Agile Innovation Through Difficult Times - Systematic Innovation

Agile Innovation Through Difficult Times
“Planning is everything, the plan is nothing”
Dwight Eisenhower
In tough times, managers and leaders have a tendency to revert to wise words from earlier
times. Often the words they read appear to conflict with one another. But does this mean
some gurus are right and some are wrong? Well, occasionally, yes it does, but more often
than not, the apparent conflicts are better viewed as a call for leaders to find the higher
levels of thinking our current recessionary predicaments demand.
Take the apparent conflict between two of the titans of the previous generation of
management thought leaders, W Edwards Deming and Peter Drucker. Dr. Deming was
the guest of a “big 3” automotive company in the late ‘70’s. They were seeking his
advice about their quality issues, and about competition with Japan. In the course of his
orientation to the company, they told him that all 22 vice presidents had met the
objectives set in their MBO system, earning appropriate bonuses, but that the company
had lost several billion dollars and substantial market share. Deming’s reaction was to
leave, telling them that they had no idea how their company worked. He later used this in
combination with his universal proscription of arbitrary quotas to condemn MBO in
general.
Some time later, at what turned out to be one of Peter Drucker’s last public seminars at
the Claremont Graduate School, an audience member noted that the two “D” members of
all the lists of important thinkers of the previous century were Deming and Drucker, and
asked how Drucker reacted to Deming’s condemnation of MBO. Drucker got the big
laugh of the evening by saying, “Well, Deming is dead…”
When the laughter had eventually died down, Drucker, reflected on the automotive story
before delivering the succinct and rather profound conclusion, “I never told them to do
bad MBO!”
21 st century managers would do well to reflect on both the ‘to MBO or not MBO’ debate
and the differences between ‘good’ and ‘bad’ MBO.
To quote another famous voice from the past, Albert Einstein is famously attributed with
saying, "we can’t solve problems by using the same kind of thinking we used when we
created them."

So, how do we rethink the MBO problem? We might perhaps start by trying to establish
the difference between ‘good’ and ‘bad’. In the case of Deming’s prospective automotive
client, ‘bad’ clearly meant that the objectives being set ended up being inappropriate.
They were ‘good’ in the sense that generally speaking, it is good to have everyone in the
organization know what they are there to do. One hopes, however, that when everyone’s
objectives were set, they were correct. But, there are two ways that objectives can be
wrong: either something happened between the period in which the objective was set and
the results were measured, or the objectives of various divisions of the company were in
conflict with each other. This would certainly be consistent with a lot of problems that
seem to occur with MBO. Organisations, and indeed all of us, tend to set objectives with
the implicit belief that we know what is good for the whole organization, and that nothing
will change before the end arrives. If those assumptions were ever true, they certainly
aren’t true in today’s speed-of-light global economy. The new problem, however, is that
objectives get set at annual or quarterly or monthly reviews. We use fixed periods
because they are easy to schedule and monitor.
Just because something is easy to do doesn’t make it right. The fundamental flaw in
calendar based planning is that if the world changes the day after we set the objectives for
the next period, we spend the rest of the period doing the wrong thing. Which may, in
worst case scenarios, mean almost a year’s worth of doing the wrong thing. Or two years.
Or three.
The more sensible strategy – especially, again, in a complex, rapidly changing world – is
to put away the calendar and rather set objectives based on timescales set by the rate of
change of the system within which the organization (or team) operates. In theory, the
moment something changes which has any kind of impact on what we are doing, we
ought to be reviewing and re-thinking whether our definition of ‘right’ has changed in
any way.
Whoa, wait a second. Let’s get this straight; the world is changing constantly, and we’re
supposed to change direction every time we observe any kind of change? Well, yes.
Fortunately, we have two things working for us to help overcome this apparently
impossible dilemma. The first requires us to reflect on the story of the two men being
chased across a snowy mountain by a wild bear? Part way along the chase, one of the
guys stops to put on snow-shoes. The other guy shouts, ‘the bear is catching up, run’. The
first guy shakes his head, ‘I don’t need to out-run the bear’, he says, ‘I only need to go
faster than you’.
Which is to say, that we don’t necessarily need to be sensing and responding every hour,
we ‘merely’ need to be doing it faster and more effectively than our competitors.
So much for theory, what might this ‘faster and more effectively’ look like in practice?

espond
sense
align
interpret
decide
design
Competitor sense-respond cycle time
Our sense-respond cycle time
‘Faster’ is the simpler of the two parts. It means cycling through the sense-and-respond
loop more rapidly than your competitors. ‘More effective’ is more complex and, although
there are many ways to cut a cake, appears to feature six essential activities:
1) Sensing that something has changed in or around the system;
2) Interpreting the significance and implications of such changes on the current
system and objectives;
3) Designing the appropriate response or responses;
4) Making the decision about how to proceed
5) Aligning the rest of the organization to act on the decision
6) Successfully implementing the chosen response
So much for the first part of the resolution of the perpetual change dilemma. What about
the other half of the story?
This side centres around the question of exactly what kinds of changes should the
organization be sensing. As we’ve said already, change is constant. But some changes are
more important than others. The really important ones – the ones that require
organizations to do something – turn out to possess a very distinct characteristic: the
changes to look out for are the ones that involve some kind of discontinuity or nonlinearity.
Here are some of the main discontinuities that organizations need to be on the look-out
for:
- Step-change in current supporting technologies
- Emergence of a new technology delivering the same functions as presently
used technologies
- Emergence of an apparently inferior disruptive technology
- Merger or split between competitors or any part of the supply chain

