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The Purpose of a System is What it Does

The great cybernetician, Stafford Beer, coined the phrase, “the purpose of a system is what it does.” What we wish it did lies in the realm of visioning and strategy formation. What a system does is expressed in terms of the recurring and onetime outputs, as well as its key processes. So, the purpose of a school, for example, is to produce both graduates and dropouts, because these are clearly outputs of the system. We may wish or prefer that the school only produce graduates, but until we gain a clear view of what a system really does, we are impotent to change it.

Here's a recent article from ABC News that says 10% of the high schools in the US are 'dropout factories.' In this article the author is defining a dropout factory as one in which no more than 60% of the students that start the school actually finish (graduate).

1 in 10 Schools Are 'Dropout Factories'
By NANCY ZUCKERBROD AP Education Writer • WASHINGTON Oct 30, 2007 (AP)
It's a nickname no principal could be proud of: "Dropout Factory," a high school where no more than 60 percent of the students who start as freshmen make it to their senior year. That dubious distinction applies to more than one in 10 high schools across America.

If anyone wants to make improvements or think about innovation in this type of system they will have to be honest with themselves and come to terms with what that system actually does.

What about industry?

What's the purpose of your organization?
A recent McKinsey survey on the approach to innovation finds that 70 percent of corporate leaders say innovation is among their top three priorities for driving growth.

If we looked closely at what these organizations actually do would we be able to see that innovation is part of the purpose of their organization?

How many of those same executives are aware of what their companies actually produce? How many of those same executives are aware of the ways their companies delight their customers? How many of them are aware of how and where they fall short of delighting and meeting the needs of their customers?

How many of those same executives are aware of the policies and procedures they have implemented that rob their own people of pride in the work they do (because they limit their ability to innovate and/or produce quality work)?

There are many things that companies do today that would be quite embarrassing when framed in the context of being 'the purpose of the organization.' When framed in this context it becomes clear there is a real need for a certain type of honesty within organizations (honesty - NOT BLAME).

When framed in this context it is possible one of the most important transformations that can and should take place in any organization is in the way people think. Changing the way people think will have a direct and immediate impact on the culture of an organization. Changing the way people think will go along way towards establishing the foundation for challenging the past, challenging the status quo, and challenging an organization's sacred cows.

In that same McKinsey survey, top managers say the most important drivers of innovation are the organization’s culture and people.

Who is responsible for the culture and the people in an organization? The leadership.

Leadership sets the tone and creates the culture in an organization. If managers are saying the main drivers of innovation are people and culture then it is their responsibility to develop the right environment and build the capabilities they are seeking.

Here are several ideas to consider for changing the thinking within an organization.

Traditional management practice suggests that competition and fear are motivators and can be used to increase performance. Research has shown (and personal experience can verify) that competition and fear may show some short term benefits but they are not good long term strategies. Competition and fear within an organization ultimately reduces productivity and removes joy from the workplace. A change in thinking would be to consider removing fear and competition from the workplace and developing the type of honesty suggested above.

In Dr. Deming's 14 points for management, point number 8 is:

8. Drive out fear, so that everyone may work effectively for the company (see Ch. 3).

This idea is complemented by points number 11 and 12 in Dr. Deming's 14 Points for Management. Here he suggests that we transform our way of thinking to remove the barriers that would enable people in the enterprise to feel pride in their work. These barriers are created by management consciously or unconsciously and can only be removed by management.

11. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality.
12. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objective (see Ch. 3).

The Next Big Economic Challenge?

Alan Greenspan's book has garnered a lot of attention, naturally.

The most interesting thing I've read about the book so far is a review by Sebastian Mallaby that appeared in the Washington Post National Weekly Edition, October 8-14, 2007.

Mallaby writes,

"For the past dozen years or so, Greenspan writes, central bankers have had it easy. Economic forces have acted to hold prices down, so the Fed has not had tro raise interest rates aggressively to choke off inflation. But at some point this circumstance will change. The incorporation of information technology into business will have run its course, so cost-savings will be exhausted; the integration of China into the global economy will near completion, ending the second source of downward pressure on world prices. When those two things happen, central bankers will have to act tougher if they are going to rein in inflation. And if they get tough, they will also get unpopular. Alan Greenspan presided over a golden moment in economic history. He was good at his job. But he was also lucky."

