Operational Innovation

Operational innovation is notoriously difficult. The power of creating and deploying new ways of performing fundamental business processes is indisputable; it has been the springboard to success for leading companies in virtually every industry. But many firms have failed at their efforts to make operational innovation work. What is the secret to success? The experiences of Schneider National, a transportation and logistics firm based in Green Bay, Wisconsin, provide an object lesson in how to get operational innovation right.

Founded in 1935, this privately held company has a long history of growth; by the late 1990s, it had become the largest full-load trucking firm in the country, serving customers such as Lowe's, Wal-Mart, and Georgia-Pacific. The company had nearly $3 billion in annual revenue and more than 20,000 employees, and its orange tractors and trailers were fixtures on U.S. interstates.

But in 2000, Schneider's growth slowed to a snail's pace, productivity dipped, and return on capital dropped. The company's managers had the insight to realize that more of the same would not get them out of the hole they were in—indeed, more of the same is what had gotten them into it. They determined that in a highly competitive industry such as theirs, which was suffering from enormous overcapacity, serving customers better than the competition was the key to success. Stretch goals were set for customer satisfaction, and a project was begun to tackle and improve one aspect of the company's interactions with customers, namely how it prepared and delivered responses to customer requests for proposals (RFPs). A team of highly capable individuals was convened to create a new way of developing these proposals. They came up with a lot of very good ideas, and there was considerable excitement about the opportunity. Yet the net result of this effort was absolutely zero: No changes were made, and life continued as before.

That's the bad news. The good news is that Schneider's leaders did not give up, but restarted the effort in a different way. This time around the company was astoundingly successful. The time to respond to a customer's RFP, which had been in the range of 30–45 days, plummeted to 1–2 days. These results started to appear within nine months of the project getting underway and were fully realized in less than two years. By getting back to customers so much faster than its competitors, Schneider was able to shape the terms of competition.