Harvard Business review

How Your Company Can Encourage Innovation from All Employees

Companies around the world benefit from the ideas and innovations of their frontline employees to improve their products and processes. The kaizen approach to this, which originated from the Toyota Production System, has been instrumental in driving performance through frontline employee idea generation and implementation. The basic notion behind kaizen is that a continuous stream of hands-on improvements translates into substantial productivity and quality gains over time.

Although the practice is rooted in manufacturing, kaizen has also proven to be effective for knowledge work such as auditing, advertising, and banking, where innovative input from employees is particularly valuable. Employees understand very well which tasks require the human touch, and they know where and how automation can do a manual routine job better. And they often have stake in automating routines, which frees them up for more interesting knowledge work.

Of course, a great deal of knowledge work is already digitized. But the approach we present here, digital kaizen, enables knowledge-intensive firms to better leverage the experience and insights of frontline employees at scale to deliver knowledge work automation that actually works. Let’s look at how accounting giant PwC and other firms applied digital kaizen to accelerate the effective automation of many time-consuming processes.

Creating Employee Engagement

In previous studies on innovation, we have seen how good frontline ideas are withheld, bad ideas are submitted, and some ideas may get lost in translation, hierarchical layers, and organizational silos.

Employees seldom perceive their idea’s evaluation and selection as transparent, and often it is not clear why an idea received low scores or has been rejected. And although frontline employees are best positioned to sense changing business conditions and opportunities, they are generally the least heard (because they are at the lowest level of the organization). In a nutshell, getting employee engagement for kaizen improvement is hard, even if companies have digitized processes already.

The digital kaizen approach involves creating an in-house platform (think of an internal “app-store”) that enables frontline employees to submit ideas, providing them with no-code or low-code toolkits that enable them to turn their idea directly into a working prototype that can be readily tested and improved. At accounting firm PwC, for example, frontline auditors used such a platform to develop a multitude of “copy-and-paste” algorithms that automatically read data from a set of source documents, apply some basic arithmetic, and then write the processed information into another target document or application.

To date, PwC citizen developers, as platform contributors are called, have created over 7,000 automations on their digital kaizen platform. In the U.S. branch alone, more than 95% of partners and staff (about 55,000 people) are active on the platform.

Scaling-Up Solutions

Another problem with frontline innovations is that solutions do not easily spread between locations or separate units. Ideas are often “sticky” to their specific customer, the specific creator, and the specific process characteristics. To complicate matters, separate organizational units can suffer from the “not-invented-here-syndrome.” As a result, potentially good ideas are often overlooked or ignored.

Digital kaizen platforms can help prevent this. To begin with, users can search solutions proposed by citizen developers and use the tools on the platform to tailor the solution to their own needs, thereby becoming citizen developers themselves.

But that functionality alone isn’t enough. A key condition for scalability is that the solution solves a problem shared by multiple target users and meeting this condition usually requires the idea contributor both to check with their peers’ interest in automating a certain task (typically, a time-consuming, error-prone process) and to understand how the task is executed by different users. It also requires an additional development effort to ensure that the solution can accommodate multiple and varying uses.

To incentivize these information-gathering and development efforts, automation leaders at PwC offered citizen developers incentives for the creation of scalable solutions: both bonuses, career advancement, and acknowledgment of a citizen developer were tied to the adoption and use of her automations by colleagues. Downloads, usage levels, and user ratings are tracked by the platform, thus enabling PwC to transparently link user performance on the platform to rewards.

And because the platform enables adopters to modify a solution easily themselves, it enables others to create new “releases” of any given solution, further facilitating the scaling of automation ideas. For instance, an auditor in PwC’s San Francisco office can tweak her Berlin counterpart’s solution because their similar businesses only differ by country-specific data input formats.

What is the bottom line of spreading and absorbing digital kaizen solutions? Productivity gains can scale up over time because they can be repeatedly reaped at zero marginal cost. Taken together, PwC’s 7,000 automation solutions have been downloaded over 5 million times and have automated over 7 million hours of work (PwC’s rough measure of productivity gains).

Managing the process

Many companies have workforces keen to contribute to the digital transformation of their work. Against this backdrop, we’ve identified five factors critical to sustaining successful digital kaizen.

Raising Awareness.

As with any successful change initiative, it is useful to establish broad awareness of the current state of digital capabilities and processes. At PwC, for instance, the digital kaizen initiative started with a self-assessment of employees’ digital skills via a digital fitness app. To create a sense of urgency and seriousness around the issue, C-level executives published their own assessments’ results — including their shortcomings.

Upskilling the Frontline.

Most frontline employees aren’t programmers, nor is programming their main job. But it is often easier to transfer — through training or hackathons — digital skills to users than to transfer information about users’ problems to digitalization specialists. And frontline workers are keen to upskill. At PwC, digital skill courses were oversubscribed by a factor of three. As the approach gained momentum at PwC, the training originally delivered through “digital accelerators” has been replaced by a suite of training modules available to the whole workforce.

Updating Organizational Roles.

The role “citizen-developer” is much more than a badge. It must become officially acknowledged and supported by training. Companies can allot paid time to citizen developers to create automations and be held accountable for the results. They can also award titles and diplomas to reflect different levels of expectations, skills, and roles in digital kaizen — in analogy to the “green” or “black belt” levels emblematic in lean manufacturing. At Romanian software company UIPath, for example, the most basic level is the “automation consumer,” who does not develop, but who contributes ideas for automation. At the next levels, citizen developers can be either “self-users” who mostly build automations for themselves, or “power users,” who build automations for larger communities of users.

Rewarding and Motivating.

As we saw, PwC ties download rates and user evaluations to monetary incentives, and performance appraisals, creating even stronger incentives for employees to engage in digital kaizen. But gearing incentives to diffusion does not necessarily require monetary incentives. For instance, at global marketing and advertising company Dentsu, some employees were more driven by company-wide visibility and a “strong and selfish urge to get rid of boring tasks,” according to Dentsu’s head of automation. Employees are powerfully motivated by making their day-to-day jobs less repetitive, by championing their digital tools, and thereby showcasing their digital skills. Quite commonly, citizen-developers list their tools in their CVs, along with download and user statistics.

Governance: Balance Creativity and Control.

Companies can introduce some level of managerial control by setting appropriate “citizen rights” for digital kaizen platforms. These rights evolve around the development and upload (“who can develop and upload what tools?”), approval (“which solutions need a specialist approval?”), download (“who should or can download?”), and adaptation (“who can modify what parts of the tool?”). Answering these questions helps companies manage the tension between the creativity of decentralized idea generation and the need to maintain consistent company-wide standards.

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Pioneers of digital kaizen, such as PwC and the other companies we mention, have found that the approach can be applied to other digital solutions beyond the automation of standard knowledge work processes. That’s because at its core, the digital kaizen idea is about the willingness of managers to leverage intrinsic motivation and skill of their frontline employees and engage them in autonomous innovation to drive their companies’ digital transformations. And that will be about more than automating information flows.

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