Let’s start with the first question. Quality involves the removal of unwanted variations, the enforcement of strict standards and controls, the application of best practice and the elimination of waste and errors. Creativity and innovation involve exploring many radical and unorthodox ideas, deliberately deviating from existing standards and controls, experimenting with prototypes and devoting resources to projects which are likely to fail.
So at first glance quality and creativity look to be at odds. One is striving for the elimination of variation and error while the other is crying out for both. They are surely two opposing philosophies requiring very different mindsets and attitudes. Can they co-exist? The answer is that they can and they must. Every successful organisation has to solve the paradox of how to achieve at the same time great quality and great creativity leading to successful innovations.
The natural tendency for business managers is to focus on improving efficiency and refining the current processes because it is clear that “we can do things better.” Improving quality and efficiency is important but it is not enough. If you were making horse drawn carriages then it did not matter how much you improved quality because automobiles were going to put you out of business. If you were making gas lamps and you focused on better production, it did not help because electric lights were going to make your lamps obsolete. If you were making LP records then it did not matter how much time you spent in quality improvement programs because CDs were going to wipe you out. And if you were making typewriters then it did not help however much you improved the mechanical operations because electronic word processors were going to destroy your business. The message is that the right innovation can always beat efficiency. You have to improve what you are doing but you also have to find entirely new and better ways to do it.
The right innovation can always beat efficiency.
Doing what we do now only better is not enough. If you do what you always did then you will get what you always got. You have to do something different to get different results. You have to do something significantly smarter to get significantly better results.
Successful businesses combine brilliant innovation with constant improvement and focus on quality. Think of a great rock group where one member composes a terrific new song. They then need perfect co-ordination, timing, rhythm and production to turn the creative idea into a hit. It is no good innovating if you cannot deliver a quality product or service to your client.
Successful organizations plan for innovation and allocate resources to it. They have innovation panels that hold reviews of all their products, services, processes, methods and routes to market. These reviews fulfill the following purposes:
Should innovation prototypes for new businesses, products or services be given to existing departments to manage and develop or should they put into special incubator units? It is generally much more effective to put them into special units which are focused on innovation. Peter Drucker explains why as follows: “Innovative efforts should never report to line managers charged with responsibility for ongoing operations. The new project is an infant and will remain one for the foreseeable future, and infants belong in the nursery. Executives in charge of existing businesses or products will have neither the time nor understanding for the infant project.”
When in 1995 General Motors wanted to create a new business based on in-car voice activated communication, OnStar, they appointed Chet Huber, a maverick within GM. He put together his own multi-disciplinary team with over half his staff coming from outside GM. Huber showed it was possible to innovate inside a large company like GM. By 2002, OnStar had over 2 million subscribers and was standard inside Acura, Audi, Lexus and Subaru as well as GM cars. Huber believes that radical innovation can happen inside big companies if you build a team that respects insiders and listens to outsiders.
IBM did the same when they had small “skunkworks” teams compete to develop the Personal Computer. Don Estridge and a team of 12 engineers in Boca Raton in Florida in just 18 months built a prototype, gained approval and launched the project which redefined the market and set the new standard for PCs.
How can you establish an innovation process in your business? Here is a simple checklist.
Most organizations find that generating ideas is easier than evaluating or implementing them. Once you have a lot of promising ideas you need to evaluate them. In larger organizations with a rich flow of promising ideas a formalized and disciplined approach is called for. According to the Product Development & Management Association (PDMA) best-practices study, 68% of leading U.S. product developers now use some type of gating process to progress and evaluate innovations from conception of the idea through to full launch of a new product. The general principle is shown in the form of a funnel.
Ideas from all sources flow in at the top of the funnel. They then go through a series of gates. The gating process determines which ideas carry on to the next round and which do not. Typically around two-thirds of the projects fail at each gate. It is sometimes described as a kill or go decision, but the ideas which do not proceed are not killed. They return to the database together with the reasons for the suspension of the idea in case they can be resurrected or recombined with another idea later. The number of gates will be determined by the complexity of the product and the cost of its development. For a small company there may be one or two go/no go decisions. A company like Glaxo Smith Kline in pharmaceuticals has around 35 gates in its new product development process. New drugs can take 7 years to bring to market – the costs, risks and paybacks are enormous. Sony, on the other hand, launches over 1000 new products a year. The number of ideas entering the funnel must be truly enormous if over 1000 make it all the way to launch.
The leading process is Stage-Gate, which is a trademark of Bob Cooper and Scott Edgett. Their methodology is well developed and deployed. Promising new product ideas go through a series of stages and gates. The flow is shown below:
Stage 1 – scoping: A quick and inexpensive assessment of the technical merits of the project and its market prospects.
Stage 2 – building the business case: This is the critical homework stage – the one that makes or breaks the project. The business case has three main components: product and project definition; project justification; and project plan.
Stage 3 – development: Business case plans are translated into concrete deliverables. The manufacturing or operations plan is mapped out, the marketing launch and operating plans are developed, and the test plans for the next stage are defined.
Stage 4 – testing and validation: The purpose of this stage is to provide final and total validation of the entire project: the product itself, the production process, customer acceptance, and the economics of the project.
Stage 5 – launch: Full commercialization of the product – the beginning of full production and commercial launch.
Each stage involves team activity. A cross-functional team examines the project using key parameters and gathers information in order to make the decision as to whether the project advances to the next stage or not. The team looks at operational, technical, marketing and financial aspects of the proposal to assess potential risk and reward. The proposal has to clear the hurdles in the gate before proceeding to the next stage. Each stage involves more financial commitment and development than the previous stage so at each gate the hurdles are raised. The idea is to kill off those projects that do meet the gating criteria. As projects pass through the gates they are better understood, there is consequently less risk and more financial and marketing resources can be devoted to them. For a fuller explanation of the process the books and website of Cooper and Edgett are recommended.
The successful organization will focus on quality and innovation; it will juggle efficiency and creativity. Creativity does not mean chaos nor does it mean leaving things to chance. You can put in place processes for idea generation, idea evaluation and proposal implementation. The whole process can be managed on a formal basis while accepting many informal inputs.
What is needed is a total quality approach to the process of innovation.
By Paul Sloane
Paul Sloane is the author of The Leader’s Guide to Lateral Thinking Skills and The Innovative Leader. He writes, talks and runs workshops on lateral thinking, creativity and the leadership of innovation.
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