JoAnn Hackos, PhD
A report in the August 4, 2002, issue of the Financial Times (FT) focused on the “twin challenges that today’s executives face—to deliver efficiency gains while creating new sources of growth.” As we all recognize, the pendulum has swung in the past several years toward efficiency—what Peter Drucker described 30 years ago as “doing things right.” Cost cutting—layoffs—outsourcing—offshoring. All are attempts to boost profits by lowering costs at a time when higher revenues are elusive.
But efficiency has its limitations, as Drucker made clear. The most efficient producer of buggy whips is out of business today. Only by pursuing the “evil twin,” effectiveness will our companies succeed in maintaining leadership positions in their markets. Our theme at the Best Practices conference this year, Innovation: Making It Happen, echoes the FT’s month-long summer school. How do we ensure that our organizations are effective? How do we know what “right” things to focus on, rather than endlessly optimizing the same old products and processes?
Key speakers at the FT summer school, W. Chan Kim and Renee Mauborgne, are the authors of the Harvard Business Review article, “Tipping Point Leadership.” This article, along with Malcolm Gladwell’s book, The Tipping Point, and John Kotter’s, The Heart of Change, are center points for the CIDM Best Practices conference and the yearlong Innovator’s Forum that begins in September.
Kim and Mauborgne argue that our organizations are being ill served by their focus on beating the competition. When companies concentrate on making their existing practices more efficient than those of the competition, they ignore opportunities to change the nature of the business through innovation. They note that divergent thinkers in the airline industry, like JetBlue, continue to increase market share by taking customers away from the big airlines. The big airlines engage in massive cost cutting but seem unable to change the nature of their business.
Information development faces the same challenges. We seek to become more efficient through single sourcing, content management, and changes to internal processes. We work very hard to produce the same content with fewer resources. But when someone suggests that we innovate by learning what customers really need, we shrink away, unwilling to assume responsibility for the customers’ experience with information delivery. We argue that we have no time to study customers and still deliver on deadline. We claim that “they won’t let us” spend time on innovation.
The lecturers at the FT summer school have a solution to the stalemate—outsourcing. If an organization cannot find innovative thinking inside their organizations, they should pursue resources outside.
For most managers, outsourcing means pursuing efficiency, not effectiveness. Information development is outsourced to decrease personnel costs, not to develop innovative solutions. However, that has not always been the case. In fact, we detect an emerging interest in outsourcing to organizations that provide innovative and cost-effective solutions to delivering information to customers. Twenty years ago, a small number of innovative suppliers dominated the information-development market. They largely disappeared when lower costs, not innovation, became dominant, and were replaced by large contract houses in the US and now in developing nations like India.
How should we respond to the twin challenges? I argue that we should pursue them both aggressively. Certainly, we need to reduce the costs of developing information in every way we can. But we cannot neglect innovation. In fact, to do so invites outsourcing. The giant tomes that describe everything there is to know about a product can easily be produced elsewhere, by less costly workers. But minimal, innovative approaches to information development can be produced only by people who know the customers well. The answer then is to pursue innovation, including reaching outside the company to premier information designers for new ideas.
Join me at the Best Practices conference and the first session of the Innovator’s Forum in September. You’ll be happy you did.