Many companies are striving to transition from industrial, process-centric thinking to an innovative, experience-centric approach. However, only a few succeed. A major obstacle is often entrenched management structures, particularly in how they handle failures. Previously viewed as detrimental, failure now plays a central role in organizational growth, yet it remains a challenging aspect during this transitional phase.
Why is this so?
In the process-centric world, performance was primarily measured by cycle times, efficiencies, defect-free production, and stable operations. Employees, seen as operators, were expected to repetitively perform tasks with decreasing error rates over time. Hence, performance evaluation was heavily based on the rate of defects and the speed of task completion.
So, what’s the problem?
Enter the experience economy. Here, innovation and disruptive thinking are redefining management. Digital technology is leveling the playing field, and global connectivity is opening new markets. Companies that deeply understand their customers and offer relevant products and services are the ones reaping substantial rewards.
How does one gain such deep customer insights?
Through experimentation. Rapid digital experiments, in particular, are enabling companies to forge new competitive edges. As a result, experimentation has become a cornerstone of modern organizations, playing a critical role in fostering innovation.
However, experimentation by nature involves the unproven and the uncertain. It’s a process of trial and error that offers valuable insights. In today’s fast-evolving business landscape, experiments need to be conducted swiftly, and organizations must adapt and learn from them quickly.
When experiments don’t produce expected results, it’s crucial to move on promptly. The ‘Fail-fast, Learn-fast’ mantra epitomizes modern performance metrics.
While failed experiments and hypothesis testing lead to new insights and open fresh avenues, they also demand significant support, which is where individual and team performance comes into play.
Employees must perform at a level that enables rapid experimentation. Drawing a parallel with scientists, who persist in their efforts despite frequent failures, employees in innovative and disruptive businesses should view themselves as business scientists. Embracing failure as a part of the experimentation process, they learn and develop insights that can offer competitive advantages.
Thus, just as scientists are not judged solely on cycle times and efficiency but on their experiments and the insights they generate, innovative companies need to radically shift their performance metrics and management structures to reflect this new paradigm.
Now, it becomes clear why truly innovative organizations cannot rely solely on traditional process efficiency methods. Embracing innovation requires more than just incremental changes; it demands a fundamental transformation of your management systems and performance metrics. If your organization aspires to be at the forefront of innovation, it is imperative to rethink and revamp these structures. This shift is not just a choice but a necessity to thrive in the dynamic landscape of modern business. By doing so, you set the stage for a culture where experimentation and learning are not just accepted but celebrated as drivers of future success and breakthroughs.
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This blog was inspired by a recent conversation with an industry colleague who is still trying to measure and manage their organizational performance in terms of cycle-time, efficiency and total cost of ownership.
Is your organization pursuing innovation? Are your innovation initiatives core to your business? How are you integrating innovation and critical thinking to your main management thinking?
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