6. Deep Change (management series)

The next article in the Management series is called, "Deep Change: How Operational Innovation Can Transform Your Company," by Michael Hammer. It is a 2004 HBR article.

1. The article uses Progressive in the last decade of the twentieth century as a model for operational innovation. They beat their competition by lower prices and better service. "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" (86). It's not operational improvement or operational excellence.

Cross-docking by Wal-Mart is an example. Goods go from truck to truck and never even enter a warehouse. Progressive did it through Immediate Response. Perhaps less than 10% of large enterprises have made a serious effort at it.

2. There are strategic benefits to operational innovation -- retain customers, greater market share. There are marketplace benefits -- lower prices, higher satisfaction. There are operational benefits -- lower direct costs, faster cycle time...

"The only way to get and stay ahead of competitors is by executing in a totally different way -- that is, through operational innovation" (88).

"Operational innovation is by nature disruptive, so it should be concentrated in those activities with the greatest impact on an enterprise's strategic goals."

Business culture tends to undervalue operations. Operations are out of sight. Nobody owns it.  

Examples of technologically based operational improvement:

• ERPs -- enterprise resource planning
• CRMs -- customer relationship management
• SCMs -- supply chain management

3. How to do it?

• Look for role models outside your industry.
• Identify and defy a constraining assumption. "At its heart, every operational innovation defies an assumption about how work should be done" (91). "Zero in on the assumption that interferes with achieving a strategic goal, and then figure out how to get rid of it."
• Make the special case into the norm. 
• Rethink critical dimensions of work. There are seven areas involved: 1) what results are to be produced, 2) who will do the activities, 3) where and 4) when will they be performed, 5) whether each activity should be performed in each case, 6) what information should be available to whom, and 7) how thoroughly should each activity be performed.

Traditional implementation strategies don't work with disruptive modes of operation. It is also impossible to get everything right from the beginning. "Only when a concept is actually tried does one learn what it should really have been in the first place" (92). An iterative (evolutionary/spiral) process may be necessary.

4. "Operational innovation is a step change. It moves a company to an entirely new level" (92). These sorts of innovations have staying power. Many won't innovate even when they see your good idea. And while some are catching up, you will be improving your innovation.