High-Tech Tools Won’t Automatically Improve Your Operations17 June, 2015 / Articles
Advanced tools for creating and testing new products and the operations that will make them are all around us. They are not only changing the economics of innovation and operations, they are also pushing the frontier of what’s possible.
Airplanes and cars are designed, modeled, and simulated on computer-aided software before the first prototypes are tested. Complex architectural structures undergo virtual stress tests before concrete is poured. Engineers can “walk” through digital factories before workflows are finalized. The CRISPR tool, which has electrified the scientific community, lets scientists easily disable genes or change their function by replacing DNA letters; its many applications include the development of new drugs. And in a recent HBR article, my coauthor and I wrote about advances in running disciplined business experiments, assisted by complex analytical tools.
While it is encouraging to see this rapid progress, tools — no matter how advanced — do not automatically confer benefits on organizations. They must be integrated into systems and routines that are already in place. Tools are embedded within the organizations that deploy them as well as the people that use them. When integrated incorrectly, they can actually inhibit performance.
In my research, I have uncovered some pitfalls for organizations that adopt such tools and ways that they can avoid them.
Don’t use tools merely as substitutes. When new modeling and simulation tools became available, their proponents initially argued that substituting virtual prototypes for physical ones could save millions of dollars. Indeed, companies did save money with such simple substitutions. But they failed to address the bigger opportunities that such tools offered: fundamentally rethinking and reorganizing the flow of product-development activities. One manager explained this by using the analog of morning traffic. Even if he had a Ferrari, his commute wouldn’t be faster unless he could find a new route that took advantage of the car’s speed and acceleration. Similarly, companies can’t unlock the full potential of new tools unless they find new ways to operate.
The technologies and trends shaping tomorrow’s businesses.
In a project with an analog chip company, I worked with senior management and engineering to find innovative ways to leverage detailed performance data of its equipment and the integrated circuits that it manufactured. We used the data to develop sophisticated statistical models of its manufacturing capabilities and embedded these models in design and simulation tools that were used by upstream design engineers. Previously, these engineers had to design with wide safety margins that ensured that their devices could be manufactured, which lowered performance and increased cost. Now, with manufacturing capabilities integrated in the design tools, they could tighten safety margins significantly. The result: higher performance and lower costs without lowering the manufacturing yield.
But it also required fundamentally new ways for design and manufacturing to work together. First, manufacturing had to collect and frequently update the data for the benefit of upstream design. Second, both had to trust that the models embedded in the tool were accurate and would not result in lower yields. Third, manufacturing had to immediately communicate and coordinate any changes, such as process tweaks, with other groups because its actions affected the tools that these groups used.
Build trust. In my research, I have observed that the rate of technological change often exceeds the rate at which people can change their behavior. That is, when the knowledge base of an organization depends on the use of particular materials and tools, engineers will not easily dismiss much of what they know; nor will they change how they work overnight.
In the chip company I discussed above, manufacturing was very reluctant to acknowledge that tighter safety margins in design tools would not affect production quality. To be sure, the company didn’t know what the overall effect would be, but the company’s CEO wanted to run some experiments because, if it worked, it would give them a performance edge over competitors. (Many competitors were “fabless” and thus didn’t have access to detailed manufacturing data.) Once the manufacturing folks saw the impressive results from some design projects, they were sold.
Similarly, when simulation tools were introduced to engineering organizations, people had trouble accepting the results of a simulated test when they had spent years or even decades learning from physical models. This led to bizarre outcomes: In one company, I found that the introduction of computer simulation tools ended up increasing overall product-development costs. Because people didn’t trust the new tool that was supposed to replace expensive prototypes, they ended up building more prototypes to verify that the simulations were accurate. In some cases, the skepticism was well founded because virtual tests were poor substitutes. But in many cases, management failure to build trust led to wasted resources.
Find new ways to create value. Advances in tools can open up new ways of interacting with partners and creating value. By putting analytics tools into the hands of customers, Google has changed the face of advertising. Apple’s app developer tools have turned many users into software suppliers and created a huge marketplace that Apple controls and benefits from. Indeed, new value can be created by findings ways that customers and users can play a more active role in innovation and operations. This is done by putting a company’s know-how into tools and empowering customers to design and even “manufacture” solutions for themselves, thus fundamentally changing value creation and capture. I’ve seen this in engineering and software industries, but new tools are now being adopted more broadly.
Credit Suisse created a platform through which customers can design their own financial products. By automating routine safety and robustness checks and shifting the design work to customers, the cost has dropped by approximately 95%, massively increasing profitability and freeing resources to focus on innovating instead of execution. More importantly, hundreds of unique products are generated each day, and the volume of trading on the platform has soared.
By rethinking how they have provided value to their customers, the bank and its customers are now creating solutions that didn’t exist before.
Advanced tools can transform the way you run innovation and operations. But it’s the way you manage the tools and the people that use them that will unlock, or hold back, their potential.