Coaching and Mentoring; The Role of the Six Sigma Master Black Belt (MBB) – Part 2 of 2

Cohesive Team through Coaching and Mentoring

Finally, and maybe most importantly, at the highest level, the role of the Master Black Belt in a Six Sigma deployment is to coach and mentor Black Belts in the application of the methodology.  Coaching and mentoring are pretty vague terms, so let us turn to how coaching and mentoring should be focused to develop high performance teams.  The following ideas are derived from the work Susan Lucia Annunzio, President and CEO of Center for High Performance has done on high performance leadership.  She writes: “there’s no question that individual performance does matter. People need to be trained, developed, and given appropriate reward incentives.  It is also good business to monitor and measure performance. But individual performance is influenced by the environment. If the best and brightest people are not in the right environment, they will not do their best work. Stars in under-performing workgroups won’t shine as brightly.”¹⁴

Valuing People

A Black Belt’s success should be the #1 priority for his Master Black Belt.  As such, the MBB should strive to develop a strong professional relationship with his Black Belts.  The ideal ratio to accomplish this is probably somewhere between 1 to 4 and 1 to 8, depending on the experience of both Black Belts and Master Black Belts .  The lower the ratio, the closer the relationship can become.  Though there are always opportunities for casual relationship building, there are also some more deliberate actions MBBs can take in order to build the level of trust required for high-performance teams.  MBBs should strive to build an environment where Black Belts feel valued, and understand how their work fits the goals of the organization.  He/she should communicate to the BBs what the “main thing” is, give feedback on performance, provide recognition for doing a good job and communicate the team’s score.¹⁵ A Black Belt should be placed in a state of self-control, where he understands the expectations of the job, knows how he is doing in reference the expectations, and given the tools/opportunities to impact his performance.  Ultimately, as MBBs we should make use of the highest and best talents of our Black Belts.

Optimizing Critical Thinking

In order to promote high performance, the MBB should lead by example.  One of the best bosses I’ve had has a gift for critical thinking.  You would come to him with an idea or theory, and he would, in a non-threatening way, ask very keen questions to find a weakness or oversight in your reasoning.  MBBs need to be excellent critical thinkers, and transfer that skill-set to the Black Belts in their charge.    Furthermore, the BBs need to have access to and knowledge of important information about the state of the business.  This understanding should lead them to better decisions, in terms of the big picture.

Seizing Opportunities

The MBB should work to create an environment where the BBs will be able to thrive.  Some ways to accomplish are to constantly seek and try new ideas, reward learning (even as the result of a mistake), continuously adapt to change, and look for ways to work more efficiently.  A common thread that runs through each of these ideas is the need for unfiltered and open lanes of communication. 

References

14.  S.L. Annunzio, “Contagious Success,” Portfolio, 2004

15.  D. Cottrell, “Monday Morning Leadership,” CornerStone Leadership Institute, 2002-2009

Good Training, Better Projects; The Role of the Six Sigma Master Black Belt (MBB) – Part 1 of 2

Six Sigma Training

An MBB should be able to teach the methodology.  In that regards, simply being a competent and successful black belt does not qualify you to teach.  Yes, proficiency in the methodology is required to effectively teach, but the skill-set of a teacher is different from that of a practitioner.  An MBB must possess both.  There are many courses available to help the Black Belt interested in becoming an MBB acquire that ability.  Typically called “Train the Trainer,” these courses focus on universal teaching techniques.  A basic curriculum will address Training – Process & Fundamentals, Presenting – Building Clarity & Credibility, and Facilitating – Engaging Hearts & Minds.¹¹ Other resources to develop that skill set are the “Telling Ain’t Training” book and workshop by Harold Stolovitch, as well as resources made available by professional training association ASTD.  Ultimately, as MBBs, we need to keep in mind that the “whole purpose of training, instruction, and education is to enable people to learn.  [Our] mission is not to transmit information but to transform the learners.”¹² This is one area MBBs need to deliberately develop their abilities in, relying on research and proven teaching techniques.

