A Referee Report on

“Deep Change- How Operational Innovation can transform your company”

Submitted By:

Term III

Submitted To:

Mr. Rabindra Silwal

Ace Institute of Management

When Dell entered the personal computer market, when all the other PC makers were focusing
on traditional brick and mortar, it started taking orders from customer through online system and
delivering directly to the customers. Furthermore, Dell offered customer the choice of their own
preference. This little innovation helped a lot in getting the market for Dell.

Michael Hammer talks in his paper titled “Deep Change” in HBR about how operational
innovation is one of the most important ways to transform a company and help attain
sustainability. He explains operational innovation and the effects it can have on business.
Hammer begins the article by telling the Progressive insurance story. The company’s growth was
based on substantial innovations in everyday operations, revealing their potential to produce
significant reductions in cost, increases in productivity, and improved customer satisfaction. The
company positioned itself by providing more for less. It was able to deliver better service by
lower price due to discovery of new ways of doing things. However, we can see that the case is
one sided as it gives important to operations and idolizes operations as the main activity to gain
success

Operational Innovation is the process of innovating the operational activities and following the
unconventional methods which helps companies to reduce the operating cost which make up a
major chunk of the total cost. The term operation improvement or operational excellence are
sometimes used as a synonym with operation innovation. However, it is necessary to note that
operation innovation involves finding new way to do the same things in better ways.

The author provides the view that operational innovation remains the task between many
departments and there is no separate group responsible for it and tracking it. All the line
managers are focused on their own departments leaving operational innovation to lag. With the
globalized and competitive business world, operational excellence and operational improvement
are not enough to stay ahead in the curve. Executives who know about the operational innovation
and know the barrier to it can really use such innovation to bring about competitive advantage in
the competition. However, looking at it from a different perspective, many companies are not in
the right place or time to move to a sudden innovation and leave behind the previous methods.
This sudden change may cost them more than just the small changes.
 Michael mentions in the report that most companies have been successful by focusing on specific
areas for innovation and working on those programs and creating a specific goal and focusing on
only that. However, these apply to well-structured companies. Many companies are not properly
structured and a lot of them could be in its early years or facing internal issues. Having one
specific goal is equal to having a myopic vision and not looking at the entire company from a
bird eye.

Hammer lists four ways that help us discover new ways, not just better ways, of operating:

i. Benchmark with companies outside your industry

ii. Identify the assumptions that constrain how you think about your work
iii. Turn special cases into everyday actions
iv. Rethink critical dimensions of work

It is necessary to understand that the list doesn’t give definite results but keeps a company
always wondering if they should continue or give up the change.

Operational innovations can either destroy competitors and shake up entire industries or it
can destroy the company itself. The author has mentioned some success examples in Dell,
Toyota, and Wal-Mart However, fewer than 10% of large companies have made serious attempts
to achieve operational innovation. Operational innovation alone cannot be attributed to the
company’s success. The organizational culture, business strategy, human resource policy
including operational excellence and operational improvement are also significant for the
company’s success. Luck and time can also be a major factor to influence the success. This talks
about the fact that it is not an easy process or a decision to make. The grass always looks greener
on the other side and companies need proper understanding and planning before deciding to hop
on board the organizational innovation train. Thus, the company should strive for regular
continuous operational excellence but should consider the demand and need of the innovation in
the market.