(By Matthew E. May)
“The project demanded rethinking the entire concept of what automotive luxury performance meant. And one by one, the innovations came. Many mechanical components were completely redesigned. For example, the propeller shaft, originally in two parts connected by an angled knuckle, was replaced by a perfectly straight one, enabling a nearly silent cabin.“
I’ve written before about the science that helps explain why and how constraints and limits, often in the form of intelligent, well-set stretch goals, result in more creative solutions.
Too often, though, managers set what appears to be a good stretch goal, only to discover that it did not produce the hoped-for innovative thinking. One common reason for this is that the goal was in fact not “stretch” enough. When I ask executives what they consider “stretch,” I commonly hear about 5% to 10% increments in improvement.
That’s not stretch enough, because a 5%-10% improvement often translates to people working harder and longer. A 25% improvement, though, while audacious and arduous, can rarely be met simply by sweating more. It demands innovative thinking.
Many executives are afraid to set such a high bar, however, for fear that some other area of the business will be compromised. That’s a very real danger. But there’s a technique that prevents compromise: intentional goal conflict.
To illustrate how intentional goal conflict can product breakthroughs, consider these two examples of innovation — one product, one process — drawn from the annals of innovation at Toyota:
1. Product Innovation: The Lexus
When Toyota’s Ichiro Suzuki, chief engineer for the secret project that would become the first Lexus, issued the challenge to produce a luxury performance sedan that would beat the best luxury sedans — BMW 735i and Mercedes 420SEL — across the board in comfort, styling, performance, handling, cabin noise, aerodynamics, weight, fuel efficiency, and cost, the reaction from 1,400 engineers and 3,700 designers was unanimous: Impossible!
Suzuki’s goals included a top speed of 155 miles per hour (735i and 420SEL topped out at under 140), 22.5 miles per gallon (735i and 420SEL got less than 20), a cabin noise level of 58 decibels at 60 mph (735i and 420SEL were over 60), and an aerodynamic drag of 0.29 or less (735i and 420SEL were over 0.32), all in a vehicle weighing 80 pounds less than the 3,880-pound 735i.
Not only were the goals impossibly high; they all conflicted. For example, greater speed and acceleration conflicts directly with fuel efficiency, noise, and weight, because higher speed and acceleration require a more powerful engine. A more powerful engine is a bigger and heavier engine, and so it makes more noise and consumes more fuel.
But Ichiro Suzuki’s war cry was naukatsu, Japanese for “never compromise.”
The project demanded rethinking the entire concept of what automotive luxury performance meant. And one by one, the innovations came. Many mechanical components were completely redesigned. For example, the propeller shaft, originally in two parts connected by an angled knuckle, was replaced by a perfectly straight one, enabling a nearly silent cabin.
Contradictions began to be reframed as complementary. For example, aesthetics and aerodynamics could complement each other, by fitting window glass and door handles into the metal itself, producing a cleaner look and better airflow.
When the Lexus LS400 made its debut in 1989, it trumped the BMW 735i and Mercedes 420SEL in every category rated by Car and Driver. And for $30,000 less.
2. Process Innovation: Supply Chain
Toyota’s North American Parts Organisation, an auto parts distribution division serving 1,200 retailers, accomplished a similarly impossible mission not long ago in their supply chain processes.
A newly-appointed general manager set a three-part stretch goal for the $2 billion dollar unit: reduce operating costs by $100 million, remove $100 million of inventory from the supply chain, and achieve a 50% improvement in customer service. She stunned her eighty or so senior managers by telling them she wanted these goals met in three years.
Again, cries of “Impossible!” rang out.
And again, no compromise. Putting their heads together, the managers arrived at ten key objectives that needed to be met in order to accomplish the mission:
- Reduce inventory by 50%
- Decrease backorders by 50%
- Reduce packaging expense by 50%
- Reduce damage by 50%.
- Increase throughput by 25%
- Improve safety/decrease errors by 50%
- Increase space utilization by 25%
- Decrease landfill usage by 25%
- Reduce freight costs by 25%
- Decrease lead time by 40%
These targets were audacious, to say the least. Such a high bar had never been attempted in the division. But the more aggressive targets actually engaged people’s brains in new ways and forced them to rethink and redesign processes.
The real secret, though, lies in a hidden dimension to how the goals were set. The ultimate mission of the initiative was to optimize the entire supply chain, but there are inherent conflicts existing between and among the various natural functions of any supply chain. The real art of the strategy was in recognizing those tensions, calling attention to them, and capitalizing on them to power new thinking and drive collaboration.
At first glance, the list of ten objectives seems like a simple master wish list. But take a second look. See if you can spot the tension points.
Here’s a hint. Take a look at the first two targets, inventory and backorders. In most supply chains, they’re opposite sides of the same coin. Increase inventory, and backorders drop. Decrease it, and backorders generally rise. So management brilliantly, yet counterintuitively, paired the two, pitting one against the other in order to generate creative tension.
If you look back at the list above, you’ll see that the ten targets are really five pairs of two conflicting goals. This simple graphic helps visualize the pairings:
Not all of the stretch goals were met, but the organization came close enough: $100 million in cost savings, $90 million taken out of inventory, and nearly 40% improvement in customer service.
These two examples illustrate why you want your team to believe that their reach can and should exceed their grasp. “Impossible” and “out of your mind” can signal impending breakthrough. Innovative thinkers thrive on seemingly impossible targets. They hold the tension between conflicting goals, and use it as creative fuel.
After all, breakthroughs demand something to break through.