Saturday, March 8, 2014

ROI: Return On Investment ...or...Restriction On Innovation?

‘Innovation’ is a big word this year for ‘business.’     The bookstores and ‘e-book’ world is filled with publications describing the process to start  an innovation program.  I like that.   I like change and I like innovation.   Bring a structure together, prioritize initiatives, allocate funds, reward idea-creation (‘ideation’ if you are really innovation-hip) and make money from these new ideas.  Harness the creative staff, ‘capture’ their ideas, prioritize them and fund the initiatives.  The 2013 innovation goal appears to be  a structured program for innovation.  The warning in that previous sentence is ‘structured.’   If there are enough checks and balances, committees, prioritization meetings and limited funds we’ve done a good job of creating an innovation bureaucracy.  That’s to be avoided.
A few years ago I initiated a ‘lean process improvement’ program in a $1B company.  We approached this pretty simply doing a five day Kaizen to create a framework of priorities within the overall business process of the organization.  Following that we embarked on a a series of Kaizens at an ever more macro level.  Each facilitated event was teamed with stakeholders, topical experts and disinterested parties who were just good at ‘doing Kaizens.’  The pre-work included goals, objectives, metrics and an event budget.  It was important to leave management out of the events to the extent possible.  Everyone in the event had an equal voice.  At the end of each Kaizen there was a rollout of improvements and a system of measurement to ensure that the changes stayed in place and to monitor bottom line impact.  It was simple, leveraged everyone’s skills and experience and it worked.  Continuous improvement in the ‘lean’ context equates to ‘incremental’ innovation.   ‘Breakthrough’ results from a Kaizen look a lot like ‘disruptive’ innovation.
The Kaizen events resulted in change because the teams were given the freedom to act, to change processes that week and they had money.  It was not a scenario where team members finished an event and then had to get approval to spend; that was part of the pre-work.  Lean deployments result in continuous incremental change.  Every event, regardless of length results in rapid innovation deployment.
The forklift operator  knows when it’s time to replace a forklift.  They deal with performance, function, maintenance and safety every day.  The cost accountant looks at acquisition cost, depreciated cost, maintenance cost, and operating cost.  One of those people is going to focus on return on investment (ROI); the other knows how to get the job done.  Put the operator in a Kaizen and make him/her aware of forklift options and you’ll get to a the better solution whether it be equipment performance, features or even racking system  or loading dock modifications.  Facilitate the innovation opportunities of people doing the real work.  Focus on return on innovation (ROI).
Traditional ROI analysis is required to get past the bean counter numbers.  A lot of innovation dies at the feet of those gatekeepers.  Traditional ROI is rarely tracked after the purchase.  Deployments and implementations start changing parameters on day 2.  I’d suggest that innovators have a seat at the table.  Ensure that return on investment (ROI) does not become a restriction of innovation (ROI).

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