Business Case Studies, Executive Interviews, Michael Treacy on Innovation

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Executive Interviews: Interview with Michael Treacy on Innovation
November 2006 - By Dr. Nagendra V Chowdary

Michael Treacy
Co-founded GEN3 Partners

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  • What according to you are the critical success factors for innovation to become the DNA of any companys corporate culture?
    This topic of how to make performance a part of your DNA is a topic that I'm engaged in a very long and extensive research program on right now. In fact, as we speak, I have a team of people in India studying five companies under the topic I call a "performance discipline." A performance discipline exists when it gets a particular objective; lets say product innovation, but it could be quality or safety or whatever you have. When a company gets that objective it is able to achieve extraordinary levels of

    performance while everybody else struggles. This is because it essentially has eliminated all (or at least most) the risk of performance. And all thats left to do is basically hard work.For example, there are some poster children we are all aware of that have performance disciplines. Toyota has a quality discipline. General Electric has a productivity discipline. DuPont has a safety discipline.Federal Express has a reliability discipline. Our research has been aimed at understanding the anatomy of those disciplines. I donot have yet a full picture of it because the research is still underway but I have some fairly strong hypotheses about what it takes to create a discipline.

    For example, what we consistently see is that the companies that have built a discipline around a particular performance objective tend to turn their work practices against that objective into a science. Its a science in two respects. First, they have much more structured and standardized work practices for how they do things. The companies that have a product innovation discipline tend to have much more structured work practices for how they do innovation, companies that have a safety discipline tend to have much structured work practices for how they handle safety, and so on. The flip side is that we all know standardization of process at some level dries out local innovation. (If everyone has to do it the same way then theres not a lot of experimentation)

    In turn, the second way in which companies make their practices a science is that these firms create very explicit, controlled and managed experimentation thats aimed toward improving the standard work practices. To illustrate, in Toyotas quality processes, when they encounter problem whether it is on the line or elsewhere management and rank and file workers are trained to essentially turn the fixing of that quality problem into a scientific experiment. The manager or supervisors job is to coach the rank and file employee in how to set up the experiment in order to try to find a permanent solution to the problem. And the second rule of the managers once they have a successful solution is to migrate that into the new standard for how they operate so that it is shared companywide.

    In this regard, what we see are companies that have a performance discipline turn their work practices into much more of science than other firms. Also, the companies that have a performance discipline have taken the time and the effort to, in essence, indoctrinate their employees in a common mental model of the principles by which they succeed against the objectives. If you talk to a FedEx driver or someone who works in a call center or someone who pilots the plane in fact, anyone from that firm and you engage them in conversation about what are the principles around how they manage reliability, they will give you exactly the same playbook. They have in essence turned reliability into a religion that they all live by. A great deal of innovation, how to improve a process or fix a problem occur down among the rank and file in an organization and it occurs spontaneously. So these organizations, when they have to get in alignment about the new way they are going to operation, already start with 90% agreement because they all basically agree with the same playbook.

    The third thing that we see about companies that really create a performance discipline, whether its for innovation or anything else, is that they really only do it against very long lived objectives. This is because it takes years and years to build it into the DNA of the organization often a five to ten year journey. As a result, they need to find an objective that has legs and is going to live for a long time.

  • Is there any relationship between national culture and innovation culture? (For example: Israelis, Swedes, Americans, etc.)
    I cannot directly address the question of whether there is a relationship between national culture and innovation culture, but I can address a related issue and that is there is clearly a relationship between national educational infrastructure and innovation culture.

    Allow me to relate my own experience. I was an engineering student in Canada before coming down to study and then teach at M.I.T. What I found was education in Canada was actually more training than education and it was with an eye towards fulfilling a role of being an engineer at a branch plant of an American corporation. When I went down to M.I.T. my eyes were opened. M.I.T. first and foremost dedicated to producing entrepreneurs and to producing people who really think for themselves. And what I really got for the first time was an education. I attended the most prestigious university in Canada but the mindset wasnt innovation, the mindset was fitting into a large organization and its way of operating. So, I think in different countries you see the postsecondary education has taken on different character and it has led to different qualities with respect to innovation capacity.

    I will give you one last example. Lets look to Russia, where GEN3 Partners has its business. In Russia there are many positive reinforcements to becoming a scientist or engineer. Being a scientist in Russia is socially highly prestigious. The reason is they have a culture that is built around intellect and truly they honor, not the richest person in the room, but the smartest person in the room. That is what matters in their culture who is smart.

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