Disruptive Innovation, Not Here

December 6, 2006 · Posted in innovation, strategy · 1 Comment 

Innovation is the big buzz word these days. Christensen’s “Disruptive Innovation” books popularized systematic innovation. Growing up in the middle of the personal computer revolution I’ve experienced first hand repeated massively disruptive innovation.Perhaps because so much innovation has occurred in the high technology industry, people associate innovation with technology. My own experience has shown me that the mental technologies, the thoughts and ideas, concepts and procedures, values and perceptions have the most potential for disruptive innovation.

Let’s look at an example. My first paid programming job was creating software to apply statistical quality control. Our software was the first time a US automotive manufacturer used statistical process control. Our software was good; it saved work and provided answers that weren’t possible doing things by hand. But they weren’t doing it by hand. They weren’t doing it at all. The big impact wasn’t the technology being used; it was that they were using it. This was the first time the US auto industry consistently measured quality and applied the results toward improving.

Today it might seem obvious to measure quality. We constantly hear about quality surveys, crash tests and measurements of all kinds and all sorts. But in the early 1980’s that was basically unheard of. Only lab coat scientists took samples and used statistical models.

Affordable computers and the software I and others created made it possible to measure like never before but the biggest step was in seeing the value and doing it. As obvious as it seems today the US auto industry simply saw no value in measuring quality. But in the 1980’s the Japanese were starting to take over and it was all because of statistical process control.

The statistical process control movement was started by Deming. Oddly enough he had gone to the US Auto Makers first. He showed them this great new technique.

Deming showed that if you measure every part you make you can learn how your process works. Once you understand your process you can predict quality problems before they happen, thus avoiding the problem and produce higher quality more reliably and efficiently. For example if you’re drilling holes your drill bit wears down. After a while it stops making the holes to the proper size and shape. But if you know how long it takes for the bit to wear out you can replace it before it starts making bad parts. So you always make good parts. There is a lot more to it than that but that is the basic concept.

When the US auto makers heard Deming’s technique they rejected it outright. They said, “Measuring everything will cost too much. Your idea sounds great but we don’t need it. We don”t have a problem with quality. We could slap chrome on a turd and customers would buy it.” The truth was they had huge problems with quality but they weren’t yet feeling the effects. Maybe in the 1950’s and 1960’s a chromed turd would sell but that would change. A huge disruptive innovation was about to take place, and they chose to ignore it.

See after World War II Japan was destroyed. They were starting from scratch. By the 1960’s Japan’s industry was functioning again but they were thought of as the low cost low quality manufacturer of “cheap” things. Today in 2006 we often apply that label to Chinese products, remember that. China is now considered the same way that we once considered Japan. So how did Japan come from being the maker of cheap junk to being the recognized leader in hi-tech and hi-quality? It was through an attitude.

After being laughed at in the US, Deming went to Japan. The Japanese realized they needed something to help them, so they were open to change. That is the first most important element of innovation. All innovation starts and ends with people. Technology is a tool; innovation is the tool in action.

The Japanese took Deming’s statistical process control and turned it into a lifestyle. So in the 1980’s when I was implementing the first SPC system at a US auto plant, the Japanese had grown past it. They weren’t just 1 step ahead they were now 2 steps ahead and starting to capture the automotive market and building new markets they owned.

The Japanese accepted that they could do better. They used this new technique then they applied technology to maximize the effectiveness.

I’ve only scratched the surface of innovation. I’ll cover more about this in future articles. I’ll explore this more when I cover the following: Google, Copyrights, Democracy and Terrorism.

Action Items:

  • Make a list of tasks you regularly perform.
  • List 5 ways you can improve each of those tasks. Ex.: faster, cheaper, easier, more options, for more people.
  • Estimate a value of having those improvements.
  • Estimate the potential loss if your competitor made that improvement and you didn’t.

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$1000 Rechargeable Cordless Razor. How Much Are You Worth?

November 27, 2006 · Posted in economics · Comment 

If I told you I bought a $1000 rechargeable cordless razor you would probably say I was nuts. There was a time when I would have said so as well. And no, I never paid $1000 for a razor. But I did discover just how valuable such small items can be.
When I was a consultant in Silicon Valley during the 1990’s I had 3 contracts at a time. In the morning I would drive into San Francisco from Sunnyvale where I lived. I would work for my financial clients until 5 pm, then I continued my clockwise trip around the bay to Oakland where I had a second contract designing and developing the virtual reality engine used in many video games including Top Gun and Falcon 4.0. I would work there until 10 pm or 11 pm then finish my circle of the bay by driving back home to Sunnyvale. On the weekends I wouldn’t have to drive because I worked out of my house on smaller projects.

As you can imagine I did a whole lot of driving. A little over and hour and half each day. The work plus driving schedule didn’t leave me much time for anything else. Why was I working so much? Because I was 26 years old and making over $250,000 a year. That wasn’t stock options that was cash in my hand.

One day while getting ready in the morning I thought about my hourly rate and what the 10 minutes a day I spent shaving was worth. At my average hourly rate I was spending $12 each morning to shave. WOW. I would never pay someone $12 to shave my face. A little multiplication and I discovered I was wasting $262 every month just on shaving. I immediately went out and bought a rechargeable cordless electric razor. The razor cost $79, an amount that I previously had thought was extravagant. So instead of wasting time in the bathroom I would shave while I was driving and that razor paid for itself in the first week. So now I consider that I paid $79 for a $1000 rechargeable cordless razor.

After that I looked at my whole life and found many ways to put my time to the best use. Now what ever I do I’m calculating “is this something that I would be better off paying to have done?” And the more times I find that is true the more pleased I am at my success. It means my value is increasing. How Much Are You Worth?

Action Items:

  • Figure out what your time is worth
  • Find repetitive tasks that could be shortened or eliminated
  • Determine if its cheaper for someone else to do the task
  • Remember time to do things you enjoy, life is just as valuable as work.