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Business transformation – think like a farmer, not a scientist

Monday, December 7th, 2015

by Alastair Ross, Director

Business Transformation sign with lots of comments

Business Transformation.  What is it?

Does it even exist in the real world outside the rarefied environment of the CEO’s vision, the consultant’s presentation or the academic treatise?

If it does exist, how can it be achieved?

These are important questions at a time when the need for major change in businesses is ever more pressing, faced with an environment that is full of new challenges and opportunities.

In my career I have worked both inside large businesses and outside them as an external consultant. During this time I have experienced the wide continuum that is ‘business transformation’:  from the all-too-common hype to the reality of major change projects that drive step-change performance improvements through the application of new business practices.

What I have learned is that ‘business transformation’ is not achieved by one mythical ‘big bang’ programme, despite the (over) promises of advisors, consultants and CEOs. Business Transformation is not like a chemical reaction where you bring together key business elements and catalyse them with a strategy to create – in a flash of light and a cloud of smoke – a new business model. Instead it is something apparently more mundane. It’s like farming.

For transformation is achieved by the hacking-away of the stifling undergrowth of conventional thinking, the planting of seeds of new paradigms and practices, and the hard graft of execution in the office, on the factory floor and out in the field. Transformation is realized across many harvests of change – not simply one ‘bumper harvest’. Sometimes the yield from a harvest is poor, the crops of change wither and die and new approaches are needed. Transformation requires the hardy farmers of change as well as its clear-eyed visionaries and sober-headed analysts.

Business transformation requires a bold and unique vision of how the organisation can generate value in a significantly new way – effectively a new business model – and this vision needs to be bought into by leaders and champions in the business. Communicating this new vision across the organisation – repeatedly – serves to catalyze improvement activities and provide a focus for innovation programmes. Then comes the hard grind of execution.

The reality is that most business transformation programmes fail to realize the initial vision. Most commonly the business fails to sustain the transformation programme long enough to yield the planned results. Management is typically impatient for results and performance metrics in most businesses do not encourage the long-term outlook required for successful transformation.

Finally it is worth remembering that businesses that are successful in the long term continually transform themselves – developing new business models – just as a farmer will continually develop their land, introduce new methods and plant new crops. Business Transformation requires long term thinking, it is an ongoing journey of innovation,  not a single destination.

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Continuous Improvement – the quiet giant of innovation

Wednesday, December 2nd, 2015

Continuous Improvement image

A BBC article (here) recently gave media prominence to a well-established business approach, namely incremental or Continuous Improvement. It cited the example of how Sir Dave Brailsford applied Continuous Improvement approaches in his role as performance director of British Cycling to benefit from ‘marginal gains’:

Brailsford believed that if it was possible to make a 1% improvement in a whole host of areas, the cumulative gains would end up being hugely significant. He was on the look-out for all the weaknesses in the team’s assumptions, all the latent problems, so he could improve on each of them. (Source: ‘Should we all be looking for marginal gains?’, BBC)

Brailsford made small improvements in cycling aerodynamics, in maintenance methods, in rider health and other areas identified by analysis as being small areas of weakness. These small improvements aggregated together transformed the competitiveness of the British Cycling team and subsequently Brailsford used a similar approach in the Team Sky cycling team. The result?

Team GB used to be also-rans in world cycling. Indeed, one pundit described the operation as “a laughing stock”. But in the last two Olympics, Team GB has captured 16 gold medals and British riders have won the Tour de France three times in the last four years. (Source: ‘Should we all be looking for marginal gains?’, BBC)

A short history of Continuous Improvement

Continuous Improvement (CI) is a type of innovation (defined as creating value from ideas) that sits at the unsexy end of the spectrum of business innovation. It receives few column inches in innovation blogs, individual projects do not result in earth-shattering changes and few of the project instigators will receive individual rewards. It is noteworthy only for its aggregated impact – of using new ideas to increase customer value or internal efficiency (by a little at a time). Toyota is often considered, incorrectly, as the parent of CI as part of its Toyota Production System (TPS), which later became known as Lean. But its conception was much earlier, primarily in the work study movement of the early twentieth century, fathered by Frederick Taylor and resulting in Taylorism. Toyota wrapped the resulting hard mechanics of time & motion study with its own philosophy of waste elimination and high workforce engagement.

Toyota sets the performance bar

Toyota’s ability to generate an average of 10 implemented improvement ideas per employee per year places it in the premier league for continuous improvement; most western firms struggle to get into the lowest league with typically 0.1 implemented ideas per employee per year. Toyota’s approach to CI lies in its combination of a specific methodology and a work philosophy that defines a unique organisational culture: ‘Toyota views employees not just as pairs of hands but as knowledge workers who accumulate the wisdom of experience on the company’s front lines.’ (Source: ‘The contradictions that drive Toyota’s success’, Harvard Business Review, June 2008) This is a powerful view and one that is all too often missing from business organisations.

Whilst industrial firms will have established CI programmes, focusing on shop floor teams, they vary significantly in their effectiveness. In my work with Codexx I have assessed a number of industrial CI programmes and typical weaknesses that occur include: Limited training in the use of CI methods, lack of defined goals and focus areas for CI, weak processes for reviewing and selecting ideas and limited workforce engagement (i.e. most ideas come from a few people). However for businesses that get it right, CI programmes can deliver significant financial benefits year on year and create a working culture that energizes and engages the workforce.

What about services?

Service businesses often lack robust capabilities for CI, although this is changing as Lean thinking continuous to permeate this sector. Allianz Insurance plc launched a major and ongoing innovation programme in 2006. At its core is a Continuous Improvement system.This uses departmental teams meeting regularly to identify and implement improvement opportunities. Each department team defines three key goals for their team and then, using a short weekly or bi-weekly meeting, they seek to solve problems that have been identified during the previous week and put on a departmental whiteboard by team members. Idea exploration and selection is performed by the team through a discussion. Implemented solutions are then recorded in the firm’s ideas management system. In total there are about 400 teams working in this way with the support of 100 trained innovation champions. Since its start the programme has yielded 38,000 implemented ideas with benefits measured at £19m (1).

