In my AMEX OPEN Forum article, “Design Your Business to Handle the Exception, Not for the Exception,” someone commented that simplification is a better strategy than segmentation.  And I wholeheartedly agree.

Car manufacturers do this when they use common parts and reduce the number of configurations to reduce costs and complexity.

Having said that, if you want something special, you still have the option of getting aftermarket modifications.

But sometimes eliminating options is not an option.

A company’s strategy may determine what makes the most sense; having a lot of options may be what you want.

Or in some cases (e.g., TSA airport screening) government regulations can impact your process.

Or sometimes, the overall cost effectiveness of the system, requires more complexity (e.g., the insurance claims/underwriting process described in the article).

We’ve done a lot of computer simulations that demonstrate that the segmentation strategy is, when simplification is not an option, the best solution (in most cases).

For example, when working with a race car team, the designers would develop major improvements to the car every two weeks after each race. They would then have manufacturing create the new parts so that they could be tested. The problem was that this caused disruption in the manufacturing process which was streamlined and optimized.

When they developed a new dedicated manufacturing line for the designers, the overall throughput increased significantly. The ad hoc design process no longer impacted the efficiency of the production process.

Of course you can find extreme example where this principle does not work. And in those situations, you may need to alter your process.

During slow times, fast food restaurants “make to order,” cooking your food only after you order it (although components may be pre-cooked). But during peak hours, they pre-make the most popular foods as a way of reducing wait time. Those with special orders will have to wait longer.

There is no one-size-fits-all solution. With any “innovation,” you want to test out the concepts, ideally via computer simulations, before introducing them.

“You don’t listen!”

All of us have likely heard these words spat at us in frustration at some point in our lives. And guess what, it’s true! The fact is that no one listens.

In a previous OPEN Forum article, I wrote on how to more effectively hear what others are really trying to say. By recognizing how you listen (or more accurately, don’t), you can then better understand the way others listen. This in turn arms you with the ability to speak in a way that will have you be heard.

Effective innovators and business leaders need to “sell” their ideas to others. But too often we fall into unproductive behaviors that prevent our message from coming across.

What are these barriers and how can you conquer them? Having given hundreds of speeches in 43 countries, I have learned a few tricks on how to be heard more effectively, whether you’re speaking to a big audience or just one client or employee.

1. To be heard, first hear. While speaking on Capitol Hill in Washington D.C., I became painfully aware that everyone was more interested in being heard than hearing the perspectives of others. How can you be heard in this environment? Listen. Appreciate their point of view, even if you don’t agree with it. People can sense when you are not open to what they are saying and will thus be less inclined to hear you. Acknowledge differences in opinion and appreciate others’ perspectives.

2. Build an emotional connection. When starting a speech, you want to connect with the audience emotionally. Why should the audience care about what I am going to say? What’s in it for them? What benefit will come from listening? Buy-in is rarely done on an intellectual level. People are more likely to listen if they can relate to you and your message on an emotion level. Does what you offer—your product, service or idea—solve a problem? Can you speak to a pain they have?

3. Know your audience’s style. I’ve found that although American audiences typically like my speaking style, people in other countries are sometimes put off by it. For example, if I use my high-energy style in England, I can be viewed as overly enthusiastic and not taken as seriously. I find that a more professorial approach works there. Equally, when speaking to scientists, I use a different style than when speaking to advertising agencies. In order to be heard, match your style to that of the audience.

4. Avoid a one-size-fits-all approach. Everyone makes decisions in different ways. Even though I may be interested in the novelty/coolness factor, others want to know the scientific evidence and facts. Some are more interested in the practicality of your solution while others are more concerned with the impact on others and are driven by emotions. When speaking to larger groups, you need to address all of these styles. But when talking to someone one-on-one, speak to the style of the individual.

5. Don’t preach. Coach. It is fine to be passionate about your topic, but being dogmatic and closed-minded prevents others from being interested in your point of view…

Read the rest of this article (and comment) on the American Express OPEN FORUM site

In my latest American Express OPEN Forum article, I talked about how designing to handle the exception, not for the exception can improve efficiency and reduce costs, while increase overall performance. [If you didn't read that article, please do so before proceeding]

When I first wrote that article, I included a potential use of this concept as a way of solving our clean water challenge.  But during editing it was cut, so I decided to include it here…

Our aging water infrastructure provides potable water to a large percentage of the houses in this country.  340 billion gallons of water are used every day in the United States; an average of 1,000 gallons per household per day.  Although less than 1% is actually used for human consumption, nearly all of the 340 billion gallons are treated for drinkability.  The other 99% is for industrial use, showers, toilets, swimming pools, lawns, and other functions where potable water is not needed.  Therefore, applying this principle, one solution would be to stop worrying about the aging water infrastructure, and instead provide bottled water for drinking.  Or maybe every house is retrofitted with a simple filtration system to handle only the water that requires treatment. 

