How To Execute on Innovation Better

Failure to execute is a leading reason why organizations don’t gain the full benefit of their innovation initiative investments. Day-to-day business pressures quickly overcome all the good work creating an innovative idea when it comes time to execute. Something we have previously called the innovation-delivery paradox.  An ongoing challenge is how can firms execute on innovation better while still delivering on the day-to-day?

The four disciplines of execution or 4DX method developed by Chris McChesney, Sean Covey, and Jim Huling provides a solid methodology to solve this challenge.

4DX Method

The 4DX method is based on these four disciplines:

  • Discipline 1: Focus on the wildly important
  • Discipline 2: Act on the lead measures
  • Discipline 3: Keep a compelling scoreboard
  • Discipline 4: Create a cadence of accountability

Why The 4DX Method Is Particularly Well Suited To Execute on Innovation

Focus. The 4DX method helps the innovation team bring focus to the main business goal of the innovation and drive cross organizational collaboration for innovation that requires change to the firm’s business model.

Results Oriented. Most business executives are well aware that key performance metrics are usually lag measures and organizations have difficulty linking actions to lag measure results. Lead measures that are often less than obvious enable team members to link their efforts to lag measure results. The 4DX method provides a systematic method to identify and optimize lead measures unique to the innovation.

Allows Experimentation. This is perhaps the most critical reason. Experimentation, failure, and learning are central to innovation. The regular team session based on commitment, accountability, and problem solving supports fast and responsive adaption as the innovation idea is implemented. No innovation initiative can foresee all the challenges in bringing an innovation to market. The 4DX method enables teams to break down the challenges and try different approaches to learn faster.

Enables Change. All innovation requires some degree of change. Change in behaviour. Change in business model. Change in procedures. Failure to execute on innovation is closely tied to failure to change. The 4DX method provides a positive framework to help teams through the change necessary to implement innovation.

Facilitates Engagement. Innovation is a team sport.  Everyone in the firm has to contribute to achieve the full benefit from innovation. The 4DX method facilitates engagement by clarifying how each team member can contribute to success as well as how their efforts achieves results.

Builds Momentum to Success. The regular cadence of the 4DX method along with flexibility to support experimentation helps to build momentum where team members get faster feedback and short term success. Through the medium term repeated application to follow-on innovation enables the culture of innovation execution to be strengthened.

Moving Forward

Adopting the 4DX method to overcome the challenge of innovating while delivering the day-to-day requires effort, commitment, and resilience. Alopex can help you through this process and strengthen your culture of innovation execution.


Study Supports Value of Lean Engineering

The Boston Consulting Group and the Laboratory for Machine Tools and Production Engineering RWTH Aachen University recently published The Lean Advantage in Engineering study of Lean Engineering methods and cost/cycle time/quality benefits achieved by adopters.  The study confirmed the value of fail-fast and short iterative cycles in lean engineering in reducing the product target costs.

The BCG have compiled a best practices model of lean engineering that entails 16 practices in four dimensions organized for effectiveness (doing the right things) and efficiency (doing things right):

  1. Product – For effectiveness use strategic positioning, holistic and detailed roadmap, and transparent product requirements. For efficiency use a modularized product design and optimized product range.
  2. Processes – For effectiveness use solutions-oriented design sets and an agile/fast cycle process. For efficiency use flexible workload leveling and sequencing to reduce bottlenecks.
  3. Leadership & Behaviour – For effectiveness use proactive uncertainty management and fact-based/fast-cycle steering. For efficiency use cross-functional collaboration and empowered project management.
  4. Enablement and Tools – For effectiveness use experience and expertise driven development. For efficiency use speed-supporting tools and single source truth.

Lean Champions – What Does Good Look Like

19% of the study participants were judged to be Lean Engineering Champions based on the following distinguishing characteristics:

  • Routinely apply lean engineering methods in most projects.
  • Established lean engineering as the new standard in engineering.
  • Succeed in decreasing development time significantly (as much as 25% faster and up to 6 months faster).
  • On average complete 71% projects within scheduled time,
  • On average complete 74% projects within budget.
  • Two thirds have full transparency into capacity utilization and specify flexible mitigation actions to avoid project disruptions in the medium to long-term.
  • 70% employ a cross-functional knowledge management system to maximize reuse in some cases on a global scale.
  • Leaders in modularization were better at shortening the duration of a development process by 15-20%.
  • Leaders use modularization with standardized interfaces across the full range of product lines and families and differentiate modular product design on the basis of customer requirements.
  • Practitioners of agile development complete 59% projects on time with 35% lower deviation from product target costs where product cost decreased as the number of gate reviews (ie. iterations) increased.