Project Selection

The lifeblood of a successful Six Sigma deployment is the selection of the right projects to work on.  If the project does not address a vital issue or area, it will be difficult to gather the required resources to tackle it.  Most witnesses may ironically smirk and ask “why are we working on this?”  Conversely, performance improvements achieved through a Six Sigma project that resolves a complex, important and high-visibility issue will tend to generate excitement and momentum.  Activity is not synonymous with progress.  The projects assigned to black belt ought to be important and significant to the success of a firm.  These strategic projects, other than being aligned with the vision of a company, enable true progress in operational excellence and profitability of a company, which is a main reason for a Six Sigma deployment. Furthermore, these high-impact projects provide the black belt with a sense of purpose, which author Daniel Pink has identified as a key motivation driver, together with autonomy and mastery.  “Ultimately, type I behavior depends on three nutrients: autonomy, mastery, and purpose. Type I behavior is self-directed. It is devoted on becoming better at something that matters. And it connects that quest for excellence to a larger purpose.”¹³ While autonomy is achieved through an independent organizational structure, and mastery through challenging and rigorous training, a key way to provide purpose is to assign the black belt to the top priorities/challenges/opportunities that a firm faces.  As MBBs, we need to be able to identify these projects, properly scope them, and assign them in short-order.

References

11.  G. Evans, “Train-The-Trainer,” Dynamic Training Corporation, 2008

12.   H. Stolovitch & E. Keeps, “Telling Ain’t Training,” ASTD Press, 2002

13.   D. Pink, “Drive,” Riverhead Books, 2009

Six Sigma and Lewin's Change Model

 

Six Sigma and Change Management

Every institution is vulnerable, no matter how great.  No matter how much you’ve achieved, no matter how far you’ve gone, no matter how much power you’ve garnered, you are vulnerable to decline.  There is no law of nature that the most powerful will inevitably remain at the top.

– Jim Collins⁶

Introducing Lewin’s Change Model

As Collins eloquently writes, if a company does not change and adapt to a changing environment, it will likely die.  Managing change is the main role of a leader.  Jack Welch is well aware of this, and made this an important point in his definition.  Since Six Sigma can and should be used as a mechanism for change, it is logical to see its crucial role in developing leaders. 

Let us look at this idea of leadership and change management a little further.  One of the cornerstone models for understanding organizational change was developed by Kurt Lewin back in the 1940s, and still holds true today. His model, known as Unfreeze – Change – Refreeze, refers to the three-stage process of change he describes. Lewin, a physicist as well as social scientist, explained organizational change using the analogy of changing the shape of a block of ice.⁷ In order to change the shape of a cube of ice into a pyramid of ice of equal volume, you have to unfreeze it, place the water into a new mold, and refreeze it. On both ends of the change, the process is held in equilibrium, with some forces exerting helpful pressure, and others negative pressure.  This equilibrium can be depicted using a force field analysis.

Six Sigma seen through Lewin’s model

The Six Sigma methodology can very intuitively be framed following Lewin’s change model.

Define/Measure

The performance of a culture, before a Six Sigma deployment, is driven primarily by the amount of inertia it experiences, i.e. a level of comfort with “status quo.”  This status quo often leads to sub-optimal processes, processes that are “good enough” and characterized by significant waste (muda) and excessive variation.  As the leadership team becomes aware that increased profitability could be achieved with better processes, and business analytics yield new information and insights, these helping forces may lead to a decision to improve operational excellence.  One way to accomplish this is through a Six Sigma deployment.  Not only are these forces seen at the organizational level, but they are also present at the beginning of most Six Sigma projects.  Status quo, muda and variation dictate a process’ capability, while a financial analysis (linked to profitability) and baselining of the process (read analytics) help describe opportunities.  Change begins with a culture that challenges the status quo.  If status quo is accepted, waste and process variation will be tolerated.  There will be no reason or incentive to address short-comings, if short-comings are even recognized.  Lean Six Sigma is most effective and durable when it builds on an underlying culture that demands continuous gains in efficiencies.  Such a culture typically exhibits a bias for improvement activities, or to use Deming’s words, “a constancy of purpose toward continuous improvement”

