Innovation: Time to Have the TALK with the Finance Team

Treading water. Fighting to stand still. Today's operations leader feels the pressure. American productivity from the Third Industrial Revolution stalled in 2004. Continuous improvement programs and the focus on efficient, but silo'd processes, within plan, deliver, make and source are not yielding the improvements in the desired goals for operating margin. Stuck, ninety-percent of companies, struggle to improve the portfolio of balance sheet metrics of growth, operating margin, inventory turns and Return on Invested Capital (ROIC). Disappointed, shareholder activism reigns.

What to do? It is time to have the talk with the corporate finance team. And, the board. To break the current cycle, there needs to be a conscious choice to take off the handcuffs and eliminate the barriers for process innovation. Maximizing the value from new technology innovation requires questioning the status quo.

A Look Back: A Look Forward

American productivity from the third industrial revolution stalled in 2004. Over the last decade, we have talked about innovation, but made little progress. Today, the industry is a buzz with the promise of a fourth industrial revolution often called the digital revolution. It takes many forms: uberization of assets, hands-free processes, the effective production and delivery of the each, the change in business processes to sense at the edge and move data at the speed of business using Internet of Things, the disintemediation of banking using cryptocurrency and blockchain. It is not one technology. The excitement stems from the use of multiple technologies--3D printing, autonomous vehicles, blockchain, cognitive computing, internet of things (IOT), mining of unstructured data forms, new forms of sensors, robotics, open source analytics, wearables--to transform business processes. There are numerous opportunities: redefinition of channel strategies, service models, replenishment, and digital manufacturing.

Figure 1. Imact of Industrial Revolutions on American Productivity

While laggards define the digital supply chain as a customer-centric platform model that captures and maximizes the use of real-time data including demand stimulation, matching, sensing and management to optimize performance and minimize risk. I think that innovators need to stretch beyond these traditional boundaries to define the atoms, electrons and flows of business process automation.

Unshackling The Organization

The unfortunate reality is that there is no natural "home" or "support" for process innovation to redefine the possible. To drive progress requires the definition of "scrappy cross-functional teams" with a focus on a business goal. The teams need to be challenged to test and learn and innovate. To do this requires having the "talk" with finance to release the handcuffs.

  1. Stop The Forced March For IT Standardization And Process Uniformity. The greatest promise for innovation happens when bright technologists can align and test/learn with business leaders. The fastest rate of technology change is happening in start-up incubators with technology innovators. While there are a few bright innovators in established vendors, the technologists at large company are also struggling to drive innovation. As a result, the organization needs to allow and encourage innovation teams to partner with technologists based on capabilities. It cannot be limited by a focus on IT standardization.
  2. Redefine The Role of Labor. Stop Chasing The Lower Cost of Labor. Embrace Employees As Assets. To drive process innovation embrace technology and innovation skills in employees. When IT, sourcing and transportation are outsourced there is an opportunity cost to innovate. Embrace labor as an asset and recognize business process outsourcing as a long-term barrier to drive digital innovation.
  3. Don't Demand A Fixed Return On Investment (ROI). The common thread for digital innovation is the "unknown." Fund the initiatives with a focus on solving a business problem, but do not limit the potential of the initiative by forcing a fixed ROI. In the face of the unknown, defining a fixed ROI is fools play.
  4. Be A Leader of Change. This Is Not About Large Projects Led By A System Integrator. The shift to the unknown to focus on the use of new technologies and techniques to solve new business problems, is led by small business teams. In this phase of innovation, large projects with a fixed project plan led by a system integrator is not a viable business model.  Test and learn in small teams.
  5. Network and Learn from Other Innovators. Find opportunities to learn from other business leaders. Avoid conferences where traditional leaders pontificate on the answers. Be open to the outcome. Recognize that this is a time where we do not know the answers. Avoid those that feel that they do. The future lies before us. The technologies will continue to change, and the opportunities will continue to gain momentum. The fastest change happens when innovators are collaborating with innovators. Fund travel to make this happen.

Forging a Path ForwardIn the planning, drive innovation consistent with the cultural DNA. Not all companies are ready to be innovators. Today there are 3X more laggards than innovators. Before the recession, this was a bell curve with an equal number of business leader innovators and laggards, but the financial restrictions on innovation are pushing the industry away from innovation. This is an opportunity cost for most. Why? Simply put. There is more promise from the confluence of today's technologies than what we have seen in the past two decades.

It is time to have the talk. Challenge traditional paradigms and take the plunge to redefine the possible.

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