Making difficulties visible

A challenge for service firms in Continuous Improvement is the difficulty of ‘seeing’ problems. In industry, a production process is physical, parts and products move through process steps involving people and machines. In a service business, the ‘product’ is information or an experience and is not always physical. This is especially so in Knowledge Intensive Services such as design, accountancy, law and management consulting where the ‘product’ is information-based. Why does this matter? It matters because ‘making difficulties visible‘ is key to Continuous Improvement. This is why a key mantra in Toyota is Genchi genbutsu or ‘Go See’. In other words: Don’t rely on reports or information from others, go and see the situation for yourself. In a services environment, walking into the location where work is performed provides limited value, particularly in information-based work, for there is little to see: what does a law firm’s office filled with people, desks, computer screens and paper (oh yes) tell you about the services performed there? Very little. This is why process mapping and visual management methods are key to making processes and their performance visible in a services environment. In my re-engineering work with professional service firms, the power of collaborative process mapping cannot be underestimated.

Continuous Improvement needs ‘Know Why’ not ‘Know How’

‘Know How’ is a common term used to describe expertise and is thus considered a ‘good thing’. However it is a bad thing when it becomes a barrier to innovation, which is not uncommon. Let me explain further. Much of work is repetitive to a degree with work comprising common activities and sequences of tasks. ‘Know How’ is sufficient to perform such work, as the procedures to be performed and the steps to be followed can be learned and represent the required ‘Know How’. The underlying reasons for why the work is designed in this way are not necessarily understood or indeed do not need to be to perform the work. But ‘Know Why’ is key to making significant improvements in how this work is performed as there needs to be understanding as to why the work is designed in its current form. Indeed much waste exists in working methods because steps and procedures in place were relevant to a situation that does not apply any more. For example, in a major insurance client, some activities in an internal process related to an IT-workaround which had not been required for many years….the people performing the work simply had not been told. The disciplines of questioning, investigation and analysis to enable ‘Know Why’ – a deep understanding – of the work area under focus provide a strong foundation for Continuous Improvement.

Marginal gains x high participation = something big

One of the biggest challenges in driving innovation in an organisation is how to fit it in around the daily business. Innovation is about creating ‘tomorrow’s business’ – a organisation’s focus is on delivering ‘today’s business’ and employees are measured and rewarded on this. So finding time for innovation is always challenging. A related challenge is that the term ‘innovation’ can be intimidating to employees. Many people (incorrectly) associate innovation with the need for creativity and radical ideas and thus feel that they can’t contribute. AXA Insurance Ireland ran an innovation programme in the early 2000s (2). AXA’s analysis of those improvement ideas implemented in the first few years of the programme showed that 80% of them related to small process or service improvements or waste elimination. This helped employees realise that indeed they could participate effectively in the programme by seeking improvements in how they performed their daily work. This helps engage employees in innovation as a regular part of their work – as demonstrated at Allianz Insurance. CI thus provides a good foundation for commencing a programme of innovation in an organisation. So whilst Continuous Improvement might not make as much noise as other forms of innovation, don’t underestimate the power of marginal gains multiplied by high participation in your organisation.

Notes:

1. Source:‘High engagement innovation at Allianz Insurance plc’.  2. Source:‘Experiments in innovation at AXA Insurance Ireland’

both case studies in ‘Innovating professional services – transforming value and efficiency‘, Alastair Ross, 2015, published by Gower.

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Customer-focused redesign of internal service functions

Monday, November 2nd, 2015

Customer Service

Introduction

It is all too easy for internal support functions, such as IT, R&D or HR, within organizations to lose sight of their purpose and their customers over time, resulting in poor service and inefficiency. For such functions do not operate in an open market where customers are the final arbiter and can take their business elsewhere. The result can be costly and poor internal support, which adversely impacts the performance of the entire organisation. So how do organizations ensure that internal services are provided effectively and efficiently?

Such a question was asked in the European operation of a global engineering company as part of a major transformation programme driven by the business challenges resulting from the 2008 economic crash. The function in focus was a production support function, responsible for the development, maintenance and enhancement of production lines and new production technologies for multiple factories in Europe and internationally. This function was key to the business as it provided important core competencies in new production technology platforms and automation. Codexx was asked to perform a review of the function as part of the transformation programme. The specific remit was to clarify current task responsibilities and interfaces, determine key problem areas and identify required improvements. This was a sizeable organization of more than 200 engineers and technicians, centred in northern Europe, but with teams also based in Eastern Europe and China.

D21 - 1

A customer-focused approach
We took a customer focused, service-led approach to the review, rather than focusing on the existing organisational structure. We did this as we considered the delivery of these services as the fundamental mission of the function. If we had aligned our approach with the existing departmental structure, we would have limited our thinking. We defined four key services provided by the function and focused our review on how well these services were delivered. We then identified five key internal customers, such as the factories and the R&D function, and then interviewed them to get their views as to the key measures of success for the services provided to them.

Assessing organizational effectiveness
To review the effectiveness of the existing organisation and to point the way towards structural improvements, we asked each department within the function to determine the % of their workload spent on each of the key services and their key challenges in performing this work. We also asked each department to identify the % of their time spent working with each of the other functional departments and also their customers. This helped us identify any misalignment in the current organisational structure.

We then assessed the quality of the service delivered and the efficiency of delivery for each of the four services using workshops with the key internal customers. In these workshops we identified the key service touch points or ‘moments of truth’ to determine how well the function was serving each customer. This provided a very clear ‘voice of the customer’ which was very specific in their requirements and issues.

D21 - 3

Identifying service breakages
We then held workshops with the key functional departments to feed back these customer views on their service performance and to identify the root cause ‘breakages’ within the department’s operation or processes that was causing the identified issues. We reviewed each department’s effectiveness at working with other functional departments and identified opportunities for improvement. We also worked with each department to get their assessment on the effectiveness of the currently defined business processes, including how well they were documented and deployed. We found that whilst the organisation was progressive in its use of process management, with a defined set of business processes, there were weaknesses in how well these processes were actually ‘lived’ in daily business.

