Saturday, September 21, 2019



Two Types of Innovation

There are two basic types of innovation. The first, Type I, does happen, but rarely. Type I is something completely new. And new things under the sun do not occur as often as we think they do. The first automobile and internal combustion engine were certainly new innovations, but even they built on the wheel, cart, and other existing technologies.

Things such as nuclear power, radio, phones, electricity in the home, and manned flight are certainly good examples of something that was pretty close to new under the sun. All the great, really new innovations can often be traced back to a genius, a lucky accident, or both.

We know the names of many of the geniuses – Fermi, Wright, Edison, Benz, and Ford. However, this is not an endless list, and while lucky accidents are good, they are too chancy. Type II innovation presents a better way.

Type II innovation is much more common than Type I. This second type can be reduced to three general approaches:

  1. Making something that already exists larger
  2. Marking something that already exists smaller
  3. Combining one thing that exists with something else that exists

The simplicity of Type II is profound. It can create dramatic breakthroughs and change the way we live.  Most of…

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Designing for Innovation

In section 4.1 of the Baldrige Criteria, Measurement, Analysis, and Knowledge Management, there is a question under Performance Improvement that asks, “How do you use organizational performance review findings to develop priorities for continuous improvement and opportunities for innovation?” Well, how do you?

Designing for customer needs frequently leads to higher-quality goods and services as well as innovative outcomes because an effective design process uncovers hidden customer needs. This discovery, and the subsequent solving of the problems that kept customer needs hidden, will lead to innovation. Designing innovative and superior quality services and products requires gaining a clear understanding of the customers’ needs and translating those needs into products and services aimed at meeting them. This information can be the driver of innovation; however, most do not recognize it as such.

Innovation has everything to do with creating something new. In competitive business situations success often comes to the best innovators. Many organizations have design and development functions that create annual plans to develop new models and new services. Sometimes these functions design the good or service internally to the organization and then look for customers to sell it to, while other innovation comes from solving societal problems. Additionally, organizations may look for customer problems to solve; as a result they create something new, something innovative. It is the latter that we have found to be the most economical and therefore provides the greatest return on its investment.

To create continuous innovation, an organization…

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Acknowledging Innovative Excellence – Iredell-Statesville Schools

As a school system, Iredell-Statesville K-12 Schools (I-SS) are committed to igniting a passion for learning and are rigorously challenging all students to achieve their academic potential. Regardless of the fact that I-SS has per-pupil operations expenditures ranked among the lowest in North Carolina, the 2008 Baldrige Award winner’s average SAT scores have drastically increased in the last 10 years. They have a strategic plan to keep moving forward, realizing high student performance, and long-term student success.

I-SS isn’t succeeding by motivating faculty and staff alone, but instead have implemented a number of research-based best practices to raise achievement and close gaps. By implementing formative assessments, essential curriculum, and collaborative teams, a learning-centered atmosphere has developed. I-SS asked themselves questions such as, What do students need to know?, How will they learn it?, and What will we do if they already know it? Quarterly performance measures are generated based on “customer” requirements and satisfaction, stakeholder requirements, how services will be provided, and how I-SS will know if the services are operating efficiently and effectively.  When student performance does not meet targets, the gap is addressed through the systematic use of a Plan, Do, Study, Act (PDSA) cycle to identify and implement improvements.

Iredell-Statesville Schools has a drop-out rate of 2.36%, ranking it the 7th lowest in North Carolina. However, back in 2002, before implementing the Baldrige Criteria, I-SS had a drop-out rate of 6.5%. Its overall academic ranking in the state in 2002 was 55th; in 2010 they climbed up the ladder to 38th. They increased the number of highly qualified teachers on staff from 6% in 2002 to 11% in 2010 (As defined by No Child Left Behind).…

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The Economics of Customer Loyalty

This article is part of an on-going series on Customer Loyalty and Customer Satisfaction

Profitability is correlated in a positive way with customer loyalty. While we have confirmed this with empirical evidence for a variety of clients in a wide range of industries, it is interesting to consider why the relationship should exist. Exhibit 1 show below summarizes the reasons. First, simply keeping a target customer longer means the cost of churn, or replacing lost business with new business, is reduced. While Exhibit 1 depicts a relationship with a single customer, the same principle applies to portions of large business customers. Time and again, we have seen companies managed for market share, which gain share only by incurring great churn. These companies tend to realize a lower average price and have a higher delivered cost than their competitors with lower rates of churn – even if the competitors have a lesser share of the market. Customer acquisition cost, while not ordinarily accounted for by the finance department, can be significant. Improving customer loyalty reduces the significance of this cost of poor quality.

