Efficiency Or Innovation?

Double-dip recession anyone?? How about the W-shaped economic outlook/recovery? We are going through some unprecedented times here folks; despite the gloom, one significant contributor to the few gains we are observing has been the technology-led productivity improvements. Productivity improvements, in turn, can be result of the corporations either being more efficient (i.e. doing more with less) or being more innovative (i.e. building better processes or machines). Although it is hard to draw boundaries around when one stops being efficient and starts being innovative or vice versa, an organization can always decide, albeit at a macro level, where they would want their precious resources (people, machine, money, etc.) to be invested.

To me the $1M question is what is the optimal place to start? Does it make sense to start by doing what I call “house-cleaning” – fixing the things that are broken, reorganizing functions/teams, removing things that do not work, improving existing processes, releasing once captive functions to 3^rd parties who can perform them more optimally, etc. OR do you say “Our organizational setup and processes are just fine; it’s just that the current set of widgets/services we offer are out of synch with what the market is looking for and hence we need to innovate towards better, faster, cheaper, and closer offerings.”

Are you with me so far? You see, at some level you need to make a choice – Do I improve or do I innovate? Let me try to paint a hypothetical picture for you that will hopefully give you a context to consider while you debate the learnings from this blog posting. Imagine you are the CIO of a multi-billion US firm. Your project delivery follows some vague, questionable methodology that requires people to produce artifacts that adds little value to the desired business outcomes. Your network connectivity is dead slow and your customers constantly complain about how long it takes to open/retrieve network assets. You do not have a clear way of measuring how your function is contributing to the top/bottom-line performance of your customers or organizations. Your internal customers are always mocking you for your ability to be agile and responsive to their needs. Although you are responsible for collecting the firm’s data and information, you are yet to propose any meaningful intelligence or insights, based on all that data you’ve been collecting, to your business customers.

So on one hand this is the state of your IT affairs. On the other hand, you are noticing all of the jazzy mobile, social, cloud, digital, and analytical trends in the market place that are making the rounds and you are thinking of all the cool, smart, and trendy ideas you could have your people working on. Of course, showing off a couple of cool and new ways to engage and campaign to the firm’s customers would position you as one who is with the technology curve and one who is thinking of improving the firm’s market share.

Now the question – what should the executive focus on? Should the CIO focus on fixing his organization’s structural issues? Or should he pursue the more flashy, trendy opportunity and have his team innovate towards potentially new products/services? I am not sure if there is really a right or wrong answer. Like my Corporate Strategy professor used to say – It Depends. You ask – On What? One could do a detailed DCF (discounted cash flow) analysis and compare one opportunity with the other. One could consider where executive management is “politically” leaning towards. One could consider the opportunities from a social and/or external perspective, in terms of which would give more mileage. There are a number of internal and external forces that could influence the final “choice” outcome and they would need to be evaluated.

If you ask me, I would lean towards fixing the firm’s structural problems first before investing in any sort of innovation of firm’s products/services. In the long run, what’s inside matters more than what’s outside when it comes to a firm’s success and ability to increase shareholder value. A firm’s culture is the most important building block and helps lay the foundation for all future innovation. You must lay the rail tracks on which you want to travel in the future. Travelling on existing rail tracks will lead you to the same destination, i.e. results.

As always, I welcome you ideas and feedback on my blog posting.