Tool #1: Three Objectives for Process Improvement

In the internal competition for scarce resources in most large traditional companies, almost always today’s performance engine wins the lion’s share. Earlier this year FCB Partners' own Brad Power presented a keynote address at the annual PEX conference. He explained how organizations are shifting from continuous improvement and episodic innovation to more of a continuous innovation approach. 

How do some leading organizations continuously innovate? How do their management systems protect money and people to generate, incubate, and commercialize disruptive innovations? Here's the video of his talk:

 

Brad also wrote an article for the PEX newsletter last fall, "Three Objectives for Process Improvement", which we've excerpted below:

If your organization is confronted by a critical need to improve your operations, the focus of your process improvement activities should depend on the needs for change in the business, and I see three possible objectives: (1) fine-tuning the “performance engine”, (2) process innovation, and (3) making your organization “anti-fragile”.

#1: Fine-tuning the Performance Engine

The performance engine is the ongoing operation of the business day-to-day. It delivers services to customers according to a formula. As long as there are no major threats, organizations do the same work we’ve always done and improve within the existing organizational structure. If fine-tuning a success model is what you need, work with operating leaders to define projects and use Six Sigma and Lean tools to reduce cost, eliminate waste, and improve quality.

The biggest challenge to focusing process improvement on fine-tuning the performance engine is the competition for people and money with line managers. Given possible short-term thinking, many line managers often would rather “work harder, not smarter”, for example, hiring a few more people to work around a broken process or system, rather than fixing it.

#2: Process Innovation

Process innovation is the radical redesign of cross-functional, end-to-end processes. It is called for when performance for customers is not meeting competitive standards and when functional optimization is inadequate ... big change is needed. Process innovation can’t be achieved within the existing organizational structure of the performance engine or with typical projects. This is a transformation program, with the need for dedicated transformational leaders and governance systems. Business reengineering offers useful tools and approaches, such as “process owners” and an evolutionary experimental approach to redesign, labs, pilots, and rollouts. An example of process innovation is the move by companies to implement global standard enterprise systems and processes.

The biggest challenge to focusing process improvement activities on process innovation is making peace with the performance engine. People are comfortable in the success model of the organization, and imposing major changes will naturally meet with resistance. There is competition for resources, and the financial review systems will favor the predictable and short-term over the risky and long-term. Senior leaders need to approve funding and be actively involved over a number of years. The result is often episodic bursts of process innovation.

#3: Making Your Organization Anti-Fragile

Some systems are “anti-fragile”. They thrive on randomness and uncertainty and get stronger with stress and volatility. While large, successful organizations tend to be fragile, many small start-ups are agile. Focusing your process improvement activities on making your organization anti-fragile is called for if your organization’s major concerns are increasing disruption from threats and opportunities in the environment. Toyota's Lean Production System is one approach, based on developing workforce capabilities in problem solving. A disruption or crisis that might be crippling for some organizations is a challenge Toyota workers already know how to handle.

The challenge in making your organization anti-fragile is that a focus on building problem solving capabilities competes with the performance engine’s short-term focus on immediate results. Command-and-control management will almost always get results faster with less effort devoted to developing people. And in the competition for resources, the momentum of the performance engine will again be to “work harder, not smarter”.

Summary

Process improvement activities can drive very different kinds of results, so where you focus your efforts requires clarity of purpose and knowing what your organization needs most: fine-tuning, innovation, or anti-fragility?