A variety of extra “chunks” of value accrue as a customer’s loyalty level increases. These are shown in Exhibit 1: profit from referrals; profit from price premium; profit from broadened purchasing; profit from co-development of products & services and profit from reduced operating costs. In theory, the relative size of these value drivers can be measured. In practice, we espouse only some simple analysis to make the case for customer loyalty management, and tend to focus our efforts and the attention of management on the practical aspects of managing for loyalty. As has been mentioned,…

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Quality and Customer Loyalty Goals

This article is part of an on-going series on Customer Loyalty and Customer Satisfaction

Customer loyalty can be defined as a bond between a supplier and target customer, reflected by the customer’s consistently spending most or all of its entire budget on the supplier. Two important aspects of this very simple definition deserve elaboration. Retaining a customer by no means results in getting all, or even most of its budget. Managers often think they do not have a customer loyalty problem because the names on the customer list have not changed in ten years. In our experience, these same managers inevitably find their businesses would be more than twice the current size were they to win the entire budgets of their existing customers for competing products or services.

The second important aspect of the definition above is the “target customer” part. In fact, there are certain customers whose business, let alone loyalty, you do not want. The story of two general merchandise retailers is a case in point. Analysis showed that very seasoned customers of Company A, the historical market leader, (now number two in the industry) became proficient at scanning the Sunday papers for specials, and would essentially “cherry pick” the retailer of low price/low margin merchandise. While Company B, the (then) number two competitor retained customers at a lesser rate, their customers: (1) bought a desirable mix of merchandise; (2) paid twice as many visits per year to the retailer and (3) spent twice as much per visit. The latter retailer, with a higher rate of customer loyalty, has since overtaken the former in market share and enjoys superior profitability. Creating loyal customers is the goal of a superior…

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Foundation Approves Baldrige Funding Through 2015

Source: NIST

NIST has announced that the Foundation for the Malcolm Baldrige National Quality Award, Inc., has committed funds to sustain the Baldrige Performance Excellence Program (BPEP) through fiscal year 2015. The funding is further evidence of the foundation’s commitment to the long-term viability of Baldrige.

The foundation said its support was due in part to its confidence in the ongoing development of the business and financial model by the Baldrige Enterprise, which includes BPEP, the foundation, the Alliance for Performance Excellence, and ASQ.  Baldrige will use the funding in conjunction with revenues raised through a variety of fee-based product and service offerings to ensure both its and the Enterprise’s sustainability.

The foundation has stipulated that the use of the funds is the furtherance of the Malcolm Baldrige National Quality Award and the Baldrige Program.  The foundation will review the gift annually to determine any appropriate adjustments for a rolling three-year period.

For the official press release and more information, click here.

For continued reading on the Baldrige Award:

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Leading the Innovation in Aviation – Airbus, Boeing, and Embraer

Airbus, Boeing, and Embraer have recently signed a memorandum of understanding to collaborate on the development of drop-in, affordable aviation biofuels. These three major airframe manufacturers agreed to seek collaborative opportunities to speak in unity to government, biofuel producers, and other key stakeholders to support, promote, and accelerate the availability of sustainable new jet fuel sources. The significance of this agreement is substantial, considering the size and scope of these organizations. In addition to this collaboration, these airlines are taking initiatives across the board to reduce emissions, increase efforts dedicated to societal responsibility, and slash waste; all of which can be found within the Baldrige Criteria.

“We’ve achieved a lot in the last ten years in reducing our industry’s CO2 footprint – a 45 percent traffic growth with only three percent more fuel consumption,” said Tom Enders, Airbus President and CEO. “The production and use of sustainable quantities of aviation biofuels is key to meeting our industry’s ambitious CO2 reduction targets and we are helping to do this through Research & Technology, our expanding network of worldwide value chains and supporting the EU commission towards its target of four percent of biofuel for aviation by 2020.”

