Deep Change : How Operational Innovation Can Transform Your Company

Michael Hammer explains operational innovation and the effects it can have on business. The
main areas of change executives address are exciting and benefit companies in the short run
while both the company and their executives get noticed. On the other end of the spectrum exists
operational innovation which is considered an under the radar innovation causing many
companies to not even consider it, but through substantial innovations in everyday operations it
is possible to produce significant reductions in cost, increases in productivity, and improved
customer satisfaction. The author describes the concept of operational innovation, the invention
and deployment of completely new ways of doing things, using Dell, Toyota and WalMart as
examples of how such fundamental rethinks can lead to enormous advantages in the market
place.

Operational innovation means coming up with entirely new ways of filling orders,
developing products, providing customer service, or doing any other activity that an enterprise
performs. Operational innovation should not be confused with operational improvement or
operational excellence both these terms refer to achieving high performance via existing modes
of operation. And true operational innovation is rare. The author estimates that only around 10%
of large enterprises have made a successful effort of it, and there are reasons for this. Firstly, the
power of such operational change is usually totally underestimated by senior managers. On top
of that it is neither glamorous nor sexy, and usually means getting your hands dirty. And the
effects of operational innovation impact all aspects of the enterprise, from reward systems to
managerial roles, meaning that executive leadership is vital for success.

Most Operational innovation initiatives begin at the grass roots level, fostered by enthusiasts.
These people need to find a senior manager who can understand what they have in mind and the
charisma and drive to help push it through. Particularly helpful are existing pockets of
Operational innovation in the organization, which can be used as references. And since
operational innovation is disruptive, it should only be attempted where true impact can be
achieved on the strategic goals of the business. Having selected the area for innovation, it is then
important to set stretch goals that cannot be achieved with only incremental improvement, to
stimulate radical thinking and change. The following suggestions may also help:

Look for role models outside your industry benchmarking in your own industry is
unlikely to uncover breakthrough concepts.
Identify and defy a constraining assumption zero in on the assumption that interferes
with achieving a strategic goal, and then work out how to get rid of it.
Make the special case into the norm companies can often achieve extraordinary levels
of performance in extraordinary situations, so turn special case procedures into the norm.
Rethink critical dimensions of work review who should do the necessary work, and
where and when it should be done, and with what results.
 Implementation also requires a different approach. Conventional methods take too long and
enable the internal opponents to campaign against the changes, delaying tangible results and
unnerving senior management. Furthermore, conventional implementation assumes accurate and
complete initial specifications when in fact this is seldom ever possible with quantum change.
So the best approach is to use a method popular in software companies, known as iterative,
evolutionary or spiral development, in which you launch the best estimate of what is required
and try it out live, using feedback to further evolve the solution. Breaking this down into a series
of limited releases reduces possible negative impact of early solutions being sub-optimal. Ideally,
operational innovation must then move from being a one-off project to being a way of life. This
can then be translated into a brand promise of relentlessly improving performance, which his
highly attractive to customers.

Operational innovation may feel unglamorous or unfamiliar to many executives, but it is the
only lasting basis for superior performance. Executives who understand how operational
innovation happens--and who understand the barriers that prevent it from happening--can add to
their strategic arsenal one of the most powerful competitive weapons in existence. In an
economy that has overdosed on hype and in which customers rule as never before, operational
innovation offers a meaningful and sustainable way to get ahead and stay ahead of the pack.

Avinash Hada

MBA TERM IV