• Questions we will explore:
    • Individuals: Are the people good enough to succeed?
    • Organization: Will our organization have the ability to succeed at this task?
  • Goals of this module, to understand:
    • What can the organization do, and what it can not do.
    • Identify the resources, processes, and profit formula required to succeed.
    • Build the capabilities you need to grow.
  • Three factors (RPP)
    • Resources (tangibles, visible, can be hired and fired, bought and sold, depreciated or built – flexible and transferable – Resources are the things that are available.)
      • Technology, People, Products, Facilities, Equipment, Brands, Information, Distributors.
    • Processes (how resources work together to get the outcomes you need. To understand what a company can and can not do you need to understand processes. decision making, communication – inflexible; not meant to change – Processes tells you how to do it.)
      • Product development, Procurement, Market research, Budgeting, Employee development.
      • Process creation
        1. Task emerges and people need to work together to get it done.
          1. If fails, they re imagine the task
        2. Try task 1.1 execution again, if it passes, use it again… This creates a processes.
      • Processes that people don’t even think about it how to do it, they just do it, becomes the culture.
      • When people follow a process to do a task for which it was designed, it usually works efficiently.  But when the same efficient process is employed to tackle a different task, it often doesn’t work. In other words a process that becomes a capability in executing a certain task can be a disability in executing other tasks.
    • Profit Formula (any person in the company who is going to prioritize this over that. e.g. today I’m going to call customer A, instead of customer B…. based on profit formula. Very diffused, decentralized.. Criteria is critical, if asked to do something is not a lined with the cireteria you can see that the company can not do it. – Criteria in Profit formula tells you what a company can not do.)
      • Gross margin targets, ROI/ROA, thresholds, utilization goals, type pf orders or customers.
  • What your organization cannot do
    • Early in a company, all capabilities exists in the resources.
    • When a company grows, the ability shifts from resources to  to processes.
    • Do we have the resources to succeed, will processes enable us, can we prioritize?
    • Find the ability to do something is rooted, will tell you what a company can and can not do.
    • Good people, working in an organization that is not capable, are destined to fail.
  • NYPRO Healthcare
    • Management that has been around for 30+ years
    • Founded in 1955 Frank Kirk and Gordan Stoddard (50% to 100%)
    • Customers want “Lowest cost per cycle.” They pushed “high cavitation” within a tool, so they are able to extrude more parts in less time.
    • Gordan was not a formally trained engineer. His thing was understanding people and winning them over.
    • netstal machines were used.
    • Reources:
      • Technology: Nypro invested in and developed top-of-the-line equipment in injection-molded plastic manufacturing
      • People:
        • CEO Gordon Lankton, who had an innovative mind-set and attracted great talent
        • Strong general managers of each plant
        • World-class engineers
      • Facilities: Global plant network that allowed Nypro to be close to customers
      • Brand: Recognized name for high-quality injection-molded plastics
    • Processes:
      • Benchmarked plants against each other via a daily and weekly reports to spot areas for improvement (e.g. tool turnover time)
      • Strong base of central talent, but allowed innovation to come in through different plants
      • GM: Good to go out and see what others are doing, to “steal” and make your plant better.
      • Gordon’s weekly visits and person-to-person conversations to find ways to improve
      • Yearly General Manager meeting to gather and share best practices
    • Profit formula:
      • Criteria
        • Fewer, large customer accounts or small accounts with the potential to grow
        • High-volume, long-run orders that maximize machine utilization
        • Complex, technologically challenging orders with better margins.
      • Each machine was like a hotel room. If you don’t use it one night, you lost that revenue forever.
      • Sales team was off volume, engineering was off of profitability.
    • Here are some of Nypro’s strongest capabilities and disabilities (everything they did was geared towards the high-volume market):
      • Nypro organization can:
        • Deliver industry-leading efficient manufacturing
        • Complete high-volume programs with very sophisticated molding machines
        • Solve challenging manufacturing problems
      • Nypro organization can’t:
        • Deliver simple manufacturing with quick change-overs
        • Complete low-volume, short runs
        • Conduct fast prototyping
    • Nypro Dilemma
      • Gordan saw new operation in Japan
        • Operation in japan, built around small machines… 60% were running.
        • The machine caught his attention. it was a simple machine
        • Gordan thought there was a operunityu to gain new customers small run, contaminates, grindings and oils.
        • Easy switch over.
        • faster cycles
        • Less parts per hour
      • They created a novaplast (short run, simple products). After they decided to adopt the NovaPlast machine, Nypro’s leaders had three options:
        1. Nypro initial decision: Integrate 1-2 NovaPlast machines into several different plants
        2. Concentrate all NovaPlast machines into 1-2 existing plants
        3. Second choice: Build a new plant dedicated to the NovaPlast machines
      • They had problems with staff. they wanted to make it more complicated.
      • Sales got paid on volume, so it went against existing model.
        • Needed to create a new sales group for NovaPlast machines
      • Seems an odd way to impart a new tech. Not sure I saw the pain they were solving
      • Ultimately NovaPlast was killed
  • Charles Schwab and introducing an on-line trading platform eSchwab
    • Clay went from Merrill Lynch to Charles Schwab, because the latter cared for the type of client clay was.
    • Schwab was a low-end disruptor
    • Schwab decided to disrupt itself charging $79/trade for traditional, and $29/trade for on-line. They set the latter up as a separate business unit.
  • EMC – Merging competing products through an acquisition.
    • background
      • Core: information storage. 55%
        • Mid-tier (SMB/SOHO) 6%
      • Acquired data general clariion for mid-tier, two server model.
    • data general 20% direct, 80% channel, EMC 80% direct, 20% channel
    • They were going to move data general to EMC model… oh, oh.
    • Formed a separate sales force for Clariion 6% to 35%, with dell as channel partner.
    • Went from $400m to $4b product line.
    • VMWare was treated completely differently. $60m to $6b
    • Big company can kill it, or hug it so tightly it takes the breath away.
    • Focus on the people in acquisitions. Let the small company use the big companies resources when needed, but do not let the large company just use the little company.
    • What teaching like Clays are…Guide posts, warning posts, a way of thinking. Remember that values are non-negotiables, but culture should be flexible.
  • You can not disrupt yourself
    • You need to set up a different business unit, under the umbrella of the existing business
    • If sustaining then fold the innovation/conpany in.
    • if disruptive, allow it to operate separate.. If you fold it in, you will ultimately kill the innovation.
  • When companies succeed, sometime they need to develop new capabilities.. They need to be built independently of the old.
  • This can help us to predict when we need a new business unit, and when we need to craete a new one.
    • If a manager see that they need new resources, proceesses, and profit formula… then the game will be over.
    • You need to be looking out into the future.
  • Summary
    1. We need to think deeply to understand what an organization can and can not do. It tells use where we need to build abilites. telling use where to create new, of leverage old
      1. resources – flexible
      2. processes – inflexible
      3. profit model – dictates criteria to prioritize “this” over “that.”

Organizing for Innovation.pdfWorks Cited Organizing for Innovation.pdf