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Reverse Waterfall Strategy Delivers Powerful Innovation

A "reverse waterfall" strategy solves this dilemma and delivers the best of both worlds in terms of meaningful innovation, cost savings and improvements on an end-to-end basis

11Jan

When a company stops innovating, it stops growing. But precisely where does that innovation come from? In some cases, a single individual becomes the 'heart and soul' of a company, directing and inspiring growth and innovation. And for a while, that works, but it's simply not sustainable. By the same token, strict 'top-down' models tend to be limited in scope, and not get the feedback needed from front-line stakeholders to be realistic, especially when it comes to innovative thinking.

A 'reverse waterfall' strategy solves this dilemma and delivers the best of both worlds in terms of meaningful innovation, cost savings and improvements on an end-to-end basis. Setting priorities is naturally the domain of the C-suite, but once those priorities are set, they are sent down the line throughout the organization. With proper implementation and enough support from higher levels, what happens next is nothing short of phenomenal. Armed with support, resources, empowerment and defined priorities, ideas from the 'shop floor' will flow back upwards, be captured, implemented and measured for impact.

The result is that those great ideas that often come out of the departmental level actually get heard by those that can make it happen. And those innovators don't need to 'go rogue.' They will, under this strategy, have the guidance and support of the C-suite, and those great ideas will be more likely to be integrated into a broader strategy. This holistic approach to business innovation has been shown to deliver solid, measurable results and meaningful improvements across the board. In one case in the medical device industry, this strategy resulted in a six million dollar cost savings to one division over a six-month period.

Yes, the strategy works. And yet as is often said, 'The devil is in the details'. Like any strategy, the 'reverse waterfall' strategy’s success depends on several factors including thoughtful leadership, overcoming barriers to teamwork, and implementing the right type of progress metrics that measure not only results but the key drivers of success.

Leadership

Leadership is defined in many ways. Fundamentally, leadership is about direction, motivation, and measurement. Effective leadership can accomplish these elements through an equal emphasis on results and relationships. Thoughtful leadership includes an understanding that there are many in the organization that do not think and act as the organization’s leaders think and act. It does not matter within which industry category your company falls. What matters is that leaders appreciate that when they set expectations of results for the company, many manufacturing folks, research scientists, or service personnel may very well not understand how the expected results translate into work they do in their jobs every day. When this happens, the expected results can be misunderstood and thus not achieved. Thoughtful leaders consider these potential barriers to success and ensure that the organization understands the 'what' and 'why' behind the expected results. In addition, these leaders must facilitate the 'how' to achieve the results through engaging and empowering the very same people, at all levels of the organization, who are expected to achieve those results.

A reverse Waterfall strategy and process to facilitating innovation does, in fact, leverage the knowledge and talents of the people in your organization who are most familiar with what is done today. With the help, guidance and empowerment of the organization's leaders, those individuals may have a significant impact on implementing improvements going forward.

Diagnostic assessments can provide sound guidance on the size of the opportunity for change and the effort/risks involved in creating change. At the same time, diagnostic assessments are only as good as the understanding and experience of the people doing the work. If people do not understand the objectives or don’t have the experience to know how to use diagnostics to identify issues and gaps, you will miss critical information and could end up attempting to solve the wrong issues.

When your organization’s quest for innovation focuses on only one of the critical components of people, culture, process, or structure, you can miss key ideas for innovation. In order to focus efforts on all four critical components, leadership must be open to addressing all four starting with engaging the one component that touches all of them – People. Properly engaging your people involves an equal emphasis on results and relationships!

Silos - The Hidden Barriers

Teamwork, the old 'all for one and one for all' call to action, can be difficult to achieve under the best of circumstances. Resistance and other barriers to change make gaining momentum difficult, and unlocking innovation at all levels frequently include process issues. Most organizations start with the assumption that process issues are the biggest barrier to achieving expected results. In fact, experience informs us that this is where most organizations start to attack the lack of innovation. The risk with this approach is that the change initiative starts and ends with tactics to 'fix what’s wrong with our processes'.

The reality is that there are 'hidden' barriers beyond process steps that are not addressed. The hidden barriers that frequently prevent companies from unlocking the knowledge and experience of its people to optimally 'fix processes' in a sustainable way are cultural and structural barriers. If an organization is structured such that units operate relatively autonomously from one another, a lack of appropriate communication between operating units can and will lead to breakdowns in process and quality. We call these barriers 'silos'. 

