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Schumpeter & Keynes on an Innovation Dilemma | The Discipline of Innovation

Schumpeter & Keynes on an Innovation Dilemma

John and I were talking last week with a CEO for whom we were doing some consulting. His firm had gone through some major stress during the project when their primary customer switched suppliers.

The company is remarkable – they are in a traditional industry with a history of poor workforce relations. Despite this, they have been very successful in implementing a lean production system. One feature of this has been that they have reorganised their entire manufacturing plant into teams, and then delegated a huge amount of decision-making authority out to the teams.

Everyone else in their industry thinks they’re nuts. And so did their main client, which appears to be part of why they lost that contract.

Pulling out of that contract was stupid though – the company has successfully reduced operating costs by 10-20% as a result of their lean program. The client didn’t leave due to outcomes, which were excellent and getting consistently better. They left because the company wasn’t acting the way they were expected to.

It’s as though they are acting out this quote from John Maynard Keynes:

Worldly wisdom teaches that it is better for reputation to fail conventionally then to succeed unconventionally.

The issue isn’t whether or not the company is succeeding or failing, but rather that they are doing things unconventionally.

That’s pretty scary.

And it raises an important issue. Doing things that are look weird scare people off. Yet, we have to be a bit weird to innovate.

That’s scary, and it’s also hard work. Consider this quote from Joseph Schumpeter:

Carrying out a new plan and acting according to a customary one are things as different as making a road and walking along it.

Making a road is a lot harder than walking along one. But innovators break new ground – they have to.

I grabbed my cat named Schumpeter and thought about what we can do.

Here are a couple of ideas. If we are the innovators, we simply have to be ready to do the work. And we have to be ready for people to think that we’re weird. Both of these are challenging, but the payoff is pretty good. Making a difference is worthwhile and rewarding.

If you’re managing innovators, you must do all you can to protect them from the fallout that being weird attracts. Removing obstacles for your people is a fundamental but often overlooked management role.

I’ll also recap one idea that I had in a previous post:

Be extra vigilant for conventional failures. These are hard to spot because people who are failing conventionally will look normal, or average. This is the outcome of the saying that I kept running into back in my photocopier days – “no one ever got fired for buying Xerox.” But if Xerox isn’t the best choice (and they weren’t then), then someone should be getting fired for buying Xerox. Or you should at least have a word with them…

Keynes and Schumpeter didn’t agree on a lot, but both talked about the challenges you face in getting new ideas adopted. It’s never easy.

Nevertheless, we should be thinking about what new roads we can make.

About Tim Kastelle

Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

4 Responses to Schumpeter & Keynes on an Innovation Dilemma

  1. Peter Bond 26 July 2012 at 5:57 am #

    Some great material on your blog, Tim. Like it. Regarding your client who reorganised around teams. I’m sure you know this is a well tried strategy. I guess it was first exemplified when Volvo took the decision to reorganise their Kumar plant along these lines.

  2. Tim 13 August 2012 at 10:49 am #

    Thanks for the comment Peter. It is well tried, though not in their particular industry. It’s been interesting to watch how this has developed for them – they’re facing some serious challenges, but so far, they’ve met them well.

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