Analyze

As the team (leadership or project) becomes discontent with status-quo it begins the process of unfreezing the existing process.  Just because this is “how we’ve always done it,” does not mean that the process cannot be improved.  At this stage, the process is subjected to a root cause analysis.  The team can use qualitative tools, such as brainstorming, Ishikawa and affinity diagrams, cause and effect matrices, and failure modes and effects analysis. It may also use Six Sigma’s quantitative arsenal, with weapons such as box plots, dot-plots, histograms and other graphical tools, and a plethora of hypothesis tests, to include correlation and multiple regression analysis.  At this point, the process assumptions should have been shaken to their core, achieving an unfreezing of the process, and identifying new hypothesis and theories about how its performance is driven.  As we now want to move from correlation to causation, we are ready for experimentation.

Improve

It is in this stage that we really begin to improve the process. Deliberate experimentation, usually through design of experiments enable to team to identify true cause and effect relationships, and build models that optimize the performance of the process the team is trying to improve.  Indeed, we are changing the process through improvement, molding it into its new shape.

Control

Quality (Solution) = Impact (Solution) x Permanence (Solution)  (Equation 2.1)

As seen in equation 2.1, the impact of the solution is determined in the Improve Phase, while its permanence is greatly influenced in the Control Phase; the Control Phase is a key aspect of Six Sigma.  In this step, the team is truly attempting to refreeze the process at its new and improved level of performance.  The forces present at this stage differ of the forces before the change effort.  Key Six Sigma tools and techniques are employed to that end.  Control Plans (CP) identify, critical input by critical input, the specifications at which the process need to be set, and what activities need to be conducted on an on-going basis at predetermined intervals.  Mistake proofing (Poka Yoke) relates to the robustness of the solution, i.e. the propensity for a mistake or error to occur.  Usually through design consideration, the ability for a defect to manifest itself needs to be minimized.  Finally, on-going monitoring of the process can be achieved through Statistical Process Control (SPC), a process developed by Shewhart at Bell Labs, and refined later by W.E. Deming.  As these forces are put into place, great care needs to be taken of not introducing complexity and over-burden (muri) into the process, as these are hindering forces that will make sustaining the improvement more difficult.  As Pascal Dennis writes in Getting the Right Things Done, “Complexity reflects a primitive state; simplicity marks the end of a process of refining.”⁸

References

6.     J. Collins, “How the Mighty Fall,” HarperCollins Books, 2009

7.     http://www.mindtools.com/pages/article/newPPM_94.htm, accessed June 2012

8.     P. Dennis, “Getting the Right Things Done,” The Lean Enterprise Institute, 2006

What is Six Sigma?

What is Six Sigma?

Six Sigma is a quality program that, when all is said and done, improves your customers’ experience, lowers your costs, and builds better leaders. – Jack Welch¹

Definition

Developed by Motorola, Six Sigma became popular when it was successfully adopted by GE in 1995.  Jack Welch’s definition is profound, because even though he uses the unexciting term “program,” he juxtaposes that term next to benefits that differentiate Six Sigma from ordinary, run-of-the-mill programs.  Furthermore, he rightfully refrains from calling Six Sigma a strategy.  Indeed, a strategy can be defined as a “set of rules the firm follows to be able to deliver on its mission and should be geared to maximizing returns to shareholders.”² Strategies are typically unique, and difficult to copy.  Six Sigma, on the other hand, is easily replicated.  Six Sigma belongs in the realm of “Operational Excellence.”  In an increasingly competitive business landscape (some have even called it hyper-competitive³), Operational Excellence plays more and more of a “permission to play” role, rather than an opportunity for differentiation. Indeed, “the process of competition forces firms to offer a line of high-quality, low-priced goods that eventually make high quality and lower prices a necessity for survival.”³ Six Sigma is ideally suited to help firms meet that end.

So, what is my definition of Six Sigma? Six Sigma is a problem solving methodology that rigorously aims to identify problems, and to solve them, once and for all, in a way that delights your customer. Delighting the customer enables Deming’s chain reaction to unfold and results in increased profitability for the firm.

