Corner Office-Better, Faster, Cheaper Myopia

Corner Office-Better, Faster, Cheaper Myopia

Is innovation obsolete and undervalued?

Which of these statements are true?

{1}   Water drains counterclockwise in the Southern Hemisphere due to the Earth’s rotation.

{2}   There is no gravity in space.

{3}   Humans use only 10 percent of their brains.

{4}   Chicken soup can cure the common cold.

{5}   A dog’s mouth is cleaner than a human’s mouth.

{6}   Animals can predict natural disasters.

{7}   Lightning never strikes the same place twice.

{8}   It takes seven years to digest gum.

{9}   A penny dropped from the top of a tall building could kill a pedestrian.

{10}   Doing things better, faster, and cheaper is the only way for businesses to create competitive advantages.

Answer: My mother certainly knew that chicken soup could cure the common cold, but the rest are false. (For explanations about the first nine myths, go to www.livescience.com. For an explanation about the last myth, read on.)

It’s common business knowledge that businesses gain competitive advantages (or “actionable leverages,” as I recently heard it called) by figuring out how to produce goods and deliver services better, faster, or cheaper than the competition.

In fact, that’s the way our economy has grown into the relatively stable mammoth that it is today. According to the Federal Reserve Bank, over the past 20 years, real gross domestic product growth in the United States has become less volatile for several reasons including monetary policy, globalization, deregulation, and improved supply chain management through new information technologies (i.e., producing goods and services better, faster, and cheaper).

Simply put, supply chain management is getting the right stuff to the right places in the most efficient way. Creating those competitive advantages is what consumes most of the energies of business leaders, so that’s what I’m focusing on. Although this focus is largely beneficial, the way we revere “better, faster, cheaper” makes me concerned.

200 Years of “Competitive Advantage” Evolution

First, let’s understand how we got to where we are today. During the past 200 years, new ideas and technologies have constantly improved how things are produced. Factory machinery replaced manual labor, while railroads, electricity, telephones, and telegraphs also made business operate better, faster, and cheaper.

Henry Ford took it a step further in the early 1900s. With the assembly line, he created an era of mass production. Ford’s statement, “You can paint a Model T any color, so long as it’s black,” ruled the day for the next 60 years, while American manufacturers developed ways to mass-produce goods and streamline supply chains.

In the 1970s, Japanese manufacturers figured out how to make higher quality goods at lower costs, which challenged our manufacturing superiority. Americans  were forced to follow their lead in changing from mass production to the era of lean production, valuing quality and flexibility over quantity and efficiency. The mantra of “better, faster, cheaper” took on new names, including total quality management, just-in-time inventory, and Six Sigma quality control.

Most recently, some forward-thinking manufacturers (Dell being the most famous) were pioneers of the new era of mass-producing customized products. Through the Internet, businesses now can eliminate middle distributors and go directly to consumers, thereby getting customized products to customers better, faster, and cheaper. Have you ordered anything lately from a major Internet-based business, such as Amazon.com? Most of these companies now have information systems that allow customers to track the status of their orders. Many retailers and manufacturers now have information systems that share real-time data with their suppliers, creating a supply chain that runs better, faster, and cheaper.

In a nutshell, U.S. business has evolved into a very efficient system with lower inventory, faster delivery, and less expensive logistics. This new era of mass-producing customized products has become possible by creating information management systems with technologies focused on doing things better, faster, and cheaper. As a result, our economy is stronger, with consumers paying less for higher quality goods.

Innovation Obsolescence

That’s the good news. The bad news is that true innovation appears to be falling by the wayside. It concerns me that we believe in the myth that better, faster, and cheaper is the only way to create competitive advantages. We have forgotten the importance of thinking outside the box to find ways that are entirely different. The focus on better, faster, and cheaper becomes a limiting factor. This focus is often very metrics driven, complete with dashboards to measure progress. While beating the competition by doing it better, faster, and cheaper may provide incremental gains, it won’t provide the breakthrough ideas that command the highest value in the marketplace. The new, breakthrough ideas that create entirely new paradigms are getting fewer and farther between.

For example, I am amazed at the failure of many business leaders to make innovation part of their company culture. It’s a shame that so much effort is spent copying others or beating up the competition, instead of finding new applications and new markets for products and services. The Internet is certainly the greatest innovation in recent times, but now it seems that new ideas are simply add-ons.

I am also amazed at the failure of many industries to realize that the net effect of better, faster, and cheaper is compressed profit margins. Instead, why don’t we have more businesses creating innovative, value-added products and services that create wider margins?

Innovation’s Value Proposition

At the core of this problem is a society that doesn’t currently value science, engineering, and information technology education or careers. Between 1998 and 2002, the number of science and engineering doctoral degrees awarded to U.S. citizens at U.S. institutions fell 12 percent to 14,000, according to the Commission on Professionals in Science and Technology. (During the same period, by the way, the number of doctoral degrees granted in most other fields remained the same.)

Compare that to other countries—like Russia, where 50 percent of their graduates major in science. Microsoft Research says that 180,000 people graduate each year with information technology skills in Russia, while India graduates 60,000 and China graduates 50,000. No other country in the developing world, including the United States, even comes close.

Having an advanced science or engineering degree will make it easier to get a green card, and that may be a factor in that trend. In fact, between 1990 and 2000, foreign-born doctoral graduates in science and engineering fields in the U.S. rose from 24 percent to 38 percent, according to the National Science Foundation. But that source of brainpower began to shrink after increased security restrictions were implemented following September 11, 2001, so we now get fewer scientists and engineers from foreign countries as well.

While business leaders have little direct control over what students decide to study or the immigration policies of the federal government, we can influence students’ choices by choosing to pay more for what we value. Scientists and engineers typically don’t get paid the highest salaries, but if we started paying them more in our own businesses, the number of students attracted to science and engineering would grow.

Our great country has thrived on “disruptive innovation” by the research and development of new ideas, products, and services. Don’t believe in the myth that better, faster, and cheaper is the only way to create competitive advantages. Rather, learn to value and reward innovation, new ideas, and paradigm shifting. (By the way, the common myth that adults don’t grow new brain cells is a bunch of horsepucky!)

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