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Fostering innovation in mature enterprises
- 1. Fostering Innovation in Mature Enterprises Dave Litwiller Executive-in-Residence Communitech, Waterloo
- 2. Overview • Adoptable innovation practices • Empirical performance gains • Winning framework • Getting started • Overcoming resistance • Preferred practices and areas to watch Dec. 1, 2011 Dave Litwiller
- 3. Adoptable Practices from the Tech Industry The Toyota Production System (TPS) Dec. 1, 2011 Dave Litwiller
- 4. What TPS Means for Innovation The expenditure of resources for any goal other than creation of value for the end customer is waste, and target for elimination Dec. 1, 2011 Dave Litwiller
- 5. Efficiency Gains • Manufacturing 5* at basic proficiency, 25* at the highest • Healthcare 60% to 70% • Professional Services and Consulting 25% to 60% • Sales, Research & Development 2* to 5* Dec. 1, 2011 Dave Litwiller
- 6. Where to Start Source: http://www.mbakku.com/STD/CourseSyllabus1-52/1_52/OM-Montri/Leasons%20Learned%20from%20Toyota%20Way.pdf Dec. 1, 2011 Dave Litwiller
- 7. Where Further to Look for Improvement • Processes Waiting Rework Errors Flawed early assumptions which surface later • People & Teams Outsider-insiders Anonymized brainstorming Reference class benchmarking • Five Whys Dec. 1, 2011 Dave Litwiller
- 8. Group Change from Within (I) • Each member anonymously submits one item for collective improvement which (s)he deems most critical to group progress • Facilitator aggregates topics, and divides them into member subgroups for a working session • Each subgroup develops results driven change plans for its topics over the next two hours Dec. 1, 2011 Dave Litwiller
- 9. Group Change from Within (II) • Each subgroup reports back to the full group with action plans, weekly milestones • Rank impact and attainability of each plan, and get to work on the most promising with a coalition of willing participants • Use pilot efforts to build social and other proof points for change to larger group Dec. 1, 2011 Dave Litwiller
- 10. Getting Started Results-Driven Change (RDC) Dec. 1, 2011 Dave Litwiller
- 11. Productive Incremental Innovation • Division of solution into a series of non- overlapping increments • Increments measurable, and consistently interpreted • Increments implementable under 2 weeks • Adjust plan after each increment • Each increment has to deliver enabled results Dec. 1, 2011 Dave Litwiller
- 12. Finding Resources • Cut back on administrative overhead in low leverage areas • Help staff see their own self-interest through longer-term gains from shouldering the load of near-term change Dec. 1, 2011 Dave Litwiller
- 13. Common Myth to Dispel • The cost of workarounds to quickly interface new experiments with existing operating methods and business processes will eat up efficiency gains Dec. 1, 2011 Dave Litwiller
- 14. Dealing with Failure • Embrace it, especially during the early stages of an innovative initiative • Early on, failure is ok, as long as it is done quickly and cheaply • Learn from each failure • Maximum information is released from experiments having a 50% chance of success Dec. 1, 2011 Dave Litwiller
- 15. Evolving Toward an Innovation Culture • Every task, every interaction, every result is a chance to learn and improve – continuous improvement • Gain energy from small things that go wrong because they are the ways to improve and differentiate – focused creativity • Management immerses itself in the process of value delivery and directly confronts all the manifestations of waste Dec. 1, 2011 Dave Litwiller
- 16. Preferred Practices • Don’t jump prematurely from problem to solution. Always ask five whys • Visual control. Make work visible • Constrained inventory of work in progress • Fast cycles of action, quick changeovers • Control group testing, a.k.a. A/B splits • Bottom-up, concrete projects; top-down support • Reflection events Dec. 1, 2011 Dave Litwiller
- 17. Summary Traditional Innovative Benchmark to justify being good Ultimate performance comes from absence of waste Volume lowers cost Reducing cost comes from lowering cycle time, removing waiting, trimming inventory, root-cause diagnosis and repair of errors, and otherwise reducing waste Internal focus Customer focus Anecdote driven Data driven, rigorous experimentation, empirical Performance metrics stay the same Tactical metrics evolve, strategic metrics remain My job is to do my job My job is to do my job better, and communicate those lessons to others so they may do same 1* Speed 1.5* to 4* Speed 1* Efficiency 3* to 10* Efficiency Dec. 1, 2011 Dave Litwiller
- 18. Thank-you. Questions? “It is not the strongest nor the most intelligent of the species that survives, but the one that is most adaptable to change.” -Charles Darwin- Dec. 1, 2011 Dave Litwiller
- 19. References and Further Reading “The Toyota Way”, Liker, McGraw-Hill, 2004 http://www.amazon.ca/Toyota-Way-Management-Principles-Manufacturer/dp/0071392319/ref=sr_1_7?ie=UTF8&qid=1322495130&sr=8-7 “The Lean Startup”, Ries, Crown, 2011 http://www.amazon.ca/Lean-Startup-Entrepreneurs-Continuous-Innovation/dp/0307887898/ref=sr_1_1?s=books&ie=UTF8&qid=1322495184&sr=1-1 “The Principles of Product Development Flow”, Reinertsen, Celeritas, 2009 http://www.amazon.ca/Principles-Product-Development-Flow-Generation/dp/1935401009/ref=sr_1_1?ie=UTF8&qid=1322530117&sr=8-1 “Your Company’s Secret Change Agents”, Pascale & Sternin, Harvard Business Review, May, 2005 http://www.onlinecoaching-freiburg.de/uploadfile/PDFs/your_companys_secret_change_agents.pdf Dec. 1, 2011 Dave Litwiller
