Current measurement practices may provide the biggest barrier to successful implementation of frugal innovation. Management schools provide students with a lot of tools to track cash flow, customer satisfaction, inventory, performance, and dozens of other dimensions of business. These tools, supported by an array of reporting mechanisms, provide security, assure compliance with laws, allow for smooth operations, and support decision making. Without a doubt, these allow businesses, especially those that are large and complex to create efficiencies and accomplish otherwise impossible tasks. Measurements maintain order and control, and they allow predictability.
Unfortunately, they can dampen creativity and initiative. Strong controls, especially those that tightly track work hours, can limit the flexibility of employees and make it difficult to put together ad hoc projects and develop and mentor talented people who are early in their careers.
When I was at IBM, I was fortunate to be part of a lot of projects that, in retrospect, had frugal aspects to them (especially in terms of funding). We benefited greatly from informal networking that allowed us to access people with the capabilities and resources we needed. That was a plus side of the corporate culture I’ll discuss in future posts.
But, as IBM began to manage more to the numbers, with many sophisticated approaches that ensured they made their quarterly targets, automated systems were put in place that more closely tracked the days, minutes, and hours of work. From my perspective, this cut back on the kind of stealth innovation that led to IBM’s use of the Web, the acceptance of open software, the development of e-business systems, and a host of other major innovations.
I found that, especially among veteran services employees, tougher time measurement meant a large chunk of the workforce could not investigate out-of-the-box innovations without executive approval. Now, IBM has a broad array of approaches to innovation and, strategically, it seems to have moved more in the direction of pharmaceutical companies, which buy small companies to get fresh ideas. So this may make good business sense, but it points to a concern for those who want to develop and support frugal innovation.
Can measurements support frugal innovation? Perhaps. I suspect the most useful measures are indirect, and top management has to have tolerance and respect for indicators that do not allow short-term actions that serve quarterly results. Here are a few things a firm might keep track of that could serve frugal innovation:
Evidence of interactions across groups and cultures – This goes to the heart of social networking that is broad and ad hoc. Frugal innovations are most likely when trust is built and is it easy to bring together needed talent and capabilities.
Growing capabilities and mentor relationships – Seeing that the skills claimed by employees are broader and mentorships come from people outside their groups.
Innovators from unexpected places – Seeing that the innovations that are recognized come include people from geographies and groups that have not been included on innovation teams in the past.
New ideas are picked up by different groups – Many great ideas are adaptations. In fact, in frugal innovation, this is an explicit principle. When new ideas pass from one group to another, it indicates 1) passion and commitment in the originating group and 2) the ability of employees to recognize intrinsic value of ideas and to transform them. Seeing these transfers also shows the employees are not suffering from the “not invented here” syndrome.
Observing success from a portfolio of frugal or ad hoc projects over a long timescale – Over a year or years, are important innovations emerging that did not originate, at least in part, from the top?
Now, measurements always distort. Unless employees understand and buy into the vision that numbers and targets represent, they will find ways to game the system. And there will be a risk of unintended consequences.
In fact, the attitudes across the culture and perspectives on how people can succeed within the company are more important than any measurements that are put in place.