|
BUSINESSWEEK ONLINE: Business Week ebiz | |||||||||||
| |||||||||||
 |
 | |
 | |
 |
||||||
Managing Innovation: How to Keep Change from Turning Chaotic Ingram Micro's Stead and San Diego State's Belasco offer their insights on staying ahead of the curve and making renewal a constant Jerre Stead likes to say that work is play with a purpose. So he teamed up with author James A. Belasco to write a book about imparting that sense of exuberance and direction to companies facing an intimidating process of continual innovation and renewal. As chairman of Ingram Micro Inc., a distributor of high-tech products, Stead has gathered his insights from his present company, as well as from earlier stints at AT&T, Square D, and elsewhere. Belasco, a professor of management at San Diego State University, has consulted for AT&T, Royal Dutch Shell, and other companies. Stead and Belasco met with a panel of Business Week editors to discuss Soaring with the Phoenix: Renewing the Vision, Reviving the Spirit, and Re-creating the Success of Your Company. To read a chapter from the book, click the link at the right. Here are excerpts of their conversation: BW: Could you sum up the book for us?  Belasco: I think that two things strike you in the face all the time. One is the problem of churn. Economists say churn is good because it provides economic growth. Churn is also terrible in human terms because what happens is you find jobs appear and disappear, organizations appear and disappear. Churn: change, dramatic, unparalleled, unpredictable, chaotic. The second thing we see every morning is the process of renewal. Growth through renewal. Renewal is the natural process of growth. What we talk about in the book is the process of growth through renewal. Churn gives rise to the need for revive-olution. Change through revolutionary means or rapid evolution. It's a lot like revolution. But the answer to churn is renewal. Getting ahead of the curve rather than being a victim of the curve. What the book talks about is the systematic methodology to renew yourself and renew your organization. BW: What are the highlights, then, of a strategy for renewal that would be applicable to a broad range of companies? Belasco: Well, I'll start with a line of sight. Line of sight is where it begins. Line of sight to the people you serve. Line of sight to customers, line of sight to the people upon whom we depend -- customers, suppliers, whatever it is. Stead: As background, I've been on 23 corporate boards and chairman and CEO of five public companies. So I've got pretty good cross-experience -- all basically global companies. Typically the internal objective-measure reward systems create a behavior issue that's incredible in companies. We all want to operate against what we believe is the reward system. And I would guess over 80% of the time that ends up creating an incredible wasted energy, and it's not externally focused. So what we try to do is start outside-in. A very good example is our customer service index. We use 50 metrics measures, by the minute, by the hour, by the day, by the week. Every person in our company has at least a third of his or her bonus or incentive based on delivery against one of those metrics. Those metrics are created from quarterly external customer surveys, which we call CVA -- customer value added, where we have an outside organization measure by country or region for us how we're doing as compared to our competitors. We use current and future customers. So we first ask those customers what are the most important things that are the drivers for you to have from companies like Ingram Micro. Then we categorize those, and if we're 1.0, that would say we were equal in our customers' eyes to our competitors. 1.1 says you've got a very important competitive advantage; 0.9 says you're in trouble, and 0.8 says go find another job, it's over. You can go on our Web site every day to understand how we're doing, vs. the outside world, by competitor as based on what our customers think. Then you can go on the Web site, as every person in the company does, to see how his or her, or their team's objective against [the] customer service index operates. BW: Help a little on the metrics. Are these calls by some independent agency to the customers, "Is this how we're doing?" Or do you have actual statistical measures in terms of deliveries? Stead: Statistical measures. First of all, it's got to be statistically relevant: the number of customers. Secondly [there] is "worth what's paid for," in other words, how do they perceive us, vs. our competition. Are we worth what's paid for? An example would be something as mundane -- but important -- as a new customer calling in and getting credit approval within an hour. Another one would be never more than three rings for any of our sales organization. Another one would be 99.99% of the orders we receive, we ship. If we get it by 5 o'clock, we ship the same day. Nobody else in the world does that. So everybody has a specific metric as an individual or team member. BW: So far this sounds to me like a philosophy of continual improvement. Explain to me how this translates into renewal. When I think of renewal, I think of dramatic upheaval. Stead: Low is better. Zero is perfection. We said by the year 1999, we'd be 28. That's real change. That's incredible change. Last week we were 26.8. So I always peg it, get folks to think if we reach out to the future and work backwards with big change. BW: What specifically changed then? Stead: First of all, training. Had to do that. Secondly, every person in the company is linked directly incentive-wise to one of those metrics. We also changed the way we hired people. In fact, we now -- it sounds like a cliche’ but it's not -- "hire hard, manage easy." We added testing programs of perception and also, I use the word carefully, personalities. So that if we needed team players that were externally focused, then we went after those kind of people. We also dropped a lot of other objectives. That's the other problem with work. Organizations end up with books of measurements on people, so it doesn't mean anything. We have a standard tough rule in our place: never more than five objectives for anybody. Ever. And one of those has to be personal development. BW: Let me take a specific example: Barnes & Noble, just because everybody likes to use them. They're doing a good job, their customers are happy, they're eating up bookstores, and gaining market share. And here's this thing that comes out of left field that's not going to show up in any kind of measures that you're talking about. Stead: Amazon.com. Absolutely. BW: How do you see that coming and what do you do about it? Stead: It didn't just appear. In the world we live in today, E-commerce is a good example. Two years ago it didn't exist. Two years ago the techies that are our customers were telling us we needed to get on the internet for ordering, responsiveness, pricing, etc. So if you go out and listen to customers and do your best to anticipate with technology, you would not get caught by surprise with Amazon.com. Belasco: Line of sight to your customers is not only line of sight to your performance. And I think it is revolutionary in terms of the system infrastructure, which enables people every minute, every day, every hour to have line of sight to tell how well they're doing. That's not ordinary. That's not incremental. That's revolutionary. The infrastructure is revolutionary. The Web access is revolutionary -- and if you talk to your customers, your external customers, and find out, and you are in touch with them. Stead: My guess is, if Barnes & Noble, who I agree with you does a great job in all cases, had been surveying their customers with, "What is the next biggest thing we do for convenience?", I'll bet you would have heard people say, "Gee, we'd like to be able to have this product shipped to our home." And if they'd listened to that, the next logical sequence is: How do I do that technology-wise? BW: So what, from your perspective, is the larger view of technology and how that feeds into the renewal process in general? And, more specifically, how will this burgeoning of E-commerce that we're seeing now change things in the future? Belasco: I think the issue is that technology is the great enabler. Technology doesn't push. Look at the Palm V today. I think it's a fine example of how a great piece of technology may be in search of a market -- as opposed to a market that's demanding the technology. And so the technology enables you to deliver things faster, better, cheaper, whatever the case may be, more conveniently to a segment of the market that values faster, better, cheaper convenience. Technology is a path, it's not a destination. Want to know more? Chapter One of Belasco's and Stead's book is available to readers of Business Week Online _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ |
| |
 | |
PREVIOUS Q&As Diamond Technology's Mel Bergstein Motorola's Les Shroyer Amazon.com's Jeff Bezos Author Clayton Christensen Venture capitalist John Doerr BOOK EXCERPT Soaring with the Phoenix | ||||||