I write this, not as the best solution, but just a different way of looking at the problem.  A one-size-fits-all approach to problem solving can work against us.  If we look at what is really needed, we will find some new solutions.

What other uses of this concept can you find?

While going through security at the airport the other day, I was reminded of an important design and innovation concept.

Things were going smoothly until a bag was flagged during the X-ray procedure. The luggage was held on the conveyor until an authority could conduct a manual inspection. At the same time, a similar problem arose on another line. Everything ground to a complete halt. Although it took only 5 minutes to get the lines moving again, during rush hour that was all it took for the queues to grow out of control.

Many years back, a supervisor shared with me a design principle I still use 25 years later: design to handle the exception, not for the exception. That is, don’t design your business model around the most complicated case. Instead, design it so that the exceptions can be addressed, even if their efficiency is impacted.

When designers try to make one process cover every situation, no matter how rare or unusual, the result is usually greatly increased complexity and diminishing returns for everyone.

Using my supervisor’s mantra, this airport dilemma differently would be solved by pulling off the bags that need manual inspections (the exceptions) into a separate area. Even if those bags would have to wait longer to be processed, they wouldn’t impact the bulk of the customers and would significantly speed up average wait times. Those travelers with the exception bags may be more inconvenienced than they are today, but perhaps knowing that you will be significantly slowed may encourage people to be more careful with what they put in their luggage.

How can this be applied elsewhere?

A major life insurance company found that its claims handling was slow and expensive. What they discovered was that every claim was being processed using the same rigorous procedures.

But all claims did not need to be treated equally.

To improve efficiency, they scaled down the process and segmented claims according to their level of complexity. A simple version was used for straightforward cases. More robust versions were used for more complicated cases, while the full process was reserved only for the most difficult and time-consuming cases.  The most skilled and expensive specialists would resolve these complex claims while generalists handled the easiest ones.

What they found was that 60 percent of their cases could be handled using the simplest process with the least expensive resources. Thirty percent received the mid-level procedure, while only 10 percent needed the original full treatment. The result? Processing costs were reduced by 40 percent while average processing time was greatly reduced. Service levels also increased.

So how does this apply to your business?

Look at your customers. Which customers account for the bulk of your business? Which customers account for the bulk of your profits? Design your business to meet their needs. If you have other, less frequent needs, find a way of handling them outside of your standard processes, even if the cost is greater (to you or the customer) and the convenience is lower.

If you run a restaurant and 80 percent of your customers order the same five menu items, make sure you can inexpensively and efficiently cook those meals. For patrons who want items less frequently ordered, maybe they can pay a premium or wait a bit longer. Additionally, instead of keeping perishable ingredients in house for those rarely ordered meals, maybe you can find a nearby store where you can buy them just-in-time when needed.

If you run a call center…

Read the rest of this article on the American Express OPEN Forum

Innovators know that great ideas that don’t get implemented are worthless.

So how do you convince people that your solution is a good one?

Consider the case for “business casual” in the workplace.

What are the traditional selling points? People will be more creative. Employees will be happier.  A more casual environment improves communication. 

All of these are interesting, but debatable.

One company that reputedly fought the move towards business casual was Procter & Gamble.

What sold them on making the shift? A more well thought out proposition.

Someone reapplied that suits are dry cleaned and casual clothes are washed.

P&G makes Tide.  When an extra 140,000 people start washing their clothes on a daily basis, sales of laundry detergent will likely increase.

Selling your ideas means understanding the pains and opportunities of those who will implement your solution.

P.S. I have not yet confirmed if this story is true; it was told to me the other day by a client.  Regardless, the thought process is interesting.

…and guess what, you don’t really listen.  In fact, while reading this article, you are not really reading what I intended it to mean…

Last month, I was on a flight from Orlando to Boston that had a bit of a problem.

An hour before our scheduled landing in Boston, the pilot announced the main braking system was not functioning properly. Although the backup system would most likely work fine, the pilot and flight attendants were preparing us for the worst.

They carefully described the emergency procedures. They were very similar to the ones frequent travelers have heard many times before. But this time, you could hear a pin drop as they walked us through what would happen.  Everyone was paying attention.

Although I am on nearly 100 flights a year, I was listening in a way I never had before. The truth is, I rarely pay attention to the emergency procedures when we are not in an emergency situation.

This got me thinking: Do I ever really listen?

The answer is no. And regrettably, I am not alone.

Unfortunately even when you are trying to listen, you are still likely not really hearing properly.

