Leading An Ideas Driven Organization
It is ironic that so many leaders, scrambling to respond to shifting market environments and the ramifications of the latest technologies, are overlooking one of their most significant sources of sustainable advantage. Our research shows that nearly 80 per cent of an organization’s potential for performance improvement lies in the ideas of regular front-line employees. From ideas to improving productivity and customer service. To ideas for new or better products or service. Any company not soliciting and implementing these ideas is using, at best, one-fifth of its available improvement potential. Ideas driven organizations, which today routinely implement 20, 50, or even 100 ideas per person per year, register improvement at much faster rates. They execute strategies more rapidly and possess capabilities their competitors cannot match.
Take, for example, Brasilata, an innovative Brazilian company in the steel can industry. It is part of a mature industry. Yet 75 per cent of Brasilata’s products are either protected by patents or were developed within the last five years. Every year, Brasilata’s nearly 1,000 “inventors” (the job titles of its front-line employees) come up with some 150,000 ideas. 90 per cent of which are implemented. The result? Brasilata dominates the domestic non-food can business with a market share of more than 50 per cent! Ideas driven organizations like Brasilata are different from their traditionally run counterparts in that they are top-directed but driven by ideas from the bottom. This means they have to be organized and led in a very different manner.
In this article, we will briefly touch on four aspects of difference found in an ideas driven organization.
Humility is one of the key traits of leaders. From front-line supervisors to the CEO valued by ideas driven organizations. The business model of the Spanish company Inditex, the world’s largest clothing retailer and parent of Zara fashion stores, is based on the rapid flow of ideas. The company is structured to take ideas from its front-line people. Develop and deliver products to more than 6,000 stores worldwide within 14 days.
Jesus Echevarria, chief communications officer, says humility is a key characteristic the company requires. “A manager has to have the humility to listen to and respect other people’s ideas if he expects to rise up in Inditex.”
2. A well-designed process
A well-designed process for capturing, discussing, and following through on ideas is a must. Nothing shuts down the flow of front-line ideas faster than employees believing their ideas are not taken seriously. At the same time, management cannot deal with large numbers of ideas in an ad hoc manner. Today’s high-performance idea processes are designed to handle lots of employee ideas quickly and efficiently.
It is important not to confuse today’s processes with those of the traditional nineteenth-century suggestion box. A suggestion box – even with an automated online system – usually yields only one-half an idea per employee per year. And many leaders launch their idea initiatives without realizing that best-practice has moved well beyond suggestion boxes. Condemning their initiatives to mediocre performance, or even failure, from the outset.
3. Aligned systems
The systems and processes of ideas driven organizations are deliberately and carefully aligned for ideas. When we ask managers in our executive programs to identify a bottom-up improvement or innovation in their organizations, invariably a litany of horror stories emerge. These include managerial indifference or opposition, burdensome policies. Key players unwilling to change, and other ridiculous or petty behavioural and institutional barriers.
While listening to these stories, someone always asks, “Why are these organizations and managers making it so difficult for their people to implement good ideas?” Bingo!
Perhaps the most challenging part of building an ideas driven organization is realigning it for ideas. Then rooting out and eliminating all the misalignments that are impeding the flow of ideas.
4. Regular Training
Regular training is needed to help people to come up with more and better ideas Idea-driven organizations help their people continually come up with more and better ideas. One relatively easy approach is the use of idea activators. Short targeted training modules designed to give people new perspectives on their work that result in more improvement ideas.
Subaru Indiana Automotive (SIA) was on a quest to become the first North American automobile manufacturing plant to be “zero landfills.” One idea activator was “the 3Rs,” based on the framework of reducing, reuse, recycle.
At SIA, engine components arrive in large shipping containers. Packed tightly with Styrofoam blocks that were always recycled. But after 3R training, an employee team proposed a new idea: as the empty shipping containers were returned to the supplier, why not repack them with the Styrofoam for reuse?
In fact, this idea was not only feasible but profitable! Eventually, some eighty different kinds of packing materials were being returned to suppliers for an annual savings of more than $3 million.
More and more leaders are realizing that they simply cannot produce the results they now need with the organizations they currently have. They are searching for solutions. At the same time, the growing number of high-performing systems around the world is increasing the population of managers who understand the advantages of operating in an ideas driven manner. This growing base of experience and knowledge is making it even easier for organizations to make the transformation.
We believe the ideas driven organization is an idea whose time has come!
Alan Robinson is a professor at the Isenberg School of Management at the University of Massachusetts, Amherst, and Schroeder is the Herbert and Agnes Schulz Professor of Management at Valparaiso University.