Defining improvements
Our approach was deliberately collaborative and we engaged 80 managers and employees in the review – covering both those in the function and those who were customers of the function’s services – so that we could be sure that we had a good feel for the function’s service requirements, its performance and key underlying challenges.

This enabled us to identify key ‘breakages’ in the existing function, such as weaknesses in the function’s role in the critical NPI (New Product Introduction) process, weaknesses in the strategy and definition of production technology platforms and challenges in providing sufficiently responsive production support. In developing improvements we maintained our service-led customer focus. We were also guided by visioning work we performed with the function’s management team that identified increasing trends of globalisation of production, increased cost focus and speed to market – which the function had to meet if they were to maintain a viable future within the organisation (for outsourcing of internal services was increasingly an option to be considered).

We asked fundamental questions (see first diagram) about how best the required services should be provided, to meet internal customer needs and to do so in a way that was affordable. Based on this and the findings from our stakeholder and internal assessment, we identified 7 key improvement projects. These covered improved internal processes – particularly in the definition of completion criteria at key stages – also improvements in the platform development approach and organisational changes to provide improved and ‘joined-up’ services to production customers. We then worked with the functional managers to define an implementation programme.

Conclusions
Internal service functions should be able to demonstrate effective service delivered in an efficient manner. If this is not the case, they need to be re-engineered or outsourced. A customer-focused service-led approach can be effectively used to assess the performance of an internal support function and to define any improvements required. Due to the high engagement of internal customers in such an approach, it is much easier to get their support for any required changes.

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From benchmarking to best practice sharing

Tuesday, May 5th, 2015

by Alastair Ross and Martyn Luscombe

 

The term ‘benchmarking’ originally emanated from the practices of cobblers, measuring people’s feet on a bench to make a pattern for a shoe. It was appropriated by business in the 1980s when progressive companies began to formally ‘benchmark’ themselves against each other. Its purpose was to drive business improvement based on identification of superior practices in other organisations. Xerox was the first major business to popularise it and since then it has become a core tool in the business improvement toolkit. Whilst benchmarking can be a very effective tool in catalysing and focusing improvement, it can also be easy to misuse, with the result that the not insignificant resources required can fail to yield usable improvements.

Codexx has gained significant experience in benchmarking programmes since it was established in 2002 and our consultants have additional benchmarking experience gained from their work with previous employers such as IBM, Philips and Cranfield School of Management. Our experience includes the benchmarking of manufacturing practices and performance, supply chain management, R&D, general business innovation and law firm innovation. This experience has given us a good feel for both the strengths and weaknesses of benchmarking as a whole. In this short article we want to share some of the key lessons we have learned and our recommendations on how to best to use benchmarking methods in your own improvement programmes.

To help in establishing a framework for assessing the use of benchmarking, it is important to recognise that in practice ‘benchmarking’ covers a wide range of approaches, each with their strengths and weaknesses. We have divided benchmarking into three distinct types and evaluated each on their merits based on our experience in applying them:

  • Quantitative benchmarking
  • Quantitative practice assessments
  • Qualitative practice assessments

In practice, many benchmarking assessments will be a hybrid of two or more types to suit specific requirements. A key success factor in benchmarking is not to lose sight of the goal. In benchmarking the goal is to be able to use the assessment findings in a practical way to catalyse, focus and effectively execute changes in business practices which will yield performance improvement. The benchmarking findings (the ‘score’) should never be seen as an end in itself – although, in our experience, that can all too easily happen as managers use the findings simply to validate a past or planned action, rather than to use it to drive improvement.

1. Quantitative benchmarking

This type of benchmarking can be considered as the ‘classic’ benchmarking with its focus on comparing the selected business against a defined set of performance metrics and comparing the results with a database of other businesses on an anonymous basis.

Sometimes benchmarking exercises make the mistake of focusing solely on performance metrics, and only part of the story is revealed. By also comparing business practices in an objective way (e.g. through the use of maturity grids) a more valuable assessment can be performed helping to answer the ‘why?’ as well as the ‘what?’ of the scoring. For example, if a manufacturing company is shown to have high inventories compared to the average in its sector, weak practice scoring in the use of lean practices and the use of large production batches would explain this poor performance and give management a list of areas for improvement.

A good example of this type of benchmarking is the Probe manufacturing benchmarking tool. This was developed by IBM Consulting and London Business School in 1992 as an objective way of assessing a manufacturing operation against world class standards. It was based on a model of World Class Manufacturing that drew heavily on lean thinking. The benchmarking tool provided numerical scoring based on practice maturity and measurable performance achievements, and grew to a database of over 2000 manufacturing sites. Codexx has been a licensed user of the Probe manufacturing benchmarking tool since 2002 and we have used Probe for multi-factory benchmarking on a regular basis.

An excellent example of a company that has successfully applied best practices benchmarking and improvement is Grundfos, the leading global pump manufacturer with factories in Europe, America and Asia and headquartered in Denmark. Grundfos started using best practice benchmarking using PROBE in 1996 to assess the practices and performance in its factories. This identified gaps with best practices including the need to utilise Lean manufacturing approaches. Grundfos commenced implementation of lean manufacturing techniques across their factories from 1997 and continued regular PROBE benchmarking supported by Codexx. In parallel it used EFQM to drive overall Business Excellence. Grundfos Denmark won the EFQM award in 2006. In the PROBE benchmarking assessment in 2008, their Danish factories scored at a world class practice level. The result has been clear improvement in key performance indicators such as on-time delivery, inventory turns and quality.

New Directions 19 - benchmarking article - Figure 1

Figure 1: Example of practice v performance scatter for PROBE manufacturing benchmarking

 

Strengths

  • Uses a structured approach and provides quantified comparisons with other organisations on an anonymous basis.
  • The large database of businesses that have been benchmarked against the defined practices and performance provides an authoritative comparison.
  • This can be a cost-effective approach – the license or consulting fee required will be less than the total cost of a ‘do it yourself’ approach.
  • The benchmarking exercise can be performed without visiting other companies so does not require much time.