Six Sigma and Culture

We’ve already mentioned that the concept is easily copied; however, Six Sigma has the uncanny tendency to take on the attributes of the culture in which it is deployed.  As such, it is critical to identify areas where a firm’s culture and Six Sigma may appear to be in conflict, and to address these from the get-go.  In a culture that values creativity and individuality, the structure that Six Sigma brings, if not properly framed, could lead to an ultimate failure of the methodology.  But it does not have to be that way…  3M is often considered as one of the world’s most innovative company, and it has successfully been developing and leveraging its Lean Six Sigma capabilities since its initial deployment in 2001.  “Today, Lean Six Sigma is routinely used in 3M globally as a natural part of the way we do business. We use the tools and methodologies to systematically respond to customer needs, launch new products through perpetual innovation, streamline our manufacturing and supply chain processes, create speed and eliminate waste, drive overall operational excellence, and help enhance our financial performance and yours.”⁴ On the other hand, when a firm’s culture is founded on Deming’s philosophy, it is driven by a “constancy of purpose towards continuous improvement,”⁵ and Six Sigma finds itself in an environment where it can thrive.  The main point here is that it is dangerous to ignore the cultural element in a Six Sigma deployment.  A firm’s culture can and must be deliberately created to enable the stakeholders’ vision.

 

References

1.     J. Welch, “Winning,” HarperCollins Books, 1^st Ed., 2005

2.     M.C. Scott, “Value Drivers,” Wiley, 1998

3.     R.A. D’Aveni, “Hypercompetitive Rivalries,” Free Press, 1995

4.     3M Lean Six Sigma, “Building Value for Our Customers,” 3M Center, 2007

5.     W.E. Deming, “Out of the Crisis,” MIT Center for Advanced Engineering Study, 1982

Start Early, Start Small, and Demand Early Success

Discussion Point 3: Chapter 9: There Is Good Money and There Is Bad Money

Key passage: “We suggest three particular policies for keeping the growth engine running. Taken together the policies force the organization to start early, start small, and demand early success. (Page 246)

Key Takeaway: The time to work on growth is while the firm is still growing.

Start Early.  Christensen’s point here is that a firm should not wait until the signs of a crisis emerge to think of how it will remain competitive.  Though Christensen does not mention him by name, a few of his critiques of management literature are undoubtedly addressed to Jim Collins, famed author of Built to Last, Good to Great and most recently How the Mighty Fall and Great by Choice.  Though Christensen’s caveats of Collins’ conclusions and recommendations are noteworthy, there are still a lot of valuable insights in Collins’ work.   In his book, How The Might Fall, Collins writes: “Every institution is vulnerable, no matter how great. No matter how much you’ve achieved, no matter how far you’ve gone, no matter how much power you’ve garnered, you are vulnerable to decline… Anyone can fall, and most eventually do.”⁹ Despite extensive literature warning managers of the hubris of success, too many firms still fail to pro-actively, and in a disciplined fashion, seek new opportunities.  Collins and Christensen agree that firms can never rest on their latest achievements, and both theories do complement each other well.  When a firm does not become blinded by the hubris of its success, does not enter an undisciplined pursuit for more and acknowledges the risk and peril it faces⁹, it is more likely to “launch new –growth businesses regularly, [while] the core is still healthy.”¹⁰ I really like what Collins writes on this subject, as he encourages firms to ask the following three questions as they pursue disciplined continuous (Christensen would say “rhythmic”) leaps.  These questions are: “1. Do [the moves] ignite passion and fit the company’s core values? 2. Can the organization be the best in the world at these activities or in these arenas? 3. Will these activities help drive the organization’s economic or resource engine?”¹¹ For all their differences, both authors agree that firms should start early.

