Igniting New Growth is Like Falling in Love

 

‘Shall I compare thee to a summer’s day?’ William Shakespeare

As a Toyota acolyte, I experienced the power of Kaizen - continuous incremental improvement creating continuous Value (not unlike the effect of compound interest). A decade ago, a nagging doubt crept in. If Kaizen & TPS are enough, why are the market valuations of the Tech tigers so much higher than those of the great Industrials? Clearly, Kaizen is necessary, but not sufficient. And so, I went to Singapore and fell in love.

A human being drew this & wrote this

Finding the Blue Ocean

I fell in love with the mindset, skillset & processes of ‘Abracadabra’ Innovation – creating new offerings seemingly out of nothing. In earlier articles, I described my collaboration with Laurent Simon – my friend, co-author & East Asia Innovation leader. Under Laurent’s guidance I participated in Innovation sprints in a range of industries. Twenty-five years after my Toyota apprenticeship, I found myself on another steep learning curve - how to ignite new Growth.

My Sprint colleagues & I were seeking the proverbial ‘Blue Ocean’, a place where nobody else was fishing. Kaizen, by contrast, entailed making small improvements to an existing offering or process – a very different challenge, though no less profound.

Abracadabra Innovation is Like Falling in Love

Abracadabra Innovation is a journey in the dark. Our Sprint teams often have little data & thus cannot answer the most basic innovation questions:

1.     Who is the customer?

2.     What do they value?

3.     Why do they buy or not buy?

Lesson # 1: you have to create your own data. You have to learn our way up the proverbial innovation curve through quick, cheap experiments. (Lean experimentation has a bright future).

Lesson # 2: It's like falling in love. You build trust a little at a time. Coffee, then lunch, then a low-risk date, say, a bike ride or a museum visit. So far, so good? Do I know this person? Do I like & trust them? Do I want to spend more time with them? Okay, then maybe dinner? At each step, each party gives a little more, and trust grows thereby.

We want to gradually engage the customer. The stages are typically some version of: I Know, I Like, I Trust; I’ll Try, I’ll Buy, I’ll Buy Again. And if you’re really good & lucky: This is so great, I’m going to tell all my friends! At that point the proverbial Customer Funnel becomes an Hourglass.

Think of this as a process with three Phases:

·       Awareness (Who are these jokers?),

·       The Bridge (Maybe I’ll try it), and

·       The Clubhouse (I’m a fan)

The innovator’s job is to pull people from Left to Right, and into a Clubhouse full of fans. Like any process, Innovation has bottlenecks. As Eli Goldratt taught us decades ago in ‘The Goal’, our job is to 1) Identify the bottleneck(s), 2) Understanding the blockers underlying each bottleneck, 3) Remove the bottlenecks, and 4) Keep going till we have a clubhouse full of fans.

And here’s the hard part – to do so we have to generate sound data usually out of nothing.

Next time I’ll talk about common innovation bottlenecks. Stay tuned.

Best wishes,

Pascal Dennis         E: pascal.dennis@leansystems.org

Kaizen is Necessary But Not Sufficient

 

‘There are more things in Nature, Horatio, than are dreamt of in your philosophy.’ Hamlet

As a Toyota acolyte, I was focused on the factory. How could I not be? New factories & model launches, new processes & equipment, continuous problem solving in a splendid team environment. I experienced world-class management & leadership. A Toyota logo is forever emblazoned on my heart.

But I began to realize there were large gaps in my understanding. If TPS was enough, why were the Tech tigers so much more valuable than the great Industrials? And so, I went to Singapore seeking a sensei.

Finding the Blue Ocean

I found my Innovation sensei in Laurent Simon, my friend, co-author & East Asia Innovation leader. Under Laurent’s guidance I participated in Innovation sprints in a range of industries (Financial Services, Consumer Goods). We were trying to create something seemingly out of nothing – ‘Abracadabra’ Innovation. Twenty-five years after my Toyota apprenticeship began, I found myself on a new learning curve, one just as steep & just as exhilarating.

Kaizen entails making continuous incremental improvements to existing offerings & processes and can achieve seemingly magical outcomes not unlike those of compound interest. My Sprint colleagues & I were seeking the proverbial ‘Blue Ocean’, a place where nobody else was fishing – a very different challenge, though no less profound.

