Observations
Well-established companies in the public sector have entrenched processes and practices. Their success and ongoing performance have been at least partially dependent on their ability to execute efficiently, not to innovate. Often there are many levels of management and oversight to navigate between the operational level and executive. It can also be a case where old practices stop being effective and become prohibitive to change and innovation. Chrysler had been an extremely successful car company and by 2009 was almost bankrupt. Tiers of management and processes meant that most ideas that were generated at the operational level were either so watered down that they no longer resembled the initial idea or they just ran out of steam and died quietly. There was also a lot of pressure on operational staff to do more with less.
A change in chairman at Chrysler saw dramatic change including a new CEO with a mandate to break through. Traditionally there had been a push to apply pressure to be more efficient down to the operational level, which had little control over process and procedure change and little to no decision-making power. Instead, the pressure was applied at the executive level and the decision was made to consolidate the responsibility at executive level to combine the operational and functional roles. For example, executive responsibility for a product line was combined with procurement. The concept was that the increased responsibility and workload would result in process refinement, and inefficiencies would be more visible. In addition, the combined responsibility was at a level that could make decisions to change and remove obstacles. In four years, the company almost doubled sales and it had rebounded from the brink. While the example is dated, the lessons are not.
Organisations across Australia are incorporating budget cuts, employment freezes and efficiency measures at the operational level due to market dynamics and funding pressures. At the same time, innovation is included in every strategic plan and is recognised as a critical element of organisational growth and future viability.
Coincidently, there is not the same consolidation of executive-level responsibility and the organisation structure at this level and it remains much as it has always been. Responsibility for engineering, service delivery, policy, sales etc. is most often separate from corporate functions such as procurement, finance, human resources and technology. Significant bureaucracy occurs when new ideas are raised that impact on these areas individually AND they are aligned to different executives.
New skills and capabilities for progressing innovative ideas are also targeted at the operational level and not necessarily embedded at the executive level as there is a perception that oversight does not require practitioner-level knowledge. Not every idea will be a breakthrough idea and most organisations will innovate by actively and methodically reviewing three main areas: a valuable problem to solve, the technology available to solve it and an effective business model to create value from it, whatever value means to that organisation.
Consolidating executive-level functions supports the ability to innovate and minimises some of the key elements which have traditionally killed new ideas and stifled implementation.
Flatter organisations with shared responsibility for production and corporate functions combined with distributed and targeted decision-making assists with the identification and progression of new ideas. This sharper focus assists in developing and promoting appropriate skills and capability for innovation across all levels of the organisation which contributes to making innovation a sustainable attribute; this will be necessary, not just once or occasionally, but as part of planned activities every year.
Next Steps
Organisations that are looking to innovate and are finding it difficult to get traction should consider:
- How are ideas generated within the organisation?
- How long does it take to progress ideas from inception to executive level and then back to the operational level to be implemented?
- How does the idea get altered in the process and do these changes add to the idea or do they dilute the idea and the impact on the organisation?
- Does innovation training and skills development happen at all levels of the organisation?
- Is the separation of responsibility at an executive level impacting on the ability to progress good ideas?