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5 Ways That Standardization Can Lead To Innovation

We'd like to think that innovation comes from freewheeling chaos. Think again: It's extreme order that begets breakthroughs in business.

At a time when we are constantly being told to value the new and the different, it may come as a surprise to learn that the standard, the shared and the common can be strong drivers of transformation. In fact, many of the innovations that have changed the world, including railroads, modern manufacturing and interchangeable parts, money, agriculture, containerized shipping, numbers, the Internet, even language, only succeed because of standardization.

Organizations that are looking to transform their operations, their customer experience or even their industries can benefit from incorporating as many types of standard, shared and common features into their efforts as possible. Here's five ways:

Despite its ads, Steve Jobs instilled a culture that ran against free-spirited expression

Standard Processes

In 2009, Baptist Health System (BHS) in San Antonio, Texas, became part of an initiative designed by The Centers for Medicare and Medicaid (CMS) to reduce costs and increase quality in acute care. A physician-led Clinical Improvement Council for Orthopedic Care at BHS transformed its approach to hip and knee replacement procedures. Where previously each one of the system's 40 orthopedic surgeons had their own particular way of doing things, the Council developed a single model of care for all five of the hospitals in the system. New standards included everything from pre-operative tests, radiology, operating room instrumentation, supplies and other equipment, to post-surgery medication, food and nutrition, physical therapy and physician consults.

Within a few months the results were dramatic; BHS cut its readmission rate in half, and infection rates dropped significantly, providing patients with a measurably improved customer experience. The physicians were able to complete their surgical workload in notably less time than it had previously taken them. Nurses, technicians and other medical staff reported higher job satisfaction because they no longer had to worry about managing 40 different models of care. The procedures cost less, saving the taxpayers hundreds of dollars per procedure. In short, common procedures, as well as a shared goal between physicians and hospital administrators, have demonstrated the potential to drive transformation in the U.S. health care system.

Common Goals

Apple may seem like a strange company to include in a discussion of standards. It is, after all, the company that exhorted us to "Think Different." But during his tenure as CEO, Steve Jobs instilled a culture inside Apple that had nothing to do with the free-spirited and rebellious self-actualization that its TV and billboard ads proposed.

Instead, Jobs set high expectations and goals for himself and the entire organization and swiftly got rid of people who couldn't or wouldn't play along. And for their part, his employees are known not for their diversity of perspectives but rather for their uniform adherence to and advocacy of the Apple approach to product design and development. They all value deep collaboration (multi-disciplinary teams that have the same goals and work together on different parts of the same problem at the same time) and take individual responsibility for the success of the organization, not the other way round.

From this surprising conformity, Apple achieves an extraordinary level of innovation and productivity that has transformed not one but several different industries, including computers, music, phone and home electronics. Its recent results have been a series of highly innovative consumer products and services that have catapulted the company into the upper echelons of profitability, growth and consumer loyalty. In the last decade, Apple's stock price has risen from around $10 in 1998 to nearly $400 in 2011, its revenues from around $5.5 billion to $87.5 billion, and the company is currently growing at about 60% per year.

New products were introduced to the market in weeks rather than months.

Common Platforms

By 1970, Black & Decker's consumer power tool portfolio was a hotchpotch of 122 different models, which between them had 30 different motors, 60 different motor housings and 104 different armatures. Each of these variants required separate tooling. There were few shared components or processes, leading to high costs in inventory ordering, storage and management as well as in tool production and manufacturing. These costs were passed on in part to the customer. In 1971, driven by a triple threat of offshore manufacturers, inflation and rising costs, and anticipated regulation requiring double insulation to protect consumers against electric shock, the Black & Decker management team and board decided that it needed to rethink its entire approach to the design and development of its power tool portfolio.

A concerted effort by the business over the next three years saw a massive reduction in variants, leading to just one motor, a huge reduction in space, facilities, resources and time needed to manage parts and equipment, faster production cycles and retooling times. Motor production labor costs were cut by 85%, armature costs by 80%, and failure rates fell from 6-10% to 1%. New products were introduced to the market in weeks rather than months and prices to the consumer were slashed by as much as 30% while maintaining 50% margins. In what amounted to nothing less than a complete transformation of their operations, Black & Decker became so dominant in sales, price, variety and quality that it forced many of its domestic competitors—including Sunbeam, Porter Cable, Rockwell and even General Electric, among others—out of the consumer power tools market.

Shared Values

Every potential new employee at the online retailer Zappos.com is screened not just for capabilities and experience but also for likely culture fit. As a new hire, they receive five weeks of training, are immersed in the company's culture and taught the company's 10 core values. Commitment to these values is so important to the company that it offers new recruits $4,000 to leave if they don't share them. The results are clear. Voluntary staff turnover, in a customer service/call center industry plagued by attrition rates as high as 50% nationally, is estimated by some accounts to be as low as 10% at Zappos.

Meanwhile, the customer service ethos??Deliver WOW Through Service?—is famously anything but common or standard. Unlike the vast majority of call centers, phone calls are not scripted and they are not timed. In fact, there is some pride in the fact that the record for the longest call (as at July 2011) is 8 hours and 3 minutes. The shared commitment to a common set of values provides a platform from which a highly differentiated service is delivered, transforming what would typically be the most mundane of transactions into a delightful one, and one that itself drives loyalty and rapid growth.

Zappos's shared set of values provides a platform for highly tailored customer service.

Standard Interfaces

Until the development of standard parts in the early 19th century, rifles were built individually by hand. Expensive and time consuming to build and to repair, they were also totally incompatible with one another, rendering them useless if they malfunctioned in the field. Interchangeable parts, a powerful form of standardization, changed all that and ushered in the era of mass production. Nearly 200 years later, a standard interface has further transformed the rifle, allowing a standard weapon to take on multiple functions.

The Picatinny (Pic) Rail allows soldiers to attach and detach weapon accessories like optics, lasers, bipods, and other hardware to the M-16A1 assault rifle. Since its introduction in 1995, it has helped to more than double the longevity and functionality of millions of the Armed Forces' standard issue weapons. The common interface provided by the rail has reduced the costs and simplified the logistics of equipping and supporting 1.5 million soldiers and 1.5 million reservists, and increased the rate of innovation and growth in the small arms and accessory industries. For example, Aimpoint Inc., a manufacturer and supplier of high performance optics to the U.S. Army and Air Force, has seen a fifteen-fold increase in revenues since 1997, since the rail makes it possible for more soldiers to be deployed with, use and service advanced optics and other accessories in the field. Most importantly, the rail has increased the functionality and efficacy of active-duty front line soldiers, providing them with a tool that can meet a variety of both specialized and general needs.

Standards are Critical Tools of Innovation

Most organizations get it wrong when it comes to thinking about standards and innovation. They think that standards are a necessary evil, important but dull, their significance limited to cost reduction and quality improvement. At the same time they equate being innovative with being different. This is provably wrong on both counts. Focusing on the similar, the shared and the common will provide a stronger platform for scalable transformation then trying to be different ever will.

[Photo: Alfred T Palmer/Library of Congress]

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