Psychologists call this “confirmation bias.” We are naturally wired to filter and interpret information to conform to our underlying belief structures. And very simply put, these beliefs cloud how we hear. We only take in those pieces of information that align with our beliefs, and we disregard anything that contradicts them.

Understanding confirmation bias can have a significant impact on your ability to have effective relationships. And as a small business owner, it can have a profound impact on your success if you’re not hearing the true meaning of what your customers and colleagues are saying.

In the corporate environment, I’ve seen brilliant ideas proposed by recent college graduates that were completely dismissed by more senior people. But when those senior people said the exact same things, others thought they were geniuses.

A friend of mine recently attended a weeklong training class. When asked about the class, he responded that he was less than impressed with the instructor. When I asked why, he said, “It’s hard to listen to him. He’s dressed like a slob. His hair was a mess and his shirt was never properly tucked in.” The instructor’s appearance impacted how he was heard. Amusingly, on the last day of the class, his perspective changed. When pressed to understand why, I discovered the instructor had gotten a haircut and was wearing a stylish suit and tie. The change in appearance impacted how my friend heard the instructor. He claimed the instructor now “sounded more intelligent.”

As you read this article, I can assure you that your judgments are impacting how you receive what you are reading. If you want to actually absorb the value of what someone is saying, you need to know your natural biases.  This will impact your ability to innovate.

Listen better

The first step to listening better is to recognize the fact that you don’t. Ask yourself the following questions:

• Are you really hearing what others are saying?  Or are you only passively listening?
• Are you focused on their words?  Or are you thinking about what you will say next?
• Are you putting yourself in the shoes of the other person?  Or are you only interested in meeting your own objectives?
• Do you ask a lot of questions?  Or are you doing all of the talking?
• Are you hearing what they are really saying?  Or are you too colored by your own perceptions, judgments and filters?

This last question is critical. If you are honest, you will most likely begin to see that your filters are getting in the way of communication. By recognizing that you even possess these filters, you can become more aware when they begin to color your interpretations. This allows you the choice to set them aside so you can create an effective opening to listen.

Think about what your customers try to tell you…

Read the rest of this article (and comment) on the American Express OPEN Forum

I recently had a conversation with a colleague who is a professional speaker.  She and her husband are debating if they want to have a child in the near future.

She said, “Right now my life is easy and I know if I have a child, it will be a lot more difficult.”

The implied question: “Do I want a life that is easy or one that is challenging?”  Based on that question alone, many might go for the easy solution.

But maybe this is the wrong question.  I asked her, “How fulfilling is your life right now?”

Her answer: “Although life is easy, it is not fulfilling.”  She felt that having a child would make life more fulfilling.

A different question gives a different perspective which yields different solutions.

Because she eventually wants children, she wants to travel less.  As a professional speaker, she currently only makes money when she is on the road.  Therefore, to create passive income, she has been developing a number of “products” (books, CDs, DVD, cards, etc) that she can sell.

What she is doing again implies a particular question: “How do I create products that will generate passive income?”  As it turns out, the creation of these products has required a lot of time and money on her part.  And there is very little leverage since the margins are so low and the distribution channels are limited.

But what if she asked a different question: “How do I generate passive income that can scale with minimal effort and minimal investment?”

Now she has many more options including licensing, partnerships, sponsorships, technological platforms, etc.  The work can be done by others rather than her.  And given that others are selling to their networks, she can gain much greater leverage.  The opportunity now is much larger.

If you ask a different question, you will get a different solution.  And from my experience, most individuals and organizations are asking the wrong questions.  And this will always lead to the wrong solution.  A simple shift in mindset can fundamental shape your success.

If you want to hear my voice talk about innovation, here are two recent interviews for podcasts:

I had a blast with Karen Keller when we addressed how women (and men) can be more innovative.  This was a no holds barred conversation where I said what was really on my mind: Power Influencer Series

SchoolBriefing.com is a subscrition-based website targeted at school administrators.  In this interview, I discuss how teachers, educators, and administrators can be more effective in the way they teach their students.  This link will allow you to listen to the recording and read the transcript without a subscription: Re-Thinking Innovation, Creativity and Collaboration

I recently gave an hour-long webinar for eCornell and TrainingIndustry.com.  Over 3,000 people registered for only 1,000 slots, maxing out the system.  Thousands of people were unable to attend, so they made the recording available to everyone.

I discussed some of the key concepts from my book, “Best Practices Are Stupid.”

Watch this wildly popular webinar by clicking here.

Normally we don’t do this.

We have not yet posted an entire tip to this blog.  Yet, at the request of one of my clients, the publisher has agreed to let us do it…just this one time.

USAA is one of the coolest and most interesting financial services companies out there.  Every year they appear on Business Week’s list of best customer service organizations.  And they are innovating the way they innovate.