Weaknesses

  • The underlying model that the benchmark is based on is key to its relevance and its makeup should be clear to participants. It is all too easy for this to be complex and opaque and therefore unclear as to the validity and relevance of the final scoring.
  • Performance benchmarking alone does not provide easily actionable improvements. An effective Quantitative Benchmarking tool will cover both practice and performance.
  • The scope of the benchmark and the practice and performance areas covered are pre-defined by the benchmarking model and there is little or no room for flexibility.
  • Valid comparison is based on the assumption that all participating organisations define the compared metrics in the same way. It is up to the benchmarking assessors to ensure this is the case and if participating businesses are self-assessed, this cannot be guaranteed. The danger is that if the metric is ‘apples’, some organisations will actually be measuring ‘pears’… And this can easily be done. For example one global engineering company found that each of its international subsidiaries had different ways of measuring ‘on time delivery’; so a benchmarking performance question that asked for ‘on time delivery performance’ could get a high variety of %results from across this company even if they actually had identical performance…

2. Quantitative practice assessments

This benchmarking approach uses a defined framework of key practices with levels of maturity, i.e. from weak to strong practices. It is used when there is an absence of a large database of companies which have been assessed against these practices, so quantitative benchmarking is not feasible. Typically this would be because the nature or scope of the practice area is not wide enough to have merited academic or consulting study and the development of a benchmarking programme. This approach suits niche assessments of specialist areas, where a structured comparison against best practices is required. The lack of a database of comparative data means that the process must involve a number of like-minded organisations, all seeking to learn how to improve performance in the area involved.

Codexx used this approach to help a client perform benchmarking of production maintenance practices as part of a re-engineering programme for maintenance across 8 factories. The objectives of the benchmarking were:

1. To help ‘open the eyes’ of the maintenance managers to better practices in other maintenance organisations – and thus encourage change.
2. To provide a quantifiable comparison of practices and some key performance metrics with organisations with measurably better maintenance operations to provide a set of improvement targets.
3. To provide examples of improved practices which could be transferable to their business.
4. To learn about each company’s ‘journey’ to their current maintenance practices and benefit from their learning.

We initially looked to use a commercially available benchmarking tool for this work, but we found no tool that was broad enough to meet the client needs (most were focused on specific aspects of maintenance such as cost). We therefore developed an assessment framework built around a skeleton provided by the ISO 9001 8 principles of quality management. On this skeleton we added maintenance-specific practices and performances and developed this assessment model collaboratively with the client’s re-engineering team of maintenance managers – with whom we were already working. This approach was used to benchmark five other European companies, using 1 day visits – attended by the majority of the maintenance managers – supported by prior data sharing and preparation. Each participating firm was provided with an assessment report and overall scoring – it was important to ensure that each participating company gained value from the exercise. The assessment approach provided much insight to the maintenance managers and was used to develop improvement projects as part of the re-engineering programme. The scoring also provided a measurable set of practice and performance targets that were used over a three year period to measure re-engineering progress, with 6-12 month self-assessments against the framework (more information).

New Directions 19 - benchmarking article - Figure 2

Figure 2: Extract from F4i showing questions on innovation practice maturity.

 

Another example of this approach is in the development of the Foundations for Innovation (F4i) assessment tool by Codexx in 2006. This was born our of our recognition of a lack of a cohesive tool for assessing an organisation’s innovation ‘health’ in a cohesive and objective way. F4i was developed with the support of Imperial College Business School to bring academic rigour to the development of the assessment tool. Based on an academically validated model of innovation, it used 60 key innovation practices and performance metrics to enable a quantitative assessment of innovation in a business (see figures 2 & 3). We have used F4i in innovation assessments of industrial and service organisations across Europe, USA and China. F4i does not have a large database of companies – we focus primarily on how participating organisations score against the defined practices and more importantly in the underlying reasons for weak practices. We took a similar approach in the development of an innovation assessment for the legal sector, building on our experience of working with major UK law firms in innovation since 2005. We used this to perform a study of innovation in 35 UK and German law firms, together with the business schools of Exeter and Leipzig universities (more information).

Strengths

  • The assessment framework can be tailored precisely to the specific needs of the organisation (or group of companies) involved.
  • The assessment approach can again be tailored as required.
  • Learning is gained from the visits to other organisations.

Weaknesses

  • It is typically a more expensive approach to benchmarking than Type 1 as all the costs of development usually have to be borne by the lead partner(s).
  • There needs to be mutual value in the assessment for each participant and the lead organisation needs to recruit the involvement of others and typically cover the costs of the framework, travel to the other companies and in the scoring and reporting.
  • The limited number of participants results in a limited data set which restricts the ability to identify and validate relationships between practice and performance. Findings are thus more indicative than anything.
  •  A custom assessment framework needs to be developed for the benchmarking exercise by one of the parties involved in the assessment or by a supporting consultant.

New Directions 19 - benchmarking article - Figure 3

Figure 3: Example of ‘traffic light’ scoring against overall F4i innovation model.

 

 3. Qualitative practice assessments

This final type of ‘benchmarking’ is comparatively unstructured and primarily produces a qualitative assessment. One could argue that this is what normally happens in ad hoc and unstructured visits to other companies. Such informal benchmarking is sometimes referred to as ‘industrial tourism’ where the lack of any objective or structure to the visit results in limited value and few actionable outcomes. We are not advocating this approach. Structured qualitative practice assessment does have objectives and an assessment framework but it is deliberately loose. Codexx have facilitated a number of such assessments in a practice sharing programme on manufacturing technology areas, between a major Scandinavian and German manufacturers where there was mutual interest in a specific area of production technology development and the companies did not compete directly in their customer markets but were mutual users of each other’s products. Our approach to these assessments was to develop an overall practice framework (again based around the ISO’s 8 principles of quality management) and develop specific practices around this framework in collaboration with the two companies. An assessment visit programme was arranged and the framework used to scope and focus discussions. Key findings from the assessment were documented for each company.

