Fostering Innovation David Spong President American Society for Quality

1. Fostering Innovation David Spong President American Society for Quality Former President Aerospace Support, Integrated Defense Systems, Boeing

2. InnovationThe Key to Sustainability “This is the New Economy. The Old Rules do not apply…” “Innovate or die.” “But it must be relevant so we must forecast the future!

3. What Is Innovation? Instituting significant change that adds value: Increasing efficiency Increasing effectiveness Reducing costs Developing new profit streams

4. Needs for Aerospace/Manufacturing Processes • Reduced Cycle Time • Reduced Tooling • Just-In-Time Inventory • Lean Six Sigma • Products • Lightweight Structures • Increased Reliability • Reduced Maintenance • Improved Fuel Consumption

5. So What’s the Problem:Obstacles to Innovation* External • Government and other legal restrictions • Economic uncertainty • Inadequate enabling technologies • Workforce issues arising externally • Internal • Unsupportive culture and climate • Limited funding for investment • Workforce issues • Process immaturity • Inflexible physical and IT infrastructure • Insufficient access to information * IBM 2006 CEO Study

6. How do we facilitate Innovation? The Compelling Case For the Three “I’s”: Integration, Involvement & Innovation All Embedded in the Right Culture Integrate Involve Innovate The “Sweet Spot” Only at the intersection do you get relevant innovation 6

7. Signs of Lack of Innovation • Fear of failure is palpable (shoot the messenger) • A complex process with multiple levels of approvals exists for screening new ideas • A small group is the expected source of new products or services for the organization • Suppliers and customers seldom contribute to new product and process ideas • Ideas that originate inside of one country are rarely adopted by others

8. Signs of Dis-integration • Each part of the organization seeks to maximize its own profit or “success” • Strategies and plans are developed independently and often in competition • Financial and operational measure-ment systems are not linked with or reinforced by reward and recognition systems • Suppliers and stakeholders held at arms length • Customers viewed only as sources of revenue and irritation

9. The Common Denominator:Organizational Culture • Observed behaviour • Group norms: standards and values • Espoused values: published, public • Formal philosophy: mission • Rules of the game • Climate: group interaction • Embedded skills • Habits of thinking, acting, paradigms • Shared meanings of the group • Metaphors or symbols * Organizational Culture and Leadership by Edgar H. Schein

10. Leadership Cultural aspects of an organization can only be set and sustained by leadership!

11. How do you foster Innovation? “Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It's not about money. It's about the people you have, how you're led, and how much you get it.” Steve Jobs, Fortune, Nov. 9, 1998 US computer engineer & industrialist (1955 - )

12. Management Set of processes used to keep people and technology running smoothly Leadership Set of processes that creates/adapts organizations to significantly change them The Leader’s Role Captain The “Leader” Uncharted Waters Steering Communications Entertainment Navigation Catering Engines

13. Leadership Attributes • Developing strategic perspectives • Championing change • Connecting outside world – networking Leading Organizational Change • Display high integrity & honesty Focus on Results Character Interpersonal Skills • Drive for results • Establish stretch goals • Taking responsibility for outcomes/initiativ • Communicating powerfully and prolifically • Inspiring/motivating others to high performance • Building relationships • Developing others • Collaboration & teamwork Personal Capability • Technical and professional expertise • Solving problems & analyzing issues • Innovation • Practicing self-development 2-20 From the “Extraordinary Leader”, Zenger & Folkman (2002)

14. Join if espouse shared values Leave if cannot accept shared values The Leader establishes the culture to be shared by his/her behavior Culture – A Set of Shared Vision/Values/Beliefs/Goals Shared Value Filter Integrity Learning The Organization Corporate Citizen Quality Stakeholder Requirements & Expectations Diversity Teamwork INVOLVE AND COMMUNICATE Safety Innovation Customer Satisfaction Sharing & Supportive Agility

