Innovation is probably the most overused and least understood word in the management lexicon. It is closely followed by the word entrepreneurship, which is routinely confused with enterprise. There is a need for everybody to be more enterprising, but it is given to only a few to be entrepreneurial.
Most executives and managers would have difficulty defining innovation or indeed differentiating its meaning from that of invention. Invention is something novel or new, whilst innovation is exploiting invention and using it to generate additional revenue and profits, a simple but subtle distinction. Colin Dale of the Welsh Development Agency put it very succinctly when he said:-
“Innovation is profitable change.”
Likewise technology transfer is a term much bandied about, with little or no understanding of its true implications for the donor or the recipient. To quote Dr Goldratt, author of ‘The Goal’:-
“Technology can bring benefit if and only if it diminishes a limitation.”
Sadly there are far too many examples of organisations that have purchased expensive technology for its own sake, with no understanding of whether or not it will diminish a limitation or constraint within the organisation. I have known several businesses where the fascination with sophisticated new equipment and its unnecessary purchase led to their demise. On the donor side, universities are urged to make available the fruits of their research and technical developments, with scant regard to the strategic and therefore commercial implications for the recipients.
Like technology transfer, innovation is a futile exercise if it does not increase the revenue and profits of the organisation. It has to be tied in with, and support the strategic aims of the organisation. The limited number of organisations, particularly SMEs, with any meaningful strategy means that there is often no discernible way of knowing whether or not innovation and technology transfer will be financially beneficial. ‘Strategic navigation’* described in the previous paper has the advantage of setting out logically and with clear priorities the actions that need to be taken for the future success of the organisation. Thus the most appropriate form of technology and the order in which it should be applied become self-evident.
Enterprise Ireland, in the Republic of Ireland, promoted a grant scheme at the turn of the century called the ‘eBusiness Acceleration Fund’, which supported some eighty indigenous businesses in the introduction of technology. In the main these were website based applications. They followed this with an excellent book setting out the results in the form of case studies, together with the lessons learned. The executive behind the initiative, Mr Lorcan O’Sullivan, identified two key weaknesses:-
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“Strategy: Failing to deploy ICT where it can create best return and failing to use the most appropriate facilities for the chosen focus”,
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“Day-to-day management: Existing systems were neither robust, nor secure or fully utilised”.
In a subsequent presentation Mr O’Sullivan suggested that in seeking to acquire and implement technology; “you should focus advice on setting strategy”. The second of the two weaknesses he identified highlighted the fact that many organisations, again particularly SMEs, are not sufficiently robust structurally or operationally in their day-to-day management to consider implementing, let alone take full advantage of technology transfer.
Innovation and technology transfer of themselves are no panacea, especially when the organisation is neither in a position to take the technology on board nor to exploit it successfully. Offering organisations technology, where there is no way of knowing if they actually need it and don’t have the capability to apply it anyway, doesn’t seem to me like a sensible solution to anything. Particularly when the chances of an organisation selecting the most appropriate option for their current situation are at best remote.
What is needed is a commercially orientated procedure that will allow organisations to assess accurately the technology that gives the best short-term return for the circumstances currently prevailing. Such a strategically based approach will produce a disproportionately higher return, as the initial gains are likely to come from garnering the so-called ‘low hanging fruit’. In turn this is likely to release more resources, enabling the organisation to strengthen its operational performance, or at least purchase additional expertise, which will enable it to take advantage of further innovation and technology transfer in the future.
Knowing the most appropriate solution, however, is only half the answer. Equally important is to know how to implement the solution, and successfully derive the anticipated benefits. Assuming that the technology is being implemented knowingly in order to diminish some limitation, then there are at least two further considerations. These are:-
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What rules or procedures were in place to accommodate, or get round, the limitation before the new technology was introduced?
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In what way does its introduction require you to change the previous rules to achieve the maximum benefit from the new technology?
Frequently organisations derive little or no benefit from introducing new technology, because they don’t change the old rules. A classic example of this was MRP where, after its introduction, many firms continued to calculate their ‘net requirements’ on the strict rule of once a month, when the ability to carry out recalculations much more frequently, indeed overnight, was the real benefit of the new technology. They didn’t change the old rule!!
