Innovation is the true solution

Fri, 20 Oct 2006 13:11:11 +0200

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.

Reducing costs is not always the solution

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.

DAEMON QUEST - Tom Peters

Innovation is the true solution

Reducing costs is not always the solution