Is there a point where you should no longer invest in being “faster, better, cheaper”? At what point should you focus more on innovation and experimentation and less on continual improvement?
Make no mistake – I am a big believer of continual improvement. But when the focus is only on “faster, better, cheaper” – it will actually work against an organization.
Need an example?
A Harvard Business Review article discussed the impact of Henry Ford’s nearly singular focus on “faster, better, cheaper.” It talked about his disruptive innovation – the moving assembly-line process for the manufacturing of automobiles. This allowed Ford to produce and sell the Model T at a significantly lower price than his competition, enabling the creation of a new, rapidly growing market.
In doing so, Ford froze the design of the Model T, which allowed him to better refine the moving assembly line process. As a result, Ford was able to further cut costs and produce more automobiles faster. Ford grew from manufacturing 10,000 cars in 1908 to nearly a million cars in 1920!
But in 1920, General Motors introduced some new concepts and innovations in automobile manufacturing, such as installment selling, used car trade-ins, and annual model changes. Ford stubbornly stuck with his cycle of improvement and saw his 1921 two-thirds market share fall to about 15% in 1927.
The curse of “faster, better, cheaper”?
Is “faster, better, cheaper” getting in the way of experimentation, innovation, and creativity at your company? Is “faster, better, cheaper” preventing your company from looking at its products and services from a fresh perspective?
Ford fell into the “faster, better, cheaper” trap. By continuing to focus only on improvement, Ford did not react to changes and innovations in the market. As a result, Ford lost its dominant position in the automobile industry in just seven years.
Why is solely focusing on improvement so appealing?
One, it is fairly straight-forward to justify and determine a return on investment (ROI). The scope is often very well defined. In Ford’s case, the scope was the optimization of the assembly line. Ford realized a great ROI in improvement through increasing production (and subsequent impact on sales).
Secondly, when compared to innovation, improvements are relatively easy to do. Because improvements are usually targeted on internal systems, where most variables of that system are known or, at least, easily identifiable.
Again, don’t get me wrong – I’m all for continual improvement. I’m all for eliminating waste from processes and optimizing costs. I’m a strong believer that IT organizations must become good at getting better.
However, only being “faster, better, and cheaper” is a threat to the IT organization.
Continual improvement cannot be the primary focus of the IT organization. In fact, continually driving “faster, better, cheaper” is a threat to IT.
If all IT does is work on optimization and improvement, IT will soon find itself out of a job.
IT has to be able to lead the business discussion regarding how to leverage technology to exploit new market spaces, gain customers, and increase revenues. IT has to be able to deliver value, not just demonstrate lowest cost. If all IT delivers is the lowest cost, IT becomes irrelevant to an organization. IT becomes a commodity.
As Ford learned in 1927, “faster, better, cheaper” is also a threat to the business. Why? Because optimization and improvement efforts are typically inwardly-focused.
There’s a risk of optimizing only parts of a system, rather than the whole. By only looking at internal improvements for investment, it limits a company’s options to those that have lower risk, instead of looking at the potential for big reward.
But perhaps here is the biggest business threat of “faster, better, cheaper” – companies won’t find paying customers looking inside their own four walls. Internal improvements may not deliver service or product features that customers want – and are willing to pay for.
Tomorrow’s customers don’t want better flip phones or cheaper typewriters – things that were perhaps considered disruptive or innovative when they were first introduced. Companies have to look forward, not inward.
And while improvements may result in a business saving money, businesses can’t save their way to prosperity. Making money is usually driven by innovation.
At the same time, we all know that neither IT nor a business can just “sit still.” Sitting still really means that you’re falling behind. The world – aka your competition – is not sitting still. If your focus is only on optimization and improvement of the current state, you may get some short-term benefits. But in the longer term, you will be passed up and left behind.
Improvements must be balanced by innovation. The gains from improvements must be reinvested into innovation. Perhaps, then, the most important improvement that can be made is improvement of the ability to innovate.
How can you improve your company’s innovation ability? Here are some suggestions:
Today’s businesses understand that innovation is critical if the business is to remain relevant. Likewise, to remain relevant, the modern IT organization must be a critical factor and resource for innovation. Don’t fall into the trap of “faster, cheaper, better.” Improve your innovation ability by knowing your business, understanding your business’ mission, its vision and goals, and by becoming a leader of your company’s innovation efforts.