Thursday, February 16, 2012

Only the Innovative and Efficient Survive

Andy Grove wrote about his experiences at Intel in a book entitled "Only the Paranoid survive".  Paranoia, at least as described by Grove, was the constant fear that someone would disrupt Intel's business, and his passionate pursuit of innovation to remain the top semiconductor manufacturer.  I was thinking about this today after reading Scott Anthony's post on HBR entitled Negotiating Innovation and Control.  Scott reviews three academic frameworks that examine the tradeoff between innovation and control.

Scott looks at Christensen's framework, which argues that a firm can't simultaneously house two competing philosophies.  Christensen believes that one will be dominant and the other must be spun off.  Further he looks at two other frameworks, one by Tushman and O'Reilly that examines "ambidextrous" organizations, carefully balancing both competencies, and finally a framework by Govindarajan and Trimble that argues for a discovery team and a performance engine - basically an efficient development capability loosely coupled with a disruptive, innovative front end.

In my book Relentless Innovation I argued (in line with Christensen) that "business as usual" operating models focused on efficiency and effectiveness are barriers to innovation.  I also think that Govindarajan's model of an innovative "front end" and a highly efficient performance engine that converts ideas into products and services effectively is a valuable idea.  But the real opportunity as innovation becomes a competitive advantage is the concept that all firms must become ambidextrous - as good at innovation as they are at control and efficiency.

I'm not the first to make this claim - Roger Martin suggested the framework in his book The Opposable Mind.  Basically he argues that corporations should be able to pursue "both/and" strategies using integrative thinking rather than more simplistic "either/or" strategies.  As managers and their roles (and more importantly education and tools) have evolved, we have the talent to build organizations that can be both innovative and efficient.

Scott has accurately identified three frameworks which represent current thinking about the structure of a business and how control, efficiency and innovation are manifested.  However, I think that as we look to the future successful firms will be those that achieve balance between innovation and efficiency as part of one operating model, one core capability, one organizational culture.  No firm can sacrifice efficiency and control.  That would lead to poor product quality and higher costs.  Conversely, no firm can sacrifice innovation.  That would lead to commoditization and obsolescence.  As we move into the future, both skills are necessary, within one corporate framework.  That's why I think every firm must move from a "business as usual" operating model to an "innovation business as usual" operating model, fully balancing innovation and efficiency.

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posted by Jeffrey Phillips at 6:07 AM


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