offering will be building trademark equity.

To address the importance of systems - we are changing the Blue Cards to make them align - focusing on

• VIO - Very Important Opportunities - with New or Current Customers (external innovation)

• VIS - Very Important Systems - for how we work together (internal innovation)

The new "work flow" for VIO / VIS is as follows.

Step 1: Start with a list of VIP - Very Important Problems.     We find that "problems"  is the easiest thing for managers to list.   And, when they list them they list problems that are both internal (VIS) and external (VIO).

Step 2: Think about ROOT CAUSES by assigning Problems to VIO / VIS categories.   This process of segmenting them causes deeper thinking and often "reframing" of the description of the problem. Umbrella.044

Step 3: Think about ROOT CAUSES again by clustering VIO and VIS problems into related systems.  This is similar to the process of creating an umbrella benefit.   It causes you to once again think deeper about what is the real issue. Clustering makes the upcoming VIS project more challenging however it dramatically reduces rework as the interconnections are resolved simultaneously.

From this you then write the Blue Card detailing most importantly the NARRATIVE of why this is a VERY IMPORTANT issue for the organization.   With the Narrative clear  - the back side of the card is documented detailing Request, Focus Areas, Don't Request and Constraints are made clear.

We recommend you use the process detailed above in IEMS Planning Meetings.   I've used it myself and find it an easy conversation.

We also have a more structured format we call a Strategy Activation project.   We been piloting and refining it and will roll out to all IE Black Belts (SME and Large Company) later this fall after it's stable, reliable and we've documented it.

The Blue Card output from what ever process is used fuels System Summit projects that we are piloting with Large Companies.  These projects are a modified version of an IE Accelerator.  Instead of Simultaneously Engineering - Customer, Problem, Promise, Proof, etc - we Simultaneously Engineer the VIS Stakeholders i.e. Leadership, Market Research, R&D, Marketing, Finance, etc..

As with IE Accelerators or IEMS projects there is Management Education, Deep Stimulus Mining, Spark Decks and An Abundance of Ideas.  In the case of VIS the ideas are written on a modified Yellow Card where "Customer" is modified to "Stakeholders."   What doesn't change is clarity of idea, quantification of benefit and a driving force for Meaningful Uniqueness i.e. doing something meaningfully, tangibly different.  Following the session Fail FAST Fail CHEAP prototypes are operational within a biblical 40 days and 40 nights just as with IE Accelerators.  Then the process of never ending innovation begins.

System Learning #3.  SME's Have a Major Advantage over Large Companies in adopting the new mindset. 

We are finding that with SME (Small and Medium Sized Enterprises i.e. < 500 employees) it is possible to make the flip to the new mindset in one pass.  This is because classically the ownership & leadership are closer to the work and there are less "rigid" departmental silos.  We find that if we put company managers into IE Black Belt early in the process - and they work alongside the outside IE Black Belt - that a new culture of innovation can take root in about a year or two at the most.

In large companies it is much more difficult to make the flip.  We find we have to do it in two steps:

Year 1:  Accelerate the Fuzzy Front End system

Year 2 and often, 3 and even 4:  Accelerate the TOTAL System.   The longer time is due to the challenges of connecting multi-national cultures together.  Often doing a Large Company you are working on cultures within cultures that can take time to adapt.

In the case of Large Companies we find that classic "umbrella" systems include:

• Development System:  This interrelated system includes the gate system, Organizational Structure, Decision System, Compensation System.

• Innovation Supply Chain System:  This  includes internal collaboration system, external open innovation system, patenting system and development speed.

• Go to Market System:  This includes the variables of the Fourt Woodlock Equation.  It's about our system for generating awareness, distribution, promotion, repeat, pricing, business model, financial metrics, rapid adaptation and field learning system.

Maggie and I will post the latest versions of Blue and Yellow Cards on IE Labs.

If anyone has questions feel free to call, email or text me or the rest of the Ranch staff - we have nothing more important to do then to help you.



p.s. I'm off for a couple weeks to Ottawa Canada,  Soul South Korea and Hanoi Vietnam to continue the education process - as we pursue our mission of "Changing the World by transforming Innovation from a Random Art to A Reliable Business System that delivers increased speed and decreased risk.  Phone coverage will be variable -  I will be available on Skype and via e-mail for sure.