Innovation is wasteful
Recently Blair Enns of Win Without Pitching fame posted an article describing his concept “the Innoficiency Problem”. The Innoficiency Principle is the idea that efficiency and innovation are opposable ends of a spectrum. You can lean toward one or the other but you can't optimise for both.
Innoficiency shows up in two areas for professional services. Firstly, innoficiency creates tension in client engagements where the client desires or expects a low, fixed cost to produce a creative outcome. Secondly, it shows up internally in the tension between spending time on billable activities and spending that time on internal improvement projects or innovation. (This second one shows up a few times in the unique challenges to innovation at professional services firms.)
Both of these challenges require the teams involved to get a little more comfortable with the idea of “necessary waste”. You invest inputs (in our case, time) into innovation activities such as ideation, prototyping, testing and analysis. Innovation outcomes cannot be guaranteed so some percentage of the time you don’t reap the desired outcome from the time invested: a workable solution to the client’s problem, a new service offering, etc.
Now there’s a fair bit of nuance to this concept, as I learned in some brilliant conversations about the principle over on LinkedIn, under this post. Some key themes coming out of that conversation include:
Innovations can make us more efficient once they are realised.
Innovation can be undertaken using a repeatable process.
The lessons from the innovation “failures” are valuable and often lead to better outcomes.
The commercial context for a project may limit the amount of waste that can be tolerated.
Constraints and lack of resources can drive innovation.
While these are all true, it doesn’t mean we can avoid all waste and optimise for efficiency when attempting to innovate. Let’s look at these ideas one-by-one.
Innovations can make us more efficient once they are realised
This is true. This week on the Work Upgraded podcast I spoke about Sir James Dyson and the invention of the bagless vacuum. Now this invention increases my efficiency when vacuuming. But according to the Dyson website, Dyson tried 5,127 prototypes before he created the first working bagless vacuum cleaner. Each one of those prototypes that didn’t achieve the intended outcome was “waste” and “failure” in the sense that it was resources spent without a return. But arguably they were all unavoidable. If he’d known how to build the vacuum without 5,126 of those attempts, I’m sure he would have.
At a macro level, looking over a long time period, businesses can reasonably expect that good innovation will drive efficiency. Or at least profitability and longevity as a business, which are the end goals of being efficient too. But on the timescale of projects, and sometimes even individual careers, it won’t look anything like efficiency to be truly innovative.
Innovation can be undertaken using a repeatable process
Now, I’m sure Dyson didn’t just randomly try attaching different parts together to come up with his vacuum design. He would have followed a repeatable process, applying his knowledge of engineering and industrial design. However, although he could have an efficient approach to coming up with each prototype, this did not prevent some (most) of the prototypes from failing.
Even when we have a repeatable or standardised process for innovation, it does not guarantee that every idea will go into production successfully. Standardised innovation processes can give us confidence that experiments and prototypes are being developed from a base of knowledge. And they may reduce waste in the sense they can catch ideas that won’t work at the earliest point that can be known. But they don’t guarantee outcomes or eliminate all waste.
The lessons from the innovation “failures” are valuable and often lead to better outcomes
Dyson was able to use the data he collected from each of the 5,127 prototypes to inform the subsequent prototype. Failures and innovative ideas that don’t commercialise do teach us about what works and what doesn’t. However, the resources that were invested in ideas that don’t work are still spent and don’t reap a return.
Again, looking from the macro perspective, there may be a big enough return on the successful prototype to pay-back the cost of the unsuccessful prototypes. This certainly appears to be the case for Dyson given his profitable company of the same name. And this is why it’s ok to tolerate levels of waste within individual experiments, as long as we’re confident the failures aren’t teaching us that our current idea leads only to a dead-end.
The commercial context for a project may limit the amount of waste that can be tolerated
Blair Enns developed the Innoficiency Principle to reflect trends he was seeing in how creative services were being procured. Buyers were talking to agencies and asking for services to achieve an innovative outcome. But once the buyers’ procurement department got involved, suddenly agencies were being asked to provide innovation for “20% less” than the price discussed with the buyer.
Over on LinkedIn, one commenter writes:
“Nobody's going to write you a blank check to meander your way to innovative ideas. In fact, many have remarked on the key roles of survival/necessity and time pressures in producing breakthrough innovation.” - Andrew Long
This is true. Some commercial constraints either in how a client has engaged an innovator or in how an organisation’s business model work mean that they cannot afford to explore widely to come up with a solution. This needs to be looked at on a risk and cost-benefit basis.
I’d also ask the question: If you can’t afford an innovation approach, do you really need a innovative solution?
Innovation isn’t the answer to every problem. Some business challenges have well understood solutions. It just may be that understanding is held by a specific type of expert. It’s important not to use innovation as a hammer to problems that may require a screwdriver.
Constraints and lack of resources can drive innovation
The quote above also touches on the idea that constraints can create the pressure, or burning platform, needed to motivate innovation. Otherwise, it can be all too easy to maintain the status quo. An oft-cited example of this is Netflix, which switched to streaming services when consumers stopped watching as many DVDs. (In a twist, Netflix anticipated they would need to get out of DVDs from a very early stage.)
I have seen this play out in professional services. Financial auditors have accelerated their use of digital tools to replace human work hours far more quickly than management consultants working under the same brand. I believe this is largely down to the immense cost pressure on audit due to it’s perception as a non-value-add service. It’s harder to justify large fees for something companies only pay for because of regulation, therefore firms needed to find cheaper ways of delivering the services.
So certainly, these types of innovations developed from a lack of resources available for doing things the old way. However, back to point one above, there was likely waste and failure on the way to finding the new innovation that addressed the scarcity.
Blair sums up the innoficiency problem this way: “A culture that values efficiency over innovation will not allow its constituent components (departments or individuals) to waste the necessary resources of time and money to properly innovate.”
Certainly, if we prioritise innovation we do need to return to an efficient state eventually, and we cannot afford to waste more resources than we have. However, we may have to waste some short-term resources to get to the long-term outcome.
“Efficient innovation” may be an oxymoron, but “necessary waste” is not.