Other Interesting Conclusions

  • Most participants at least considered implementing lean engineering;
  • Participant performance was above the mean in strategic positioning, transparent product requirements, cross-functional collaboration, speed-supporting tools, and single source of truth.
  • Participant performance were below the mean in modularization, optimized product range, solution-oriented design sets, agile/fast-cycle process, sequencing to reduce bottlenecks, fact-based/fast-cycle steering, and experience/expertise-driven development.
  • High levels of maturity in diligently translating customer requirements into a full set of product specifications and early involvement of other functions in the development teams.
  • Low use of product modularization with limited reutilization of existing modules.
  • Engineering processes were typically broken up into five or fewer long phases lasting 6 months or more with feedback provided at intermediate stages as opposed to more frequent feedback iterations.
  • Engineering KPIs were usually available but were not clear or meaningful enough for steering.
  • Design reviews occurred too late to allow for effective steering.
  • Most companies do not have a design library like cross-functional knowledge management system.
  • Know-how is managed locally and lessons learned shared almost exclusively within a function.

What Is The Key Take-Away

Firms that compete in engineered product markets need to take a closer look at how they stack up against emerging lean engineering champions who are achieving  significant competitive advantages in terms of cost, speed, and quality then put in place a medium to long-term improvement program. Alopex Management Consulting can assist firms achieve this very critical strategic objective.

Why Corporate Skunk Works Need to Die

Steve Blank

In the 20th century corporate skunk works® were used to develop disruptive innovation separate from the rest of the company. They were the hallmark of innovative corporations.

By the middle of the 21st century the only companies with skunk works will be the ones that have failed to master continuous innovation. Skunk works will be the signposts of companies that will be left behind.


In the 20th century companies could be leaders in a market for decades by just focusing on their core product(s). Most companies incrementally improved their products with process innovation (better materials, cheaper, product line extensions) and/or through acquisitions. Building disruptive products were thought of as “risky” and a distraction since it was not “core” to the company and did not fit existing corporate structures. Why make big bets if no one was asking for them and competitors weren’t doing so.

a-12 CIA A-12 spy…

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Creativity, Inc. & The Fuzzy Front End

iStock_000005724324MediumThe fuzzy early stages of any idea that offers the potential to create new value involves more art than science and is very difficult to achieve in business.  Ed Catmull’s book Creativity, Inc. sheds light on these early stages and provides incredible insight into how to lead a development organization’s fuzzy front end in the context of the lean engineering framework.

The fuzzy front end starts with the identification of an unmet customer need and ends with convergence on the optimum solution that a firm can repeatedly produce and sell profitably in new or competitive markets. Ideas that lead to market-creating innovation are of immense strategic importance in today’s competitive markets.  The fuzzy front end is messy, unpredictable, and highly uncertain. Start and end points are ambiguous. The process involves novelty, experimentation, complexity, creativity, and non-routine engineering work. Ed Catmull’s book provides a broad set of management tools and mindsets that every engineering leader needs to master to nurture ideas for new value creation to improve business performance in the fuzzy front end.

Protecting Ideas In The Fuzzy Front End

Catmull does a wonderful job describing the tension that exists in firms between what I call the delivery and innovation paradox. He uses the analogy of ‘The Hungry Beast and The Ugly Baby’ to describe how engineering leaders need to be mindful of the balance between day-to-day delivery and idea driven innovation. His point is the day-to-day delivery (The Hungry Beast) can quickly kill idea driven innovation (The Ugly Baby) because originality is fragile and the fully mature product resulting from the original idea do not just pop into the world as Catmull says ‘already striking, resonant, and meaningful’ to the market. New ideas need to be protected during the fuzzy front end to be developed and enable the convergence on the optimal solution (the best all around solution from among a variety of possible choices).

