Need and development of innovation

Starting from Quality: »to be a manager who makes quality triumph by doing…«

1. Establish the vision and policies

2. Staff training

3. Establishment of the objectives to be achieved

4. Planning the way to achieve the objectives (strategy)

5. Provision of the necessary resources

6. Management and measurement of quality with the same rigor that we would apply if it were about profitability

All this implies taking into account the necessary innovation in each of the 6 aspects mentioned, let's see what we can do to innovate:

Innovation:

By process innovation we mean a fundamental reconsideration and radical redesign of business processes to achieve drastic improvements in critical results measures such as cost, quality, service or speed.

By fundamental reconsideration we mean the need to reconsider the basic and normally implicit assumptions about how we organize tasks. It is necessary to break the pre-established schemes. The consequence of this is that the redesign must be radical. Incremental improvements are insufficient. Even though they are often desirable or may even be what a company needs, the above definition simply does not include them as process innovation.

Once the hypothesis that configured the old process has been detected, a radical redesign of the process is required, usually with intensive use of information technologies, normally the redesigns focus on the creation and use of shared databases, eliminating unnecessary tasks and performing the rest in their most natural place.

The third underlined element in the definition is business process. It should be noted that the objective of innovation and redesign is not a specific task (which Taylorism would do), nor an organizational unit such as a department (since these units are a consequence of the division of labor into tasks), but a complete business process, that is, a set of related activities that add value to the customer (internal or external). Consistent with these explanations, we could talk about the entire company instead of processes. However, its complexity still exceeds us, and experience advises us to be prudent and focus on processes as the unit of analysis.

Finally, the consequence of all of the above should be reflected in improvements in traditional results indicators. However, we emphasize that these improvements must be drastic. If the improvements are only marginal, it is not worth embarking on radical changes; surely the same can be obtained with marginal changes. And even more important: if we propose only marginal improvements, we will hardly consider fundamental reconsiderations or radical redesigns. It is necessary to set ambitious objectives so that our imagination breaks the established patterns. Ex: Ford achieved its redesign when it changed its expectations from improving 20% to improving 80%, so that the goal could not be achieved simply by improving the present.

Process innovation is not the same as process improvement. The latter claims a much lower level of change. If the innovation pursues a level of radical change, the improvement aims to carry out the process in the same way, but at a better level of efficiency (or effectiveness). In a well-managed organization the two processes must coexist; some processes are subject to innovation, while others are constantly being improved.

Key aspects	Participation
Improvement	Down - up (bottom -up)
Innovation	Up - down (Top - Down)
Change level	Typical scope
Incremental	Inside a function
Radical	Wide, crossing several functions.
Point	Risk
Existing process	Moderate
Right from the start	Tall
Change frequency	Main facilitator of change
One time or continuously	Estadistic control
Just one time.	Information technology
Duration of the change process	Exchange rate
Short	Cultural
Long	Cultural and structural.

They are thus radically opposite philosophies as well as intrinsically complementary. Once we have defined what we mean by process innovation, it is convenient to describe its stages to identify an operation that will serve as a guideline for this type of change processes. There are no series of steps that, strictly followed, guarantee the success of the process redesign. In any case, although success cannot be guaranteed, the literature provides a series of examples that allow us to draw some conclusions about the stages followed by those companies that have successfully carried out projects of a certain size.

Methodology

1. Identification of the process to innovate

2. Identification of the levers to make the change

3. Development of the vision of the new process

4. Analysis and understanding of the existing process

5. Design of the new process and realization of a prototype.

Identification of processes to innovate. What is a process.

Process definition:

A structured and measurable set of activities that are developed in an organization with the aim of achieving a specific result for a specific client or market.

Thinking about processes in the global sense - where the specific purpose is to put a product or service in the hands of a client - requires a fundamental change in the approach that is used in the traditional company.

It is common for companies to think about how they do things, and because of this they have a functional orientation; the development of functional knowledge is at the base of the division of tasks. Looking at the organization as a set of processes, we must instead think about what - and for whom - things are done. We are used to organizing ourselves into functions to be able to efficiently manage different stages of the value chain. Here we propose that the emphasis should be on a view of processes that normally cross functional barriers. Most companies are organized in such a way that we cannot identify a person responsible for each of the main processes. It is outlined by a typical transfunctional process.