This leads to a number of interesting questions, including one such as, "How soon will information technology be fully exploited?" Many computer industry people think that it will not happen for a long time. Jeff Bezos of Amazon, for example, has suggested that we are at the very beginning stages of the internet's development, equivalent to where the electricity industry was 100 years ago.

And what about social networking? Is there a business benefit to be gained, a productivity or learning payoff, or is it just another way to do advertising? So is Facebook really worth $15 billion?

Underlying all this will be the persistent pursuit of innovation. Indeed, innovation could be the central banker's best friend, for it is innovation that yields productivity improvements, and productivity improvements are the best antidote to inflation.

Mind Mapping Permanent Innovation

Permanent Innovation reader David Takahashi of Group 1 Software has gone to the trouble to prepare a beautiful mind map of the entire contents of the book. He has been most gracious to share it with all of us.

It was prepared using Freemind, a mind mapping tool that you can download for free.
Click here to go to the Freemind website and download it.

Once you have Freemind on your computer, this mindmap file will be readable.
Right click here (and if you're using Firefox, select "Save Link As ..." ) to download the Permanent Innovation Freemind Mind Map file.

Thanks, David! We appreciate it!

Sustainability and Innovation

Sustainability is generally defined as achieving 'triple bottom line' success. Triple bottom line has also been called 'full cost accounting' and when successful shows economic profit, environmental profit and social profit (some people say: People, Planet, Profit as a way to refer to the triple bottom lines of sustainability).

A friend of mine used to say Sustainability holds the seeds to the most and widest range of innovation we've ever seen.

Think about it. If one were to completely adopt a sustainability philosophy and approach to doing business one would have to rethink just about everything we know as business today.

Dr. Deming used to talk about the four pillars of quality as:

• improvement of current product(s) and service(s);
• innovation of product(s) and service(s)
• improvement of current processes
• innovation of processes

A focus on products, services and processes will get us to look at the value being added to customers but it will also get us to consider the materials, relationships, and waste. If we take this just a little further it could take us into energy usage, or even energy footprint.

If we go about further we can think about the environment differently. There is growing research that supports the idea that providing a positive, healthy work environment improves productivity. The environment referred to here is the physical, emotional and cultural environment where work takes place. What if that environment included clean air (not conditioned air), pure water (not just city water), healthy carpets (no out-gasing), office equipment that didn't harm the environment (either in its development or in its use), ergonomic furniture, etc? These types of considerations and questions barely begin to explore the areas where we might see innovation if we were to adopt sustainability as a way of doing business. A focus on sustainability will take us beyond process and product and into management policies and practices, organizational structures, and beyond the borders of our organizations into industries, networks and networks or networks.

Some people have argued that triple bottom line accounting is foolish since the measures for ecological and social 'profit' are not easy and possibly impossible to calculate. Just because something is difficult to measure doesn't mean it isn't important! In Dr. Deming's book Out of the Crisis page 121, he says "The most important figures that one needs for management are unknown or unknowable (Lloyd S. Nelson, director of statistical methods for the Nashua corporation), but successful management must nevertheless take account of them."

Honda is said to have begun managing 'from the earth, back to the earth' when they think about their supply chain. That means they are thinking about the disposal of their products way beyond their involvement with them.

From a recent McKinsey article about strategy we see just a glimmer of what might be coming - and this article primarily focused on social issues:

• Chief executives have increasingly incorporated environmental, social, and governance issues into core strategies, McKinsey research shows.
• These CEOs are responding to increasing pressure from employees and consumers, but some also see opportunities to gain a competitive advantage and address global problems.
• CEOs view globalization as the key development reshaping the contract between business and society. They identify talent constraints, poor public governance, and climate change as the issues most critical for their companies to address.
• Competing strategic priorities and the failure of financial markets to recognize the importance of implementing a strategic approach to societal issues are among the barriers to change.

If the kinds of innovation that are possible continue to show up (here's a small example recently shown at PopTech! - portable light project) we will see that financial markets may just start recognizing the importance of focusing on business as a vehicle for profit in more than just dollars, euros, or yen.

Mark my words: Sustainability could turn out to be the greatest inspiration for innovation we've ever seen.