There are a number of silos that prevent organizations from being effective and some of them are intertwined with culture. For example, there are functional silos, hierarchical silos, and constituent silos. When an organization operates in silos, breakdowns can occur in the handoffs between processes anywhere along the product or service development and delivery spectrum. The reverse waterfall strategy and process recognizes these potential hidden barriers and takes them into account through the planned engagement of all levels, departments, functions, and hierarchy of people involved in meeting the expected results outlined by management.

Defining expected results is one thing. Achieving expected results is another. For the Reverse Waterfall strategy to be effective priorities need to be communicated to every unit in the organization in each unit's own terminology. Further, frontline employees, shop floor, researchers, etc. must be enabled to help the organization achieve its goals and priorities. This in turn translates into two key strategic implementation questions: Do front line employees need special training and/or technology to effectively contribute to the organizational objectives? If the answer is yes, these needs must be addressed in concert with the rollout of communiques on targets and metrics. The second question is how do managers ask frontline workers to identify problems and issues within their range of control and not cause chaos throughout the organization?

The answer is in the implementation of the strategy. The key is providing frontline workers and their managers with ownership of the innovative process. Once leadership has translated and communicated priorities to the entire organization and any educational and technological issues have been rolled out, leadership then requests ideas for solutions that meet or exceed objectives. These requests authorize and empower every employee to identify, within their range of control (work responsibilities), any issues and offer their manager possible solutions. Managers at all levels should facilitate the process of identifying, quantifying, and prioritizing potential solutions. For those initiatives for innovation and improvement that are the priority, work teams that transcend any silos should be engaged to implement recommendations and be held accountable for results. The people in your organization should be empowered to be able to repeat this process on a continuous basis as needed.

Financial bonuses are always appreciated but are not always necessary. Recognizing and empowering employees are the keys to this strategy's success.

Measurements of Results and Drivers

Metrics are a critical element of accountability and progress. Most organizations/companies understand the need for metrics. Without metrics, it is impossible to know what the target is or what has been achieved. There are two types of metrics: measures of drivers and measures of results. Knowing which to use when and properly developing the correct metrics is not as simple as it sounds. Many measures of business today are required measurements of results, and while necessary, these metrics only tell half the story. Typically by the time results are known, time and money has been wasted. Measures of the drivers of your business are more meaningful predictors of results. To understand and interpret drivers allows you to be more proactive, and to prevent wasting time and money – and the result is maximized value, and a more proactive outlook. The process of how to identify, report, and prioritize measures of drivers is something that Phoenix Strategic Advisors has helped many companies in a number of diverse industries and the subject for a separate publication dedicated to that topic.

Real Life Example- Medical Device Manufacturer

A medical device manufacturer sold a product that was one of a hospital's highest cost disposable items. Medical staff at a hospital would open the product which included a machine with attached tubing, all sterilized and ready to go. In many cases the attached tubes had kinks in them making them unusable, leading to a large number of returns and high replacement costs. The solution included for key elements:

- The right team: The packaging engineers, manufacturer of the tubes, line packing employees

- The right metric: Product returns by reason code

- The solution: Packaging redesign identified by the team

- The result: Six million dollar cost savings to one division over a six-month period and improved customer satisfaction/

In this case, innovation came not only from frontline workers, but in a box. Who knows what innovative ideas your frontline will come up with given the opportunity? You hired your people. Let them work for you!

Sources

Charlie Leichtweis has over 30 years of Global, Strategic, Operational, and Financial leadership experience with a record of success in helping organizations achieve sustainable profitable growth. He is a Partner with Phoenix Strategic Advisors who most recently served as CEO and President of The Testor Corporation. Prior to that, he was the COO of North American Wholesale Group of Blyth Inc, the CFO of Rand McNally Book Services, and the CFO and Comptroller of Rust-Oleum. In addition to success in industry, he has also successfully led engagements for clients in a consulting role as President of Process Solutions Inc.

Charlie has significant experience in strategy development and execution, alignment of strategy with process, business transformation, driving growth, and creating a culture of continuous improvement. His strengths and track record of proven success include business planning, brand management, customer intimacy, innovative new product development, improving margins, and supply chain optimization. His leadership background includes a balance of domestic/global, marketing/finance, B2B/B2C, Public/Private companies, acquisitions, divestitures, and process/people experience. Charlie has also served Boards in a number of capacities.

Charlie is co-author of a book on business intelligence and analytics titled “QlikView Your Business.”

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