Strengths

  • Suitable for use in highly specific business areas where an existing benchmarking tool is unlikely to be available.
  • Learning is gained from the visits to other organisations.
  • The flexible framework enables practice sharing visits and discussions to accommodate discussion and evaluation of thinking, methods and experience which emerge as of value to participants, and would not easily be accommodated in a tight prescriptive assessment format. Basically ‘best practices’ in this area are not well defined or understood and so the assessment approach needs to accommodate emergent practices that have proved to be of value to at least one of the participating organisations.

Weaknesses

  • Requires participants to each have areas of practice which are perceived to be progressive by other partners, so each participant can learn from the assessment – not just teach the other participants. This means that pre-work is typically required to engage participants and establish the potential for a mutually beneficial practice sharing arrangement.
  • There is a danger that the assessment will be so flexible and loose that it becomes difficult to make objective comparisons to enable effective learning for participants.
  • Again one party needs to take the lead in such a practice sharing programme.

 Final Words

Benchmarking is a proven way to compare an organisation’s effectiveness with others and do this in a way that provides objective findings that can be used to catalyse business improvement. However, sometimes traditional benchmarking can be expensive, too ‘one size fits all’ and its scoring opaque to participants.

Less formal methods, based around ‘practice sharing’ can be effective at achieving the required objectives of catalysing improvement – without the ‘heaviness’ of typical benchmarking – and enabling a more personalised fit to the requirements of the participants.

Overall, it is key that, whatever benchmarking approach is used, participants do not lose sight of the ultimate aims of the activity: to catalyse and focus improvement activities.

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Product development – ten best practices

Friday, October 17th, 2014

Product development is a critical function for product-based businesses. The ability to develop new products with features and functionality that are valued by users, to bring them to market quickly, cost effectively and at acceptable quality and then to support and enhance them during their lifetime has always been a complex undertaking.

Today’s additional requirements to serve a global market, to exploit new technologies – including the opportunities provided by the internet – to meet ever higher customer expectations and to compete against new low cost, but increasingly high value, rivals from China and other emerging economies simply adds to the challenge.

How do companies ensure that their product development practices are good enough?

Over the past decade Codexx has worked with a number of clients on assessing and improving product development practices, most recently we performed a global R&D benchmarking assessment covering Europe, US and China. In 2010-12 Codexx carried out two major research studies on what we call ‘the innovation journey’ for technology-based product businesses, from new ideas to value (e.g. [products) in the marketplace. This covered 43 technology businesses in the UK and Denmark.*

New Directions 18 - Figure 1

Figure 1: An end-to-end product innovation process

From our experience, we have put together a ‘top ten’ list of practices that we consider have a key impact on the success of product development. In no particular order:

  •  Become a user. Get the ‘voice of the user’ into R&D and keep it there. This can be done in a number of ways: by ensuring that development engineers and product managers spend time with relevant users, or by nominating a ‘user advocate’ in the development team, or by regularly and systematically bringing field feedback into R&D. A measure of the importance of this practice is that our innovation journey study found that end-user involvement in new product development was the practice with the fourth highest correlation with innovation performance.
  • Effectively explore new ideas. This means using a rich approach to exploration that involves personnel from development, marketing and production as well as potential users and partners, to determine the potential user and business opportunities and also the risks of new concepts and to identify potential improvements. The use of rough-prototyping is very effective here to help evaluate the concept. This level of exploration ‘shakes up’ the concept to determine whether it has sufficient merits to consider taking it forward. In our innovation journey study of 2012-13, the effective use of rough prototyping for idea exploration was the practice with the second highest correlation with overall innovation performance.
  • Enhance existing products. It can be easy for R&D to over-focus on new products, at the expense of enhancing existing products – from an engineering perspective it can be seen as less challenging and less exciting. But enhancing an existing product instead of investing in a new one has many advantages – less technical risk, less investment, easier for sales personnel to sell (minimal training required). Enhancements can be through updated technology elements in an existing platform, through accessories (which can be provided by 3rd parties) or through software and services. This does not mean we are ‘anti-new products’, but simply that the development investment portfolio should give sufficient weight to existing product enhancement as well as new products.
  • Establish an ‘end-to-end’ product innovation process. Whilst most product businesses will have a formal New Product Development (NPD) process, this only covers part of the journey from new ideas to products in the market. The NPD process needs to be complemented by a front-end process for idea generation and exploration (covering the key ‘fuzzy front end’ of product development), a back-end support & enhancement process and a parallel process for capturing learning from the field (as shown in Figure 1). Front-end exploration projects will often “fail” in the sense that the results are disappointing – which is an acceptable outcome as not all new ideas should (or can) proceed. Engineers must be judged on whether they do good, disciplined investigations in this stage, not on whether the ideas work out. Some element of waste is inevitable at the front end. Without such an end-to-end approach, the NPD process will waste resources on weak concepts and deliver sub-optimum products to the market. Product innovation must be guided by a clear stage gate process with an objective Go/No go at all the stage gates, especially, of course in the ‘Fuzzy Front’ end. Few companies are good at biting the bullet and stopping unpromising projects early on. But these processes have tendency to become more onerous with time as extra checks are inserted every time a problem occurs. This can become a bureaucratic nightmare. Beware of making the process any more formal than is absolutely necessary.
  • Reduce development time and team size. A major proportion of development cost is engineering hours – and this is a function of team size and project duration. So short development times and small teams have many benefits. Small teams are easier to coordinate, require less project management time and thus are able to make faster decisions. Shorter development cycles are less likely to require specification ‘resets’ due to competitive product announcements, new technologies, regulatory changes or delays from resource shortages. Frankly long development cycles and large teams generate waste in lost time, rework and non-value-adding coordination. Philosophies such as ‘Lean Startup’ (see the book by Eric Reis of the same name) support fast development time as this enables products to get to market faster and then user-based learning can start. So the mantra ‘keep it short and keep it small’ should be the guide for product development.