15. Mission, Vision & Values Culture/Integration Values Leadership Integrity Quality Customer satisfaction People working together A diverse & involved team Good corporate citizenship Enhancing shareholdervalue Mission Provide world-class sustainment solutions to our aerospace customers Vision People working together as the world’s number one provider of innovative sustainment solutions 10 Year Objective We will be a recognized world-class, global business, providing sustainment solutions aligned with our customers’ evolving needs

16. Set and Communicate Direction Continuously Improve Be Role Models Vision & Values Integrity Learning Organizational & Employee Learning Stakeholder Requirements & Expectations Quality Corporate Citizen Organize, Plan, and Align • Customer • Work force • Suppliers • Community • Shareholders INVOLVE AND COMMUNICATE Diversity Teamwork Sharing & Supportive Motivate Employees Empower Teams Innovation Customer Satisfaction Agility Reward & Recognize Perform to Plan Analyze & Compare Leadership System GP30117.ppt

17. Culture Focused Survey • Aerospace Support • 58 Questions • 3Narrative questions • + • 28 Focused questions • Results to the Business, Program, • Function, Site, to the manager level • with 5 or more D/R • Resultsactionable • Summary for 17 key issues • Exec summaries for each Bus, • Site, & Function • IDS • 58 Questions • 1 Narrative question • Results to only the Business, • Function, Department? Level • Resultsnot actionable

18. Code Of Conduct Enabled by the correct behavior where messengers don't get shot and failures are not punished but learned from

19. Operating Principles Culture • We insist on integrity, first and foremost • We tell it like it is • We communicate openly and candidly in all our dealings • We respect, honor, and trust one another • We work toward consensus • Disagreement is healthy and encouraged, but once a decision is made,we proactively support it • We have one conversation at a time • Our silence is consent • We focus on issues and ideas rather than titles or personalities • We actively listen and question to understand • We do not attack the messenger • We identify clear objectives and expectations for our meetings • We start on time, observe time limits, and end on time • We praise in public, we coach in private • We have a bias for velocity Have Fun. . . Enjoy the journey and each other

20. Employee Involvement A Human Resource Focus on developing a team-based culture with a robust recognition and rewards program

21. Employee Involvement • The extent of workforce commitment – both emotional and intellectual – to accomplishing the work, mission, and vision of the organization • Members of the workforce find personal meaning and motivation in their work • An engaged workforce benefits from trusting relationships, a safe and cooperative environment...

22. Involvement EMPLOYEE INVOLVEMENT (EI) • Is it a Culture? • Is it a Belief? • Is it a Way of Life? • Is it Teams? • Is it Belonging? • Is it a Process? "It is not a new program, project or process. EI is a cultural change in the way we treat each other and work together. It is a journey in which people apply their skills to improve individual, team and organizational performance continuously. This leads to employee satisfaction and improved business results.“ Raj Kanungo

23. Leadership Drives the Employee Satisfaction Index Culture 90 Great Leadership Results in Top Quartile Satisfaction 80 78 73 70 71 66 Good Leadership Results in Okay Satisfaction 62 60 ESI Percent Positive 60 58 52 50 47 Poor Leadership Results in Low Satisfaction 40 39 30 1 2 3 4 5 6 7 8 9 10 Leadership Effectiveness Deciles 23

24. Involvement Leadership Drives Employee Involvement 100 90 Great Leadership Results in Top Quartile EI 80 70 Percent Positive on Employee Involvement Good Leadership Results in OK EI 60 50 40 Poor Leadership Results in Low EI 30 1 2 3 4 5 6 7 8 9 10 Managers Level of Leadership Effectiveness (Deciles)

25. Boeing Aerospace Support’s employees are more motivated New Leader 66 ESI 62 EI 50% 58 54 50 2003 2001 2002 1999 2000

26. Cooking the “Soup” or Creating an Innovation Culture Recognition Ethics Operating Principles Diversity “Open Door” Empowerment Employee Involvement Vision & Values 26

27. Cooking the “Soup” or Creating an Innovation Culture Motivated Employees “Smells Good” Business Results “Taste Great” Recognition Ethics Operating Principles Vision & Values Employee Involvement Empowerment Focused Survey 27 CC40170002.ppt