"Operational Innovation"

Think bigger - don't just go for optimizing, shoot for revolutionizing.

One of my favorite articles of all time is from the April 2004 issue of the Harvard Business Review. I read it whenever I want to be inspired. I recommend you do the same.

The theory the author, Michael Hammer, is presenting is how to create deep change through operational innovation. Hammer writes about some case studies - which are the most interesting part of the article and the part you should study. He presents ideas and pointers on how to get these exciting disruptive changes through an organization. At Globat.com, my team is always looking for ways to not just tweak, but revolutionize the way operations are performed.

Why You Should Be Interested in Progressive Insurance

Often times in an industry, things are done the "same old way" because that's how "they've always been done". The concept is to break through and not just operate very well, but to leap frog the competition's process to innovate with in operations.

Progressive Corporation was well known to me from their commercials on television. Progressive was founded way-back in 1937. In the late 90s, there was nothing special or booming about the insurance industry - insurance performs with GDP and is a 100 year old industry, yet the old company performed amazingly! They innovated. It wasn't just solid execution or good marketing, it was operational innovation.

What did they do?
1 - Started sending out IRVs (Immediate Response Vehicles) to process claims on site.
2- Opened up their website to share competitors rates - as insurance rates are regulated.
3- They realized FICO scores were very good indicators of risk level.

This may seem on the surface as 3 good marketing ideas. In reality, it's much, much deeper than that. The numbers show that.

In 1991, Progressive had $1.3 billion in sales. By 2002, that figure had grown to $9.5 billion. Today, Progressive is listed on the S&P 500 with $14.8 Billion in revenue.

By deploying adjusters in their mobile offices (Immediate Response Vehicles), it cut something like 7 people out of the loop, boosted customer satisfaction and saved the company money since people were willing to settle for less.

Change your Organization

The changes Progressive made were revolutionary to their business. Get out there and create Operational Innovation in your business today. It's going to change every metric in your business and lead to delighted customers.

--Chris Ueland / President, Globat.com

(You can actually buy the article online on the HBR website from their back issues.)