To create the right environment Catmull suggests several management actions:

  • Seek Balance (Continuously) – Management needs to give continuous attention to achieving strong counter balance in the face of the strong delivery desire for efficiency and consistency of workflow by: enabling give & take from parts of the business; not allowing one function to win at the expense of the whole company by seeing balance as the collective end objective; allow continuous healthy conflict; act on situations where balance has been lost; and ‘hold lightly to goals and firmly to intentions’ which permits adjustment as new information and learning comes to light.
  • Constructive Feedback Through An Advisory Team (Brain Trust) – New ideas don’t develop in a vacuum but rather need a constructive feedback mechanism to evolve, improve, and be tested as they develop through the fuzzy front end.  The Brain Trust at Pixar provided the constructive and iterative feedback system facilitated through candor, challenge,  independent and emotionally disengaged advice, all by people who ‘have been there and done that’ free from overpowering outside agendas. Catmull emphasized that to function effectively the Brain Trust had no authority avoiding negative influence on development team dynamics.
  • Trusting Culture – Management needs to continuously facilitate a culture that enables honesty and candor, accepts failure with no retribution, sees change as good, and pushes employees mindset beyond their comfort zone. Management also has to recognize that they can’t possibly have all the solutions to unforeseen problems trusting all employees to respond with solutions because they are closer to the problem and have the best information.

Engineering leaders faced with the need to continuously innovate in response to competitive pressures should read Creativity, Inc. to understand how they can manage the fuzzy front end. The book is rich with examples, methods, and advice. As Catmull observes ‘discovery means you don’t know the answer when you start’ which capture perfectly the essence of the fuzzy front end.







The Capitalist’s Dilemma Explains A Lot

Developed economies have settled into a new normal of low growth as a result of the structural change from the recent financial crisis. Clayton Christensen and Derek van Bever recently suggested that The Capitalist’s Dilemma explains why growth hasn’t picked back up like after previous recessions and is the leading reason why “despite historically low interest rates, corporations are sitting on massive amounts of cash and failing to invest in innovations that might foster growth“. The thinking behind The Capitalist’s Dilemma also help to understand the delivery-innovation paradox, Missing M in SME, innovation investment decision risk aversion, low R&D spending, innovation investment behaviour by large firms, and Canada’s poor innovation performance. Business leaders need to understand the implications of The Capitalist’s Dilemma because it may lead to the biggest change of all in current times – the end of capitalism – if the current financial orthodoxy does not change.

The Capitalist’s Dilemma

Christensen and van Bever describe the capitalist’s dilemma as “doing the right thing for long-term prosperity is the wrong thing for most investors, according to the tools used to guide investments“. Readers should refer to their article for their complete argument but essentially they blame the confluence of supposedly success oriented finance metrics (RONA, ROIC, RORC, IRR, etc), false sense of correctness from spread sheet models, low loyalty investors, and analysts pressures to force short term business decisions that result in low returns and low growth and a bias against new value creation. Their argument is based on revisiting the basic economic assumption that capital is scarce and costly which drives the backwards looking finance metrics towards the wrong decisions for developed economies at the macroeconomic level but also for long term value creation for investors through firm level innovation.

Explains A Lot

The finance orthodoxies from before the structural change and the capitalist’s dilemma explain much of why business investment in R&D and innovation is so low, the preference for low risk investment decision alternatives, and why Canadian business leaders don’t adopt innovation as a strategy. Economic growth requires innovation but business leaders given the choice are not investing heavily in innovation or if they do are not receiving good results (in terms of top line growth) or think they are innovating a better future by investing in continuous improvement alone. How can we make sense of better outcomes from innovation investments?

Innovation Outcomes and Impact On Growth

Christensen and van Bever frame innovation in a way that helps to differentiate how different innovation activities(R&D, business model innovation, new product development) , emphasis, and investments lead to positive growth outcomes or not.  By categorizing innovation by outcome (be it top-line revenue growth or more jobs) they propose three categories and how each impact growth:

  1. Performance Improving Innovation – Innovation that replaces old products with new and better models. The impact of performance improving innovation are substitutive in the market place that don’t drive growth.
  2. Efficiency Innovation – Innovation that helps companies make and sell mature, established products or services to the same customers at lower prices. The impact of efficiency innovations raise productivity that frees-up capital for more productive uses.
  3. Market-Creating Innovation – Innovation that transforms complicated or costly products so radically that they create new classes of consumers or a new market. The impact of market creating innovation is growth from new customers. The authors also note that efficiency innovations that turn non-consumption into consumption are market creating innovation.