Start Small.  The idea of “start small” really relates to firms remaining decentralized, more entrepreneurial, as “more managers [seek] disruptive growth opportunities.”¹² Though Christensen only discusses the idea in a very narrow sense, and only over the course of one page, Jason Jennings, in his book “Think Big, Act Small,” expands on the idea and offers a compelling case as to why this is indeed a really good idea.  Using a research and writing style similar to that of Jim Collins, Jennings was able to identify several behaviors successful companies demonstrate, and he generalizes these into a theory where a long-term future is achieved through meeting short-term objectives.   In the chapter most closely related to Christensen’s context of new business creation, Jennings describes how “acting small” translates into the arena of new business invention.  Companies that “act small” mind their resources, maintain utilitarian facilities, put the people with the most to gain or lose on the front lines (this one sounds like what we read in the M-Tronics case, doesn’t it?), let volume drive the need for expansion, never forget their roots, control their growth and stay true to their principles and values.¹³ Jennings’ concrete steps help elaborate on Christensen more general point.  Additionally, there is well-documented research, British anthropologist Robin Dunbar’s in particular, that indicates that groups or organization should be careful when surpassing 150 members.   Malcolm Gladwell recounts Dunbar’s work and, in reference to the 150 member tipping point, writes: “above that point, there begin to be structural impediments to the ability of the group to agree and act as one voice.”¹⁴ This is certainly another good reason to keep new ventures initially small in order to leverage flexibility and adaptability.

Demand Early Success.  What Christensen really means by “early success” is early financial returns.  Indeed, Christensen writes that “being impatient for profit is a virtuous characteristic of corporate capital.”¹⁵ Christensen expands on this idea in his latest book, How Will You Measure Your Life?, and gives another reason why this rule is fundamental.  He writes:  “Good money from investors needs to be patient for growth but impatient for profit.  It demands that a new company figures out a viable strategy as fast as and with as little investment as possible—so that the entrepreneur don’t spend a lot of money in pursuit of the wrong strategy… Once a profitable and viable way forward has been discovered—success now depends on scaling out this model.”¹⁶ This line of thought aligns very well with the self-reinforcing spirals from adequate and inadequate growth Christensen describes in figure 9-2. McGrath and McMillan echo Christensen’s exhortation to built profitability into the venture early. They also provide concrete advice on how to achieve this goal using “discovery-driven planning.”  The initial step is the generation of a reverse income statement.  McGrath and MacMillan explain: “Instead of starting with estimates of revenues and working down the income statement to derive profits, we start with required profits…  The underlying philosophy is to impose revenue and cost disciplines by baking profitability into the plan at the outset.”¹⁷ Discovery driven planning is a thought-provoking process that should help companies identify flags early in the venturing process.

Notes

9.     J. Collins, How the Mighty Fall, HaperCollins, New York, 2009, p. 8, 20-22

10.  C. Christensen, The Innovator’s Solution, Harvard Business Review Press, Boston, 2003, p. 246

11.  J. Collins, How the Mighty Fall, HaperCollins, New York, 2009, p. 8, 63

12.  C. Christensen, The Innovator’s Solution, Harvard Business Review Press, Boston, 2003, p. 250

13.  J. Jennings, Think Big, Act Small, Portfolio, New York, 2005, p. 103-105

14.  M. Gladwell, The Tipping Point, First Back Bay, New York, 2002, p. 182

15.  C. Christensen, The Innovator’s Solution, Harvard Business Review Press, Boston, 2003, p. 254

16.  C. Christensen, How Will You Measure Your Life?, Harper Business, New York, 2012, p. 87-88

17.  R. McGrath and I. MacMillan, Discovery-Driven Planning, Harvard Business Review, Boston, 1995, p. 5

Law of Conservation of Attractive Profits

Discussion Point 2:  Chapter Six: How to Avoid Commoditization

Key passages:  “A company that finds itself in the more-than-good-enough circumstance simply can’t win: Either disruption will steal its markets, or commoditization will steal its profits.” (Page 152) and “The bedrock principle bears repeating: The companies that are positioned at a spot in a value chain where performance is not yet good enough will capture the profit. That is the circumstance where differentiated products, scale-based cost advantages, and high entry barriers can be created.” (Page158)

Key Take-away:  Firms ought to use the law of conservation of attractive profits to identify high profitability areas.

The two sentences in this key passage are very rich in insights, as they really tell us where to dig to strike gold.  In this chapter, Christensen sets up his argument using two extremes on the spectrum of product/service fulfillment of the customers need to help us understand the benefits of one, and the problems with the other.

