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Combining Continual Improvement and Innovation

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Presentation delivered at the "2013 World Quality Day Conference", in Helsinki, Finland, sponsored by the Laatukeskus Excellence Finland.

Presentation delivered at the "2013 World Quality Day Conference", in Helsinki, Finland, sponsored by the Laatukeskus Excellence Finland.

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  • 1. COMBINING CONTINUAL IMPROVEMENT AND INNOVATION ALEXIS P GONCALVES IT DIRECTOR & INNOVATION CATALYST COTY INC. NEW YORK, NY, USA NOVEMBER 2013 @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 0
  • 2. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 1
  • 3. Finland is an Innovation Hot Spot ! Information Technology Telecommunications Forestry Metals and Mechanical Engineering Intelligent Machines @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 2
  • 4. Reinventing oneself several times 2013 Network Solutions 2006 Mobile Phones 1967 Electronic Devices 1922 Rubber Business 1865 Paper Mill @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 3
  • 5. Combining Continual Improvement and Innovation… @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 4
  • 6. Several “metaphors” can delineate the combination… Growth Path & Risk Janusian Thinking The Game Changer Disruptive Technologies The Three Horizons Knowledge Funnel @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 5
  • 7. The Metaphor of Change @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 6
  • 8. The Metaphor of Change @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 7
  • 9. The Spectrum of Change Exploitation Horizon 1 Kaizen Horizon 2 Kaikaku Exploration Horizon 3 Kakushin Sustaining Breakthrough Disruptive Innovation Continual Improvement Description Goals Incremental improvement Breakthrough product in products that can be improvements that delivered by existing boosts market share but is business resources and still delivered by existing processes resources Playing the Old Game Better @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED Old Game / New Rules Disruptive business model that serves new customers and requires a new profit model, resources and processes to deliver New Game / New Rules 8
  • 10. Three Relevant Perspectives to take into consideration… 1 2 3 The Reliability Bias When the pursuit of continual improvement risks innovation Building Ambidexterity How to use both exploration and exploitation techniques De-risking Innovation Moving from “trial and error” to a “pattern recognition” realm @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 9
  • 11. The Reliability Bias @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 10
  • 12. The Predilection Gap 100% Reliability @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 100% Validity 11
  • 13. Exhibits Three Classic Stories of Reliability Bias A B NTT slow adoption of the Internet C @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED Japan Loss of the DRAM Industry The Death of Vacuum Tube Companies 12
  • 14. A DRAM Memory 25 Years’ Durability Japan Loss of the DRAM Industry Japanese producers were making incremental improvements but not adjusting to the dramatic changes in market conditions created when DRAMs shifted from Mainframes to PC. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 13
  • 15. B NTT slow adoption of the Internet NTT decision makers believed that the only way to get high quality connection was based on a dedicated connection between sender and receiver – something that the Internet (TCP/IP) did not offer. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 14
  • 16. C The Death of Vacuum Tube Companies They all took a license from Bell Labs and invested over $3 Billion dollars trying to make the Transistor good enough that could be used in products (televisions and radios) that existed. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED SONY first “Pocketable“ Radio ($2.00 in 1957) 15
  • 17. 5 Productive Steps 1. Take inattention to Reliability as a management challenge. 2. Empathize with the “Reliability-unfriendly elements”. 3. Speak the language of Validity. 4. Share data and reasoning, not conclusions. 5. Bite off as big a piece as possible to give innovation a chance. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 16
  • 18. “The optimal approach to Reliability and Validity is not to choose but to seek a balance of both.” – Roger Martin @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 17
  • 19. Building Ambidexterity @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 18
  • 20. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 19
  • 21. Five Conditions To Promote Ambidexterity A B A Common Identity C A Senior Team that Owns the Strategy D Separate but Aligned Architectures E @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED A Compelling Strategic Intent A Clear Mechanism for Conflict Resolution 20
  • 22. A Emerging Business Organization (EBO) A Compelling Strategic Intent In 2000, IBM began a programmatic effort, termed the Emerging Business Organization (EBO), to identify and develop cross-IBM business opportunities that could provide $1.0 Billion in revenue within a 5-year time frame. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 21
  • 23. A • Need to intellectually justify the importance of both exploration and exploitation. • Need a rationale for why A Compelling Strategic Intent In 2000, IBM began a programmatic effort, termed the Emerging Business Organization (EBO), to identify and develop cross-IBM business opportunities that could provide $1.0 Billion in revenue within a 5-year time frame. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED profitable exploit units, especially those under pressure, should give up resources to fund small, uncertain efforts. 22
  • 24. B A Common Identity At USA Today there is an explicit strategy to “be a network, not a newspaper”. The overarching aspiration is to be “the local news for the global village”. Common values around fairness, accuracy, and trust, help knit together a highly differentiated organization. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 23
