It's Time to Rethink Continuous Improvement
Admittedly, continuous improvement once powered Japan's economy. Japanese manufacturers in the 1950s had a reputation for poor quality, but through a culture of analytical and systematic change Japan was able to go from worst to first. Starting in the 1970s, the country's ability to create low-cost, quality products helped them dominate key industries, such as automobiles, telecommunications, and consumer electronics. To compete with this miraculous turnaround, Western companies, starting with Motorola, began to adopt Japanese methods. Now, almost every large Western company, and many smaller ones, advocate for continuous improvement.
But what's happened in Japan? In the past year Japan's major electronics firms have lost an aggregated $21 billion and have been routinely displaced by competitors from China, South Korea, and elsewhere. As Fujio Ando, senior managing director at Chibagin Asset Management suggests, "Japan's consumer electronics industry is facing defeat. "Similarly, Japan's automobile industry has been plagued by a series of embarrassing quality problems and recalls, and has lost market share to companies from South Korea and even (gasp!) the United States.
Looking beyond Japan, iconic six sigma companies in the United States, such as Motorola and GE, have struggled in recent years to be innovation leaders. 3M, which invested heavily in continuous improvement, had to loosen its sigma methodology in order to increase the flow of innovation. As innovation thinker Vijay Govindarajan says, "The more you hardwire a company on total quality management, [the more] it is going to hurt breakthrough innovation. The mindset that is needed, the capabilities that are needed, the metrics that are needed, the whole culture that is needed for discontinuous innovation, are fundamentally different."
So should we abandon continuous improvement? Absolutely not! It has created tremendous value and still drives competitive advantage in many companies and industries. But perhaps it's time to nuance our approach in the following ways:
Customize how and where continuous improvement is applied. One size of continuous improvement doesn't fit all parts of the organization. The kind of rigor required in a manufacturing environment may be unnecessary, or even destructive, in a research or design shop. Sure it's important to inject discipline into product and service development, but not so much that it discourages creativity.
Question whether processes should be improved, eliminated, or disrupted. Too many continuous improvement projects focus so much on gaining efficiencies that they don't challenge the basic assumptions of what's being done. For example, a six sigma team in one global consumer products firm spent a great deal of time streamlining information flows between headquarters and the field sales force, but didn't question how the information was ultimately used. Once they did, they were able to eliminate much of the data and free up thousands of hours that were redeployed to customer-facing activities.
Assess the impact on company culture. Take a hard look at the cultural implications of continuous improvement. How do they affect day-to-day behaviors? A data-driven mindset may encourage managers to ignore intuition or anomalous data that doesn't fit preconceived notions. In other cases it causes managers to ask execution-oriented, cost-focused questions way too early, instead of percolating and exploring ideas through messy experimentation that can't be justified through traditional metrics.
Continuous improvement doesn't have to be incompatible with disruptive innovation. But unless we think about continuous improvement in more subtle, nuanced, and creative ways, we may force companies to choose between the two.
