There has been a lot of soul searching in the U. S. about a perceived lack of innovation among domestic manufacturers. One sign U. S. manufacturers have trouble innovating comes from the management consulting firm Booze & Co.’s annual report on the 1,000 companies that spend the most on research and development. Last year, only one company among the top 10 R&D spenders (Microsoft) made the list of the top-10 most innovative companies. In a nutshell, Booze points out that a lot of companies spend piles of money on R&D that don’t result in innovative products.
In the quest for things to blame for this poor performance, Six Sigma programs seem to be one of the latest scapegoats. The case for Six Sigma as a cause of mediocre research is made by Navi Radjou, Jaideep Prabhu, and Simone Ahuja in a book called Jugaad Innovation, which outlines ideas for innovating more frugally.
What convinced these three business consultants that Six Sigma kills the innovative spark was 3M’s experience applying Six Sigma processes to its R&D labs in the early 2000s. By 2005, 3M’s share of revenues from new products had dropped from the 30% it had seen for decades to 21%. The reason: 3M engineers became risk averse and played it safe, the consultants say. The situation turned around when 3M rolled back the program and reinstituted an old practice of giving employees 15% of the their paid work time to pursue pet projects without worrying about whether such efforts could be immediately commercialized.
But Six Sigma is just a symptom of what ails R&D in most companies, the consultants insist. It is a manifestation of an approach to R&D structured so that it lacks flexibility and is insular. Companies that run R&D under rigidly structured schemes like Six Sigma seem to think that innovations can be scheduled, say the consultants.
Another problem: Western companies often measure innovation the wrong way, by the number of patents they file. Big mistake, the consultants claim. The patenting process costs a lot, is time consuming, and often mires the patent holder in lawsuits. Better to not bother with patenting at all. Instead, focus on commercializing developments fast rather than trying to erect barriers around them.
Maybe so, but having heard these arguments, I am convinced the real obstacle to innovation in many companies lies elsewhere: In the ranks of top management. Even when an innovative product gets developed, bottom-line oriented managers are likely to axe it before consumers can venture their opinion. That’s because ivory-tower managers often don’t know their own customers, so the only thing that can convince them an idea is good is a spreadsheet full of data. But there won’t be any such data for something that is a real innovation. (After all, the market for MP3 players was microscopic prior to Apple’s invention of the iPod.) And by the time there’s enough evidence to justify an innovative project, it may be too late to commercialize it.
Radjou, Prabhu, and Ahuja seem to agree. They say top management’s overreliance on formal data shows why 90% of all consumer-product R&D goes into tweaking existing offerings, and why big R&D spenders leave the door open to competitors with truly innovative ideas.
— Leland Teschler, Editor