New ideas will light the way to future growth.
The word “innovation” conjures up images of hightech, perplexing things like computer chips, biomedicine and nanotechnology.
But there’s another, more down-to-earth aspect. In fact, the greatest innovation opportunities are prosaic. If we’re looking, we can find them in warehouses, manufacturing facilities, offices and other common places.
Innovation—the capability to perceive and adopt positive change—is a powerful tool that can offset declining revenue, boost cash flow, reign in rising costs and even help prevent layoffs. And, it can be achieved with low risk and minimal investment.
Contrast Google and GM, for example. Google developed an algorithmic search engine that led to its initial success, but its innovative move was marrying advertising techniques to search engines. This monetized its search-engine capabilities. Today, Google is arguably the largest and most profitable advertising entity in the world.
GM, on the other hand, has remained mired in status-quo thinking. For years, it was churning out big vehicles as fast as it could. Management believed customers would follow GM’s lead. Now, the company’s survival hangs in the balance.
The automaker failed to recognize that continuing innovation needs to be part of organizational culture, not a crash effort in the face of crisis.
Innovation can be simple or complex, free or expensive, long term or short, risky or not. But, innovation always requires a change in thinking, mindset and approach. It allows managers to lower costs, improve quality and service, reduce errors, hasten deliveries and achieve other benefits.
The bitter irony is that many managers overlook their greatest sources of innovation, even in the current environment plagued by declining earnings, lack of credit and increasing layoffs. The greatest resources are employees and suppliers. And, they’re already being paid, so no new investment is required.
Unfortunately, in many organizations, employees and suppliers are discouraged from thinking or acting creatively, resourcefully and innovatively. After all, doing things the same old way—following the system—doesn’t involve risk, failure, extra work, conflict or discomfort. Or, does it? Remember, “crazy” means doing things the same old way yet expecting better results.
Employees and suppliers have a wealth of experience, knowledge, opportunity, means and motivation to innovate. Why not use these tremendous potential resources?
How to Innovate
Innovative techniques usually lead to simplification, elimination, standardization or consolidation of tasks, materials and costs.
One example is a major manufacturer of automotive bearings caught in the crossfire of a declining U.S. auto industry and an onslaught of foreign imports. As a noted procurement consultant with more than five decades of industry experience, I was engaged to conduct an educational program for all manufacturing managers, from foreman level up.
Sessions were conducted in groups of 10 and held literally on the plant floor. One group was given a bearing that had been manufactured for 15 years at a current standard cost of $65. The team was challenged to cut that cost in half. Everything was questioned, including tolerances, specifications, materials, manufacturing methods, routing, equipment, lot sizes, quality standards and more.
By the end of two days, the cost dropped to $30 (on paper), and the results were given to the product engineering department. After reviewing key issues, such as quality, durability, performance and customer requirements, the engineers accepted the bulk of the recommendations.
The company made and tested prototypes. The new bearing had a standard cost of $46, which added up to a savings of almost $12 million annually! And, there were added benefits: managers applied their newfound energies and creativity to other activities; educational sessions were extended to all employees throughout the organization, including board members; and two plants slated for closure remained in operation.
The creative energy and productivity that can be unleashed in an innovative organization is truly remarkable. Employees stop being liabilities—overhead that must be cut—and transform into engines of profit and cash-flow improvement. Suppliers are no longer necessary evils; they morph into creative consultants.
Of course, not all innovations are as dramatic. The most important lesson is that innovation doesn’t have to be complex or expensive. But, it does require a change in thinking and practice. Organizations without opportunities to innovate are rare.
Joel Roth is a consultant, speaker, workshop leader and author of The 20% Solution: A Practical Guide to Dramatic Cost Reduction in MROP (maintenance, repair, operating and production supplies) Procurement. He is a member of Affiliated Distributors and the Industrial Supply Association. For more information, visit www.the20percentsolution.com.