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CHOI Bong

Innovation: the Art of Retooling the Tool

CHOI Bong

Aug. 16, 2006

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Innovation is an act of introducing new methods and ideas. The term derives from Latin word nova, meaning "new." Korean word for innovation is "hyoksin," a combination of two Chinese ideographs "hyok" and "sin," the first denoting the process of tanning animal skin for making leather and the second one meaning "new." So together, they form a single noun ""hyoksin" meaning "change" or "to change" or "innovate" what exists into something new, like turning the skin of animal into usable leather.

Broadly defined, innovation means changing the style of management. And management innovation, like everything else, has evolved from period to period, country to country, as corporate management style naturally responds to changing environments surrounding it.

The basic concept of management innovation first arrived in the early 20th century, evolving through four distinct stages. In the first stage -- in the first half of the 20th century -- the basic concept and tools for management innovation were identified and established. Frederick Taylor's concept for a scientific management is seen as the first innovative activity in the history of management science. In 1898 he conducted a landmark study on improving productivity in the steel industry. Using Bethlehem Steel as his laboratory, Taylor tested the company's best coal shovelers to determine how much material they could move. He found that when a shovel loaded 21.5 pounds, it reached the highest level of efficiency. The result: the average volume of coal shoveled per day by all the workers at Bethlehem Steel rose from 16 to 59 tons. At the same time, he could reduce the number of yard crew from 500 men to 140 men for this increased productivity.

Taylor 's idea influenced the development of another scientific method for mass production. Walter Andrew Shewhart, a physicist from Bell Telephone Laboratories, introduced the idea of statistical quality control (SQC) in 1931.

The second period of evolution -- from the 1950s to the 1970s -- is marked by a movement among the Japanese companies for management innovation. After World War II Japanese companies, concluding that statistical methods played a significant role in the US defeat of Japan, invited William Edwards Deming and Joseph Moses Juran, the two US gurus of quality revolution to teach SQC methods in Japan.

Their teaching was so successful that in 1951, the Union of Japanese Scientists and Engineers created the Deming Prize for excellence in innovation, naming the award in honor of Deming and awarding the honor annually to Japanese companies with the best innovation techniques. Japanese companies continued to develop a variety of innovative methods based on SQC until they developed their own concept of Total Quality Management (TQM). From there, they went onward to develop the concept of Total Productivity Maintenance (TPM), maximizing the efficiency of facility in the car-making industry.

In the third period of evolution from the 1980s to early 1990s, American companies -- stung by dramatic progress in quality innovation achieved by Japanese companies -- introduced a variety of their own innovative techniques. Taking Japan's example to heart, the US government started promoting the importance of quality innovation on national scale, going so far as to institute Malcom Baldridge National Quality Award in 1987, which, one might say, is a US equivalent of Japan's Deming Prize.

It was at this period that innovation methods were expanded to a variety of business areas, whereas in the past, innovation techniques were directed mostly at enhancing efficiency in the manufacturing industry. For example, the idea of Business Process Reengineering (BPR) was introduced in early 1990s, to drastically improve business through a concept called process reengineering. Soon, BPR was being used in service business.

Motorola created the 6 Sigma formula in the mid 1980s. It was suffering from a product defect rate of over 1,000 times that of its rival firms, and was spending 2-10% of its annual sales to deal with this problem. Robert Galvin, its Chief Executive Officer, announced a goal to reduce the annual cost of poor quality products to half the original amount. The 6 Sigma concept was developed to reach that target, and its 6 Sigma campaign helped it win the first Malcolm Bridge Award.

By focusing on quantity at the expense of quality, both the public and private sectors in the US have committed mistakes. In Japan , however, a sustained management innovation was steadily strengthening its corporate competitiveness. When NBC TV on June 24 1980 first aired a documentary called "If Japan Can, Why Can't We?," it created a sensation by showing how Japan captured the world markets for electronics and automobiles.

In the final, fourth period from the mid 1990s to the present, all previous innovation techniques were integrated into the 6 SIGMA formula. GE made a valuable contribution to this integration process. Its farmous CEO Jack Welch, who introduced the 6 sigma in the mid 1990s, took the lead in implementing it in his management. GE used it in its service and research areas. Later, the 6 Sigma was combined with other methods of innovation to achieve a synergy effect. As GE began producing good results, leading companies all over the world started adopting this method.

Tools of innovation evolve with time. But they need to meet the following requirements to be successful: leadership, the role of group in charge of innovation, communication, training and education, utilization of information, customer satisfaction, and relationships among employees. Each of these tools has its strength. Old tools as well as new ones can be useful. The important thing is to use these tools efficiently. He's a poor workman indeed who blames his tools for his problems.

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