I Thought I Understood the Customer

At our great Toyota factory, we thought we understood our customer, and so we did – to a point. We understood the customer’s wide range of satisfiers & dissatisfiers. We set both process & outcome targets for critical items like water leaks, engine surges & stalls, squeaks & rattles and dozens more. We focused kaizen activity on hot spots, kept improving and repeatedly won the coveted JD Power Gold Plant Quality award (still a point of great pride).

But here’s the rub: Could my Toyota colleagues & I have imagined that the automobile would evolve into a ‘smartphone on wheels’ or a ‘living space’ designed for comfort & productivity?  Could we have imagined parallel developments like the Smartphone or AI?

Kaizen is necessary but not sufficient. Abracadabra Innovation entails creating something new & useful seemingly out of nothing. We were often in the dark regarding core innovation questions like:

1.     Who is the customer?

2.     What do they value?

3.     Why do they buy or not buy?

We had to create our own data by running quick, cheap experiments. We had to learn our way up the proverbial innovation curve.

Abracadabra Innovation is a Process

What have I learned about innovation?

It’s a process through which you gradually engage a prospective customer.  Process steps typically comprise some version of:

·       I Know, I Like, I Trust; I’ll Try, I’ll Buy, I’ll Buy Again, and if you’re lucky,

·       This is great, I told all my friends!

This so-called ‘customer funnel’ has three phases:

·       Awareness – (Who are these jokers?),

·       Bridge – (Hmm, I should check them out), and

·       Clubhouse – (I’m a fan)

The innovator’s job is to pull people from Left to Right, and into the Clubhouse. Like any process, this one has bottlenecks. As Eli Goldratt taught us decades ago in ‘The Goal,’ our job is to 1) Identify the bottleneck(s), 2) Understand the blockers underlying each bottleneck, 3) Remove the bottlenecks, and 4) Keep going till everything flows.

To create ‘flow’ we have to a) develop hypotheses around the core innovation questions, b) run quick, cheap experiments, c) thereby generate sound data, and d) continually adjust our offering based on what we’ve learned, without going broke.  

Experimentation has a bright future! More to come.

Best wishes,

Pascal Dennis         E: pascal.dennis@leansystems.org

 

Innovation is Even Harder Than Baseball

 

"How do I avoid going through all this twice?" Bob Dylan

Baseball is a game of failure. Ohtani at the plate? He fails more than 70% of the time. Kaizen (incremental innovation) success rates are much higher. At my alma mater, Toyota Manufacturing, our strike out rate was much lower than Ohtani’s. Each year we hit demanding improvement targets in Safety, Quality, Delivery & Cost, which created the kind of 'Kick Ass, Take Names!' culture I enjoy to this day.

What about Abracadabra Innovation (aka creating something new out of nothing)?

Does Innovation Failure = Waste?

 Abracadabra Innovation (aka creating something new out of nothing) entails failing 90% of the time! My earliest sprints in Financial Services & Consumer Goods were a bit of a shock. Toyota's powerful methods & mindsets around Value & Waste are an indelible part of me. And here I am, part of a Sprint team whose experiments almost always fail, and whose offerings the customer almost always rejects! Surely, that's pure waste...

 The Currency of Innovation is Learning

 It's pure waste only if you learn nothing, and only if your experiment is needlessly expensive. But what if your experiment is quick & easy, say, a low-cost ad on the customer's favored channel, that tests the appetite for a critical product attribute? Or a brief online survey that illuminates an undiscovered Early Adopter group? Or a pop-up store & product mash-up that validates (or invalidates) a critical hypothesis around price point or distribution channel?

 That's a different story, no? The currency of innovation is learning. Hence the well-known mantra: ‘Fail fast, fail forward’. Each these experiments generate valuable knowledge & prevent far great waste downstream.  Like making, marketing & distributing something nobody wants. This is one waste Lean/OpEx usually misses. We're trained to look for waste in existing processes & products, not in our aggregate offerings & how they are received. The famous Wheel of Waste does not include 'making stuff nobody wants'. 

 

To be fair, Lean/OpEx managers & engineers are not trained in Abracadabra Innovation. My Toyota sensei drew a circle on the factory floor & asked me to watch the process till I understood its secrets, and especially the value & waste. He did not ask me to run experiments around who is the customer, what do they value, and why do they buy (or not) from us?