New Directions 18 - Figure 2

Figure 2: A system for innovation within an organisation

  • Employ platform thinking. This approach supports fast development time by introducing modular thinking into product design, to create a platform-based architecture. Thus new products become a mix of existing, evolved and new modules – for example a new mobile phone may have the same casing and screen, but updated processor, camera and new version of the operating system. This approach reduces development cost and risk and enables innovation to be focused on the new platform modules (rather than unnecessary re-invention). Platform thinking is well established in sectors such as automotive with cars such as the Volkswagen Golf and Audi A3 sharing much of the floorpan and chassis. Our innovation journey study showed that the separation of technology and product development (which is a key aspect of platform thinking) and the re-use of design or technology elements in new products were both top ten practices for correlation with overall innovation performance.
  • Ensure development proven practices are deployed. There are some proven practices for the design of new products such as documented user requirements – to provide a firm base for specification, QFD (Quality Function Deployment) – to build a functional specification that is aligned with user requirements, FMEA (Failure Mode Effect Analysis) – to identify potential design weaknesses, Design Peer Reviews – to provide an independent ‘fresh view’ on a design before it is frozen and Post Project reviews – to capture lessons learned and required improvements to working methods. These good practices are well known, so it can be surprising how poorly these are in place in product development teams. We have been in firms where these practices have simply ‘faded away’ or only have ‘lip service’ paid to them. It is the responsibility of development management to ensure that these proven development practices are in place and used effectively.
  • Establish an innovative culture. We have worked in product development teams where employees have said ‘We don’t have time for innovation, we’re too busy developing products’. Of course incremental product development is indeed one type of innovation. But the point is well made – employees need to have time, management support and encouragement to identify new ideas and concepts. This requires a supportive culture for innovation – a key element of the ‘climate’ for innovation within a firm. This is one of the seven key practice areas required for an effective innovation system (see Figure 2). A key aspect of an innovative culture is a clear and overt tolerance for failure when new ideas don’t work out. Of course, this is not the same as a tolerance for bad work…
  • Don’t overload! Management ambitions can lead to the commitment of new projects and a development roadmap that simply exceeds development capacity. The result is a climate of project slippage and postponement – which further wastes development resources in re-planning and stop-start activities. Development capacity should not be loaded more than 80% of capacity to avoid short-term overloads of some resources and also to allow personnel time to get involved in new concept exploration work, platform development or other improvements. Overloading inevitably leads to queueing, and extra inefficiency comes if engineers need to swap from project to project.
  • Have an effective Go/No Go to market. Stage-gate management in product development is a proven and effective way of managing cost and risk exposure. Just as cost and risk exposure significantly increase once a new product concept is accepted for development, so does cost and risk exposure increase significantly once a product is released to be taken to market as large investments in manufacturing and sales are required. This is why the decision to go/no go to market needs to involve all the key functions affected (such as marketing, sales, manufacturing and development) – it is not a decision for development management alone. Indeed marketing involvement in signoff of product release to market was the practice that had the highest correlation with high innovation performance in our innovation journey study.

Thanks to Rick Mitchell, Visiting Professor of Innovation Management at the University of Cambridge for his contribution to this article.

*‘The Innovation Journey for technology-rich product businesses – Phase 2 – Final study report’, October 2013, Codexx Associates Ltd, The University of Exeter Business School, The University of Aalborg Business School. More information.

For further information on our innovation and product development solutions, contact us at www.codexx.com.

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A new year – time for new resolutions?

Friday, January 4th, 2013

Goodbye 2012. Hello 2013.

A New Year represents renewal and the chance for a fresh start. Many of us will take the opportunity to make resolutions of personal improvement – to become fitter, get thinner and be better in some aspect of our lives. Some of us will even deliver on those resolutions too…

So what resolutions might you make in your own business? New Year resolutions for business? And why not? The start of a new year offers the opportunity to look at your business afresh, to start new initiatives and to retire old ones. All seems possible with the whole year ahead. In this spirit I offer three ‘2013 Business Resolutions’ that you could make that would stimulate and challenge you in the grey days of early January and if followed through would make major improvements in your business – with little investment other than time (and the courage to make change):

1. I will encourage more ‘crazy ideas’ within our business.
Crazy ideas? At a time of austerity do we really have time for such things, you might ask. Shouldn’t we be focusing on more grounded matters such as efficiency improvements and cost reduction – not on fuzzy, nebulous stuff like this? The simple answer is that you need to do both (more on efficiency later). ‘More of the same’ can only go so far. As Edward de Bono, the father of lateral thinking said, “You can’t dig a new well by digging the same hole deeper.” Truly getting ahead means doing something different.

To increase your differentiation from your rivals you need to create radical ‘do different’ products, services or ways of working. Only by allowing time and space for your employees to ‘think outside of the box’ are you likely to get some ideas that are truly revolutionary. Create the right conditions for this with space and time for innovation, clear management support and direction-setting together with a recognition and reward structure. Google’s well known ‘20% of time available for personal projects’ for its engineers has been a key element of its success in innovation. Separate out ‘ideation’ from implementation. Allowing space for ‘crazy’ ideas without the immediate application of rigid evaluation criteria allows opportunity for ‘crazy’ ideas to evolve into radical but nonetheless feasible business ideas. ‘Get crazy, get real’ is the approach to follow. Establish a simple process with some seed funding to enable controlled experimentation and prototyping of ideas. Then take the most promising ideas forward.

By the way, this doesn’t mean that ‘do better’ innovation such as incremental improvement is any less important to your business. This is the core of business innovation, accounting for 99%+ of improvements and needs to continue and indeed accelerate in these challenging times. But a business that is effective at innovation will operate a balanced portfolio of innovation activity including some radical/risky/’crazy’ projects as well as the more ‘sure’ projects.

“To have a great idea, have a lot of them.”
Thomas Edison


2. I will pick three key customers and go and give them a good listening to.
You might think you do this already – but are you simply telling them about your products/service offerings and listening to them within the confines of your existing offerings? To truly listen to them, try and stand in their shoes and understand their key business issues. Work to truly appreciate their underlying challenges which may be so accepted by them that they are not questioned and may not even be recognised. You can then determine their root cause limitations to their business. Then you can investigate how you could potentially reconceive the service you provide to them (or at least greatly improve it) to help them address their limitations and thus increase the value you provide to them.

