Sunday, July 24, 2011

How GE develops innovation leaders through the LIG program

GE launched Leadership, Innovation and Growth (LIG) program in September 2006 and ran it till September 2008, mostly in Crotonville, epicenter of GE’s learning & development. Altogether 2,500 senior managers in 260 teams went through this four day program. The purpose of LIG was to make innovation and growth as much of a religion at GE as Six Sigma had been under Jack Welch. On day four the course wrapped up with a plenary session at which each team had 20 minutes to deliver a presentation to Jeff Immelt, GE’s CEO. When Immelt was asked why he devoted so much time to LIG, he said, “LIG gave me a way to drive change and develop leaders at the same time”. What happened at LIG? Here is an overview on what GE Power senior management team went through at LIG. (source: An excellent HBR article “How GE teaches teams to lead change” by Steven Prokesch, a senior editor of HBR who was invited to attend one of the LIG programs in October 2007).

LIG program is a brainchild of Susan Peters, GE’s VP of executive development and Daniel Henson, then CMO. Before attending the LIG, the senior managers at a business would assess their team’s success in creating a climate supportive for innovation. The assessment would generate an innovation dashboard that would be used during the program. During the program there would be talks by external gurus as well as internal role models. A large amount of time – about 15 to 20 hours – was set aside for breakout sessions. What happens during these breakouts?

During the first breakout on the morning of day one, the Power Gen team guessed and the learned their actual team scores for the 360 degree review of their growth values. This triggered a reassessment of almost every aspect of their business. Some of the questions that got raised by the team were: “We’re not as good at anticipating major trends as we ought to be”, “Is solar a good place to be?” or “Renewable energy, clean coal, nuclear – all are going to be policy dependent. Are we good at this?” The reassessment continued in this manner throughout the four days.

The reflections generated insights – may be the old rules don’t always apply; may be limits on carbon emissions and tax incentives for clean, renewable power matter more. That sparked a conversation about GE’s ability to understand and influence government policies. Managers agreed that it was deficient and that beefing it was therefore a priority. In the next breakout session the Power Gen managers talked soberly about the state of their core. Unless the operations are strengthened it is difficult to free up time for innovative thinking.

At another breakout session the team assessed their innovation portfolio by putting each project in one of the three boxes, a framework created by Prof. Vijay Govindarajan: incremental (aimed at strengthening the core), adjacencies (taking existing technologies to new markets or taking new technologies to its existing markets), nonlinear shifts (discontinuous shifts in technology or markets with radically new products or business models).

The final LIG session involved the reports to Immelt. Power Gen team led by Bolze talked about their biggest takeways from the program, their 10-year projection of revenues (from $13 billion to $40 billion with renewables’ share going from 30% to 50%), and a vision statement – “Powering the world responsibly”. They committed themselves to strengthening the core. They confessed they needed to get better at looking around the corners to spot nonlinear shifts. They listed the capabilities they needed to build: regulatory expertise, faster product development, creating emerging-markets products “in country for country”. They vowed to lighten up a bit and become more playful, a characteristic of innovative companies. As they spoke Immelt asked questions and shared observations.

Within a few weeks after the LIG session Steve Bolze, as required, sent a commitment letter to Immelt, laying out the measures his team would take to increase the pace of organic growth. Such a letter becomes a living contract between Immelt and the team.

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Saturday, July 2, 2011

Managing innovation: story of Tesco India

Last week I got an opportunity to listen to Sandeep Dhar, CEO of Tesco Hindustan Service Centre (HSC) on how Tesco India manages innovation at CII Innovation Forum. Tesco is the third largest retailer in the world by revenue and the second largest in terms of profits. Tesco HSC is responsible for standardizing all back-office processes impacting Tesco business globally and it currently employs 4000 associates. Sandeep demonstrated with examples how Tesco has made innovation an every day practice. How is it different from other places? Let’s see in this article.

Idea qualification: At Tesco, like everywhere else, every idea needs to have a business case which typically means cost saving for an idea from HSC. However, at Tesco, it needs to meet two additional criteria: One, it should improve or maintain customer experience. Two, it should simplify or at least maintain employee work complexity. Several ideas end up getting dropped for not meeting these criteria.

Continuous improvement track: Small ideas are taken seriously at Tesco. In fact, if an idea can reduce average time taken to handle a customer at the TIL by one second, it saves the company 2 million pounds a year in UK alone. How to keep people motivated for doing continuous improvement? At Tesco HSC this is ensured by how the team KPI or SLAs are set. For example, there is a team in India which receives calls when particular equipment like a refrigerator or air-conditioning unit is malfunctioning. Team’s job is to call the relevant vendor of the town and the vendor would send people to the Tesco store for servicing. Typical KPIs of such call-centric team would be percentage of calls serviced in 90 seconds, percentage calls tracked to closure etc. With these metric the improvements would be directed towards improving the efficiency of handling calls. They deliver limited value. Tesco changed the KPI of the team to “reduce the amount of money Tesco spends on maintenance”. With this the orientation of the team changed. They started looking into the reasons for equipment failures, some of the early warning and on preventive maintenance measures. Two years after this change the maintenance budget has come down by 40 percent.

Another team in India is responsible for making payments for the traffic violations of the truck drivers carrying Tesco supplies. Typical KPI would be timely payment of the fine and the accuracy of the payment. This KPI was changed to “figure out ways to reduce the fine”. One of the team members visited the traffic authority web site and found out a mechanism to challenge the fines. He and a couple of his colleagues started looking into the data and started challenging the fines selectively. At times the challenge would be successful, at times it wouldn’t. Then the team went one step further and analyzed the reasons for the traffic violations. They identified some commonly made mistakes and sent the information to the drivers. They were able to identify drivers who were more prone to making traffic violations.

Problem solving track: This is the track where the businesses are asked to share some of their chronic problems. Tesco India sets up cross functional teams to work on them. One such problem was related to Tesco’s online website. Tesco is world’s largest e-grocer. The web site has a favorites list which currently includes all the items a customer had shopped in the past. The drawback of this mechanism was that the favorites list becomes very long and inconvenient for the shopper. A Tesco India team worked with IISc experts and came up with a statistical algorithm that predicts what a shopper might be shopping on a day. For example, if you have purchased 3 gallons of milk on Monday, it would not show milk in favorites on Tuesday. But it may show it on Friday. This has resulted in reducing the favorites list to one third of the original size. This has been piloted and going into production.

In-store work experience: All managers in India go through Tesco Week in Store Together (TWIST) program whenever they visit a country with Tesco stores. For Sandeep a TWIST a year is mandatory. He said if he doesn’t spend a week working the store, his KPI goes down by a notch. When Sandeep spends a week in the store, he may spend a day at check-out counter, another day stacking products, third day he may be doing stock count, on the fourth day he may be going out with the delivery van.

Retail test lab: In 2007, Tesco HSC established retail test lab where recreated all hardware environments that exists in different Tesco stores. For example, sales counters and handheld devices etc. When IT develops a software it is tested in this simulated environment which improves the reliability of the deployment.