by The HLH Team
“Blue oceans are right next to you in every industry.”
-Renée Mauborgne
You buy a widget for $7.00 and sell for $15.00. People buy them, and the money rolls in. That’s how business is supposed to work, right? A competitor with more buying power moves in and starts selling the widget for $10.00. Your inventory (which is excessive because you got excited about all the money you were making) sits on the shelf.
What do you do? One school of thought says that you put your price down to $10 or $11, grind the supplier, tighten perks for staff, and get down in the weeds. It gets vicious just to scrap out that extra 5%. But there’s another school of thought, and in an age of disruption it’s catching on fast. It’s to make the competitor irrelevant.
Red or Blue Oceans:
In 2005, W. Chan Kim and Renee Mauborgne published “Blue Ocean Strategy,” a book on marketing theory that advises businesses to stop fighting tooth-and-nail in the “red ocean” of thinning margins where you’re always watching your competitor over your shoulder.
Their advice: stop worrying, stop fighting, and put your energy in opening new markets. It’s for the competition to become irrelevant, because what they’re offering can’t compete with your new approach. It’s both simple and fiendishly difficult. You need to pull yourself out of the horse race with your competitors for a 30,000 foot view of what semi-autonomous revenue streams you can tap into.
What is a New Market?:
One of the most paralyzing myths of business is that all the new ideas have been taken, and we’re just fighting over the details. New ideas are everywhere, with every disruptive shift opening more of them. We just need to know where to look. Instead of fighting for a razor thin margin on that widget, how about launching a workshop about how to use it and sell them that way? Or accept it as a low margin commodity item and be the first to open up a new market, with a new widget.
Lean is about developing the instinct to identify a process that’s bugging you and improve it. Spotting new opportunities for revenue streams is similar; it’s about being aware of the trajectory of what’s happening around, whether that’s worsening waste or evolving opportunity.
How to get There:
The best thing about a new market is that it’s usually uncontested. You’ll be the first one there, and you’ll be up and running before while your competition is still losing sleep over margins. On the flip side, the fact that it’s new means there will be few best practices to fall back on. Make sure you keep your eyes wide open and don’t invest too heavily.
Here are a few rules of thumb for your new market:
- It needs to be in your industry; stick with what you know. The new market should be semi-autonomous at most.
- Reverse your perspective. Go to the core of your industry, down past products and to the basic motivations of your customers. Then think from there to your products/ services and how else it could look like.
- Take time for strategy. If you go into a new market blind, you won’t have anticipated all unknown variables and you won’t get the most out of it.
by The HLH Team
“The only way to avoid disruption is to constantly do what you would if you were just starting out.”
-Aaron Levie, Box.net
We’re doing business in an age of disruption. It’s a time when Netflix and Uber and arise from nowhere and smash their competition with new, tech-driven, and soberingly simple approaches to established business models.
If you think you’re in an industry where disruption can’t touch you, give your head a shake. The technology necessary to disrupt your industry hasn’t been invented yet. But it will be. If you’re complacent, it will eat you like Blockbuster.
The first step to staying ahead of disruption is understanding exactly what it is. To do this, let’s compare and contrast it with a close cousin: innovation.
The definition of disruption is:
“A radical change in an industry, business strategy, etc., especially involving the introduction of a new product or service that creates a new market.”
Time and again, success = our ability to identify a new market, or a new approach to an existing market, and seize it effectively.
Disruption is violent. If the established approach to a market is a tree, disruption rips it out of the ground and plants it somewhere else. The ecosystem depending on that tree either finds a way to follow it, adapt to another tree, or it dies.
In business, disruption is both the yin and yang, creation and destruction, happening all at once. Disruptors tend to start as smaller businesses that offer a new way to approach the segments of customers (often lower-end customers) that established businesses have left behind.
The definition of innovation is:
“The process of translating an idea or invention into a good or service that creates value or for which customers will pay.”
There’s nothing here about new markets. No trees get ripped up and there are no apparent victims. Innovation in business is an act of creation, of yin, without the destructive yang.
Hotels.com (https://ca.hotels.com/), which allowed people to sign up for their rooms online, is innovative. It opened up another route for booking hotels while making money at the same time.
AirBnB (https://www.airbnb.ca/) is disruptive. It took the irrational idea that people would open their homes to strangers, turned it into a business model, and ripped a hole in the balance sheets of the hotel industry. It decentralized (idealists might say democratized) the business model from an established core of the few to an upstart many.
All disruptors are innovators but not all innovators are disruptors. A company can innovate and challenge a competitor by doing so, but to disrupt you must destroy.