This tip describes the way they leverage organization structure to drive innovation.  Enjoy and feel free to share the pdf.

****  Download the pdf here  ****

Why the Pyramids Are One of the Seven Wonders

Most companies start their innovation efforts by creating a new corporate function charged with delivering innovation. These functions are composed of employees who are reassigned to and dedicated to this new organization within the company. In most cases, this is a complete waste of time and money. This model keeps innovation separate from the rest of the business, and there is no involvement by the people who make the important decisions. Additionally, the innovation efforts remain out of touch with the real needs of the business.

Recognizing this common dilemma, USAA, a 22,600-employee financial service firm, took a completely different approach.

At USAA, innovation starts at the leadership level. Leadership sets the tone for the rest of the organization and is a strong advocate for innovative thinking. Next, USAA created a “core team” composed of thirty-five individuals, all of whom dedicate 100 percent of their time to innovation. However, here is the twist: Only ten of those individuals report directly to the innovation leadership. The other twenty-five “matrixed” individuals spend their time solely on innovation-related activities, yet with a focus on the specific innovation needs of their line of business. This creates widespread buy-in.

What USAA realized was that thirty-five people could not change the culture of a 22,600-person organization. Therefore, beyond the core team, it created a network of two hundred “innovation advisers,” each of whom spends 10 percent of their time on innovation efforts, working closely with the core team.  In addition, there are ten “innovation champions.” These are leaders who serve as powerful advocates for innovation and help break through any challenges that might pop.

How can you use this same method to accelerate your innovation efforts?

First, make sure your leadership team is on board, as they will set the tone, demonstrate strong executive support, and help challenge the status quo.

Of course, your leadership cannot create a culture of innovation on their own, as they have far too many other responsibilities.  Therefore, most organizations tag someone as a full-time “innovation leader” whose role is to help shepherd the innovation process.  Innovation leaders are different from other leaders within the organization in that they do not have direct authority over those who make innovation a reality. Ultimately, everyone in the company plays an important role in driving innovation. The innovation leader is more of a mentor, coach, and negotiator than a boss or taskmaster. Their ability to influence and sell the value of innovation and its practices is paramount to their and the organization’s success.

Next, create your innovation “core team” (sometimes referred to as a center of excellence), a small cadre of people dedicated to driving innovation into every corner of your organization. In smaller companies made up of few geographies or lines of business, this can indeed be a small central group. But in larger, more widely distributed organizations, the matrixed strategy is preferred, as it addresses the complexities associated with geographic, product, and customer differences.

This core team has many responsibilities. Some of them involve the basics: generating awareness, building the necessary infrastructure, selecting tools, creating training materials and plans, and developing a process for managing the innovation pipeline. But their more valuable role is serving as the eyes and ears of your innovation efforts, providing insights into the specific needs of their departments, employees, customers, vendors, and other stakeholders. They serve as advocates and mentors for innovation, bringing innovation to the masses. They are typically responsible for the development and delivery of innovation/creativity training. They also run brainstorming sessions for various departments. And they play an important role in identifying and shepherding challenges that may exist inside the organization. In essence, they are the go-to people when innovation is needed.

But no core team alone can ever make innovation pervasive. The next step is to pull together your ambassador network. Although all of these individuals are deployed to the lines of business, they must be passionate about innovation. Quite often, these people may dedicate as much as six hours per week (15 percent of their time) to innovation activities. This helps spread the innovation message even deeper into the organization. Since these individuals play such a critical role, contribution to innovation should be one of their performance measures.

How large should your ambassador network be? According to studies conducted by scientist Robin Dunbar, individuals have the capacity to maintain stable relationships with around 150 people. If we use this capacity as a baseline for determining a maximum sphere of influence, having one person in your network for every 150 people you wish to impact (or 0.07 percent) would be appropriate, but 1 percent is a good rule of thumb. At USAA, between the core team and the innovation advisers, almost exactly 1 percent of the organization is represented.

At USAA this approach has worked incredibly well. In only one year, the company achieved 84 percent employee participation (yes, you read that correctly) and implemented approximately one hundred employee solutions. What were the bottom-line results? There was more than ten times ROI for USAA and almost thirty times ROI for USAA members. USAA is different from shareholder companies in that it has a higher goal and motivation for taking care of its members— present and former members of the military services and their families.

These are impressive results. Follow USAA’s lead by embedding innovation throughout the organization.

The Egyptian pyramids worked so well because the majority of the weight was closer to the ground, making these structures more stable. Equally, this pyramid approach to innovation will ground your innovation efforts and fulfill the needs of the business and your customers.

Excerpted from Best Practices Are Stupid by Stephen M. Shapiro by arrangement with Portfolio, a member of Penguin Group (USA), Inc., Copyright (c) Stephen M. Shapiro, 2011.