  • 25. B • Need over-arching vision and values that promote a common identity but separate cultures. • Without a common identity it’s difficult to promote trust, cooperation and long-term perspective. A Common Identity At USA Today there is an explicit strategy to “be a network, not a newspaper”. The overarching aspiration is to be “the local news for the global village”. Common values around fairness, accuracy, and trust, help knit together a highly differentiated organization. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 24
  • 26. C A Senior Team that Owns the Strategy In the Cisco Telepresence case, members of the governance team (Boards and Councils) had a significant portion of their bonus (70%) contingent on the success of both units. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 25
  • 27. C Without senior team consensus about the importance of ambidexterity, those who are uncommitted will: Resist the effort Diminish cooperation Increase competition for resources Slow down execution A Senior Team that Owns the Strategy In the Cisco Telepresence case, members of the governance team (Boards and Councils) had a significant portion of their bonus (70%) contingent on the success of both units. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED Create a Common-Fate Reward System 26
  • 28. D Separate but Aligned Architectures In 2006, the CEO of SAP declared that the future revenue growth for the company was in selling software on demand. This Software-as-a-Service (SaaS) product was developed but no separate unit was established. Although this market has grown substantially, SAP has failed to successfully market their offering. In 2010, the CEO Leo Apotheker was fired for failing to implement SaaS. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 27
  • 29. D Separate exploratory and exploitative units with targeted integration at both senior and tactical levels. Key objectives are: • To properly leverage organizational assets. Separate but Aligned Architectures In 2006, the CEO of SAP declared that the future revenue growth for the company was in selling software on demand. This Software-as-a-Service (SaaS) product was developed but no separate unit was established. Although this market has grown substantially, SAP has failed to successfully market their offering. In 2010, the CEO Leo Apotheker was fired for failing to implement SaaS. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED • To efficiently use resources. • To ensure coordination across units. 28
  • 30. E A Clear Mechanism for Conflict Resolution At Zensar, even though there were substantial conflicts between the existing business units and the new integrative software platform, the CEO saw to it that his team actually dealt with these conflicts and made the appropriate resource allocation shifts between the existing units. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 29
  • 31. E • Have a clear, identifiable leader and forum to resolve conflicts and make definitive resource allocation decisions. • Linked to the ability of senior A Clear Mechanism for Conflict Resolution At Zensar, even though there were substantial conflicts between the existing business units and the new integrative software platform, the CEO saw to it that his team actually dealt with these conflicts and made the appropriate resource allocation shifts between the existing units. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED leadership to tolerate and resolve tensions arising from separate alignments. 30
  • 32. “Organizational ambidexterity is a firm's ability to simultaneously exploit and explore with equal dexterity.” – Michael Tushman @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 31
  • 33. De-risking Innovation @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 32
  • 34. How much do we know about Innovation…? @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED INNOVATION 33
  • 35. How a does Body of Knowledge Emerge…? Wallace Carothers (April 27, 1896 – April 29, 1937) An American chemist, inventor and the leader of organic chemistry at DuPont, credited with the invention of nylon and neoprene. @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED Organic Chemistry 80 years ago 34
  • 36. How a does Body of Knowledge Emerge…? Nylon Teflon Kevlar Neoprene Lycra @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 35
  • 37. How a does Body of Knowledge Emerge…? Today, if you need a new molecule, all you need to have is… • A B.S. in Chemistry from a state school • A great piece of software @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED Organic Chemistry today 36
  • 38. How a does Body of Knowledge Emerge…? Rules-Based Modeling Pattern Recognition Trial-and-Error @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 37
  • 39. Pattern Recognition @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED Innovation Landscape 38
  • 40. Pattern Recognition Innovation Games and Migration Paths Roger Miller Offering Standalone Products Tightly Integrated Products Open Modular Systems Pattern-driven discovery Systems Integration Platform Orchestration G H Market Market Creation A Market Evolution @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED B Cost-based search for efficiency C D Strategic Consulting & Systems Engineering E F Customized mass production 39
  • 41. Rules-Based Modeling Disruptive Innovation Theory Clayton Christensen @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 40
  • 42. “A few years from now, Innovation will be just another management discipline – like budgeting or auditing – that is well understood, thoroughly analyzed, shared and taught.” – Larry Keeley @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 41
  • 43. Closing Remarks @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 42
  • 44. Three Relevant Perspectives to take into consideration… 1 2 3 The Reliability Bias When the pursuit of continual improvement risks innovation Building Ambidexterity How to use both exploration and exploitation techniques De-risking Innovation Moving from “trial and error” to a “pattern recognition” realm @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 43
  • 45. Q&A @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 44
  • 46. SEE MORE INSIDE THIS BOOK Book “Innovation Hardwired” Available at Author Alexis P. Goncalves Join my Network http://www.linkedin.com/in/goncalves @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 45
  • 47. COMBINING CONTINUAL IMPROVEMENT AND INNOVATION ALEXIS P GONCALVES IT DIRECTOR & INNOVATION CATALYST COTY INC. NEW YORK, NY, USA NOVEMBER 2013 @ 2013 Alexis P Goncalves . ALL RIGHTS RESERVED 46