Tuesday, April 16, 2013

Trade-off: Efficiency and Innovation

I forgot to tell you that the conference I attended last week which I mentioned in my previous entry in this blog was that in the afternoon there was a great debate whether there is a "trade-off" between innovation and efficiency. Before I begin, let us try to define what innovation and efficiency are.

By definition in Merriam-Webster dictionary, innovation is the introduction of something new and is synonymous to creation, invention and coinage to name a few. Efficiency on the other hand coming from the same source is the quality or degree of being efficient. There is not much there, don't you think? :-)

Now let's look at this on an organizational stand point. Innovation in my opinion is the ability of an organization to create something new, something that can affect or change an organization internally and externally. As an example, the creation of a new product like a new software application or a new service like offering text messaging services to followup on a particular document are considered as innovations.

Efficiency on the other hand in my opinion is maximizing the organizations resources and making things run smoothly. It is something measurable and is always tied to input versus output.

On the question if there is a trade-off in anyway? I say "YES". If you do innovation, then you will always risk affecting existing processes, policies and procedure to accommodate such an innovation. Over-all organizational efficiency will suffer. That is the greatest trade-off when you have innovation. Which goes to the next question on whether an organization should go for innovation. The answer depends on how ready the organization is for change. Depending on how flexible and mature an organization is for change will determine the success of an innovation being introduced. YES, we need to innovate. Innovation brings new blood, new life to an organization. If IBM remained as a company making typewriters, do you think they will still be here with the advent of new technologies available? The answer is too obvious.

In one famous case about a big industry before on ice cuting and on how none of the ice cutters eventually evolved into ice makers and eventually none of the ice maker evolved into companies that makes home freezers and refrigerators is a classic example of companies without innovation at all. Which brings me to the term organizational ambidexterity.

Organizational ambidexterity is the ability on an organization to efficiently manage change in the organization and be able to adapt to change in the business environment which affects its survival and growth. Meaning just like a person who is ambidextrous, one should be able to use the left and the right hand with the same level of efficiency. In my opinion, efficiency and innovation are both on the opposite ends of an organization's operation.

Innovation is exploratory in nature while efficiency is exploiting to the least. YES there will always be trade-offs between efficiency and innovation but if the organization is willing to take up the challenge and is ready, trade-offs can be contained or minimized. If an organization is flexible enough and is ready for the change then innovation should explored every time an opportunity comes.

1 comment:

Anonymous said...

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