Using these categories Christensen and van Bever demonstrate that the way that investment assessments are made under the current finance orthodoxy lead to too much performance improving and efficiency improving innovation and with a bias against market-creating innovation. So business leaders say they are investing in innovation by investing in performance and efficiency innovations but these don’t drive growth. To drive growth business leaders need to invest in more market-creating innovation but the finance orthodoxies inhibit this choice. What will it take to change the finance orthodoxies going forward to allow market-creating innovation to flourish?

Actions Going Forward

Developed countries and Canada in particular have several options:

  1. Do Nothing – Allow existing businesses to not grow and slowly fail and the current generation of business leaders, CEOs, CFOs, financial analysts to go extinct to be replaced by a new generation of leaders and financial in those firms that manage to survive.
  2. Change The Rules of the Game –  Christensen and van Bever identify several:
  • Repurpose capital away from migratory and timid capital to enterprise capital through tax policy, loyalty shareholder investment rules
  • Rebalancing business schools away from the success financial metrics.
  • Appropriate risk adjusted cost of capital for the new structural norm enabling longer term investments.
  • Reallocate innovation pipeline emphasis for more market creating innovation rather than heavy weight emphasis on performance and efficiency innovation.
  • Emancipating management and reducing the influence of tourist (short term) investors.

The drivers of corporate change over the last several decades now themselves must change. The question is will they follow their own advice or have they become the dinosaurs. Investment in performance innovation and much of efficiency innovation is not good enough going forward.


SME Growth Stall – The 100 Person Ceiling

Small firm growth tends to stall when their staff levels reach about 100 employees.  Understanding this phenomena is important because Canada’s economic growth depends heavily on creating more medium firms (2.6% of all firms) that generate 12-14% of GDP, 16% of jobs, invest more in R&D, and are better able to export and compete internationally.

Why Growth Stalls At Around 100 Employees

Many small firms are led by an owner/founder leveraging a local personal network to drive business growth. The business owner/founder is heavily involved in the day-to-day business and become overwhelmed. Churchill & Lewis explored management issues of SME growth in their seminal 1983 HBR paper The Five Stages of Small Business Growth. They explored how the demands on owner/founder become limiting as the firm grows requiring disengagement, delegation, and added systems to manage growing complexity. Owner/founders who choose not to disengage, working at their personal capacity, limit any further growth and the firm continues in a marginally surviving mode market demand conditions permitting.

Sutton and Rao have provided new perspective on the problem of growth in their book Scaling Up Excellence: Getting To More Without Selling For Less. Sutton & Rao review the key research underpinning ‘the problem of more’ driving extra burden, higher cognitive load, labour efficiency, communication, coordination, and ‘grooming’ as firms grow.  In particular they quoted work by Oxford anthropologist Robin Dunbar who determined that “when an organization reaches about 150 people the communication and coordination demand outstrips what the human mind can handle”. Sutton & Rao observe that “some leaders and teams handle growth and program expansion and others do not”.

How Can Leaders Overcome This Hurdle

Sutton & Rao provide some powerful advice with excellent examples to help small business leadership grow effectively assuming that they take the decision to disengage if they are the owner/founder. Their advice centers around building a “better organizational operating system” coined from that moves accountability from the growing senior management to smaller teams that held team leaders and members more accountable. Sutton & Rao identified five tactics to employ to manage “the problem of more”:

  • Subtraction – Subtraction is the removal of “crummy or useless rules, tools, and fools that clog up the works and cloud people’s minds”. Subtraction includes simplifying standard work by working through a learning process of “simplistic-complex-profoundly simple” because to get to “profoundly simple” teams often need to understand the complexity.
  • Make People Squirm – Sutton & Rao suggest that everyone need to challenge the status quo to make subtraction work. This tactic relies on the broad field of change management.
  • Load Busters – Load busters are “simple additions of objects, activities, and technologies that cut cognitive load” by focussing on “what matters most and away from what matters least”. This tactic works when as firms get more complex staff can loose perspective on what is important for good business health.
  • Divide and Conquer – This tactic improves coordination and accountability by dividing the organization into smaller groups. This tactic relies on the benefits of teams.
  • Bolster Collective Brainpower – This tactic is based on “sticking with savvy insiders and stable teams and blending people who have worked together before” as teams are added rather than relying on outsiders.

