Can Innovation and Continuous Improvement Coexist?
This question was posed by Tom Cagley on Twitter. At first blush these may seem at odds or exclusionary, but perhaps not. I know why it may seem difficult to be innovative while we are hyper-focused on continuous improvement activities. A company that focuses on continuous improvement that tends to be incremental can occlude us from thinking creatively, laterally and innovatively. However, it is not impossible for innovation to be a considerable source of that improvement.
Consider the tier one supplier to an automotive company. Original Equipment Manufacturers typically have cost improvement initiatives in place that cover the life of the product, the expectation the tier one supplier is constantly improving their capabilities. These cost improvement targets may be a few percent per year. In the first few years of production, it will be relatively easy to meet these objectives. However, after years of reducing the cost by 6%, it will become difficult to achieve that 6%, think of the law of diminishing returns, and we have to think radical or innovatively to achieve the cost improvement objectives – or fail. To hit this target we will need to think differently, innovatively, to achieve our goals.
I have worked at a company that set difficult targets for improvement from time to time. In these instances, innovation was required since the target was larger than could be achieved incrementally, and had a delivery date that was relatively in the short term. However, I can say this company’s continuous improvement capabilities were not stellar, they did rely more on innovation than an incremental approach.
Corporate culture may impact our ability to innovate. If our organization is set on achieving targets and holds little value for the uncertainty that may come with exploration and innovation, then innovation may be difficult. If we have no time or fear failure, then we will likely have no time nor hold in high regard innovation. Management must be patient and allow time for application of new strategies (techniques or methods) and even the failures that may come with that exploration – that, in my experience are intrinsic to innovation.
Product type can also have a role in determining our approach to improvement. If we build a consumer product and our profit margins on the product are low, we will likely not want to spend time that may not create the return on investment we require. In other words, we cannot afford to take time unnecessarily nor mistakes that may go along with learning and innovation.
Any company that desires to remain in business must find ways to continuously improve can do so without innovation for some time, but at some point to continue to make progress and improve, we will need to think differently akin to the law of diminishing returns. The same equipment, processes, and methods, over time, will not improve the product or grow the company. In my opinion, the successful organization must find a way to make both happen. That may be difficult at times, but I believe both are possible; using the right approach for the circumstances at hand.