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Examples of Organization Innovations

by on January 10, 2010

Referring to the problem of  Cemex, (R. L. Daft Ch 2), managers here faced the challenge to keep up to the pace of both internal and external environments and hold on to the position of still possess an edge over its competitors (HeidelbergCement, Holcim, Lafarge).

The problem was “Delivering ready-mix concrete” which needed to be delivered before spoiling. Guaranteed delivery time  was within a three-hour window despite the best efforts of the employees. Cemex competitors offered the same time frame.

So what Cemex did to stand out from the crowd of competitors?

To decrease turnaround time in its Mexican market, CEMEX equipped most of its fleet of concrete mixing trucks with global positioning satellite (GPS) locators, allowing dispatchers to arrange deliveries within a twenty-minute window, versus the three hours CEMEX’s competitors require. This system—which did not emerge from a central R&D lab but rather from CEMEX’s internal innovation efforts, has allowed CEMEX to increase its market share, charge a premium to time-conscious contractors, and reduce costs resulting from unused concrete. The CEMEX team that developed the GPS system got the idea from a 911 call center they saw in Houston. Having identified contractors’ need for just-in-time delivery, the team reasoned by analogy that emergency response teams faced a similar problem of quickly reacting to urgent requests from unpredictable sources. Based on this insight, they studied how the call center dispatched paramedics within ten minutes despite traffic congestion and unpredictable call patterns.

Good Managers scour the globe for getting good ideas. This isn’t traditional benchmarking, since managers don’t simply copy something they see elsewhere. Rather, they take pieces of practice or technology that they find and recombine them in novel ways to solve customer problems.

In 2000, CEMEX’s Mexican unit created a special Innovation Committee to stimulate creative thinking about how the company could better serve its customers. Composed of three VPs, three directors, and one outside consultant, the committee has three key responsibilities:

1. To define a small number of broad themes to guide innovation and ensure alignment with corporate strategy. Recent themes include manufacturing breakthroughs, integrated construction solutions for affordable housing, ways to support regional development, and making it easier for customers to do business with CEMEX. Note that none of these innovation themes relate to improving the product itself-cement remains cement. Rather, they stimulate creative thinking in every other element of the business model.

2. To select four to six teams each year to identify three significant opportunities consistent with a broad theme, thereby producing twelve to eighteen big ideas each year. The teams consist of up to ten people who devote about one-quarter of their time to the project for three or four months. Participating on a team is considered a plum assignment because it provides exposure to top executives. Team members also recognize that they must develop an actionable plan for pursuing the opportunities because the innovation committee frequently taps team members to implement the idea.

3. To provide structure to the innovation process. Team members receive training in identifying an opportunity, generating ideas to address a market gap, and formulating a plan of action to seize the opportunity. In some ways, the process resembles an entrepreneur’s boot camp. CEMEX has developed tools for stimulating creativity. One, for example, is called “Ping-Pong,” in which the team splits into two groups. The first one proposes an idea to pursue a specific opportunity, then the second group improves on the idea. The two groups knock the idea back and forth until they can envision no further improvements. Every proposal follows a template that clearly articulates the targeted segment, spells out the benefits to the customer, and quantifies the financial benefits to CEMEX in terms of cost reduction or increased revenues.

Reference: http://hbswk.hbs.edu/item/3866.html

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