In my work with professional service clients, I have found that the all-pervading ‘client satisfaction’ survey is almost a barrier to true client improvement. These surveys offer little insight on real client problems and give little value to clients. This is because they do not seek to understand the client’s business, but only the client’s view of the effectiveness of your service transaction. I have found it much more useful for Partners and Executives to meet with clients and talk specifics – about their business. Clients will always be pleased to talk about their business – if they know you are truly listening.

At the very least you will improve your working relationship with your client in working this way. You will also stand apart from your rivals who are stuck in the traditional ‘broadcast selling’ mode of doing business….

“All the innovations that have powered the company’s success have come from listening
to its customers and watching how their lives are changing.”
Terry Leahy, ex-CEO Tesco

3. I will identify opportunities for dramatically improving efficiency in one of our key services.
And by ‘dramatic’ I don’t mean five or ten percent improvement. I mean twenty five to fifty percent improvement. This is the level of cost reduction that can be achieved by radical re-engineering (I have seen this myself with many clients) – where you take a clinical look at your processes and services to dramatically reduce waste and increase value. From my experience over the last 20 years working with clients in service and industrial sectors, most businesses operate with inefficient processes for delivering services to clients or for supporting employees. In good times such waste is tolerated and then simply accepted.

There is a vast amount of waste in today’s businesses – despite all the investment in IT and other technology. Waste exists in unnecessary process steps, in time spent in inspection, checking and rework, in delays, in unnecessary variation, in ineffective technology systems and in performing work with over-skilled employees.

Lean thinking is highly effective in identifying and reducing such waste – if it is utilised. Business Process Re-engineering can drive dramatic improvements through process redesign. These are not new techniques. The foundations of Lean thinking originated over 60 years ago and re-engineering is nearly 20 years old. These are well proven improvement methods. So why do so many businesses operate with so much inefficiency? What are the barriers that stop these techniques being effectively employed to tackle this mountain of waste?

Lethargy could be one explanation. But really it is Fear.

Fear of change. Most importantly fear of leading change. Someone is needed to stand up and take the lead. To champion change. To challenge existing methods, to encourage others to participate in the programme of change, to apply the tools and then to persist in making the required changes in ways of working. And most importantly to simply start. Pick a business process or a service that is important and clearly needs improvement. Put a team together – with people who know the process, with people who are change-leaders, with users or customers served by the process. Help them apply the core techniques of Lean and re-engineering. And truly persist. For change always takes longer than you expect. Then use the results of improvement to engage others and your now-experienced team and start on other processes. But that is for next year.

But for this year, focus on just one process. And just start.


Read in December 2013:
So, what happened? Did you make your resolutions? Did you work to realise them? Did you successfully engage others in achieving them? Can you see the benefits? Perhaps you did not achieve as much as you would have liked. But did you achieve more than if you had done nothing? You should celebrate successes. But a good motto for leading change is “To be pleased, but not satisfied.” There is always more that can be done. Time to make your resolutions for 2014…..

“All life is an experiment. The more experiments you make the better.”
Ralph Waldo Emerson

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New Client projects – in Insurance, Law and Manufacturing

Sunday, October 23rd, 2011

We are pleased to announce a number of recent client projects:

  • Allianz Global Corporate & Specialty – to help them further develop their global innovation capabilities.
  • Nabarro – to support their re-engineering initiatives.
  • Grundfos Denmark – whom we have been helping to re-engineer their maintenance operations, working towards a world class standard.
  • ASB Law – to help them apply Lean and re-engineering methods in their business.

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How to be a leader in the innovation journey

Friday, March 25th, 2011

There has rarely been a time when innovation has been more important for businesses. Today’s challenging economic conditions allied with global competition provide a business landscape that is hostile to companies that stand still. The dramatic and seemingly incessant development of technologies – particularly those allied to the internet – provide opportunities for new products, new services and indeed new ways of doing business. And lastly, today’s market is truly global, offering an unparalleled opportunity for businesses.

For businesses to survive, let alone grow, they must be effective at innovation – at converting ideas to products and services in the market that deliver value to users and income to their creators. The journey from ideas to value is not a simple one. There are many steps along the way and many opportunities for good ideas to be lost, poor ideas to reach the market or for the journey itself to take longer than it really should.

Working with our academic partners, Exeter University Business School in the UK and Aalborg University in Denmark and with Gill Jennings & Every during 2010 we examined the innovation journey for 25 technology-based businesses operating in the UK and Denmark. We sought to understand which aspects of the innovation journey were of most importance to eventual market success; and also to understand how well businesses typically make this journey today. We saw that whilst much research had been performed in various elements of the journey (in idea generation, in development, in selection for example) little research had been performed across the entire ‘end-to-end’ journey. We decided to study this journey for new products and in sectors where time to market is a critical requirement. We developed a model and questionnaire and used these to examine the innovation practices and performance of 25 product-based businesses across this innovation journey. The participating companies had revenues varying from around £10 million to more than £2 billion. We made the following key findings from the study which was published on the 28th February 2011:

1.Overall our study found significant correlation between innovation journey practices and ultimate innovation performance (see scatter chart below). This showed that improving practices across the nine steps of the innovation journey will result in improved innovation performance. To further enhance innovation performance, businesses need to address the other innovation practices in areas such as Leadership and Culture.

2.The biggest gaps between Innovation Leaders and the others, in innovation journey practices were in Idea Exploration, Market/Launch Preparation and in IP Strategy & Management (see chart above that maps innovation practice scoring across the 9 steps of the innovation journey). This suggests that these three areas are the most critical in determining innovation success. It is interesting to note that Idea Exploration and Market Preparation are at opposite ends of the innovation journey – one determining the quality of the new ideas that go into the ‘innovation pipe’ and the other preparing the market resources and partners for new product exiting the ‘innovation pipe’. This is an issue for many businesses whose existing New Product Development processes rarely cover these key front and back-end activities.

