“Operational excellence secures the present, innovation excellence secures the future”
-Roger Milliken, Former Chairman and CEO, Milliken & Company
Can cultures of Operational Excellence and Innovation co-exist in the same organization? Or, are these strategic levers so different, living at the extreme ends of the management spectrum, they can never reside in the same company? This question is one many organizations are struggling with and are worthy of further exploration.
“The greatest challenge of a company is to have a culture of operational excellence and innovation to co-exist…it has not happened, so far.” -Dr. Bill Coyne, Retired Senior VP of R&D, 3M
During my 40-year career with Milliken and Company, I have lived on both sides of the spectrum. With strong roots in the textile industry, years ago we faced a burning platform to survive as low cost, offshore competition posed a growing threat. This hyper-competitive environment devastated U.S. textile industries. Overnight, companies closed mills and shut down plants permanently. Gone. Milliken’s approach to surviving this onslaught was to invest in a dual approach of operational excellence and innovation. As in Roger Milliken’s quote above, we dedicated ourselves to getting our cost and quality competitive for the short term while investing more in innovation than anyone in the industry.
Like many organizations, we tried new things: we had initiatives, we spent money, and we deployed resources into operations, and we deployed resources into the innovation side, as well. Where, though, does corporate culture come into play, and what are the implications of that culture?
We need to start with a working definition of “culture.” This can get slightly messy, because there are so many. John Kotter, The Konosuke Matsushita Professor of Leadership Emeritus at Harvard Business School, defines it this way:
“Culture consists of group norms of behavior and the underlying shared values that help keep those norms in place.”
Another definition, per Kotter, is that culture is what makes up our organizational DNA. Now, we could get very academic with establishing the working definitions for “Operational Excellence” and “Innovation.” But I’d like to pose a question instead:
“What is our organizational tolerance for risk and failure?”
This question starts the discussion on what our corporate culture will permit.
Think about the words associated with excellence and innovation.
Continuous Improvement, Standard Work, Kaizen Events, Failure Mode Effect Analysis, 5 Whys, Benchmarking, Lean, Reduced Variation, Waste Reduction, Total Productive Maintenance, Level Schedule, Low Cost, High Quality, Takt Time, and…
Fuzzy Front End, Rapid Prototyping, Voice of the Customer, Discovery, Experimentation, Change the Basis of Competition, Idea Generation, Foresight, Stage Gate, Time to Market, Percent New Products Over the Last X Years, and…
Complete and exhaustive word association? No, but I do think it starts to frame up the organizational challenge of executing Operational Excellence and Innovation at the highest level.
Back to Dr. Coyne’s challenge: can these two “opposite cultures” co-exist effectively? Most organizations work hard on both, but in the end, organizational culture tends to reside in one camp and creates a gravitational pull on the other side.
Personally, I have lived this from both an executive level and an engineering level in my career. As a young development engineer, my operations manager often sent me away because he didn’t want to manufacture more difficult products that would negatively impact the “excellence” of his plant (“excellence” using the words association above). Now, this thinking has changed over time, but the dual culture question still persisted.
I do believe that organizations can create a culture where Innovation and Operational Excellence co-exist, but I am convinced these four pillars must be in place.
1. Leadership must manage Operational Excellence and Innovation DIFFERENTLY!
This is a big one. Innovation is often referred to as fuzzy (at least on the front end) or messy, and failure is encouraged as a part of the discovery process. To the extent we reduce these, we tend to morph innovations into incremental improvements rather than creating something new to the world. The elements of Innovation need to be protected. Operations need discipline, processes, standards and system to continuously improve. One CEO told me, “My operations are so predictable, I can sleep at night because I know the production and quality will be there for delivery in the morning.” Innovation, however, isn’t predictable. Great leaders recognize, protect, and manage the two with two different lenses.
2. Leaders must intelligently merge Excellence and Innovation at key points.
Strong leaders know that, throughout the Innovation process of conceptual work, new product introduction and ultimately winning in the marketplace, operations must be engaged. Late engagement tends to deliver less than stellar results. Early engagement of operations in the innovation process is key, as well as continued involvement of R&D into the market.
3. Operational Excellence must be taken to a new level to become the “delivery system” for new innovative products.
We historically think of operations as a cost center to make the products and then only to make them better and cheaper. In truly innovative organizations, operations must be taken to a higher level. Operations IS the delivery system for new innovative products. This requires more changeovers, more challenging products to manufacture and higher quality standards.
4. Rewards and Recognition
Finally, strong leaders know they are going to get what they reward. Operations need to be incentivized on their ability to adopt and commercialize new products. R&D needs similar metrics on design for manufacturability. Clearly, the day I was sent away with my proposed new product, these metrics where not aligned. Today, they are.
Operational Excellence and Innovation are key strategic levers, but great organizations understand how to manage them differently and the importance and interdependence they have to each other.
I invite your thoughts as this difficult to do and sustain.
This article was originally published on LinkedIn by Craig Long. Craig Long has spent his 40-year career with Milliken & Company in a variety of executive leadership roles. In 2007, Craig helped launch the Performance Solutions by Milliken business to assist other organizations with the same challenges that Milliken has overcome. Craig’s experience includes business management, quality, continuous improvement, corporate education, industrial engineering, product development, and complexity reduction. For the past two decades Craig has led successful MPS implementations within Milliken and with 350 client operations in 23 countries to date. To learn more, visit www.performancesolutionsbymilliken.com.