The More-Than-Good-Enough Circumstance

To delve deeper into this idea, it is useful to refer to Richard D’Aveni’s work on hyper-competition.  He echoes Christensen’s assessment when he writes: “Thus, the process of competition forces firms to offer a line of high-quality, low-priced goods that eventually make high quality and lower prices a necessity for survival.”⁴ This concept relates to what Christensen calls commoditization, and clearly supports the idea of dwindling profitability.  Furthermore, as described in the first discussion point, mature industries are susceptible to creative destruction, which addresses the threat of disruption.  So if well-served markets are problematic, Christensen offers an alternative, which can help both new ventures and established firms to improve their odds of growth and profitability.  He makes a very well supported point that the best avenue for growth and profitability is to deliver quality where quality has been lacking up to this point.  This is consistent with D’Aveni’s price-quality competition escalation ladder, which culminates with a “need to move to a new arena of competition.”⁵ This ladder of escalation when competition is based on cost-quality advantages is similar to the process of commoditization and de-commoditization Christensen describes on pages 151 to 154. 

The Not-Yet-Good-Enough Circumstance

As firms uncover “not-yet-good enough” products of processes, Christensen explains that they can pursue a differentiation strategy, leverage scale-based cost advantages, and establish high barriers to entry.  He is a little short on details here, so let us turn to D’Aveni’s work and develop these ideas further. These three ideas actually parallel his research, as they correspond to the three arenas of competition he identified in addition to cost-quality.  What Christensen calls “differentiated products,” D’Aveni defines as “timing and know-how.”  D’Aveni does a really good job showing how the first mover has the choice between using a “leapfrog strategy” (successive investments in innovation) or moving downstream into higher value-added products. Sony is a good example of former: “Early on, it built tape recorders and used the know-how and resources from that project to fuel it production of transistor radios.  It brought out a pocket-sized transistor radio… Then Sony built on that success with the development of the Trinitron television in the late 1960s… Sony used and extended its skills in miniaturization and audio technology to develop this next innovation.”⁶   Christensen uses the computer industry in the 1990s to illustrate how money can flow when following the latter strategy.  Next, when addressing cost advantages, D’Aveni looks at competitors with “deep-pockets,” where resource escalation is one of the strategic options for the incumbent.  Finally, we get to barriers of entry.  Some strategies that D’Aveni gives to building barriers are customer familiarity, customer loyalty to a local brand, government barriers to foreign entry, control over domestic distribution systems, local customs, unique factor advantages (lower cost of labor or capital), and dominance of domestic market share.⁷   In every case however, D’Aveni, also gives possible course of action for new entrants to address and overcome these tactics.

Law of Conservation of Attractive Profits

Ultimately, Christensen wraps this chapter in the book by giving us law of conservation of attractive profits.  This law, inspired from famous laws of physics, states that: “When the modularity and commoditization cause attractive profits to disappear at one stage in the value chain, the opportunity to earn attractive profits with proprietary products will emerge at an adjacent stage.”⁸ This can actually be seen as good news, since this opportunity is equally available to both the incumbent and the new entrant.  

Notes
4.     R. D’Aveni, Hyper-Competitive Rivalries, The Free Press, New York, 1995, p.29 
5.     R. D’Aveni, Hyper-Competitive Rivalries, The Free Press, New York, 1995, p.36 
6.     R. D’Aveni, Hyper-Competitive Rivalries, The Free Press, New York, 1995, p.71 
7.     R. D’Aveni, Hyper-Competitive Rivalries, The Free Press, New York, 1995, p.99-100 
8.     C. Christensen, The Innovator’s Solution, Harvard Business Review Press, Boston, 2003, p. 168

The Innovator's Solutions Discussion Points - Part I of III

Discussion Point 1: Chapter Two: How Can We Beat Our Most Powerful Competitors?

Key passage: “The Innovator’s dilemma identified two distinct categories–sustaining and disruptive–based on the circumstances of innovation. In sustaining circumstances–when the race entails making better products that can be sold for more money to attractive customers–we found that incumbents almost always prevail. In disruptive circumstances–when the challenge is to commercialize a simpler, more convenient product that sells for less money and appeals to a new or unattractive customer set–the entrants are likely to beat the incumbents.  This is the phenomenon that so frequently defeats successful companies. It implies, of course, that the best way for upstarts to attack established competitors is to disrupt them.” (Page 32)

Key Take-away:  Firms can and must adapt to the type of innovation that is occurring at the moment. 

