Referee Report on

Deep Change:

How Operational Innovation Can Transform

Your Company

Submitted by:

Dipin Pradhan

Trimester IV

MBA

Submitted to:

Mr. Rabindra Silwal

Ace Institute of Management

March 19, 2019

 Deep Change:

How Operational Innovation Can Transform your Company

In the article, Michael Hammer, talks about Progressive Insurance – an automobile

insurer to explain the benefit of operation management and its innovation. He explains that the
significant growth of sales in 2004 compared to 1991 in Progressive insurance did not happen
due to mergers or acquisitions, but due to considerable innovation in day to day operations;
significant cost reduction; efficient productivity and enhanced customer satisfaction. Valuable
benefits that were brought by operative innovation to companies like Walmart, Toyota and
Progressive insurance seems to have been overlooked by short term exciting changes in several
companies

Michael comments that Progressive insurance success was not as result to global
amplification, elevated market or even through increase in their marketing schemes but rather
because it out operated the competitors through operational innovation which helped them to
provide sustainable price. Furthermore, the article acclaims operational management as the only
factor that led to success.

The article states that although operational innovation can shake the industries, fewer
large companies have made attempt to achieve it and the main question is why? One reason
author argues is that many executives are not familiar with operations hence have no interest in
it. This article offers practical advice on how to develop operational innovations, such as looking
for role models outside your industry to emulate and identifying--and then defying--constraining
assumptions about how work should be done. Quick response to insurance claims was ensured
by progressive insurance which helped in reducing the cycle time which sequentially led to
decreased car replacement costs and other intermediary costs and amplified customer
satisfaction. Dell's direct sales model for computer sales and Wal-Mart's cross-docking practice,
which moves goods from an inbound delivery truck to an outbound one going to a store,
eliminating the need for expensive warehouse space are some of the remarkable examples of
operational innovation which most companies should be following to attain operational
excellence.
 However, Hammer points to a shortcoming that strikes at the heart of technical
publications—the deadlines. But he seconds operational innovation with a statement that “most
spectacular operational innovations come under pressure.” Another reason the author states about
why operation innovation lags in a company: precedency for small change initiatives.

Rather than an innovation, the line managers focus on operational improvements like
implementing ERP, CRM, SCM and other software. These small changes look like they’re in the
direction towards innovation yet do not cover the major scope. Saying this, operation innovation
does not always have to be big steps, small and experimental steps are enough to make
transformational innovation. For instance, Tata Nano was introduced as the cheapest car and
gained lot of attention. Operational changes made to reduce its cost led to disastrous
consequences where cars caught fire and also failed the crash test. This proves that vast operation
changes will not always bring profit and satisfaction, rather small changes should be
experimented and administered thoroughly.

From the examples of the companies that adapted the changes, it is quite clear that the
author ascribes operational innovation for the sustainability and success of the company. But
these changes are not always feasible for all the companies. There have been instances where
companies have attempted new ways of operational management and failed suffering huge loss.
Failures of above-mentioned Tata Nano cars and Coke II in 1990s cannot be overlooked and
shows that bringing innovation does not always bring success. Along with the innovation,
various other factors such as strategies, policies, planning, leadership should be evenly matched.

Just like in the case of Walmart, operation innovation had a role in its success but along
with it, other factors like organization culture, strategy, human resource policies, and operational
excellence too had a major part in its success. Balanced combination of Strategic Focus
(Leadership, Management, Planning), People (Personnel, Staff, Learning, Development),
Operations (Processes, Work), Marketing (Customer Relations, Sales, Responsiveness) and
Finances (Assets, Facilities, Equipment) are crucial for success.

In conclusion, we can say that operation innovations are coordinated and fine-tuned to
deliver first-rate customer value but it is obtained with collaboration of other factors that are
directly related to the organization. It is also clear that innovation in operation management does
not always lead to success but huge loss too if small details and future strategies are not
envisioned properly. What works for one may not be suitable for the others. Each company
should seek for continuous operational excellence. However, the ultimate decision is based on
their internal and external demand for innovation. Operation innovation solo may or may not
lead to the goal anticipation but with standard strategies, resources, policies and plans, the goal
will be definitely obtained by the companies.