4.2 Introduction

Let’s start with a question: “What is the only constant in business?” If you answered, “change,” you’re right! As crazy as today’s world sometimes feels, the idea that managing change is the key to success is not new. Consider the following.

• Creative Destruction. In 1942, Joseph Schumpeter coined the term “creative destruction” to describe an endless cycle of entrepreneurship that makes existing companies obsolete. Schumpeter argued that you have to be willing to give up the past to prosper in the future.

• Age of Discontinuity. In 1968, Peter Drucker published his book, “The Age of Discontinuity” to call attention to the fact that emerging technology and economic globalization would disrupt the status quo, creating a dynamic, tumultuous marketplace.

• The Value of Paranoia. In 1999, Andrew Grove, Intel’s iconic CEO, warned, “only the paranoid survive.”1 Grove recognized that the rules of competition can be rewritten almost overnight.

The bad news: The forces of entrepreneurial spirit, globalization, and technological innovation are converging to drive unyielding and unpredictable change. To survive—and thrive—in a chaotic, disruptive world, you need to innovate at the pace and scale of the marketplace.

How do you stay on the cutting edge of innovation? You start by scanning your environment, looking for disrupters—e.g., changing consumer preferences, new technologies, and competitive threats—before they change the competitive rules. How do you do this? You benchmark customers’ needs, competitors’ capabilities, and best-in-class processes. And you monitor not just core markets but also the periphery because new threats can emerge anywhere. But scanning is just the start. Once you identify threats and opportunities, you must help your company evolve. Now, a little good news: Lean Six Sigma can help you establish a culture of continuous improvement and innovation. Let’s take a quick look at why this is so important.

Complacency Kills

Few companies possess the DNA to pursue relentless innovation. The result: Sustaining outstanding performance is hard—even for great companies. Figure 4.1 shows that companies go through a life cycle of emergence, growth, maturity, and demise. Growth yields to maturity and decline as success breeds complacency. Why does this happen? Consider two reasons.

1. Cultural Malaise. Managers tenaciously hold on to the mental models that drove the company’s original success. Unwilling to confront the brutal facts that competitive rules are changing, they postpone change until it is too late—think A&P, Compac, and PanAm.

2. Structural Drag. Companies also become more complex, weighed down by policies and procedures that hinder innovation and renewal.

Simply put, cultural and structural inertia impede innovation, keeping companies from reinventing themselves as their operating environment, and their customers, change.

Adapt or Die

Your best bet to avoid complacency and decline is to cultivate a culture of continuous learning. Consider how Toyota, the company that led the Lean Six Sigma revolution, leveraged learning into sustained growth and profitability. Jim Press, the executive who turned Toyota into a North American juggernaut, explained, “The Toyota culture is inside all of us. Toyota is a customer’s company. Mrs. Jones is our customer; she is my boss. Everything is done to make Mrs. Jones’s life better. We all work for Mrs. Jones.” Your key takeaway: Every worker at Toyota is constantly asking, “How can we work together to improve Mrs. Jones’s experience?”

At Toyota, constantly rethinking how customer value is created drives relentless adaptation and invites employees to step out of their “comfort zone.” As each target is achieved, a new, more demanding goal is set. And consider this key fact: This quest for innovation helps Toyota, year in and year out, lead all auto companies in U.S. patents awarded, nearly doubling GM’s haul in 2018 and 2019. This persistent renewal helps Toyota consistently earn top marks from customers. The result: As the coronavirus put the brakes on the global economy, Toyota had amassed a $74 billion cash stockpile. The Wall Street Journal called Toyota “unsinkable.”2

Whether your company slides into complacency or leverages learning for success depends on its attitude toward innovation as well as how it manages the innovation process.