What then is the process that organisations should follow in order to derive the maximum benefit from innovation and technology, new or existing? The process that I would suggest involves the following steps, or stages:-
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Change the form of measurement used for day-to-day management from the ‘cost world’ to the ‘throughput world’. This was described in an earlier paper and would greatly assist in policy formulation and decision-making, essential for arriving at the organisation’s vision, goal and necessary conditions,
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Develop a strategic plan based on the system of ‘strategic navigation’*, again described in an earlier paper. This will identify the actions needed to achieve the goal of the organisation, logically, in sequence and with clear priorities,
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Identify from the ‘strategic navigation’* logic diagram, (‘strategy on the wall’), the areas where technology or other innovations can contribute to the injections, or new ideas, which must be introduced as part of the strategy to support the achievement of the overall goal.
The first two steps are ‘silver bullets’ in their own right, but when allied to the third step they form a very powerful combination, or further ‘silver bullet’, for transforming the performance of any organisation. It is almost impossible to conceive of a situation where technology would not be involved in helping to achieve the aims of a modern organisation, but there must be a strategic link.
Amongst the areas where technology can contribute significantly are:-
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Automating office systems to digitally store and retrieve information,
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Implementing and managing processes to increase productivity,
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Improving communications through internet, intranets and extranets,
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Using e-procurement to purchase supplies and capital items,
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Practicing supply chain management,
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Automating operational systems and processes,
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Reducing lead-times to customers,
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Increasing sales and improving customer relations,
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Planning and implementing projects,
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Introducing new and innovative products,
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CAD/CAM and all aspects of design,
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Reducing the design and development times for new or improved products.
There is an unlimited choice of technological solutions available to organisations today and they cover a wide spectrum of potential applications. It is essential therefore; that any solution embarked upon must be the best in terms of suitability and value for money, as well as supporting clear strategic aims.
Similarly with innovation, organisations must select the new ideas that will help most with improving their performance. The tendency has been for innovation to become associated primarily with the introduction of new ‘hi-tech’ products, on the false assumption that only ‘hi-tech’ products can overcome the twin handicaps of high costs and low levels of productivity. Increasingly, speed and reliability are becoming the dominant competitive factors, replacing price and cost. Innovation can help traditional industries compete successfully when it comes to these new factors. A well-known manufacturer had to close down not because of the price, cost or technology of their product, but because the company could not develop new models quickly enough for its principal customers to include in their latest catalogues. It must be appreciated that every organisation can use innovation to enhance key aspects of its performance.
Professor Michael E Porter of Harvard University claims that:-
“There are no low-tech industries, only low-tech companies that fail to incorporate new ideas and methods into their products and processes.”
One of the best innovations to have emerged in the past few years for increasing the speed and reliability of new-product development is ‘critical chain’. ‘Critical chain’ was conceived in the mid 1990s by Dr E M Goldratt and has transformed thinking in the field of project management. Amongst major world corporations, particularly in the USA, it has replaced the traditional ‘critical path’ approach. It is particularly powerful in the situation where multiple projects are involved, such as managing the development of a range of new products, or with planned maintenance. Both the US Navy and the US Air Force now employ ‘critical chain’ extensively in their routine maintenance programmes. Organisations from Boeing to Pfizer and The Mayo Clinic to Bank of America now use ‘critical chain’. All of Seagate’s R&D worldwide is conducted using ‘critical chain’. ‘Critical chain’ can be considered a ‘silver bullet’ in its own right.
An interesting article appeared in the McKinsey Quarterly (2004, Number 4). Stephen Dorgan and John Dowdy from McKinsey’s London office studied one hundred manufacturing companies in the USA, UK, Germany and France. They were trying to explain why European companies historically lagged behind their US counterparts in terms of productivity. Their study demonstrated that productivity is dependent more on management practices than on spending on technology. They judged the quality of management by its effective use of three tools; lean manufacturing that cuts waste, performance management that sets clear goals and talent management, which attracts and develops high calibre people. It was the conclusion of their study that organisations should first improve their management practices and then invest in technology.
Whilst it is clear that innovation and technology have a vital role to play in the operation of any modern organisation, there are to my mind two key provisos. These are:-
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Innovation and technology must be used in the clear and logical pursuance of an organisational strategy,
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Innovation and the transferring of technology must take second place to ensuring that the organisation’s management is of the highest calibre.
Finally to quote Tony Rizzo, formerly of AT&T:-
“In a well-run company, in modern times, the strategic constraint will be innovation.”
In the next paper I will look at the issue of increasing productivity. What if there was a ‘silver bullet’ that could increase productivity by at least 20%, quickly and for virtually no cost?
