Thursday, July 23, 2009

The Yin and Yang of Improvement and Innovation by Dr. Phil Samuel

Lately, the contest between innovation and efficiency approaches like Lean and Six Sigma has become a topic of heated discussions among corporate leaders and management consultants. On one hand, we are asked to focus on efficiency, optimize processes, and improve productivity and customer satisfaction. On the other hand, we are directed to explore new paradigms and identify new growth potential for the organization.

Sometime ago, Business Week magazine’s cover story – 3M’s Innovation Crisis: How Six Sigma Almost Smothered Its Idea Culture – posed a picture of a face plastered with post-it notes containing such messages as “Six Sigma,” “DMAIC,” “y=f(x),” “ANOVA” and “CTQ Tree.” The feature story inside the magazine was titled, At 3M, A Struggle Between Efficiency And Creativity: How CEO George Buckley is managing the yin and yang of discipline and imagination.
Apparently there is a controversy, but not really, as the yin needs the yang and the yang needs the yin – undeniably, if you know anything about what this symbol means in Eastern thought and culture. The ancients observed two phases of constant cyclical change. Yin constantly changes into Yang & back into Yin again. This can be seen in the changes throughout a single day. This principle is what it takes to consistently operate and grow a world-class company.

So what is the issue? It turns out that almost every corporation is on a pursuit to outperform its rivals in two key business activities - improve the performance of current business, and create the future for the business. It sounds a lot easier than done. Only a few organizations are adept at delivering superior performance in both of these dimensions, and these organizations are often referred to as “ambidextrous.”

It has almost become a cliché to explain how businesses should become ambidextrous; but cliché’s aside, it’s true. As a customer-centric company, we must deliver on our promises to the customer – flawlessly. This means we must recognize and act on our promises and value propositions to our customers; we must manage, improve and optimize key processes and systems; we must reduce variation, uncertainty and risk for our customers. This requires disciplined and systematic approaches to reduce variation and eliminate waste from our processes.

On the other hand, we must find new sources of revenue and long-term growth. This involves searching for new paradigms and charting unfamiliar territories, discovering new ideas that lead to better and newer promises to customers. It requires risk taking, exploration, and high tolerance for failure. Therefore, we need an entrepreneurial mindset and flexible systems, and a business model for successful exploration and innovation.

However, the problem is that the processes, systems, and approaches that foster efficiency appear to be at odds with innovation. The yin and the yang tend to conflict, at least at the conscious, superficial level.

Sustainable market leadership goes to the ambidextrous

Upon deeper view, we can simply relax into the paradox of preservation and evolution. As per a landmark Harvard Business Review Article (O’Reilly, C., and Tushman, M., The Ambidextrous Organization, April, 2004), preservation refers to improving current performance, while evolution refers to creating the future. When you are ambidextrous, you balance the two activities of preservation and evolution in a way that meets short-term process imperatives and realizes long-term strategic objectives.

It’s the ambidextrous leader, manager, worker and organization that embraces the paradox of preservation and evolution, and that rectifies the apparent dilemma between the need for stability and the drive for never-ending change.

Although they started as separate approaches for improvement, Lean and Six Sigma methods have evolved considerably, especially over the past 15 years, to become an integrated approach for productivity and customer satisfaction. While Six Sigma was started as an approach to reduce operational variation and defects, Lean enabled elimination of waste and reduction of cycle time. Six Sigma and Lean are the twin forces that fuel any organization’s drive for operational excellence. As they work hand-in-hand enabling preservation activities, an organization enjoys their combined benefit on the top and bottom lines.

As the organization matures, it improves the synergy between these components. Through a systematic framework for problem solving and identification of key value levers, a Lean Six Sigma approach enables an organization to also evolve, not just improve. The yang of operational excellence galvanizes the yin of change, and helps push an organization to and through new frontiers.

Here is what Lean and Six Sigma have taught the management community about innovation: Traditionally many companies have depended on happy accidents or certain individuals gifted at generating ideas and inventions in order to fuel the innovation and growth pipeline. However, if innovation were to become repeatable, scalable, and systematic across the enterprise, we must build processes and approaches that everybody can follow. These processes and systems include many factors, some of which are described below:

- Building a balanced portfolio for product (or service), process and business model innovation.
- Innovation teams with diverse cognitive style and level
- A framework for innovative problem solving, incorporating convergent and divergent thinking.
- Tools, techniques and metrics that align with convergent and divergent phases of problem solving.
- Governance structure.
- A climate and culture that fosters innovation.

Many of these factors are similar and dissimilar in nature to improvement approaches like Lean Six Sigma. For example, one aspect of the climate and culture for innovation is encouraging risk taking and experimentation. Generally speaking, Lean Six Sigma culture promotes risk reduction and convergent thinking for optimizing the process. Unless managed carefully, these approaches may appear to collide with each other. On the other hand, innovation and Lean Six Sigma shares the basic notion of generating, managing and refreshing a diverse-yet-integrated project portfolio.

Dow Chemical has effectively integrated Lean, Six Sigma, Design for Six Sigma and Innovation into an ambidextrous system. Sometimes the company implements pure improvement projects, while other times it implements pure innovation projects – the former taking about five months to yield results and the latter about nine months. Perhaps most interestingly, Dow uses various innovation and creativity approaches within its DMAIC Six Sigma format at times, thus effectively binding the left hand of analytical rigor with the right hand of creative breakthrough.

An ambidextrous person is capable of doing seemingly opposing tasks well. A baseball player is said to be ambidextrous if he can equally hit lefty or rightly. However, it doesn’t mean he has to do both in each game to be called ambidextrous. He can pick and choose which way to hit depending on many conditions - anything from his mood to whether he’s facing a right-handed or left-handed pitcher. He might bat right for an entire game and left for the next; he might switch with each at bat; or he might switch in response to the other team’s change of pitcher. The point is, organizations need to first develop the ability to bat both ways, then practice both, then strategically decide which skill to use when.

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