Implementing a policy of cost reduction in companies has not been an easy process. No company can say it has enjoyed it. But I agree with Bill Dahlberg, president and CEO of The Southern Company. Dahlberg is at the forefront of a revolution in his gigantic public electrical services company. The company is too “heavy”, and Dahlberg has assumed the role of “dietician”. He recognizes that cutting costs only works up to a certain point. And that point doesn’t take you very far.
Analysts are also becoming skeptical towards cost reduction as a total solution. They claim that in the long-term, the true “bottom line” is the “top line”. Improving sales through new products and the idea of innovation as a growth engine are the true passports to growth. While relative costs must be kept under control and the “grease” kept to a minimum, it is the “builders” who will reap the benefits of Wall Street in the long-term. Cutting jobs is a tough and difficult task. However, in order to create jobs, ingenuity is required.
The abyss of change the business world is facing is the size of the Grand Canyon (and a little bit more). There are many (too many) companies (and individuals) that try to cover that abyss not in 2, but in 22 leaps. (Although, when you can’t be saved from even one leap, it no longer matters how many leaps you take.) Constant improvement in search of perfection is admirable…up to a certain point. But there comes a time, sometimes before you expect it – especially in these times of “Six Sigma” (surely you remember the very high quality standard, popularized by Motorola under this name, that only accepts 3.4 defects out of each 1 million items) – when searching for perfection for perfection’s sake can be a catastrophic mistake.
“Incrementalism is innovation’s worst enemy”. I remember when I first read this sentence by Nicholas Negroponte. I highlighted it. Minutes later, I read it again. A few days later I read it again, and I paid careful attention to it for a long time. I think the idea is of great importance. Our devotion to quality, having adopted the Japanese idea of “kaizen” – that is, that each person is responsible for doing things today a little bit better than yesterday – is one of the longest and sharpest arrows that we’ve added to our competitive arsenal in the last 25 years.
However, what Negroponte means is that if one dedicates each waking tour obsessed with doing things a little bit better than yesterday (a great idea!), then, necessarily, one will not dedicate each minute to working on the reinvention of what one does, re-creating it time and again.
These two concepts generate tension together. One is the opposite of the other. I have thousands (well, actually 30,000) of quotes and expressions. It would be great if I could publish them all. In general, it is noticeably difficult for me to precisely choose the one that best illustrates my message. But in this case, I was successful. I’m speaking of the two following quotes: “The only permanent competitive advantage emerges from beating the competition in innovation”, and “In the new regime, wealth comes directly from innovation, and not from optimization; in other words, wealth is not generated by perfecting what’s known, but rather by imperfectly capturing what’s unknown”.
It’s the strangest thing: if one goes to the “business books” section at any reasonably important library, one finds dozens of books dedicated to TQM, Total Quality. Dozens more deal with work team training. And there are others on re-engineering. What about innovation? Regarding this subject, the shelves are practically empty. Why? Honestly, I don’t know.
The search for competitive advantage is the same as innovation. I’m convinced of that. I hope to be able to convince you.
(P.S.: It will do as much for your personal career as it will for your Department’s vitality...)