Simplifying Innovation by Michael Dalton

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It doesn’t matter if you work at a Fortune 500 company or a small startup – innovating new products is probably the most difficult task you’ll ever face. It’s also the key to profitable growth over the long-run.

In his book Simplifying Innovation, Michael Dalton gives us practical guide for unlocking the growth you need to ensure the survival of your company.

As a side note, the book was written in a story format, which we highly suggest you read. This summary will focus on the 5 Focusing Steps to Drive Improvement we took from that story.

Step 1: Identify your constraint

The concept of leverage is critical to your innovation efforts. You’ve heard of the 80/20 rule – where 20% of your efforts produce 80% of your results.

In the innovation discussion, this 20% almost always lies in the constraints in your system. As Dalton points out, even in the most complex systems, there is usually only one constraint limiting your output.

[emaillocker]This is true in companies both large and small. If you’ve read The Lean Startup, you’ll know that the main principle taught by Eric Ries is that those who learn fastest – by getting their products into the hands of customers and getting feedback – win. Even though there are only a few people in the entire company, there is usually one constraint holding up this process. Perhaps you only have one developer, and they are always overloaded with keeping the system up and running and don’t have time to work on new features or products.

In large companies, this principle is the same but on a much larger scale. Rather than one person holding up the entire process, it might be a group of people who simply don’t have the capacity to keep up with the demands the rest of the organization throws at it.

One thing you’ll figure out as you identify the constraint in your company is that there are numerous things getting in the way of its effective use.

Which leads us to the second step.

Step 2: Exploit your constraint’s capacity

When you ask your team what’s getting in the way of getting more out of the bottlenecked area of your company, invariably the complaint will be a lack of resources. “I don’t have enough time” or “We don’t have enough money” usually come up. However, the problem usually lies in how the bottlenecked resource is being used, and adding more resources will just lead to more resources being used inefficiently and ineffectively.

Here are the ways that you can get your bottleneck cleared.

Focus

This idea seems simple, but it works: reduce the number of projects that are in execution at any one time. Too often we fall into the trap of trying to do too much, at the expense of seeing projects over the finish line. So, instead of working 5 product features at a time, work on one. Instead of launching three new products next quarter, launch one. You get the idea.

Working on many things at the same time gives off the illusion of productivity while focussing on one thing at a time gives you actual productivity.

Limit multitasking

As a corollary to the last point, you should limit the amount of “side projects” your bottleneck needs to work on. Things like administration tasks, small requests, and anything that isn’t mission critical to the current most-important-project fit the bill here.

Choose what you work on carefully

If you are only going to be working on one thing at a time, choosing the one thing to work on becomes critical to your success. In fact, the inability for companies and teams to do this is what gets them into the multitasking mess in the first place.

The best way to think about this is to work on the project that will lead to the highest return on your bottleneck’s time. Typically, this means the largest amount of revenue produced in the least amount of time.

Replenish with a customer value lens

Once you’ve got your project execution under control, it’s time to think about replenishing that project pipeline with more high value new-product opportunities. It’s easy to make the mistake of starting here, but in the long run you need to have your processes and execution under control in order to produce the best results.

The first step is to observe your customer’s pain points – limitations in achieving a task they are trying to complete. Or sometimes your customers don’t even know they have a pain point until you solve it for them. One example of this was the Roomba vacuum. While other vacuum manufacturers were busy working on better suction, iRobot discovered the unarticulated need for the room to magically get clean without having to manually operate a vacuum cleaner.

Once you’ve started to identify these pain points, you need to ask yourself these three big questions:

  1. What superior value proposition would we bring to solving the buyer or end user’s unmet need?
  2. Given the value created, what price would provide the buyer with an acceptable payback on their purchase or investment?
  3. Given that price and your estimated cost to develop and manufacture, what return would the new product generate for your company?

If you get the answers you are looking for to those questions, that project should find its way into the pipeline.

Step 3: Subordinate to the constraint

“Subordinate to the constraint” is a fancy way of saying that you should use your other resources in a way that ensures the maximizing of your bottlenecked resources.

There are two parts to this equation.

Helping the constraint

Here’s an example.

You have a developer who is working non-stop to try and get new features out the door. Rather than having your designers and product managers maximize the amount of work they get done in their roles (like creating and designing more products for your developer to create), they should find ways to help maximize the output of the developer. This could take the form of helping with tasks, or helping eliminate some tasks completely.

As Dalton points out, making more efficient use of your non-constraint resources might feel good, but it only gives the illusion of improvement.

This is one of those areas where you’ll probably get some pushback from your non-constraint resources. Why would a designer want to help a developer with their other tasks? This is where your management skills need to shine by helping everybody understand that the constraint’s productivity is what will help the company succeed.

Maintaining protective capacity

Almost counter-intuitively, alongside having your non-constraints chip in to clear bottlenecks, you’ll also want to ensure that they have 20-30% spare capacity. Why? Because the smallest hiccup in the process can turn them into temporary roadblocks, impacting the productivity of the entire company.

Too often, companies see a non-constraint with any spare time and throw work at them for the sake of keeping them busy.

Step 4: Elevate constrained capacity

If you complete steps 1 – 3, you’ll be far more productive in your innovation efforts. You’ll also be earning far better returns with every dollar invested into the process.

At this point, if your organization can afford it, is to elevate your constraint’s capacity. Usually this means adding staff or resources. One thing you should consider here is that perhaps upgrading the quality of your staff might be better than upgrading the quantity. Putting an A player into a role where there used to be a C player will often make an enormous difference, and the productivity gains will greatly offset the added cost. One A player will almost always outperform two C players.

Step 5: Continuous improvement

Continuous improvement is often considered a manufacturing term, but it can also apply to innovation efforts.

One of the mistakes that companies often make is to “fix” one constraint, and then move on to optimize another area of the company.

As Dalton suggests, you should consider where you want your constraint to be at the outset, and continuously improve on that constraint. This is most often the place in the organization where it costs the most to “elevate the constraint” like we talked about in Step 4.

Putting It All To Work

Of course, the steps we’ve identified are just the nuts and the bolts of the innovation process. But as any experienced leader knows all to well, change is tough because you are dealing with human beings. Change is almost always a threat to somebody on your team, causing fear and uncertainty.

Here are some questions you need to ask yourself (and that your team will probably be asking themselves) to ensure that you’ll succeed in this effort:

  1. Do we have a problem? Do we agree on what it is?
  2. Is the direction of the proposed solution correct?
  3. Does cause & effect confirm that the changes will really solve the problems?
  4. What could go wrong with the solution? What are the negative side effects? How can we avoid them?
  5. What are the obstacles to implementation? What is our plan around them?
  6. Is management committed to ongoing innovation improvement or is this just another program that will come and go?

These are normal concerns for people to have. Take measured steps, one focusing step at a time, and most importantly, involve your people every step of the way.

With the commitment you’ll create in this process you’ll be able to leverage the constraints holding back your growth and achieve your goals of making more money in the future.[/emaillocker]

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