Innovation and Efficiency – No Contradiction

In our discussions with managers we often learn that efficiency is not their highest priority; innovation and new product development are. Therefore, the focus is shifting from improving the cost position and increasing the company performance to succeeding with new products and innovations.
However, innovation and efficiency are often perceived as contradictions: either a firm wants to be efficient or it wants to be creative. It can not be both at the same time, or can it?

Even more so, there is academic research that recommends to top executives to make up their minds: you should pursue cost leadership, customer intimacy or innovation (e.g. Treacy& Wiersma (1997)). 

In fact, our experience in the field teaches us a more differentiated understanding. Innovation and efficiency are very compatible concepts and need to be pursued in tandem. There are specifically these cases, where this is useful:

  1. Innovation itself is a process that should be efficient. Not only the amount of money that is poured into innovation is decisive. It is the effect per invested dollar or euro that counts. For example, Apple is investing a lot less than other much less innovative market players, but is extremely successful with its new products. Therefore, companies need to focus on efficient innovation.
  2. Innovation and efficiency are based on the same disciplines of effective organizations. These success factors start with a strong leadership team, and goes on with highly motivated employees, strong results-orientation, high quality awareness and other virtues. That leads to the plausible conclusion that highly professional organizations do excel in efficiency and in innovation at the same time.
  3. Process innovation is not just a slogan. It means the application of new ideas on processes and activities. With thousands of small ideas a lot of efficiency is generated. These continuous improvement efforts can make the difference between a highly creative, but bankrupt operation, and a successful innovative company, which earns money with its new products.
  4. In today´s dynamic business world innovation is an ongoing requirement, not the occasional project. Only by continuous learning companies will deliver enough competitive innovations, solutions and servcies that satisfy ever increasing customer expectations.

These cases show that innovation and efficiency are two sides of the same medal. However, there ARE big differences between both. Managers and executives just need to be clear on how these two concepts are understood and implemented in their organizations. 

For questions and comments, post here or write an e-mail to sattlberger@procon.at

How Lean Tools Lead to Waste and What Managers Need to Do About It

„For a man with a hammer everything seems to be a nail.“ This saying also applies frequently for the use of lean tools. With great enthusiasm plenty of lean tools are getting trained in order to achieve higher efficiency and profitability. However, in truth all this tool training is a huge waste.

Werkzeug, Werkbank, Kind
Lean Tools Add Waste

Typical lean tools that are trained with little benefit:

_ 5S
_ SMED
_ Kanban
_ Just in Time
_ Jidoka
_ Kaizen Workshops
_ Standardized Work
_ Visualization
_ Value stream
_ A3 Problem Solving
_ TPM, etc.

This type of training of lean tools is peddled to organizations with the promise of improvement. Unfortunately, the situation does not improve, but mostly it is deteriorating. Why? Because used in this way the tools are searching for the right problems.

In addition there is a psychological phenomenon. As we learned from nobel prize winner Daniel Kahneman, we tend to replace a difficult, complex problem, whose solution is hard for us, with a known problem, where we have smooth, easy solution. This may sound ignorant, but is probably practiced by all of us at times. Really dumb, however, seems to be the fact that we don´t like to admit our self-deception.

With lean management this means that we do have many difficult problems in our operations, where a lasting solution would greatly pay off. However, instead of trying to understand the problem thoroughly on site (gemba) and starting the hard path of step-wise improvement, we prefer instead to just “implement” the lean tools. Voilá, the problem seems solved! (Or not, as it is revealed shortly thereafter.)

Therefore the difficult problem (e.g. profit decline) is replaced with a simple problem (e.g. lacking lean skills), where the solution is an elementary training that can be provided quickly and simply.

Complex Problems Require Profound Solutions

The mistake with this kind of “solutions approach” consists of the fact that at our workplace we face problems with a complexity too high, than that they could be resolved with simple tools.

The true task requires us to eliminate all causes and obstacles that prevent us from fulfilling a customer order in one flow from receiving to delivery of the product, using the minimum of time, cost and effort.  As Taiichi Ohno said:

„All we are doing is looking at the time line, from the moment the customer gives us an order to the point when we collect the cash. And we are reducing the time line by reducing the non-value adding wastes.”

Aim and Function of Lean Tools

The purpose and benefit of lean tools is to support employees and managers to clearly identify value and to immediately and urgently highlight waste. This waste then can be eliminated quickly and for good.

That means for example, not the introduction of just-in-time transforms the operation to become lean. Just-in-time only helps to see the problems that prevent us from a highly value added operation.

The reason is that only when the worker really depends on every supplied part, then it becomes paramount to develop and practice quality and reliability for the actual work and for the long term. Everything else is just pretty words.

Ultimately, lean cannot be established by implementing lean tools. Lean tools can only support people to solve their problems and overcome their challenges in order to deliver higher value.

Managers still need to step up to their responsibility, take an impartial look at their true problems and implement effective counter-measures on the basis of sound factual analysis. And yes, lean tools can be pretty helpful at this!

For questions and comments reply here or send an email to me at sattlberger@procon.at

 

 

A Little Better Every Day

Excellence in areospace has been with us from the start of the industry. From humble beginnings to the impressive record of the aerospace industry today, pushing the envelope to higher and higher performance is part of the DNA of all aerospace philosophy and practice.

Now the time has come for the aerospace industry to fully adopt and embrace the philosophy of Operational Excellence in manufacturing as well. Therefore, we have started this blog to put out some ideas, questions and statements about what it takes us in the aerospace industries to improve ever more. We want to start with the motto from Lean Management:

A little better every day.

Wish you all much fun and success in discussing new and exciting ideas and practices and hope for your active participation in the Aerospace Excellence blog.