Nontrivial Exercises

The Value and Challenge of Balancing Process Exploitation and Innovation

I just read an article published in November 2005 on the Knowledge@Wharton web site, discussing the research of Mary J. Benner regarding the best ways to apply process management disciplines such as Six Sigma or ISO 9000. Ms. Benner, a former General Manager at Honeywell and now a Professor of Management at the Wharton School of Business at the University of Pennsylvania, began to re-think her own propensity to emphasize process mapping and optimization at Honeywell after she began working on her PhD.

Benner began to wonder if the process disciplines were having a stifling effect on innovation within an organization. She and Harvard Business School professor Michael Tushman have studied the subject since 1998 and have come to some interesting, although reasonable and practical, conclusions. By studying patent activity in the paint and photography industries from 1980 to 1999, they found that the number of patents that related to knowledge that was entirely new to the company decreased in proportion to the number of ISO certifications that a company received.

In other words, the more official process discipline certifications, the fewer new, innovative patents.

Does this mean companies should abandon process quality, discipline and optimization programs like ISO 9000 and Six Sigma?

Not at all, state Benner and Tushman. The expectation for quality, repeatable processes with very few defects or errors is probably as high today as it has ever been, especially for global companies.

Ms. Benner, however, brings a valuable perspective of balance to the idea of process management by making the following points:

• The competitive value of process quality initiatives like ISO 9000 and Six Sigma is largely marginalized today. Since there is such widespread focus on cost reduction and optimization of existing processes in so many industries – e.g. airlines, telecommunications suppliers and operators, automotive manufacturing to name a few – the long term competitive advantage of process optimization decreases. In other words, process quality programs are actually leveling the playing field in many industries, rather than creating competitive advantages.
• As a corollary to the above, however, the necessity of process quality initiatives remain. If a company is not continually and systematically finding ways to increase the effectiveness and efficiency of its current operations, it will not be able to survive in the global competitive marketplace.
• Focused process management programs should therefore not be universally applied throughout all functions in an organization. Although it is easier to make broad implementations of these programs, the stifling effect on innovation for the future can be dramatic. In stead, leaders need to be aware of the need for balance and inconsistency with respect to process management expectations across a company. From the article: “Individuals who run business units must be able to manage the inconsistency of separate areas of an organization focused on fundamentally different activities. Within a business unit, managers can specialize in either more process-oriented functions with the benefits of Six Sigma efficiency or more innovation-oriented activities without Six Sigma constraints.”

I highly value this balanced approach that is not just practical but is also built on factual research. I have personally experienced the imbalanced approach of process management certification without an exploration of expected benefits to a specific organization. I have also personally experienced the benefits that additional disciplines and refinements to processes bring to an organization, and thus have been oscillating between believing all process management is beneficial and believing that it is largely irrelevant and smothering.

Ms. Benner suggests that it is not a binary decision, that the optimal situation is more difficult and requires greater understanding and work on the part of an organization’s leaders. Leaders must possess a deep understanding of the operations and needs of their own organization, a broad understanding of possible “tools” available to them, and the capability and wisdom to apply the right tools in the right places at the right times. The challenge of this requirement on leaders further demonstrates the importance and value of quality leadership to an organization.