The power of operational innovation
This article about operational innovation was published almost 2 decades ago in the Harvard Business review, but it is still super relevant today! It is a MUST READ for innovation leaders.
“In an economy that has OVERDOSED ON HYPE and in which customers rule as never before, operational innovation offers a meaningful and sustainable way to get ahead — and stay ahead.”
What FASCINATES ME about operational innovation is that at first glance it seems disconnected from customer experience. But when operational innovation works well, it has a positive effect on the customer experience: better service, making the whole process faster and easier for customers.
For EXAMPLE: Progressive Insurance introduced “Immediate Response claims handling: A claimant can reach a Progressive representative by phone 24 hours a day, and the representative then schedules a time when an adjuster will inspect the vehicle. Adjusters no longer work out of offices from nine to five but out of mobile claims vans. Instead of taking between seven and ten days for an adjuster to see the vehicle, Progressive’s target is now just nine hours. The adjuster not only examines the vehicle but also prepares an on-site estimate of the damage and, if possible, writes a check on the spot.”
This BENEFITS CUSTOMERS: “Claimants get faster service with less hassle.”
And it results in great BENEFITS FOR THE COMPANY: Because claimants get faster service, it is less likely that they have an unsatisfactory claims experience that could lead them to abandon the company. “And the shortened cycle time reduced Progressive’s costs dramatically,” because there is less need for storing a damaged vehicle or renting a replacement car.
Beware of organizational BARRIERS to operational innovation:
- Business culture undervalues operations — they’re not as sexy as deals or acquisitions.
- Operations are out of sight (and out of mind-set) — Many top managers are ignorant about operations and uninterested in learning more.
- Nobody owns it — operational innovations spans end-to-end processes that cross departmental boundaries
PRACTICAL ADVICE on how to develop operational innovations, and the best way to implement them:
- Look for role models outside your industry.
- Identify and defy a constraining assumption.
- Make the special case into the norm.
- Rethink critical dimensions of work.
The HBR article shares stories and frameworks for doing this.
WARNING: “Conventional implementation methodologies often lead to failure…” because these “methodologies inevitably take too long.”
RECOMMENDATION:
-1- “Companies need to adopt a new approach” that is iterative and evolutionary.
-2- Don’t to try to implement an innovation all at once. “Breaking a large-scale implementation into a series of limited releases creates momentum, dispels skepticism and anxiety, and delivers a powerful rejoinder to carping critics.”
Read the full article to dive into the details of the stories and frameworks that it provides: Deep Change: How Operational Innovation Can Transform Your Company by Michael Hammer From the Magazine (April 2004 in Harvard Business Review)
