Doug Toppin's Blog

My thoughts on technology and other stuff

Innovation and Efficiency

I have become much more interested in my career in the advantages of innovation over the focus on efficiency (cost savings).  While efficiency to some degree is valuable I think that it is a mistake to focus on it to an excess because that will cause you to reduce your attempts to innovate.  A recent personal finance news article by April Dykman expresses it very well at the micro level with “There’s a limit to how much you can save, but no limit to how much you can earn”.  I believe that this is equally true at the macro level in business.  A enterprise can only reduce its costs and increase its efficiency to some physical limit but they can create new revenue opportunities indefinitely.  This is only limited by their staff.  As a leader, if your employees perceive that the main focus of management is reducing costs that is what their attention will be directed to.  If you continually provide an environment that encourages and facilitates innovation then they will attempt to do it and that will provide growth. I should also note that increasing efficiency will not increase hiring because your current staff can produce your products.  It will improve your bottom line to some degree but does not provide any new revenue stream.  Our economy requires job growth which increases the need for innovation.