Disruption on the Battlefield:
Imagine a medieval battle where one powerful army dominates the field. A front wall of knights on armour-clad horses is riding unstoppably against a weaker foe. Their supply lines are very stretched, and all the guards on the flank have been pulled up to the front where the action is.
An innovative tactic by the weaker army might mean digging a pit to entrap the horses, or sharpening branches for more and longer spears. It will give them a foothold and keep them in the game longer, but ultimately the calvary will keep bearing down.
A disruption would look like this: another small army appears and hits the powerful army hard in their unprotected flank, where the mounted knights can’t reach them. By the time the bigger army is able to get in position to confront the new challenge, it’s already been cut in half. The disruptor, though small in number, exploited a weakness and has won the day.
Disruption is about looking at an established market in a fresh way. It’s like innovation, except it takes no prisoners.
Cited:
http://www.telegraph.co.uk/sponsored/business/the-elevator/12168170/business-innovation-versus-disruption.html
by The HLH Team
For processes to actually improve in your organization over the long-term, people need to believe that there is a reason why change needs to occur and why it needs to occur now. There must be an informed consent – not a mad rush or a docile acquiescence – that drives action across hierarchies, departments, and projects. And you can structure an environment to help create that consent. Start change by considering these 7 ways to help increase urgency in your organization:*
#1: Focus on financial losses
Trust us: People get interested when they see numbers turning red. If your organization has areas that are losing profitability, share that information with employees in a way that they will be able to understand it. They need to see how those losses have the potential to impact them personally and how they personally have the ability to impact those losses. By tying the relationship between losses and people together in a direct way, the simplicity of process improvement becomes an easy “yes.”
#2: Initiate Kaizen Events to identify inefficiencies
If Kaizen Events are new to you, all they are is a tool that gathers employees, managers, and owners of a process in one place to map existing processes and collectively determine ways to improve on that process. They can extend over a couple of hours or over weeks depending on the level of organization need, and there are several checklists available to help you run a successful Kaizen Event (try HERE and HERE).
#3: Identify unpopular programs or processes
People are often intrinsically motivated to change what’s “bugging” them about their workplace. By providing time and space to discuss what isn’t working in the organization, employees can often identify and solve problems that are detrimental to company health.
#4: Increase or decrease membership in the organization
Whether from mass recruitment, layoffs, loss of customer accounts, or bringing in new clients, any time organizations experience a substantial enough shift in stakeholder numbers, people recognize the accompanying change as an inevitability and are more open to process improvement as part of that change process.
#5: Hold employees accountable for their actions
People will do what’s working for them (or what they think is working for them). If your employees aren’t actively working to improve processes and nothing is said or done, that’s a problem. Further, if they’re actively working on process improvement and nothing is said or done, that’s a bigger problem. By holding people accountable and rewarding desired behaviour, you set a clear precedent about what is expected in your organization – what will be tolerated and what won’t.
#6: Restructure leadership
Shaking up management structures across the company sends a clear message to those in charge that the status quo will not continue and invites an opportunity for employees to re-evaluate their contributions to their departments or to the organization as a whole. New objectives and targets can be set that can help accelerate process improvements across the board.
#7: Bombard people with aspirations for the future
Martin Luther King’s “I Have A Dream” speech is a great example of this. In giving people a clear picture of what could be, he helped motivate commitment to an ideal that had not yet materialized. You can do the same for your staff. Help them see so clearly what your company can become and, more importantly, why achieving that ideal matters beyond a financial logic, and you can create an urgency for change that did not exist previously.
By giving people the information and experiences they need to understand and appreciate why the change needs to occur – the sense of urgency behind process improvement – you create the kind of informed consent that can internally motivate and sustain long-term change in your organization.
“There are only two ways to influence human behavior: you can manipulate it or you can inspire it…People don’t buy WHAT you do, they buy WHY you do it.”
– Simon Sinek
* Suggestions adapted from: Bowhay, Vincent & McCracken, Edie (Mar 2017). Leading Change: Helping Transformational Efforts Succeed. Campus Activities Programming, Vol. 49 Issue: 7, 4-5. ISSN 0746-2328
by The HLH Team
Think of the word “urgent”. What comes to mind for you? Maybe an “urgent care” health centre. Maybe a few synonyms: crucial, vital, pressing, imperative.
Now think of “complacent”. What ideas do you have this time? And would you ever want to characterize yourself or your company as “complacent”?
When it comes to instituting process improvement, instilling a sense of urgency is essential. And the word “instilling” is important here. Urgency in organizations is not the natural state, complacency is. Urgency comes in spurts, but complacency tends to stay the course. Urgency has to be manufactured and re-manufactured, and complacency simply doesn’t.
