Wednesday, July 30, 2014

The innovation bandwidth constraint

After discussions with a number of current customers and potential prospective clients, I've come to the conclusion that many businesses are at a critical inflection point in regards to the innovation they can conduct.  What's interesting is how closely the constraints align to larger economic issues.  I'm talking here about the necessary level of staffing in order to get things done.  What's I've referred to in the title as "bandwidth".

Today, after years of outsourcing, right sizing, continuous improvement and an unfortunate focus on efficiency most businesses run right on the bitter edge of staff availability and competency.  It's as if many businesses decided to identify the least possible amount of staff to accomplish the everyday work that must be done, and then reduce headcount by 10%, all the while whistling past the graveyard, knowing full well that there is no staff availability to do anything above and beyond the everyday work.  When my clients talk about a lack of time or a lack of available resources to do innovation work, I don't doubt them.  Many businesses seem to lack the people to get their regular work completed.

While OVO interacts with only a handful of companies at a time, I get the feeling that my observations are in line with what other colleagues are seeing - that the productivity curve has reached or perhaps exceeded it's optimal levels.  Businesses are asking fewer and fewer people to do more and more work, and increasingly it comes at the expense of doing anything new or different.  There simply isn't enough time or enough bandwidth in many corporations to take on new, innovative or different projects.  We ought to stop and consider the paradox presented by overworked, overwhelmed corporate executives in the face of unemployment and underemployment in the US.  Right now we have a dearth of innovation in many companies because the employed staff are far too busy on everyday work, while tens of thousands of people are unemployed or underemployed in this country at the same time profits are reaching new peaks.  It may be time to hire a few more people to conduct the "Everyday" work so that your best people can focus on innovation.

The lack of innovation from many corporations today is not because there are few opportunities in the marketplace or that companies or employees lack ideas.  Most organizations are awash in good ideas.  No, the barriers to more innovation come from several sources, almost all of them having their root cause in staffing and resource availability.  At a time when money is insanely cheap, people are viewed as expensive and hiring is difficult.  Ask any group of executives and they'll blame innovation strictures on available resources, conflicts and concerns about tradeoffs for existing projects.  They'll rarely point to poor ideas or a lack of opportunities.  It's a concern about hiring more people, having the flexibility to expand and/or contract headcount as opportunities present themselves, and having people with the right attitudes, experiences and perspectives who can create new value quickly.

The answer to this dilemma breaks down into one of two internal solutions:  either hire new people who are highly creative and can innovate rapidly, leaving your existing employees to continue to operate at high efficiency, or bring on new employees to take on the everyday work, freeing up your best employees to gain skills and create new products and services.  Of course you can pursue another path, outsourcing innovation to consultants who fill the gaps that your teams can't or won't fill, but you'll never convert your internal organization or its focus by leveraging too heavily an external partner.  Innovation isn't something you can start and stop at will, but must eventually become an internal capability.  Relying on outsourced models is more expensive, and in a period when money is cheap and people are expensive is a relatively intelligent solution, but the time will come when money is expensive, and your competitors will have modified their models to incorporate more innovation skill internally. Then where will your business be?

Note that I'm not even addressing the issue of whether or not the people outside your organization are naturally creative or innovative - in many organizations they simply need more people to get the work done that they are doing everyday.  Simply freeing up a few good people to think about the next new product or service would be a great start.  Giving them innovation skills or people with innovation experience would just be the icing on the cake. 

Wall Street and us investors have become too enamored with short term success and constantly rising stock prices, which are creating disincentives for real innovation and differentiation.  The pressure on costs inside many organizations means that they shed opportunities for future differentiation and growth, focusing only on the most predictable and least risky products and services.  This leaves only the truly entrepreneurial firms to innovate, which makes innovation seem even more uneven and risky.  The breaking point for corporate innovation today isn't ideas, it isn't funding, it isn't opportunities - it's personnel bandwidth.  That seems like something that should be easy to address, especially in a time when more and more people attend college, and thousands of experienced people are looking for work.  This isn't an issue of skills match, this is an issue of too much focus on the cost of hiring and maintaining headcount, and the impact that headcount has to short term results.
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posted by Jeffrey Phillips at 7:21 AM


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