Genchi Genbutsu

Innovation is a much used term these days in enterprise meeting rooms. I have maintained for some time now, in a few past blog posts, that most of time incremental improvements get termed as innovation, which is quiet sad. As with innovations, incremental changes too cause disruption and present a change management issue that is not trivial. Innovations, unlike incremental changes, significantly alter lifestyles, make certain parts of the eco-system redundant and almost always puts someone or something definetly out of business or commission.

In the banking and financial services space I have seen very little innovation happen in the last 5 years. The last innovation was the brought in by the dot com boom, where people could bank, pay, purchase and help themselves thru self service using internet banking and on-line portals from financial services providers. This has put stress on the incumbent dis-intermediation business models to the extent that some have folded up. I wait for the day to see this happen in insurance industry, where the dot com's today are an additional step adding to the incumbent new business sourcing process for most of the insurance products, barring a miserly few. The reasons for this, is material for maybe another blog post at a different point in time. I am sure, some of my friends from insurance companies will be a bit upset for me having said this.

There are those within the enterprise who are waiting for that dream, that next big idea, something that has not been done before, something unique. Ideaologies that bridge the enterprise vision with what the customers would accept, are more likely to come up with innovations that might work. While one might fight to death on diversity of views w.r.t definition of innovation, one tends to quickly agree to the view that its not about what customer's thought they wanted and most definetly its not about telling the customers what they ought to want. While the latter happens quiet frequently when strategy consultants and IT companies engage with enterprise CIOs!

Some companies in the non-hi tech space, have innovation centres and innovation themes to motivate people to take time away from day-to-day hustle-bustle and come up with new ideas. I wonder how innovation centres, specially in the non-hitech space, measure their performance. I wonder what sort of a yardstick is used to measure their performance and how do they get rewarded at the end of the year. If the innovation centre was belting out one successfull idea a year, we would have seen some awesome stuff coming out from enterprises in the last few years, which is not the case.

In my view the one thing that an innovation department or an innovation center enriches itself with, provided they have a structured approach to the fabric of their life, is validated learning. Without a structured or a framework approach, you would have learning, not validated learning. Companies that adopt lean approach to innovation as a framework and test hypothesis as a structured methodology, gain validated learning. I feel that the innovation centres should not worry about how much stuff they are actually building, but rather measure the amount of validated learning they are accumulating. Learning gained by virtue of exploring ideas directly with the customers are invaluable.


This gives fantastic insights into customer behaviour that could be key to the current idea's success or could break the interia around junking the current idea and exploring a new one. The famous example of this approach was the manager entrusted with the design and development of the Toyota Sienna minivan. He undertook a staggering 53,000 miles roadtrip across US, Canada and Mexico, observing and talking to minivan customers and sometimes driving it himself. The outcome was validated learning! Genchi Genbutsu, as the Japenese say, is the Toyota way to do things!

Another important observation is that not all such endeavors succeed. Successful people have always credited lady luck for putting them in the right place at the right time. For every successful one in the right place at the right time, there were others too, in the right place at the right time, and did not succeed. The difference then has to be that successful people had the foresight, ability and tools to discover what works and what is misguided. Validated learning arms you with this precious treasure, so that you could decide to persevere or pivot; as Eric Ries puts it in his book, The Lean Startup.