05 Sep Innovation and efficiency – can they co-exist?
In many companies innovation and efficiency aren’t just at odds; they are at war. Take procurement companies, for instance, which often find themselves caught between marketing departments and procurement heads. Marketing wants innovation; procurement is tasked with watching the bottom line. This is not only uncomfortable, especially in the current economic climate, but also unbalanced, because efficiency usually wins. Business models, processes and methods are simply more attuned to efficiency. There’s an understandable emphasis on reducing risk, variability and costs – while innovation introduces uncertainty and has indefinite outcomes. The dilemma is clear: Is success about creativity and speed? Or cost-cutting and risk avoidance? Or new ideas and opportunities?
But… It doesn’t have to be this way. There doesn’t have to be a choice.
Defining the terms
First, let’s look at what’s really meant by ‘innovation’ and ‘efficiency’. For the purposes of this commentary, we’re not dealing with ‘innovation’ and ‘efficiency’ in their traditional sense; in fact, we’re looking more at disruptive (radical/new) innovation vs operational (efficiency-related) innovation.
On this fine line is where the conflict sits – and where the solution is.
Alan Webber, co-founder of US Fast Company magazine, says, “It’s conventional to think of innovation as stemming from a certain set of circumstances or occurring in a certain place. But in tough times, you have to be more innovative about where you find it. Are there new…places to look?”
Look at Amazon, suggests Zach Murray, Point’s GM for Africa/Middle East. “Just when we thought their service offering was done and dusted, they’re developing drones to deliver products. That’s disruptive and operational.” Anthony Swart, MD of Point, agrees, “What’s required is organisations mature enough to adopt a holistic approach that delivers on both fronts.”
How does this approach unfold in practice – and in procurement?
In one of our Middle Eastern territories Point is in the process of changing the way point-of-sale material is designed, manufactured and implemented.
The development of modular, size-adjustable units is a Point innovation that eliminates the costly, time-consuming ‘individual site survey’ requirement from the design, site survey, manufacture process. In the context of the privately owned retail stores that prevail in the Middle East, this shortens time to market, improves quality and brand consistency, and reduces cost.
In this example, the ability to be agile and to fine-tune processes in challenging emerging markets can be defined as disruptive, as long as the desired outcome – namely efficiency – is achieved. And it has been.
Collin Kupczyk, Point’s Head of Structural Engineering, points out that a big part of being ‘holistic’ is having in-depth knowledge of the client and of the market in which they operate because this enables innovative thinking about how to address clients’ frustrations and barriers to success.
In an African example, a major FMCG producer recently launched a new range into the Northern and Central African markets and Point was commissioned to manage the procurement of POS materials.
Instead of producing these for each region individually, as had been done in the past, Point initiated a regional, volume-based buying drive, consolidating order quantities into a bulk order. This – complemented by a specialist supplier base, mass manufacturing experience, and different technologies –led to significantly higher buying efficiencies, quality and consistency.
A firm that engages in innovation and efficiency simultaneously follows an approach that is often referred to as ‘an ambidextrous strategy’. But relatively few companies can successfully balance these two emphases.
Swart points out that Point has managed ambidextrous innovations in a number of areas, particularly with its introduction of a group of industrial designers to the business: “What you want is client-facing industry experts; people with a solid background in print and POS, supported by technology, structural engineers, branding and financial experts. In that situation, really good innovation can improve efficiency – and bring other benefits.”
In practice, Point’s innovation is often process/efficiency-orientated, defined by a clear set of rules that are adaptable to meet clients’ needs. For instance, Murray explains, “We recently implemented a more simplified and transparent process for logistics, translating into savings in excess of 40% for a client.”
Gary Davies, Point’s CEO, is known for saying, “If we are doing tomorrow what we do today, we are out of business.” In good times, it is true that it’s easier to keep doing what’s worked in the past. In tough times, however, more is expected for less and those who don’t innovate face extinction.
Simon Jeffery, President and COO of LucasArts Entertainment Co., says, “Innovation is relative. It happens in companies of different sizes, at different levels. It can be a clerk who finds a way to make filing 20% more efficient.
So which is ‘better’: efficiency or innovation?
Should we encourage our people to use existing resources and experience to run a business as efficiently as possible? Or, should we drive them to invest the time and effort in developing innovative solutions? The answer? Both. And the challenge? The ability to identify where the big opportunities might be.