In a process-focused organization, “product development” consists of starting with an analysis of the competition and the market, and ending with a prototype and specifications for mass manufacturing of the same. To carry out this process, a close collaboration of at least three departments is necessary: R&D, production and marketing. However, by emphasizing functional differentiation, they dilute responsibility for the process as a whole.

A fundamental characteristic of the processes is that they have clients. In other words, every process - and therefore every activity in the company - is aimed at producing a good or service that someone capable of judging its quality is going to use (otherwise, we should eliminate the task or process). This customer can be external or internal to the organization itself.

One wonders how many processes there are in a company. Few, no more than twenty. Ex: Rockart and Short determine three: new product development, product delivery to customers, and customer relationship management.

In any case, in general it is desirable that the identified processes are large enough to allow radical improvement to be considered. If we define hundreds of processes, any attempt at individualized analysis and optimization of them would not lead, in general, to improvements that would justify the effort - in fact, we would be back in the task specialization advocated by Taylor-.

It is precisely in the adoption of a global perspective in the analysis and simplification of processes that until now have been managed in isolation, where the greatest potential for improvement lies.

An often important benefit is the optimization - and perhaps the removal - of the interfaces; This requires a sufficiently broad point of view. On the other hand, it is not convenient to fall to the other extreme, defining the entire company as a process, because this would entail an unapproachable degree of difficulty.

Process identification

There is no general rule of thumb about how to get to the "right" list of processes for an organization. The identification process can be carried out in many ways; An analysis of the value chain with an emphasis on the links and relationships between activities can provide enough ideas for the identification of the main processes of the company. It usually begins by asking the managers of the company to identify the processes for which they are responsible and then in successive meetings, bearing in mind that the objective is to describe the activity of the company in no more than twenty processes, refine the joint list until you get the desired object. Typical processes are: developing new products, placing orders with a supplier, creating a marketing plan, processing and paying a claim, etc.

A relevant point in the identification of processes is the determination of their boundaries. It is difficult for everything to start and end "outside the company." Many times, the end of one process is the beginning of another; it all depends on how the processes are defined. The criterion to follow, however, is the one mentioned above: by reflecting on its boundaries we will be able to identify the natural clients of each process and their link with the other processes. Consequently, the identification of processes and their boundaries is more an art than a science, so it should be done with prudence and maintaining a global vision of the company.

For illustrative purposes, the processes identified by IBM, Xerox and British Telecom are presented.

Main processes in three companies

IBM - XEROX - BRITISH TELECOM

Capture market information	Capture information on customer reaction
Relationships (hook) with the client	Supplier management
Direct business	Provision of consulting services
Selection of requirements	Marketing
Inventory management and logistics	Information management
Market planning	Network planning
Hardware Development	Integration of solutions
Product design and engineering	Business management
Business development	Network operation
Software development	Financial analysis
Product maintenance	Human resources management
Operations and process management	Provision of support services
Service Development	Accounting
Technology management	Management of "leasing" and other assets
Staff support services	Management of legal information resources
Production operations	Financial management
Marketing of products and services	Information technology infrastructure.
Order fulfillment	Investigation and development
Market management
Customer service

What process to innovate?

The selection of the processes to innovate must be adapted to the particularities of each company, but some basic criteria are the following:

1. The relevance of the process for the execution of the business strategy.

2. The quality and current state of the process.

3. The foreseeable level of resistance to change.

4. The manageability of the resulting project, taking into account the previous experience of both the Information Technology team and the organization and human resources team.

In short, the greatest opportunities for innovation reside in processes that do not work properly (for example, that present redundancies, or extensive information exchange, high stocks, a high level of control and checks, reprocessing work, they are very complex, cause complaints, etc…), in very important processes, in processes that are likely to be attacked, or in processes that present combinations of these three characteristics.

As a summary, we can say that, to identify the processes to innovate, the following steps must be followed:

1. List the main processes

2. Determine the boundaries between the different processes

3. Determine the strategic relevance of each one

4. Judge, at the highest level, the quality of each process.

5. Determine the cultural and political component of each process, in particular the possible barriers to change (we understand barriers to change as emotional and cultural impediments).

