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The Innovation Engineering movement defines a system as Dr. Deming did: two or more independent parts with a common aim. In the case of an organization, this means two or more departments (parts) that work together toward a common organizational mission.

Sadly, the average organization realizes less than the sum of its parts—they realize less than what each department delivers independently. This is because, rather than optimizing their interaction with other departments for the good of the organization, each department’s primary focus is on delivering their departmental metrics, no matter the consequences to the organization as a whole.

Good organizations are the sum of their parts—they realize an additive impact from the interactions of their departments. There is cooperation and collaboration between departments. The management of each department reacts to issues rapidly. They readily sacrifice short-term department results for the accomplishment of the overall mission of the organization.

Great organizations are the product of their parts—they realize a multiplicative impact from the interactions of their departments. Employees anticipate customer needs and the needs of other departments. Good organizations innovate to problem-solve challenges when they arise. Great organizations anticipate issues and proactively innovate to take advantage of opportunities, lead market change, and prevent problems from developing.

To move from an average or good organization to a great organization requires the engagement of leadership. This is because only the leadership of a team, department, division, or organization has the bigger picture understanding of today and tomorrow.

Dr. Deming wrote of the need to replace management with leadership. To paraphrase Dr. Deming: The job of management is one of prediction. It’s about finding out what will help the customer in the future. It’s about finding how to get ahead of the customer.

Leadership is about leading a team, department, or organization into the future. It’s about making strategic choices on what products, services, and markets to invest resources in. It’s also about investing in capability building, such as employee education, tools, and systems to enable team members to work smarter.

In 1954 Peter Drucker wrote in his management classic The Practice of Management:

It is not enough for the business to provide just any economic goods and services; it must provide better and more economic ones. It is not necessary for a business to grow bigger; but it is necessary that it constantly grow better. . . . Every managerial unit of a business should have clear responsibility and definite goals for innovation. It should be responsible for its contribution to innovation in the company’s product or service; and it should in addition strike consciously and with direction toward advancement of the art in the particular area in which it is engaged: selling, accounting, quality control, or personal management.

More recently, Kouzes and Posner wrote in their leadership classic The Leadership Challenge:

Innovation and leadership are nearly synonymous. Leaders are innovators; innovators are leaders. The focus of a leader’s attention is less on the routine operations and much more on the untested and untried. Leaders are always asking, “What’s new? What’s next? What’s better?”