Disclaimer: I work in technology and it may have profound influence in my outlook. Also the words and jargon I use might be from the IT world.
Employee skill rotation program: This would help to plant at least two of the many innovation seeds – skills and the culture of change. And this is not about sowing the seeds on just a chosen few as in a leadership development program; it’s to foster innovation as a cultural change in the entire organization. Just as traveler who has seen the world would be more knowledgeable and practical that someone who never stepped out of his hometown, an employee who has seen the professional world from different angles and perspectives is better equipped to face the challenges his profession throws at him.
Unless we are all Steve Jobs, we discover, invent and innovate by using the knowledge we gained in our past. And the best ones are always woven from our past experiences. (It’s not that formal training doesn’t help; even Steve Jobs relied on the lessons he learned in the calligraphy class when designing typefaces for Mac). An employee doing similar activities for too long (we all know at least a couple of people who have been doing the similar activity for a decade, don’t we?) develops competency in the tasks that he performs on a daily basis. He will know the processes that need to be followed and the policies in place that have to be considered when he is given a problem to solve. However, many times unknowing to him, working so long at repetitive tasks also would have tuned him to see the outside professional world from the perspective of his daily activities. Many times to the extent that he puts the boxes (so called procedures, policies, processes) in place first when he is given a problem to solve and then works around a solution that satisfies it. It does not occur to him that probably there are solutions out there that can solve the problem at hand in a better way all the while satisfying the issues for which the policies exist in the first place. In other words, out of the box thinking and innovation is not his cup of tea.
Exposure to different perspective is the key to unlearning from this kind of tunnel vision. For that it’ll be nice to have the staff move around and undertake work in different business model, technology, support architecture and the like in a safe and secure environment. It has to be ever so frequently, probably every few years, such that the employee gets sufficient exposure and experience in new functions that he performs every time. This empowers him to borrow the idea and way of thinking from the all the work he undertakes to come up with better integrated solutions to the problems thrown to him. In other words, it fosters innovative thinking. It has to be considered that the employee might feel threatened and stressed by the challenges of frequent changes in the scope & content of his work. And that’s why support and encouragement is so important in these scenarios.
Tap the honey pot – Front line employees: These are the people who deal with business users and customers most frequently. To put things in perspective, a customer is someone who takes your service or product. If you happen to do something that gets you to interact with the person using what you make or do, you are candidate for tapping innovative ideas. Front line employees know customers pain as they are the ones taking the brunt when something goes wrong with the service provided. They know things that can be done differently to bring greater value to the customer. And many times they have to deal with a multitude of problems in a variety of situation, which means they have experience and knowledge on many things that matters. Often they know more than the manager higher up who just consumes the information filtered up through mostly word of mouth. And we all know how well that usually goes!
So, form a group to champion the effort of tapping these rich sources. Identify the best ideas. Work together on solving those problems that gives the best bang for the buck. And don’t forget to keep this process iterative.
Innovation Killers
I can’t think this blog to be complete without posting a few thoughts from the HBR article authored by Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih.
They present very valid points on some of the strategies and best practices that can kill innovation.
The authors take the first short at Discounted Cash Flow (DCF) and Net Present Value (NPV) calculations for deciding on the projects to be approved. Anyone who has taken a 2 days course on corporate finance knows the importance of making fair assumptions and projections and using DCF to put a dollar figure against each new project proposal. According to my professor, if you cannot get a thought into spreadsheet, then it’s not worth mentioning while deciding on project proposals. However, the authors of this article are questioning one of the basic assumptions made in corporate finance – the option of doing nothing. When you are to decide if a project is a GO or NO-GO, you are asked to see if the NPV of the project is positive or negative. If it’s positive, your project is a go. Vice versa is also true, which means, if the NPV of the project is negative, you are not supposed to approve the project as it depletes shareholder value. At this point, there is this assumption that if you do nothing, your company continues to exist in to the eternity by doing what it’s doing now and nothing more. And who doesn’t know that’s a fallacy? So the option of doing nothing is not really an option at all. So what if you have all projects with negative NPV and worse, some of the project looks like futuristic whose value is difficult to define. Because NPV is negative, do you go for the option of doing nothing? Um, this is tough. Kind of gives the feeling – I want to agree but on second thought I don’t want to agree.
The next one looks even more important. The Fixed cost and sunk cost and its impact on marginal cost analysis. The authors claim that, when you are assessing a new project, unless it’s just adding to what you are already making, the marginal cost is actually the full cost itself. Say, you are running a company that makes nuts and bolts. If you plan to use the same machinery to manufacture say a new tool and the reason that you are using the existing machinery is just because you can, then the authors are asking you to rethink to strategy. Because you are using existing machinery, you might believe that your marginal cost is less as you are not spending on fixed cost again. But in reality, you might be forfeiting your future capabilities by not investing in new machinery that’s more appropriate for making the new tool and the tools of the future. That being the case, when you are making the decision on a new project proposal, unless you are on an incremental project (such as increasing the capabilities to make more nuts and bolts of the same kind), be cognizant of the future opportunities and use the full cost of production as your marginal cost. That way you are giving a fair chance to new disruptive project that might initially look like a loser for increasing shareholder value.
The solution the authors suggest is not to consider corporate finance and strategy as two different subjects that are not well related. They are indeed closely related and you’ve to take an integrated approach when deciding on new projects. The authors go as far as to recommend accepting strategies and not projects!
Do I want to agree? Not sure. The professor’s words still ring on my ear – If you can’t get it into spreadsheet, it’s not worth mentioning.
Learning Strategy 