Information technology as a lever for change

Everywhere there are a multitude of situations that illustrate the potential of information technologies as instruments of change.

If we had to point out a reason to believe in the power of IT as an enhancer of change towards revolutionary efficiency, we would say that it is because most of the administrative processes used today were designed when computers did not exist or were unaffordable to most businesses. Today it is possible to build a new set of processes that build on the power of today's computing and communications.

IT improvements imply major improvements in techniques for organizing and coordinating activities.

No new software application should be introduced in today's business without first thoroughly evaluating the associated process. You will never achieve a substantial increase in productivity without thinking from the first moment about the possibility of completely redesigning the process. Automating is not enough.

There are at least nine types of opportunities to support process innovation through information technology, although aware that they do not exhaust all possibilities.

• Automation: By eliminating a labor component in a process

• Computerization: By capturing information related to a process in order to improve its understanding

• Sequencing: Changing the sequence of threads, or allowing processes to be carried out in parallel.

• Tracking: Allowing the monitoring / control of processes and / or materials

• Analysis: Supporting analysis and decision making

• Geographical approach: Coordinating geographically separated processes as if they were side by side.

• Integration: Coordinating differentiated units or tasks

• Dissemination of knowledge: Based on capturing and disseminating intellectual assets

• Disintermediation: Eliminating intermediaries from a process

It is important to highlight the inductive role that IT must play in this process. The key is to consider how IT can allow us to fulfill the mission of a process in a different, more effective and efficient way. The above list can be used to reflect on the potential of IT and thus generate ideas for process innovation. It is important to remember that the role of information in the organization is above the proper role of information technology.

In the company, information is used as an element of supervision and control, for coordinating activities, for supporting decisions, for integrating tasks and units, and for supporting operations. Consequently, the information itself, independently of IT, is also a fundamental lever of change in process innovation.

Other gear levers

The non-technological components of process innovation, such as the increased responsibility of workers that normally results from an innovation effort, organizing themselves into autonomous work teams, and a generally flatter organization, are of paramount importance for the innovation be a success. In fact, IT alone is rarely effective without simultaneous innovation in the human and organizational component.

Process innovation involves non-trivial changes in the company. Most of them cross the traditional functional lines of the organization and involve new risks and responsibilities. Since the structure is not independent of the processes that the organization carries out, process innovation generally implies changes in the organizational structure.

But, at the same time, these organizational and human factors are also a fundamental lever to induce change in processes. They constitute another of the elements necessary to organize and coordinate activities, which did not even exist when the current processes were designed and which, instead, are available at the moment.

Particularly important is teamwork. For many processes, teamwork is the most natural way to organize tasks, requires less control, improves the efficiency of activities, facilitates communication, etc. Most of the teams that appear in the processes are multifunctional, mainly because most processes are also multifunctional.

Today we have many elements that facilitate teamwork. On the one hand, there is the cultural phenomenon associated with better training of people, the habit of interacting in diversity, the need to improve the socialization of work, etc. On the other hand, the experience of teamwork and scientific development provide elements that facilitate, guide and improve such work.

Finally, IT provides a fundamental support that facilitates the organization and operation of teams through systems such as shared databases, email, teleconferences, software for group work, etc.

Related to teamwork, there is a conjunction of cultural factors that facilitate process innovation via organizational changes. We refer to the current trends of empowering, the disappearance of middle managers and the flattening of organizations, increases in the level of employee participation, and their culture and training.

Finally, the redesign of processes entails a different definition of the tasks and the way to organize them. For this reason, it also entails changes in compensation systems, job design, personnel rotation policies, performance evaluation and measurement systems, human resources policies such as career management, promotions, etc.

One consequence is that one of the greatest difficulties in the implementation of process innovation often centers on the individuals themselves involved in the processes to be innovated. In general, the redesign of a process entails a reduction - sometimes even the complete elimination - of the number of people directly related to said process, so getting their cooperation during diagnosis and implantation is not easy.