3.Leaders had a noticeably higher level of user focus across the innovation journey than did other companies and we would conclude that this is a key enabler to their higher innovation performance.

4.In contrast, practice areas that might have been expected to have high importance – such as Product Development – show little difference in practice between Innovation Leaders and the others.

5.When we examined the individual lower level practices that together comprised the nine individual steps through the innovation journey and their level of individual correlation with overall innovation performance, Intellectual Property (IP) management practices had the highest correlation with overall innovation performance. We believe that this is as much an outcome of being an effective innovator as an enabler to becoming an effective innovator.

6.Overall, there was generally little overall difference between the UK and Danish participants, (see chart above) other than in Idea Exploration and in IP Strategy and Management, where the UK companies were a little further ahead. There were more differences at the detail level with different priorities in areas such as Learning and IP Management.

7.The study also confirmed that those companies practicing significant Open Innovation today were more likely to have higher innovation performance than those who were not.

8.The study sample was too small to enable valid comparisons between individual business attributes such as sectors and size. We hope to address this by expanding the database with further participants.

In the detailed study report provided to participating companies, we identified key learning points from this study and made recommendations for businesses who are seeking to improve their effectiveness in their own ‘innovation journeys’. Participating companies were also provided with their performance score against the other participants – on an anonymous basis.

We propose to extend this work by growing the sample of companies assessed against this model, through use of the model in consulting work and in research to help businesses improve their innovation performance. For more information on the study, on how to have your company assessed against the innovation journey model or  to request a copy of the complete report, please contact us via www.codexx.com.

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The innovation journey for product businesses – new study results

Wednesday, February 16th, 2011

What’s critical in the innovation journey?

What are the critical practices that businesses need to apply in their innovation journey from ideas to products generating value in the marketplace? This is the question we decided to try and answer at the end of 2009.  For it is a key question for businesses wanting to improve their innovation effectiveness and therefore their ‘hit-rate’ for creating successful new products. We have now completed our initial study on 25 medium to large technology businesses based in the UK and Denmark. We were greatly aided in this work by our collaborating partners: The University of Exeter Business School, Aalborg University Denmark and Gill Jennings and Every (GJE).

Studying the Innovation Journey
Our study used our three phase model of the Innovation Journey, an end-to-end conversion of ideas to value (see diagram). The model explores the three phases of  ‘Initiation’ (Idea generation, Exploration, Selection), ‘Implementation’  (Prototyping, Development, Go/No Go) and ‘Into Market (Prepare, Launch & Support, Learn).  We developed a detailed  80 question assessment to explore these practice areas and compare them against the participating companies’ innovation performance. This enabled the individual practices with the strongest correlation with innovation performance to be identified.

Study findings
Our study found that the innovation practices in our defined innovation journey correlated significantly with the innovation performance of the 25 participating companies – which means that those companies that had superior innovation practices achieved higher innovation performance.

We also selected the top 1/3 of the participants based on their measured innovation performance and defined them as the ‘Innovation Leaders’ and compared their practice scoring with the others, so that we could determine which areas of the innovation journey were of most importance.

Critical practices for innovation leaders
 We identified three areas where this Leader group were significantly superior to the others in their innovation practice, indicating that these areas were more critical to the achievement of superior innovation performance than the others. These were: Idea Exploration, Market/Launch Preparation and Intellectual Property Management. Those areas which traditionally are considered most important – such as the Development step – showed little difference between the innovation performance leaders and the others. It is interesting to note that it is the ‘front and back ends’ of the innovation pipe which seem to be most critical i.e. the exploration of ideas prior to entry into the pipe and the preparation of the resulting product exiting the pipe for market. IP Management was shown to be strongly correlated with innovation performance. We believe that this is primarily an outcome of being an effective innovator – you need to effectively exploit your IP.  One other marked overall difference between the leader group and the others, was that the leaders showed much more user focus throughout the journey. We believe this is key to ensuring that developed products are strongly user-influenced, rather than simply technology-driven. To enable a successful user-focused innovation approach, but also to create significant innovation, effective techniques need to be applied to determine user value (such as ‘user anthropology‘ or ‘lead users’).

Moving forward
We will be publishing the study report by the end of February. Participating companies will receive a copy of the report and their individual (anonymised) scoring against the other participants and the innovation journey model. We are seeking to expand the study database size and also intend to use the assessment tool developed from this study to help businesses improve their innovation effectiveness.

For more information
For more information or to request a copy of the study report when it is published, go to https://www.codexx.com/contact-codexx.php

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Maintenance – Cinderella shall go to the ball

Wednesday, March 24th, 2010

In many (most?) manufacturing businesses,Maintenance is very much a ‘Cinderella’ function – it works away in the back-room of the business and never gets to go to the Ball unlike other more glamorous business functions.  Maintenance is not somewhere that ambitious young managers typically seek a career in as it is often seen as something of a ‘backwater’ in the business. Maintaining and repairing equipment is not something seen as difficult or even that important to the business. The image of the spanner, the hammer and the oily rag are what many people envisage when the subject of maintenance comes up. Maintenance is somewhere out of sight where grubby stuff goes on that senior managers don’t spend much time thinking about.

But hang on a moment. Aren’t most factories these days filled with machines? Aren’t these machines expensive and complex devices like CNC machine tools, laser and water-jet cutters, presses and robots? And with Lean being a dominant way of working in most factories, isn’t equipment availability critical to achieving on-time delivery and high OEE? And isn’t RONA (Return On Net Assets) a key financial metric for any review of a company’s effective use of key assets such as production equipment?

Well, yes, indeed.

So what’s wrong with this picture? It’s simple: The view of maintenance as a non-critical function is out of date and a serious impediment to factories achieving high performance manufacturing. Maintenance must be brought into the 21st Century, along with management thinking. A key result of this old thinking on maintenance is the return on production equipment being lower than what would be possible with high equipment availability and also impacts on on-time delivery performance. Simply put, low equipment availability results in poor delivery performance and unnecessary purchasing of new equipment to provide additional capacity.

(more…)

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