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Harvard Business Review and Dell worked together on a survey to find out the current business priorities among the companies. One striking finding came out which is that there was a 13% drop in the valuing of reducing or optimizing costs. Previously, this was held as a pillar among objectives as financial health would keep businesses surviving until they figure out the winning plays. Businesses were looking less at efficiency and more on growth-driven values like innovation and customer relationships.
One insight is that companies have to be more circumspect about cost-cutting strategies which may turn-out to be more costly than the dollar figures that they saved. Short term solutions can create long term damages. One example is lay-off’s where the effect on morale can be tied up to the decrease of productivity which may linger for a long time. Training, re-tooling and transformation of employees may be the more progressive option.
There will always be areas for cost-cutting but an equal challenge is how to use them as opportunities for learning and improvements. If there are employees that needed to be laid-off, their functions or workload need not disappear with them. The IT group can be asked if technology can be introduced to maintain the productivity level. ((Innovation from Efficiency, n.d.)
Innovation Requires Inefficiency
Efficiency is an effort towards perfecting processes and eliminating mistakes. Most people see that as the measure of their craft such that they forget that processes are like products that can become stale or obsolete. It is innovation that creates new products and processes which we then make perfect to get the most benefit out of it. But there is a conflict in that in order to be innovative successfully, one has to go through trials, errors, mistakes before you get the right design. Efficiency abhors mistakes but innovation requires it as stepping stones. In the pharmaceutical industry, some firms celebrate failed and expensive trials as if they discovered the cure for cancer. It is just how they view things as how history taught them. What they learned from their mistakes will lead to the big winner of a drug that will pay off the failed trials many times over. One may call it inefficient productivity but that is the only road for innovation. Efficiency innovations reduce processes and resources to gain speed and they take only a few months. Empowering innovations create new products and processes and they take years to create. (Nisen, 2012)
A similar adage is that you will fail in 9 businesses before the 10th one will make you rich. The application for organizations is that efficiency must not be equated with not making mistakes but rather: innovate, make mistakes, adjust and learn as efficiently as possible. Organizations must create knowledge workers rather than perfect clerks. (Ikeda, 2016)
Too Much Efficiency
Efficiency means faster processes and earlier results. Systems engineers are always on the hunt for areas to be made for efficient and what we desire are systems that deliver to us the goods we need at the shortest time possible. The problem is speed is inversely proportional to control. The slower you drive a car, the more control you have because it requires less reflex when you have to react to anything. You can avoid a pot hole when you are slower but burst your tire because you were too fast.
The sub-prime housing crisis aimed for mortgage processing to be fast and efficient to serve as many citizens as possible. It did but at the expense of slower deliberation to assess applicants. And we all know the disaster that followed.
Organizations too must know when to make processes faster. They must assess risk and deliberately design processes to have checkpoints. Less efficiency can mean less risky. (Schwartz, 2012)
References
Innovation from Efficiency: Unlocking the Value in IT Systems. (n.d.). Harvard Business Review, A Report by Harvard Business Analytic Service Report. Retrieved May 9, 2016 from http://innovatebusinessit.com/wp-content/uploads/2014/11/HBR_Dell-Report.pdf
Ikeda, S. (2016, April 14). Why We Need to Make Mistakes: Innovation Is Better than Efficiency. Foundation for Economic Education. Retrieved May 9, 2016 from http://drrichswier.com/2016/04/14/why-we-need-to-make-mistakes-innovation-is-better-than-efficiency-by-sandy-ikeda/
Nisen, M. (2012, December 12). CLAY CHRISTENSEN: Our Obsession With Efficiency Is Killing Innovation. Business Insider. Retrieved May 9, 2016 from http://www.businessinsider.com/clay-christensen-our-obsession-with-efficiency-is-killing-innovation-2012-12
Schwartz, Barry. (2012, February 16). Economics Made Easy: Think Friction. The New York Times. Retrieved May 9, 2016 from http://www.nytimes.com/2012/02/19/opinion/sunday/the-danger-of-too-much-efficiency.html?_r=0