 To answer such questions, I had to go to Singapore & seek out different senseis. I learned new methods & mindsets. Sometimes they overlapped with my Lean/OpEx experience, sometimes not, as is the case with the attitudes around 'failure'. Nonetheless, my Lean/ OpEx foundation was extremely helpful, especially to the many sprint team members I mentored. 

 Applied Learning Equals Value

 Top execs in major companies tend to have a background in Operations, Finance or Engineering. (It’s been my honor to have mentored many). In my experience, many leaders are vulnerable to the Innovator’s Dilemma. To wit, the ROI on innovation work will always be much less than Business As Usual – unless we accept the above adage. Ambidexterity is now an essential element in the senior leader’s repertoire. It’s no longer enough to protect the core business, we must also ignite new Growth.

 In summary, Abracadabra Innovation is harder than baseball. You have to frame success & failure in terms of learning. "What are we trying to learn with this experiment? What's our hypothesis? How will we know if we're right? What's a clever way of getting this data? How do we make it quick, cheap & easy? And most important, how do we record, make it visible & share the learning?

 Best regards,

 Pascal Dennis         E: pascal.dennis@leansystems.org

 

Kaizen & Abracadabra Innovation

 

There are more things in heaven & earth, Horatio, than are dreamt of in your philosophy.

There are two kinds of innovation: incremental improvement (aka Kaizen) and ‘create-something-new-seemingly-out-of-nothing – ‘Abracadabra’. Both are magic and essential to sustained prosperity. Our challenge is to understand the very different methods & mindsets that underlie them. Indeed, this is an essential leadership skill, and the basis for what I call ambidexterity.

Kaizen is Like Compound Interest

Kaizen is magic the way compound interest is magic.  Imagine we’re able to engage all team members in finding & implementing small improvements that contribute 1% per month for an entire year. Where are we at year-end?[1]

Doing Nothing: Year End = (1 + 0.00)¹²  = 1     

Kaizen (1% per month): Year End = (1 + 0.01)¹² = 1.127    

At year-end we’re 12.7% better than if we had done nothing.

Now imagine we sustain this for then years.

Kaizen (12.7% per month): Year End = (1 + 0.127)¹⁰ = 3.30

After ten years, we’re better by 330%

An astonishing result, no? As with compound interest, benefits compound. Skill builds upon skill, confidence & teamwork build upon the same. The power of Kaizen blew me away. When you’ve lived it, you never forget it. I remember looking around our Toyota factory, seeing the intense focus and continuous improvement, and feeling sorry for our competitors. And our competitors were smart, capable & hardworking.  But they had yet to discover and apply the power of Kaizen.

There is a rich literature describing Kaizen culture, and more importantly, its blockers. Let me add that the long latency period is an insidious blocker. Like compound interest, incremental improvements are invisible in the short term.  ‘We had a 1% improvement last month – ho hum…’  And so, most Kaizen efforts run out of gas, or more common, we get a new leader who doesn’t understand or care about Kaizen.

Perhaps the most famous practitioner of the 1% improvement principle is Tom Brady, who turned continuous incremental gains into massive competitive moats.

Creating Something Out of Nothing is a Different Kind of Magic

People love ‘Abracadabra’ innovation – creating something new (seemingly) out of thin air. Innovation masters like Steve Jobs are akin to magicians. Nothing up my sleeve, he tells us, and then Presto! - an iPhone or iPad appear.

At first I confess I was suspicious. Apple quality is not so hot, I muttered to myself, missing the magic. In an odd way, my kaizen experience was a blocker! Then I went to Singapore and began the next phase in my apprenticeship. I learned that Kaizen was necessary – but not sufficient. 

Creating something new out of nothing is the key to igniting new Growth. So-called 'exponential' technologies, of which AI is the latest & likely most powerful, expand our ability to innovate, but the underlying mindsets & methods are essentially unchanged. How do these differ from those of Kaizen? Are there any synergies?  Do you need both types of innovation? If so, what’s the leader’s role in developing them? Stay tuned. 

Best wishes,

Pascal Dennis         E: pascal.dennis@leansystems.org

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