Development of the vision of the new process

To properly redesign a business process, it is important to precisely define the vision of that business process. In particular, it is necessary:

1. Evaluate the current competitive strategy to determine the direction of the process.

2. Consult with the clients of the process about their expectations of its results.

3. Carry out a benchmarling of expectations for improvement and examples of existing innovation.

4. Set the results objectives of the new process.

5. Develop the specific attributes of the new process, that is, the basic characteristics that it must satisfy.

As we indicated before, ambitious goals must be set to induce radical changes. In addition, these should be measured in terms of current service level parameters such as the following:

• cost reduction;

• reduction of time

• quality of the result or output;

• quality of the work environment and empowerment;

• possibilities for learning and continuous improvement in the process.

Understand existing processes

Understanding existing processes is critical for many reasons, among which we highlight three. On the one hand, in complex organizations there is no way to migrate from one process to a new one without properly understanding the starting point. On the other hand, understanding the existing problems in the current system prevents them from recurring in the new one.

Finally, understanding current processes facilitates communication between the participants in the innovation initiative.

The techniques and concepts necessary to understand and describe existing processes can be found in many texts. Without emphasizing the details, the stages that should be covered are:

1. Describe the current process flow

2. Measure said process in terms of the attributes set for the new process

3. Evaluate the process in terms of the attributes set for the new process.

4. Identify the problems and deficiencies of the current process.

5. Identify short-term improvement measures that can be done.

6. Assess the current situation of the organization and IT in the company.

The essence of innovation: design of the new process and realization of the prototype.

There is not much that can be said about this stage of the innovation process, despite being the fundamental link. The reason is that little systematic can be applied to the most creative part of the whole process. In general terms, we can identify the following steps:

1. Generate ideas about alternative designs (brainstorming)

2. Evaluate the feasibility, risk and benefit of the design alternatives, and select the preferred one.

3. Develop a prototype of the new designed process

4. Develop a migration strategy from the old to the new process.

5. Implement the necessary organizational changes (structure and systems).

These steps are self-explanatory enough. They limit themselves to remembering the necessary prudence in introducing radical changes such as those pursued. However, some reflections should be made on the first of these steps, the generation of design alternatives. It is advisable to organize the generation of alternatives based on three ways of reasoning.

• First:

Systematically apply some of the fundamental principles of process innovation that can be found in the basic texts on the subject. The following list, adapted from Hammer, presents a possible approach to the redesign task:

1. Organize work around products and / or services, not tasks.

2. Have the people who use the product of a process carry it out.

3. Include information processing work in the task that produces that information

4. Treat geographically distributed resources as if they were centralized.

5. Link activities that can be followed in parallel throughout the entire process of carrying them out, instead of integrating results.

6. Leave the decision in the place where the affected work is carried out, designing the necessary process to control the goodness of the decision.

7. Capture information only once, together with its source.

8. Combine several tasks into one. Ensure that the process steps follow their natural order.

9. Minimize control tasks; minimize the need for reconciliations.

10. As always be aware of possible barriers to change.

• Second:

Search, systematically, confront and criticize the basic hypotheses implicit in the process. At the heart of all innovation lies the concept that you have to start the design of the process without restricting ourselves to what we could describe as "the same old way of doing things." In fact, we must not only start from scratch, but we must also make a conscious and persistent effort to confront these assumptions.

• Third:

Look for opportunities for the creative application of IT -see annexes-. In short, think inductively putting IT first.

Implications for management

The examples of companies that have carried out successful process innovation programs are beginning to be numerous. They all share the same philosophy:

the need to go beyond the automation of processes looking for different ways to provide value to the customer; a clear focus on the customer and how to add value, focusing on the what over the how; breaking the boundaries between functions and departments; providing a clear vision of the direction of change and the necessary internal and external leadership; modifying the organization, changing structures and systems to respond to a new orientation towards processes, to facilitate change and consolidate new processes.

Annexes

Information technology and process innovation - Generic applications of information technology-

Product development process

Automated layout

Simulation systems

Monitoring systems

Decision support systems

Interorganizational communication systems

Process of orders to a supplier:

Product selection systems

Microanalysis and forecasting

Improvements in communication systems