While committing to substantial developments in the biofuel sector, these airframe manufacturers are also attempting to raise the bar through increased R&D efforts and development of value chains. Airbus is set to invest 2 billion Euros towards environmental research and development this year, in addition to hiring 4,000 highly-educated new recruits, and is committed to global targets of a 50% reduction of carbon emissions by 2050 (as compared to 2005 levels). Boeing recently came up with 10 initiatives that decrease the amount of jet…

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Acknowledging Innovative Excellence – 3M ESPE

The Anaheim Group recently named the 3M Dental Division (ESPE) the “Most Innovative Company” in the worldwide dental industry, for the seventh consecutive year. It is no surprise that this 1997 Baldrige Award winner is pursuing continuous excellence, as they have been striving to become the supplier of choice of dental professionals worldwide for many years. Between their outstanding product development strategies and the 81 news patents released last year alone, it is hard to ignore the innovative efforts of 3M ESPE.

The Anaheim Group’s designation of “Most Innovative Company” is based on three criteria; FDA 510(k) new product clearances for the U.S. market; United States Patent Office dental industry patents; and dental patents from the European and World International Patent Offices. The report cited 3M ESPE as, “a patent dynamo, both in the U.S. and Europe.”

“This achievement is made possible not only by 3M’s continued investment in research and development, but also our culture. Global collaboration and the sharing of ideas lead to new products. That collaboration is both expected and encouraged, it’s a part of who we are,” said Larry Lair, division vice president and general manager, 3M ESPE.

Dentists, distributors, and major suppliers are all brought in to be a part of translating the voice of the customer into real design requirements, prototypes, and reliable, quality products. Mannequins called “Fletchers” are utilized to test and evaluative products on – this, and other methods are in place to ensure customer feedback…

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Key Elements of Employee Engagement

We’ve written frequently about the value of employee engagement on bottom results (here and here, for example) and how to engage employees (here and here). The second part of the fifth category of the Baldrige model is titled “Workforce Engagement.” It asks about key dimensions of employee engagement including culture, performance management, learning and development, and career progression. It also asks “how you determine the key elements that affect workforce engagement?”

Lonnie Wilson has been teaching and implementing lean and other culture-changing techniques for more than 40 years. His recent article in IndustryWeek, “Find the Missing Pieces in Your Employee Engagement Effort,” provides some context for that Baldrige question by listing five key elements necessary to engage employees—and keep them engaged:

  • A sense of meaningfulness. Wilson poses a Baldrige-esque question: “Do [employees] understand the company mission and vision to represent a company that seeks to be competitive, thriving, growing, a company that not only makes money but gives back to the employees and it a good corporate citizen?” And do they believe their jobs serve that mission and vision?
  • A sense of control. Do employees have ways to control what and how they do things or do they check their brains at the door every day?
  • A sense of accomplishment. Can employees codify and quantify their contribution? Can they answer the question: “How did I (we) do today?”
  • A sense of growth. Do employees have ways to learn, grow, and contribute as individuals?…

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Developing the Elements of Strategic Planning and Deployment (A 2-Part Series)

Part II

Develop Annual Goals

An organization sets specific, measurable strategic goals that must be achieved for the broad strategy to be a success. These quantitative goals will guide the organization’s efforts toward achieving each strategy.

Despite the uniqueness of specific industries and organizations, certain goals are widely applicable. There are seven areas that are minimally required to ensure that the proper goals are established. They are:

  1. Product performance. Goals in this area relate to product features that determine response to customer needs, for example, promptness of service, fuel consumption, mean time between failures, and courteousness. These product features directly influence product salability and affect revenues.
  2. Competitive performance. This has always been a goal in market-based economies, but seldom a part of the business plan. It differs from other goals in that it sets the target relative to the competition, which, in a global economy, is a rapidly moving target. For example: all of our products will be considered “best in class” within one year of introduction, as compared to products of the top five competitors.
  3. Business improvement. Goals in this area may be aimed at improving product deficiencies or process failures, or reducing the cost of poor quality waste in the system. Improvement goals are deployed through a formal structure of quality improvement projects with assignment of associated…

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