Tuesday, August 07, 2012

Innovation: The optimistic science

We need a new way of thinking about business.  This occurred to me when I was thinking about many of the leading management philosophies - outsourcing, right sizing, lean, Six Sigma.  All of these management philosophies are reductive.  That is, they lead to an ever increasing focus on reducing and eliminating.  They frame business as a zero sum game, within constraints.  To continually focus on these tools one rapidly reaching diminishing marginal returns.  There is really only so much waste, fat and duplication to squeeze out of any business.  At least one hopes that to be the case.  For years we've been told that economics is the dismal science.  Perhaps that's true.  What we really need is a new vision or new perspective about abundance and opportunity.

Innovation is the only management mantra or philosophy that focuses on growth and differentiation.  It is also the only inexhaustible and potentially unbounded management philosophy, in that innovation often leads to more innovation, rather than diminishing returns.  We can squeeze more and more ideas out of a more and more engaged workforce, or base of customers, as we demonstrate the ability to incorporate ideas and listen.  Innovation can experience a network effect, becoming more valuable and more effective as more and more nodes are added. 

Why, then, does dominant management philosophy and action focus so predominantly on the negative, reductive, zero sum aspects of business, which has decreasing marginal returns, rather than the possibilities of endless insights and ideas for growth?  I suspect there are several reasons:

Training and History

We are born into a "dog eat dog" world where Malthus and others hold tremendous sway.  We are led to believe in an economy of shortages, not an economy or market of potential possibilities.  In many regions of the world, shortages are real but unnecessary, and in other regions shortages or limits exist because we allow them to exist.  In every critical shortage, mankind has created new ideas to replace exhausted capabilities or create new ones.  Familiar with Julian Simon's wager on commodities?
Yet every manager has a Malthusian view of the world rather than a sense of what's possible - limitless innovation. I place some of the blame on shared history, education and training.


I linked in a tweet yesterday to some interesting research, which points out a great irony.  The more challenging the situation, the more we need innovation, yet the more uncertainty that exists, the more we distrust innovation.  See the research here.  Uncertainty is an innovation killer, and through our training (see above) we've been taught to wait for or search for certainty.  Once something is certain it is rarely innovative anymore. We must become far more comfortable with uncertainty.

Timelines and Results

Further, we are impatient, and want results now.  While innovation has demonstrated an ability to deliver outsized results, it often takes years or even decades to be proven.  The Simon-Erlich wager linked above took place over a decade after all.  Managers and executives may suspect that innovation offers boundless opportunities, but they know reduction in costs delivers profits now.  The market has trained and disciplined many executives to focus on short term outcomes and to demonstrate consistent results.

New Thinking

So we need a new school of thought, balancing historical precedent, uncertainty and short timeframes with the power and possibility of innovation.  Our executives are so busy squeezing the last juice from small lemons that they fail to see new oceans of possibility right at their doorstep.  They have become blinkered to opportunities and distrustful of the potential, inured over decades to risk and uncertainty, lured by promises of rewards in the short term.

Innovators must learn to communicate the possibilities and potential of innovation as a force for change, for profit and for growth and differentiation.  As good innovators demonstrate, a sustained innovation program overcomes many small issues and challenges, and people enjoy working to a big vision rather than an ever shrinking scope.  As cost cutting and efficiency marginal returns grow ever smaller, innovation is the doorway to growth and differentiation, but also to an entirely different focus and purpose.

If economics is the dismal science, then innovation must become the optimistic science.
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posted by Jeffrey Phillips at 8:37 AM


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