The idea Christensen develops here is initially useful in guiding innovation in firms at various stages of maturity.  A firm’s context has a large impact on which strategies will and will not be successful.  Since there are so many business books published, it can be very tempting for a leader to take a concept or idea that resonates with him or her, and has been successful at this or that company, and decide to execute the same strategy, wrongly expecting the same results under different circumstances.  Focusing on innovation, Christensen gives a simple, yet profound rule of thumb.  Incumbents are better positioned when innovation is of a sustaining nature and at a disadvantage when innovation is disruptive.  He gives two examples in particular that help strengthen his model. 

The first relevant example Christensen gives is that of Honda penetrating the US motorcycle market.  This example demonstrates his point about new comers having to focus on disruption.  Honda tried to go toe to toe with Harley Davidson using sustaining innovation and could not break into the market.  However, when it serendipitously stumbled onto the off-road bike market, it created a disruption and was able to establish a foothold from which it could then establish itself and grow.

Second, the advent of mini-mill in the steel industry created a disruptive innovation known as thin-slab continuous casting technology.  As the established steel giants continued to improve their processes, they did so focusing on sustaining innovations.  Now this brings up an interesting point.  The steel mills could have prevailed: though one can frame Christensen ideas as a rule of thumb for focusing on what strategy is more appropriate for a new or established firm, it is really the nature of the innovation that dictates what a successful strategy will be, regardless of whether it used by a newcomer or an incumbent. 

The role of technology in the long-term success of firms has become huge.  As long as all the innovation is confined to the sustaining circumstance, incumbents will continue to prevail.  But incumbents had better watch out when disruptive technologies emerge.  The problem (or opportunity) lies in the fact that disruptive innovation is ultimately inevitable.  It is this realization that led Joseph Schumpeter to formulate his theory of creative disruption: “The…process of industrial mutation…incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.  This process of creative destruction is the essential fact of capitalism.  It is not [price and output] competition that counts, but competition from the new commodity, the new technology, the new source of supply, the new type of organization.”¹  From Christensen’s point of view, this means that as long as a new breakthrough is not discovered, incumbents will tend to prosper, but that eventually new technologies will come about to disrupt and challenge their hegemony.  So what can an industry-leading firm do to prevent this inevitable challenge?  If destruction is inevitable, then it needs to find a way of doing the destroying.  One strategy is to foster an entrepreneurial culture.  The benefits of such a culture are many, but first and foremost come creativity and a pioneering spirit.  This often translates into corporately funded new-ventures, such as was seen at Boeing and Xerox (Internal Venture Divisions) and Chase and Intel (Corporate Venture Capital)². Alternatively (or concurrently), firms can offer structures that allow employees to devote time to side projects, like at 3M or Google.  Speaking of the “15 percent time” at 3M, Daniel Pink writes: “These walled gardens of autonomy soon became fertile fields for a harvest of innovations—including Post-it notes. Scientist Art Fry came up with this idea for the ubiquitous stickie not in one of his regular assignments, but during his 15 percent time.  Today, Post-its are a monumental business: 3M offers more than six hundred Post-it products in more than one hundred countries.”³ Neither strategy (entrepreneurial ventures or time for autonomous creativity) was present at US Steel and as a result, the biggest challenge US Steel faced was its blindness to fundamental changes in the industry.  The cause of its blindness? A deeply seated paradigm and unfounded faith that what had made them successful in the past would continue to make them successful…   To highjack Paul Revere’s famous words, “Disruption is coming!”  Successful firms must be primed and ready when it emerges.

 

Notes

1.     J. Schumpeter, Capitalism, Socialism and Democracy. Harper, New York, 1950, p. 83

2.     D. Garvin, A Note on Corporate Venturing and New Business Creation, Harvard Business Review, Boston, 2002, p. 9-11

3.     D. Pink, Drive, Riverhead Books, New York, 2009, p.95