- Departure from or arrival to an organization of a critical resource
- Emergent conflict between relevant market trends
- Generational shift in either customer or employee base
- Change in legal regulations
Having mapped what organizations need to be looking for when they are sensing the need
to make a shift in their objectives, it now merely remains for us to work out the details of
each of the activities in the sense-respond cycle. We can do that relatively simply by
dividing the six basic activities into two clusters, sense-interpret-design and decide-alignrespond:
Sense-Interpret-Design
If the sense part of the story begins with the discovery of a discontinuity, the most
effective way to proceed requires a toolkit capable of dealing with the conflicts and
contradictions that inevitably arise from such discontinuities. The only sensible option in
such situations is the Soviet-initiated, TRIZ methodology and its 21 st Century successor,
Systematic Innovation (SI) methodology. Now based on the study of over three million
discontinuity-resolution data-points observed across all forms of human endeavour, SI
has successfully removed the noise from the contradiction-elimination story and thus
allows organizations and individuals to interpret what is more important than what, how
one discontinuity affects and potentially creates others, and most important of all, how
the system needs to be re-designed or re-configured and how the local and global
objectives need to be changed.
In the light of the SI findings, ‘Sensing’ essentially boils down to, as mentioned earlier,
‘finding the discontinuities’; Interpreting is all about understanding the inter-relationships
between the different parts of the internal and external systems to be able to map the
causal links between the discontinuities and the rest of the system; and Designing is all
about resolving the conflicts and contradictions that these causal links create. That’s
‘resolving’ as in creating step-change, contradiction-eliminating solutions. It very
definitely does not mean ‘optimization’. We traditionally use the word ‘optimization’ to
sound like it is a good thing. In some situations, indeed, it is precisely that. When making
a response to a discontinuous shift, however, it is a highly inadequate response. Nonlinear
shifts demand non-linear responses.
In true Stephen Covey fashion, optimization is the right response in an incrementally
changing world. Non-linear changes very often demand ‘wrong jungle’ responses. Which
in turn may necessitate some significant rethink of the objectives passed on to the team.
Decide-Align-Respond
Once the team has designed a range of possible solutions to the initial discontinuity, the
second half of the sense-respond cycle needs to be brought into play. If SI made for the
best foundation for progressing the first half of the cycle, Hoshin Kanri is its ideal partner
in arms for the second half.

The Hoshin Kanri method was developed initially by Professor Yoji Akao in Japan, and
later was used world-wide as the strategic planning methodology associated with Total
Quality Management. In many ways, Hoshin emerged from the resolution of the apparent
conflict between management by objective (MBO), developed by Peter Drucker, and Dr.
W. Edwards Deming’s 14 points, which specifically advised against using MBO.
First, though, the Hoshin Kanri method is illustrated in the figure:
Internal
Factors
External
factors
Strategic
Plan
Multi-year
Create/
Select the
Hoshin
Deploy
the
Hoshin
Modify
Planning
System
Do the
Work
Review
Modify or
Continue
Modify Objectives
Hoshin Kanri has two significant differences from classical MBO-style planning:
1. There is an extensive process for translating each strategic objective (either
annual or multi-year) into a set of plans for accomplishing the objective, with
metrics for assessing the progress toward the objective, called “Deploy the
Hoshin” in the diagram. In American-style Hoshin Kanri, a single objective is
called “the Hoshin” and gets extensive development. In Japanese-style Hoshin
Kanri, any number of “Hoshins” may be selected. Both use the term “catch-ball”
to describe the give-and-take in the deployment process, a multi-level discussion

within the company (and sometimes with suppliers or customers) to decide what
is to be done and how to do it.
2. There is a 3-level review system. The objectives are changed if the results of the
review indicate that the original objective was not valid, or has become invalid,
either because of a change of external circumstances, or because of relationships
between objectives that were not fully understood when the plan was constructed.
The work plan for achieving the objectives is changed if the review shows that it
is not effective. Finally, the planning system itself may be changed if the results
of multiple reviews show that the objectives and the work plans are being
changed frequently because the original plans were inappropriate.
A recent example shows the power of the frequent reviews: A Texas city development
board had set strategic goals of attracting German clean technology businesses to an
unused military base that was being re-designed as a technology park. They did all the
work that was planned—trade shows, publicity through the embassy and trade missions,
tours featuring their cultural and educational advantages, etc. But, when the dollar/euro
value changed substantially, there was nothing that this city could do to make their US
location desirable. Because of the flexibility of their Hoshin review process, they re-set
their goals to attracting a mix of business, targeted other world economies where the
dollar still looked cheap, and used all the lessons learned in their German experiment to
attract business from a variety of Asian countries.
The Russian origins of TRIZ and the Japanese origins of Hoshin Kanri have been left
behind by the companies that are using these methods. Combining the systematic,
structured innovation of SI with the disciplined system of Hoshin Kanri gives companies
the best of flexibility, accountability, asking the right questions and finding the strongest
solutions. In the coming highly complex, highly inter-connected, highly non-linear
‘continuous innovation’ global marketplace, only the agile will survive. According to our
findings, the combination of SI and Hoshin offers companies the best chance to not just
survive but also drive and thrive in this for-the-brave new world.
© DL Mann 2008
www.systematic-innovation.com