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Management guru on how to drive innovation
Amit Ranjan Rai |
July 06, 2005
Embed innovation, creativity and new ideas into the DNA of a company's operation and culture -- most companies have been heard repeating this statement in recent times. That's because as products get copied or become redundant at a faster rate than before, innovation is the only source for sustainable competitive advantage.
Isaac Getz, professor at ESCP-EAP European School of Management, Paris, and one of Europe's leading authorities on innovations and idea management, was recently in Delhi to conduct a workshop organised by the Indian Institute of Planning and Management.
He spoke to The Strategist on what business leaders should do to drive innovation in their companies.
According to Getz, most companies have individuals who are creative and bubbling with ideas that improve processes and operations. However, they are not keen to share these.
The reason is simple. Companies are not interested in the ideas of their employees. They would rather pay millions to consultants to get the same ideas.
As part of his research, Getz studied over 100 companies in 11 countries to find out the best practices that companies followed to exploit the potential of their employees, and manage ideas.
He cites the example of a unit at Delphi Corporation, one of the world's biggest automobile parts supplier, to drive home the point. The unit had machinery that broke down frequently.
Despite the efforts of technicians, the problem was not sorted out for several years.
One day, an employee who had been working on these machines fixed the problem in an hour. He simply replaced certain parts with modified ones.
The employee had known this solution for four years. But he didn't share it because he was convinced that the company was not interested. Back-of-the-envelope calculations showed that if the employee had spoken earlier, the company could have saved 3.5 million euros a year, or approximately 14 million euros in four years.
The employee said that it was only when Delphi launched an "idea management system", was he convinced that the company is interested in listening and implementing ideas suggested by employees.
The biggest advantage of implementing such a system is that the organisation becomes a breeding ground for innovative ideas. Says Getz, "Companies typically seek breakthrough ideas by hiring employees in R&D, strategic marketing and so on, pay them high salaries and tell them to sit everyday and provide the company with innovations."
"It's similar to what happens in casinos, you need a lot and lot of ideas to hit the jackpot to succeed in the market," he explains. Research shows that you need 3,000 ideas for one product to succeed in the end.
"With a few R&D teams working on a few lines, it's unlikely they hit upon breakthrough ideas every now and then. In many cases, big companies working on these lines haven't been able to hit the jackpot in even 10 years," he says.
In fact, Getz says that research shows that if a proper idea management system is in place, 80 per cent of the breakthroughs or innovations will come from the company's employees, and only 20 per cent from those paid to do so -- the R&D and strategic marketing teams.
What's the way out? Getz emphasises on companies having an idea management system. The system should encourage each and every employee, regardless of their position and nature of job, to come up with ideas.
In fact, suggesting ideas may be made mandatory. And, of course, good ideas must be implemented. Getz gives the example of a hotel that looks into the ideas of even a barman or the attendant at the concierge.
He says that such employees deal with customers and in most cases, even with the suppliers, everyday. They often note things, which skip the eye of a R&D or strategic marketing department.
"Most of the times their ideas will be simple, but they are likely to be more realistic and practical, and often result in significant cost reductions," says Getz.
He cites the example of French-Italian firm STMicroelectronics that was able to generate 10 to 20 innovative ideas from each of its employees. The net result was a cost saving of $4,000 from each employee. The clincher: this company had thousands of employees.
To implement such a system is hardly difficult? Getz is against the "suggestion box" practice followed in many companies. "Hardly any of those suggestions get implemented. There should be a simple system by which an employee can approach his immediate manager with the idea, who in turn should take it to the top. If the idea is practical, it could be implemented," says Getz.
Once people see their ideas being implemented, there will be sea change in their attitude. It would no longer be "their" company but "our" company.
Says Getz, the entire approach in managing ideas and creativity is to focus where the problems occur. On many occasions, problems occur at the frontier of the company -- while dealing with customers, suppliers or partners.
The system should work in such a way that the employees who represent the company to the world become antennas to capture the problems. "If you cannot satisfy the customer go back and look for a solution, and then again come to the customer," says Getz.
He cites networking giant Cisco's example: "Cisco is very good at listening to its customer. When a customer asks for specific solutions or systems that are hard to find or implement, Cisco doesn't say it can't be done. Instead, it goes back and finds a solution."
Cisco bends backwards to satisfy its clients -- often looking for a right start-up capable of meeting the demand and buying it. "Its strength is not having thousands of engineers or R&D people but senior executives listening to customers," Getz signs off.