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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    As a result, within their highly sophisticated educational apparatus, only the best and brightest go into science and technology. That is precisely why GEN3 Partners is in Russia. We find that they have at least the technical capacity to be the very best. What we then do is, in essence, reeducate them around an innovation capacity not technical capacity but we find that these folks that are the best of the best at science, take to innovation methodology very well.

  • You have observed in the article, "Operational Innovation is rare. By my estimate, no more than 10% of large nterprises have made a seriouse and

    successful efforts at it." And you have also pointed out, "Operational innovation is relatively reliable and low cost." Why do you think the effort rate is so low?Is it because they don't see upfront the possible benefits? Or is it that the leaders are not well equipped to look at operational innovation as another platform for competitive advantage?
    The major reason so few companies undertake operational innovation is that senior leaders are not familiar with operations and they do not recognize the strategic potential of innovation in the area of operations. As more companies establish leadership positions through operational innovation, I expect that more companies will become active in the area.

  • You have remarked that, "it (operational innovation) will never get off the ground without executive leadership. Yet senior managers rarely perceive operational innovation as an important endeavor, nor do they Interview 4 enthusiastically embrace it when others present it to them. Why not? The answers hinge on some unpleasant characteristics of contemporary corporate leadership." What are these unpleasant characteristics of contemporary leadership? What kind of leadership do you therefore envisage for successful fructification of operational innovation efforts?
    As I have mentioned in the article (and in the previous answer), the unpleasant characteristic is that too many senior managers are distant from and even uninterested in operations and blind to its potential. The reason for this is that many of them have risen to senior ranks with minimal operational experience.

  • How should the need for operational innovation be identified? Who should spearhead operational change initiatives? Should it be the CEO or Departmental Heads or Divisional Heads or respective Functional Head?
    Any company needing to sustain or create an advantage in a tightly competitive industry should consider operational innovation. The effort needs to be led by a senior executive, though not necessarily the CEO. The CEO needs to encourage the effort, but we find it best that the actual efforts be led by line business executives and supported by specialists with expertise in the field.

  • What's the best way to foster operational innovation in companies? Should it be driven by top-down approach or bottom-up approach? Which of these two approaches would extract "passionate commitment" from employees across the organization?
    Bottom-up is unlikely to be effective, since operational innovation requires a broad perspective on end to end business processes, which front line people are unlikely to have. Operational innovation requires both the authority and broad point of view that only senior executives possess.

  • Does corporate entrepreneurship play any role in fostering operational innovation? What should be the other institutional incentives to be organized for better operational innovation results?
    Corporate entrepreneurship is a good thing, but not the same as operational innovation. The former is more focused on creating new businesses, the latter on finding new ways to operate in existing businesses. Operational innovation does need incentives and supportive leadership, just like any other change effort.

  • What's the importance of performance goals / targets in operational innovation?
    They are absolutely required. Without them, no one feels a need to make deep change and reinvent how operations are performed. They need performance goals that cannot be achieved with the current process to induce them to come up with something new.

  • What's the importance of execution in achieving the desired results of operational innovation? What are the challenges in implementation?
    Even the finest and most innovative concept is of no value unless it is implemented. Implementing operational innovation, however, requires a new approach to implementation, one based on learning and iteration rather than precise planning. Operational innovation is at its heart a form of innovation, which is, by its nature, characterized by uncertainty.

  • How to overcome organizational inertia to make operational innovation a way of life?
    Rapid early success with organizational innovation is the first step to overcoming inertia; when people see that the approach works, they become less skeptical. It is important for the leadership team to publicize early results and make a public commitment to continuing and extending them. It is also powerful for the senior executives to make public commitments to quantified performance improvements that cannot be achieved with traditional modes of operation and so demand innovation.

  • What are your suggestions for accelerating operational innovation efforts?
    First, the senior executives must set aggressive time schedules in terms of when results are required. Second, those doing the work must adopt a new style of implementation, which foregoes detailed and lengthy planning in favor of iterative implementation, in which early results are quickly achieved and subsequent releases built on these.

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