So what is urgency in this context of process improvement?
Urgency is a combination of thoughts, feelings, and actual behaviour that creates determination and calculated movement toward making things better. Urgency is smart and methodical, not frantic or erratic, and it acknowledges the hazards and opportunities that arise as people work toward strategic objectives. Urgency is that gut-level resolve that says, “We’re going to do something now, and we’re going to do something to win.”*
When urgency is high in an organization, things happen because people commit to making them happen over and over again, across time and space. When complacency is high, transformations usually go nowhere because few people are even interested in considering what could be done to improve anything. In that environment, it’s nearly impossible to put together a group with enough power and credibility to guide a change effort. Without urgency, process improvement cannot occur in any meaningful way.
Perhaps this all seems basic, but most organizational change fails because there simply was not enough urgency to motivate the long-term investment of time and effort into process improvement. Most people do not want to endure an endless learning curve unless they see a need to, and that need is what must be constantly addressed. Below are 3 steps you can use to build urgency into your organization:
Step #1: Examine Market Realities
Get a clear sense of what is going on in your industry, what your stakeholders expect from you, and how your competitors are meeting demand. Report this on a regular basis to your employees and get them to contribute their observations and experiences.
Step #2: Identify and Discuss Crises, Potential Crises, and Opportunities
Create a forum where you can learn the challenges and chances your organization has, and make sure that every person in your organization has an opportunity to participate. Whether you decide to do it by department, project team, a town hall meeting, or some other way, creating a regular dialogue around organizational realities is essential.
Step #3: Establish Changes
Use the information you’ve gathered to determine a course forward. Clearly establish the process improvements that will address the opportunities and challenges you’ve identified, articulate why those improvements will better the situation, and show how they will do it.
In paying perpetual attention to the level of urgency in your organization, you can clearly decide where you need to focus your energy in driving process improvement ahead.
“Status quo, you know, is Latin for ‘the mess we’re in.'”
– Ronald Reagan
* From an interview with John Kotter: “The Importance of Urgency,” 2008, Harvard Business Review. Accessed on January 2, 2018 from https://hbr.org/2008/08/harvard-business-ideacast-106.html
by The HLH Team
Ever argued with someone about the best way to make it to a destination on time? It’s common: two people in a car each insisting that their way is the best way to go. They each have their reasons, and chances are good that either would get them to their destination in good time.
It’s the same for organizations who turn toward process improvement. The way you implement Lean and the way I implement Lean may look different. And there’s power in that.
Understanding how different change processes look can help you decide what method best supports process improvement in your company. There are 4 paths toward process improvement:
Path #1: Radical Change
Radical change is about fundamentally changing the way your organization operates. It’s breaking away from a template and starting fresh. These changes are usually driven by a catalyst such as a new CEO or a change in the external market. They are fast-paced and big-scope, both high risk and high return. Investing in a workspace with LEAN infrastructure could be a radical change for your organization. Job redesigns, department reorganizations, or management restructuring could constitute radical process improvement changes.
Path #2: Convergent Change
When something converges, it means it comes closer together. It becomes more unified and aligned. Convergent change is about keeping the same organizational template you have and improving on what’s already there.
In process improvement, convergent change is useful when LEAN practices have already been adopted. It’s for those working on fine-tuning and streamlining what they already do well. These changes are subtle, valuable, and easy to maintain because the foundational work is already done. Convergent change happens best when LEAN is already part of an organization’s culture.
Path #3: Planned Change
As the label suggests, planned change is deliberate. It’s about moving the organization from one state to another. Investing in a new workspace with LEAN infrastructure could be a planned change for your organization, rather than a radical one. Well-planned changes tend to run smoother, last longer, and provide more meaningful learning than do other forms. In the context of process improvement, their results can be concretely measured to drive greater efficiency.
Path #4: Emergent Change
Emergent change relies on experimentation and adaptation to create process improvement. It provides venues for knowledge to be filtered through the organization, built upon, and then re-built. The goal is to work on constant progress until improvement is no longer possible. Emergent change is difficult to measure. Its effects may be readily apparent but must be actively championed to get the most from its progress. This change path can be incredibly valuable in organizations with cultures focused on innovation.
You’ll probably need to use all of these paths at some point. Your knowledge about your people, organization, and process improvement journey will help you decide on the most effective path for you.
“We have to continually be jumping off cliffs
and developing our wings on the way down.”
― Kurt Vonnegut
* Change paths loosely adapted from Barbara Senior and Stephen Swailes’ Organizational Change. 4th ed. Harlow, Essex, England: Financial Times Prentice Hall/Pearson, 2010.
