Efficiency and innovation

Classically, in the industrial economy, there have been two choices on the path toward profits, growth, and stability: efficiency and innovation. This is a false choice.

Management has long seen efficiency maximization as the mutually exclusive and economical option. The other option, creating a more valued product that can be sold at a higher margin, is fraught with the cost and risk that is the stuff of executive ulcers the world over. A thorough evaluation of the value and supply chains in an organization is a way of doing more with less, running lean and mean.

Now, while the pursuit of efficiency may seem like the ultimate exercise in augmenting shareholder value, implementation is a minefield of conflicting organizational management philosophies.

Indulge me in some logic for a moment:

According to Roger Martin, long-term success comes from a balance of the efficient exploitation of existing products and services and the pursuit of innovation. Since business owners would all say that they strive for long-term success (despite their behavior), we can conclude that all businesses should strive to balance efficient operations with innovation.

A caller to Tom Ashbrook’s On Point this morning said that, in his experience, owners are not interested in employees that care about products. Rather, they are interested in the number of widgets that can be produced per hour. It is obvious, from Martin’s assertion above, that any business predicated on this model will eventually fail, most likely from being overtaken by an unforeseen competitor’s much better, novel solution. That said, our conclusion is that innovation is a fundamental element of long-term success.

If innovation is a fundamental element of long-term success, then how can it be that success-driver owners would do everything in their power to thwart the efforts of innovative employees in their ranks? Conclusion: Short-sighted and plain old bad business. All across the nation, and I’d venture to guess the world, there are people toiling away in anonymity, the pride in their work waning. These are people who have ever so much to contribute to the organizational conversation, people whose human capital stagnates in so many cubicles.

If management were to incorporate the need for innovation into the analysis of organizational effeciency then this underutilization of human capital would be readily apparent.

How tragic that the great potential of individuals and organizations is squandered simply because of this false dichotomy between efficiency and innovation.

The above approach is rather cold and calculative in an attempt to ground the argument in the world of traditional business management. I also wonder if we haven’t somehow trained businesspeople out of their own value systems. That is to say that I wonder if business education and pressures on the job haven’t created a negative feedback loop in which people straddle an ever widening gap between their personal value system and that of the business. Many people are talking about the shift toward more holistic perspectives in business that take account of things like environmental impact, employee happiness, and the creation of real value. There are even success stories that show this paradigm shift to be profitable, but it is disheartening to see so little of it. What I see is a polarization where the progressive thought leaders go off towards holistic success while the greedy fatcats continue to reap ever larger rewards while creating ever larger externalities making it ever more difficult for us to maintain our integrity.