It’s About the Environment, Not the System

There’s a famous quotation from W. Edwards Demming, the American consultant credited with helping modernize the Japanese industrial economy after World War II. He said, “94% of all failures occur when you’re not using a tested system.” Consultants love to quote this because the implication—if not the very next sentence—is, “And I just happen to have a tested system.” But tested systems are not always as valuable as they may appear.

Michael Dell, Founder of Dell Computers, who literally launched his business from his dorm room before he dropped out of college, was speaking to a group of students when one asked, “If you were in college today, what business would you go into?” He said, “I don’t know, but it wouldn’t be the PC business.” This is a phenomenally success entrepreneur and business leader who says he would not do the same thing today. He would not follow his own tested system. Why not? Because the world has changed. For one thing, there’s now a Dell computer that he would have to compete with.

Few “systems” have been more thoroughly tested than product branding. Yet major brands are in real trouble in much of the world, especially in Europe, where international products that have been around for generations, brands like Coca Cola, Colgate and Nestle, are finding it very difficult to maintain their traditional high margins and hold market share. Consumers either can’t tell the difference between the name brand and the knockoffs or the name brand’s price is so high that they don’t perceive it as a value worth the extra cost. Europe is ahead of the U.S. on this trend, but we’re not far behind.

Six Sigma is a proven technique for creating and refining all sorts of systems and it includes tools that can enhance innovation. But many companies have found that the way in which Six Sigma is typically implemented does more to slow innovation than to accelerate it.

Tested systems work great when the technology is well established, when the market is stable, when the business environment doesn’t change. But for many businesses today none of those things are true. Technology is advancing. Markets fluctuate. Customer expectations are constantly evolving. In such a dynamic environment, a tested system may not only fail, it may even be counterproductive. The path to success in a fast changing environment is to become more flexible and adaptable, finding fresh insights and approaches, not clinging to what used to work.

There’s great temptation to treat innovation as fodder for yet another “system,” to strive to develop some innovation formula that will be as reliable as a production line. It may be possible to create such a system, but it will be very different from any business process we have today because its objective will not be to create consistency and reliability; it will be to create variability and unpredictability, because those are the things that fuel new ideas.

Innovation requires creativity and creativity is not a linear process. It’s just not an A-leads-to-B-leads-to-C kind of procedure. If something is that predictable, it is by definition not very creative. Pursuing a “proven system,” may actually be moving you away from a culture of innovation. What’s needed is an innovation-friendly environment; one that tolerates the messiness that so often precedes breakthroughs. It takes an environment that permits failure because if you’re never failing, you’re not getting close enough to the edge to generate real innovation. The environment must make business objectives and customer needs paramount and leave people free to “fill in the blanks” to get there. You need an environment that allows your people to move beyond the proven processes that worked in the past to discover new and better approaches.

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