- 20. The Toyota 4 P System Dec. 1, 2011 Dave Litwiller
Notes de l'éditeur
- Talk very little about technology, but rather, the way that intensity of competition and velocity of innovation in technology had led to assimilation of business practices of adaptation which have broad applicability to mature enterprises
- Here in Cambridge, in the shadow of one of the highest performing factories of one of the most remarkable companies of the industrial era, it likely won’t come as a surprise that many of the most effective and adoptable practices in high technology are in fact grafted from traditional industry, namely Toyota, and the company’s renowned Production System, developed over the past seventy yearsThe names are spiced up in tech, such as rapid development, lean startup, and agile methodologies, but they are all adaptations of the innovations of the Toyota Production System
- - This simple statement unleashes two things 1) creativity, and 2) continuous improvement
- Where the TPS has been put into practice, the empirical results are compellingThe impact is highest in industries with repetitive tasks and uniform production ratesThere are nevertheless, achievable gains are substantial even in white collar, tacit knowledge, less structured workAssimilation of these practices has become a matter of core survival in many technology start-ups because they lack an inbound market position or operational sustainabilityThese techniques are especially so in mobile apps and consumer web services where technological breakthroughs are not the principal basis of differentiation, lots of people program for those environments, but instead company culture, pace of execution, and pragmatic, data-driven decision making are some of the biggest levers for getting ahead
- The place to start is the value streamThis is a typical graphic showing value stream mapping, which identifies customer value-adding time of work product versus all other timeNearly always, value-adding time is very lowReducing and eliminating non-value add time unlocks direct and derived efficiency gains of many kinds
- Five Whys – root cause, not just most recent, as well as the basis for adapting a leaner mode of operation that is specific to a particular business and its competitive environmentNow let’s look at anonymized brainstorming in a bit more detail
- Example: What is needed from the association
- So, we’ve identified an area of our processes, systems, or training that we want to improve, and are ready to start.Premise of the preferred way to start: Design and implementation decisions strongly affect one another.In a complex, interrelated system, higher output is achieved faster by integrating design and implementation in a rapid, iterative manner, especially if the cost of test at each iteration is kept low and the speed of test is fastPremature scaling is unnecessary execution with overreaching investmentBig bang initiatives with long planning and investment cycles before activating the value of their potential are a lower productivity, riskier pursuit.Incremental implementation is generally about three times more likely to succeed in delivering lasting innovation and efficiency than traditional implementation.
- Initiatives to generate improved efficiency should be engineered and selected with the following criteria:1) Implementation should strive to be divisible into a series of non-overlapping incrementsEnables measurable business improvements, even if no further increments are implemented2) A target business process for RDC needs to be not only measurable, but one that is likely to be consistently interpreted by the implementation team throughout the change effort A selected opportunity for RDC should not undergo a stream of re-definition or re-interpretation. Drift of metrics or their interpretation slows, defocuses and politicizesimplementation3) Increments should be sized so each can be implemented in a short time, two weeks each, three months for the larger culminationKeeps feedback rapid, to speed learning and hold team attention with tangible momentum, increasing the likelihood of successShort time frame also limits any tendency toward scope creep4) Endeavour to use the results of each increment as a basis to adjust the plan for subsequent incrementsMake decisions about future enhancements based on actual results of previous phases5) Each increment needs everything required to produce desired resultsi.e. Not just the functional improvement, but all complementary changes to sustainably realize its effect: operating methods, policies, processes, supporting infrastructure and measures
- People are then more likely to stretch themselves, creating capacity to get things moving
- There are some resource investments in scaffolding as part of iterative experimentation, to rapidly interface to existing modes of operationThese workaround investments will be discarded to a degree with future iterationsBut, the costs of disposable scaffolding investments pale in comparison to the cost of all-or-nothing approaches to organizational change. The value of learning as you go to adapt subsequent investment increments more than offsets the cost of scaffolding.