Sutton & Rao also suggest that as the organization grows that there is a balance to be continuously managed between too much/little complexity, too much/little management, too much/little bureaucracy. They suggest give ground grudgingly adopting “the Goldilocks Theory of Bureaucracy” of “injecting just enough structure , hierarchy, and process at the right time”. Using a approach of “running a little hot” giving staff the flexibility to operate more freely and accountable while not running the operation too close to 100% capacity  beyond their cognitive and emotional limits.

Founder/Owners of small firms who have reached the 100 person ceiling but are hesitant in taking the next step should read Sutton & Rao’s book.  The case examples are excellent and practical tips plentiful to provide helpful guidance to chart a way forward.



Systems Thinking For Innovation

Firms that compete through technology based innovation strategy need to contend with how their product/service delivers value in rapidly evolving complex systems present in today’s markets. Complexity has reached the point were we now talk in terms of system of systems to describe markets.  For example, electric vehicles operating within an electrical power generation and smart grid system, advanced aircraft operating within an air traffic management system, a swipe card payment system for an integrated public transportation system, or a medical device operating connected within an electronic records management in an integrated health services system.

Firms need better systems thinking in their strategic and tactical delivery actions. The success of the firm depend on external partners, integration challenges, customer adoption, and market conditions beyond their control. Firms that apply systems thinking  can help to maximize the return on innovation investment that drives profitability, growth, and competitiveness. Engineering leaders responsible for delivering technology solutions in complex systems markets also need to develop their staff the think in terms of systems, adopt systems engineering practices, and apply better strategic tools to leverage systems thinking.


To understand systems thinking firms need to understand complex systems. A system is a set of connected things or parts forming a complex whole.  Individual systems from the examples given could include: an electric vehicle itself; a payment system; a medical device; mobile phone; or tablet. Each alone can be complex systems in their own right. The system of systems takes a wider view of all the individual systems that must operate together in the broader context. Annette Krygiel defined systems of systems as “an interoperating collection of component systems that produce results unachievable by the individual systems alone“. For example, the electric vehicle market comprises systems such as: the electric vehicle itself; electrical power grid; charging stations; electrical power generation/transmission system; and the environmental regulatory system. All of these systems in the electrical transportation system of systems are undergoing rapid transformation but provide exciting potential for innovators active in this space.

Complex systems markets are changing rapidly making it difficult for engineers to predict how their potentially novel products/services will perform in the future system. In today’s markets complex systems perform beyond the sum of the parts and often in unexpected ways with emergent properties. How future technology users will face pervasive connectivity with the evolving ‘Internet of Things’ is an excellent example. The Royal Academy of Engineering observed that “A system is a set of parts which, when combined, have qualities that are not present in any of the parts themselves. Those qualities are the emergent properties of the system. Engineers are increasingly concerned with complex systems, in which the parts interact with each other and with the outside world in many ways – the relationship between the parts determine how the system behaves. Intuition rarely predicts the behaviour of novel complex systems. Their design has to iterate to converge on an acceptable solution. That solution might not be what the customer originally envisaged – aligning expectations with what is achievable is an important part of the design of systems and the design engineer has to work closely with the customer and other stakeholders.”

Engineers also need to ensure system outcomes such as: safety; reliability; robustness; interoperability; versatility; flexibility; and future growth are delivered in complex system markets. In terms of tactical actions, systems engineering is the field of engineering that according to INCOSE (the international professional body for systems engineering) aims to enable the realization of successful systems as defined by these intended outcomes. Eisner defines systems engineering as “an iterative process of top-down synthesis, development, and operation of a real-world system that satisfies, in a near optimal manner, the full range of requirements for the system“. Systems engineering is about managing reality, complexity, uncertainty, and increasingly innovation within budget, schedule and other project specific outcomes. ISO 15288 is the recognized standard for the systems engineering. In fact project management and systems engineering are becoming increasingly integrated as evidenced by the closer cooperation between PMI and INCOSE.

