Incremental Innovation in Turbulent Times - a White Paper

8/14/2019 Incremental Innovation in Turbulent Times - a White Paper

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3758 Grand Avenue, Suite 25 Oakland, CA 94610 email: [email protected] cell: 510-520-8011

Incremental Innovation for Turbulent Times:

A Stimulus Strategy

Summary

In the current economy, everyone is locked into a mindset that freezes action and stymiesthe most important asset of any company: the intellectual creativity of all employees.This article provides a brief background and insight into an approach that has hadtraction in over 150 companies (over 25 years) and is rooted in Incremental Innovation,those ideas for improvements in products (upgrades), processes and services, thenuggets of gold, that are waiting to be quickly mined into rich profits. Thousands ofemployees have been trained and demonstrated that all employees can find thoseopportunities. And when the process is fully endorsed by management, a newmanagement structure is mandated. This article points to Incremental Innovation as the

basis of an overlooked alternative to long and painful turnarounds and survival.

Introduction

Despite the frenetic coverage of Congressional efforts to craft a stimulus bill,most owners and managers of businesses understand that a Federal stimulus bill wontmagically restore the American economy to vibrant health. They know that if Americanindustry is to regain its competitive pre-eminence and its momentum toward growth,theyre the ones who have to make it happen, for their individual companies and for theeconomy as a whole. They need to stimulate demand and theyre looking for ways toincorporate the best practices of business operation into their own enterprises. Whatthey need much more than bailout money is clear-headed, practical guidance toward

improving their operations to help them weather the current economic conditions whileat the same time positioning them to maximize their growth and profitability when thebusiness cycle again swings upward.

The overarching problem in the current economic situation is what marketerscall the FUD Factor: Fear, Uncertainty and Doubt. This downturn is unique just likeevery other downturn before it and so it presents unprecedented combinations ofeconomic bad news. Different doesnt necessarily mean worse, but because no onehas seen this exact set of circumstances before, no one knows what to expect as thesecircumstances play out. The worst aspect of this fear and uncertainty is the very normalresponse it elicits from consumers, investors and markets: hesitancy and even paralysis.The FUD Factor is like sand in the engine of industry, causing credit, purchasing andproduction to grind ever slower.

The effect on individual companies is toxic. Theyre immediately forced toaddress short-term survival issues such as maintaining positive cash flow and keepingoperating profit at levels that not only keep the doors open through the down phase ofthe business cycle but also demonstrate to customers, vendors, and finance sources thatthose doors are likely to stay open. The long-term survival of individual companiesrests in large part in the hands of those panic-prone outside parties and partners, whose


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limited view of a companys operations and situation can result in snap judgmentsbased on faulty information snap judgments that can lead to precipitous actions withdisastrous consequences for the company and its owners, managers and employees.

Incremental Innovation Ideas - Quick and Profitable

Weve seen this all before, over twenty-five years of assisting companies in thetransformation needed to incorporate best practices and achieve increases in profitablegrowth. But we didnt accomplish anything by encouraging spending lots of money onthe wants and needs of every person with their hand out. We put our creative juicesinto those issues that could be fixed and delivered with a High Value/Low Costsolution. Spend wisely in time of crisis. Clients have always looked at our team asthe Stimulus Gurus who sparked excitement by getting everyone involved in theseIncremental Innovations that radically changed their companies. And did so veryquickly. It was amazing even to me how fast the process was when all employees got

involved in the process. Ive written three books on the methodology we use, distilledand refined from the successes weve catalyzed in scores of companies. We know frompersonal experience, as do the company owners, managers and employees wevecoached, that the down phase of the business cycle presents an opportunity tostrengthen a company and prepare it to vault ahead of its competition.

The method to achieving this result is incremental innovation with cumulativeimpact. In this context, Incremental Innovation represents product, service or processinnovation, a bottom up approach. It taps into the latent expertise and creativity of allof the companys workforce: its the workers, not the executives, who have the widest,deepest and most detailed knowledge of what new enhancements a product needs or

how the company does its work of actual production, and no one job classificationholds a monopoly on those creative ideas. For incremental innovation to be effective,however, it has to winnow out from all the creative ideas just those ones that are simple,practical and capable of delivering a modest but tangible improvement in thecompanys operational efficiency, cash flow, gross margins and/or responsiveness tocustomers. When diligently implemented, each round of incremental innovationprovides the foundation for the next round, creating a never-ending virtuous cycle.And theres another strange but equally valuable effect: when everyone in the companyfeels he or she is part of maximizing the results from the companys work, a newmanagement perspective pervades the company.

A New Management Paradigm Evolves

That cumulative effect of incremental innovation transforms the entire companyas the culture from the executive suite to the marketing personnel to the factory floorand shipping docks shifts to an innovation-driven, efficiency-focused model. Because Iwas trained as a physicist, I look at this process as a kind of quantum leap from the oldstate of the company to a new and more effective state. Thats not to say that theprocess is instantaneous actually, it requires that the company spend the time andenergy to pass through a meta-stable state as it builds the virtuous cycle of


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incremental innovation. But when that cycle kicks in and becomes second nature toeveryone in the company, the transformation occurs, and the company becomes a clearleader in its industry by outperforming its peers in one or more key dimensions.

The process isnt effortless, but its surprisingly painless and remarkably quick tothe meta-stable state. Thats because incremental innovation provides immediate andmeasurable improvements in the individual companys cash flow and profitability. Thetransformed Quantum Leap company gains an enduring advantage in its market: itsmore nimble, more profitable, better able to use price as a strategic weapon (due tobetter margins), and perhaps most importantly, able to utilize its entire workforce as areliable, ongoing source of innovation. The returns are tangible and impressive: a Stateof California audit of 23 small businesses that underwent this transformation identifieda 3,800 percent return on total investment. This involved: 371 ideas; $28 Million returnon costs of $735,000 at 10 manufacturing, 10 distribution and 3 service companies. Eachidea was implemented in less than 8 weeks from initiation of the idea. Of the 371 ideas,

57 were Big Ideas: $1 Million of Value (or 1% of sales) with a 100 to 1 ROI. The resultsare exactly the same in Fortune 500 companies. For example, in a large bank, the timeto close books each night was moved up by 1 hours (a Big Idea a really Big Ideabecause they had that extra time for use of funds).

Conclusion Focus on Hitting Singles

Beyond the value to individual companies, imagine the benefit to the Americaneconomy as a whole. As more and more companies undergo this type oftransformation, the pressure on their peers to improve and innovate will increase, andthat will lead to an increase in productivity for the entire economy. Indeed, the more

U.S. companies that make that quantum leap, the more the U.S. will reclaim places inthe ranks of world-leading companies in each industry.

Theres no dont try this at home disclaimer here. Every American businesscan and should engage in the process of incremental innovation. It isnt sexy but youcan start by learning to leverage the expertise and creativity of your companys entireworkforce everyone, at all levels. Dont look for a grand slam out of each idea,suggestion or project, but instead concentrate on producing a steady stream of solidline-drive singles. You can create your own methodology for incremental innovation,or you can accelerate the process by engaging expert help to coach you and your teamin the relevant skills and practices. The sooner you start and the more expertise you bring to bear on the effort, the quicker youll reach the goal of transforming into a

Quantum Leap company and the faster youll banish Fear, Uncertainty and Doubtfrom your business future. Leonard Bertain Ph.D. is the owner of Corporate Innovation inOakland, CA [email protected]

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Incremental Innovation in Turbulent Times - a White Paper