Change Leadership: Improve, Exploit & Innovate

Improve systematically.
Whatever an enterprise does, both internally and externally, needs to be improved systematically and continually: the product or service, the production processes, marketing, technology, the training and development of people, and the use of information. And it needs to be improved at a preset annual rate. In most areas, an annual improvement rate of 3% is realistic and achievable.

However, continuing improvement requires some major decisions by an organization. It must answer the questions "What constitutes performance in a given area? What is quality in a product? To what extent can improvement be defined only by the customer?" Defining performance in services is often especially difficult.

Continuous improvements in any area eventually transform the operation. They lead to product innovation. They lead to service innovation. They lead to new processes. They lead to new businesses. Eventually continuous improvements lead to fundamental change.

Exploit success.
It is only 70 or 80 years since the monthly report was invented and introduced into most business organizations. Almost without exception the first page of this report presents the areas in which results fall below expectations or in which expenditures exceed the budget. It focuses on problems.

Problems cannot be ignored. But to be change leaders, enterprises have to focus on opportunities. That requires a small but fundamental procedural change: a new first page to the monthly report, one that precedes the page that shows the problems. The new page should focus on where results are better than expected. As much time should be spent on that new first page as traditionally was spent on the problem page.

As is the case with continuous improvement, exploitation of success will, sooner or later, lead to genuine innovation. There comes a point when the small steps of exploitation result in a major fundamental change--that is, in something genuinely new and different.

Innovate systematically.
Innovation is the area to which most attention is being given today. It may, however, not be the most important one--organized abandonment, continuous improvement, and exploiting success may be more productive for a good many enterprises. And without those policies, no organization can hope to be a successful innovator.

But to be a successful change leader, an enterprise has to have a policy of systematic innovation.

And the main reason may not even be that change leaders need to innovate--though they do. The main reason is that a policy of systematic innovation produces the mind-set needed for an organization to be a change leader. It makes the entire organization see change as an opportunity.
That requires a policy of systematically looking, every 6 to 12 months, for changes within the areas that I call "the windows of opportunity." (For detailed descriptions, see my book Innovation and Entrepreneurship, HarperCollins, 1985.) Those windows include--

1.The organization's own unexpected successes and unexpected failures, and the unexpected successes and unexpected failures of the organization's competitors.
2.Incongruities or dissonance between what is and what "ought" to be, or between what is and what everybody assumes--especially incongruities in processes like production or distribution, or incongruities between the efforts of an industry and the values and expectations of its customers.
3.Process needs, such as a weak link in one of the organization's internal processes.
4.Changes in industry and market structures.
5.Changes in demographics.
6.Changes in meaning and perception. If, for example, general perception changes from seeing the glass as half full to seeing it as half empty, there are major innovative opportunities.
7.New knowledge.

A change in any one of those areas raises the question "Is this an opportunity for us to innovate?" Innovation can never be risk free. But if innovation is based on exploiting what has already happened, it is far less risky than not exploiting those opportunities.

By Peter Drucker

Sponsored By: Harvard Business School Press