Formal systems engineering methods are described in INCOSE’s Systems Engineering Handbook employing processes, methods, and tools have evolved since the end of WWII to apply systems thinking initially in complex cold war military systems.  Firms in aerospace, defence, nuclear, and transportation regularly use systems engineering to manage complexity, safety, interoperability, and performance but as the world becomes more connected other industries need to learn and adopt these methods. It has only been recently though that other industries have become exposed to systems engineering methods.  Some industries have been more proactive than others but some like construction are finding it increasingly difficult to deal with complex infrastructure projects that involve novel technologies and system of systems. Unfortunately there has been limited talent transfer from the traditional systems industries in many jurisdictions, non-system industries adoption has been slow if there is little need to connect, some see the methods as too costly or difficult to apply. Most university engineering and management programs do not cover systems engineering leaving industry to learn and often relearn lessons in siloes. So stand alone industries need to consider whether they need systems engineering to deliver their value proposition in an increasingly connected and complex world.

Systems Thinking

Systems thinking or ‘big-picture’ thinking, is the key systems engineering mindset that takes a holistic view of the system, its environment, its users, its stakeholders, over its life time. Peter Senge defined systems thinking in The Fifth Discipline to be ” a framework for seeing interrelationships rather than things, for seeing patterns rather then static snapshots. It is a set of general principles spanning fields as diverse as physical and social sciences, engineering and management“. INCOSE UK define systems thinking to be “a way of thinking used to address complex and uncertain real world problems. It recognizes that the world is a set of highly interconnected technical and social entities which are hierarchically organized producing emergent behaviour“.

Most engineers are functional experts but as they assume greater leadership responsibility they often have to consider design implications in a broader context and begin to recognize the importance of systems thinking. Functional point designs without consideration for the broader system often lead to inferior outcomes. Engineering leaders in industries that are becoming more complex systems of systems therefore need to develop in themselves and in succession plans how to be better systems thinkers.

To ensure present day firms develop and sustain their competitiveness in the face of an increasingly complex world, the UK Royal Academy of Engineering suggests six principles that firms who leverage engineering capabilities should adopt to apply systems thinking:

  • Debate, define, revise, and pursue the purpose;
  • Think holistic;
  • Follow a systematic procedure;
  • Be creative;
  • Take account of the people;
  • Manage the project and the relationships.

A prior post looked at methods to sustain system thinking as the baby boomer generation retire in the traditional system thinking industries.

At the strategic level how can engineering leaders deliver returns from innovation investments in applying systems thinking?

Innovating in Complex Systems Markets

Rod Adner provided a powerful strategic approach for innovating systems in his book The Wide Lens by putting systems thinking in a business context and a form more usable by industry. Adner’s method looks beyond the execution of the firm’s innovation to consider co-innovation players and the adoption chain in the complex system market.  Co-innovation players are those firms or entities that need to innovate in order for the firm’s innovation to succeed. The adoption chain considers who else needs to adopt the firm’s innovation before full value can be achieved. Adner’s wide-lens steps are:

  1. Build a value blue print that illustrates the complex system market by network mapping of the key suppliers, intermediaries, complementors all leading to the end customer;
  2. Prepare a leaders/followers diagram to illustrate who of the players in the value blue print wins (or benefits) and who loses (and could resist) the firm’s innovation;
  3. Map first mover matrix to understand if being a first mover is an advantage or not;
  4. Considering the 5 levers of complex system market reconfiguration (ie. changes to the value blue print) to facilitate value creation by the firm’s innovation: what can be separated?; what can be combined? what can be relocated? what can be added? and what can be subtracted?
  5. Taking steps to sequence successful complex system market construction through such strategic actions as: minimum viable footprint; staged expansion; and system carryover.

By visualizing the complex system market using Adner’s approach engineering leaders can apply systems thinking that drives profitability, growth, and competitiveness.