Institute for Innovation & Information Productivity

Making the Equation Work: Canadian Productivity

Daniel W. Rasmus writes: In a Toronto Star article posted August 20, 2007 (Weak Productivity is Holding Us Back,) writer David Crane makes the connection between productivity and innovation. He writes:

"Productivity is a word that scares many people because they believe it means working longer hours for less pay and benefits. The correct definition of productivity shows that it is much more about innovation – using new technologies, organizing work to make it more efficient, increasing training for workers, investing in new technologies, developing new products or services, or new ways of doing things."

I don't know which definition of productivity Crane is using, but I like it. It is imperative going forward that we don't just think about productivity as efficiency, as a way of pushing more work into less time. It is important that we see productivity as the result of rearrangements of process, new ways of seeing relationships between output and outcomes, and new views of how people and technology combine to create value.

In a parallel, networked, distributed world, productivity remains a linear term that continues to define us. Unfortunately, that linear definition creates too narrow a path for us too see the potential innovations around us because our language is insufficient to describe our experience.

Geoffrey Moore: Use Productivity to Drive Innovation

Daniel W. Rasmus writes: Back in July, Geoffrey Moore was interviewed by ComputerWorld (See The Grill: Geoffrey Moore) where he explores the relationship between productivity and innovation.

This great quote opens the article:

"The big failure of most companies is they do not have a clear innovation strategy. When they improve productivity, they have to give that money back to customers in order to get the next deal. That’s a downward spiral. You want to do a productivity project and spend the savings on yourself so you can be innovative."

Moore is spot on here. Productivity gains without a strategy, innovation or otherwise, can easily be wasted. If the goal is innovation, then it should be clear to the organization that gains need to be redirected toward innovation, that the savings is to be reinvested in the business - and that will probably translate into very different metrics than seeing productivity strictly as a way of lowering costs and improving efficiencies. Organizations may have other goals as well, be it employee retention or customer satisfaction. Productivity gains can be redirected to improve those efforts as well.

It all comes down to strategy. Investments in IT, in productivity improvements or in new facilities for that matter, need to be done in light of a strategy where the outcome can be connected to the investment.

The language of returns is inadequate to capture some of these increasingly complex relationships. It is very difficult to tie localized productivity improvements to firm level innovation. That is a chasm the institute hopes to help organizations cross as we explore new ways to model the underlying cause and effect of our investments.

Redefining GDP

Daniel W. Rasmus writes: The August 4 2007 edition of the Economist challenges the very idea of GDP (Intangible Measures). And well it should. GDP is an industrial measure, and does not reflect the knowledge economy or the information economy. Jonathan Haskell of Queen Mary, University of London has created some new indices that including computer software, work experience, non-scientific R&D, scientific R&D and advertising and market research.

For knowledge management aficionados this won't be new. We have been looking for ways to capture intangible intellectual output for years. So much of the economy is understated that it remains amazing that we base investment decisions on outmoded metrics. It is time governments step up to this challenge in a serious way so that citizens and institutions can have the kind of information they need, from official sources, to make good decisions. Without an overhaul of metrics, businesses will create their own numbers (and many already have) which will further drive disparity in the knowledge economy as organizations compete not on the openness economic reporting, but on their own competitive stash of numerical interpretations that will either provide competitive advantage or mislead them. And it may be some time before organizations know into which category their numerical ruminations take them.

 

Haskell's new GDP from the Economist, August 4 2007

(http://www.economist.com/images/20070804/CBR972.gif)

Making Your Organization More Innovative

Daniel W. Rasmus writes: I just posted an entry on my Future of Information Work blog (Five Acts to Make Your Company More Innovative). The list is not exhaustive, but it is a list I think is useful in helping organizations create the sense of unbalance necessary to stave off the status quo. I would be interested in comments about other "acts" oganizations should commit to that will ensure they create a culture of innovation.

Honey Bee Productivity

Daniel W. Rasmus writes: The 20 July 2007 issue of Science covers productivity in Honey Bees (Genetic Diversity in Honey Bee Colonies Enhances Productivity and Fitness - Mattila and Seeley)  an issue of increasing importance to farmers as the honey bee populations go through what all hope is a mysterious, if periodic, decline.

The crux of their argument is that bees are more fit, not when they have the strongest of mates creating a colony, but when the queen mates with a variety of males, creating diversity. This seems to run counter to Darwinian theory, but I'm not so sure. I think social animals benefit from multiple kinds of diversity. Unlike human societies, the immobile queen is incapable of taking flight to add additional genetic material to a hive that may be less creative about its foraging that it should be. So this behavior has evolved to create diversity in the workforce (leading to between a 27% and 78% increase in hive productivity).

It is often dangerous to draw conclusions about human social interactions from seemingly parallel behaviors in nature, but I will risk of doing so here because I want to suggest that productivity, and to perhaps and even greater extent, innovation, emerges when the workforce is diverse. When the experiences of the team are not uniform, nor homogeneous in their cultural orientation they have, in my experience, a much better chance of creating something unique: insight, analysis, design, etc. Unlike honey bees, the diversity of human populations probably requires mediation and facilitation to bring about the productivity and innovation improvements, but that pretty much makes the point, because if people all agreed, and didn't need guidance to converge their ideas into something ultimately deliverable as a product, service or process, then they would all just be sitting around and agreeing on the mundane while getting further behind their competitors.

I won't endorse polyandry for people, but I will endorse diversity in the workforce. So as a manager, if you look around at a meeting and everybody is nodding, it is time to go get some people who disagree with you, or at minimum, see the world in a very different way.

Its Not Just Enough to Understand the Measurement, We Need to Act

Daniel W. Rasmus writes: Productivity and innovation are hard to measure. Energy use is old school. The 25 July 2007 New Scientist (Building for a cooler planet) reports that 29% of energy use in large buildings could be cut by 2020 using existing technology, reducing a large chunk of the 33% of  CO₂  emissions responsible for upwards of 33% of society's production of that gas.

In the US by 2020 buildings will be using 25% more energy than today, and China 50%.

We know what to measure. We know how to measure it and we know how to act responsibly in light of our measurements, yet architects and builders continue to build energy inefficient structures.

When we look at our own organizations, there are things we know. Anecdotal things. Measurable things. We too often look to the superficial.

Think about sales productivity. How many sales people do you  know that just love their interaction with your CRM system. Probably few if any. They are berated when it isn't used, and seldom praised when they are, because praise comes in results, not in practice. Practice is a way of pointing to deficiency, not proficiency. Proficiency is measured in dollars or euros. If you are proficient you need not worry about your database deficiencies. But to the organization, the knowledge is missing. The good sales person, when he or she leaves, creates an information void. If the reward would have been a universal recognition of the technologies deficiency to be more amenable to the work, then perhaps more people would reach their goals, perhaps they would just be happier because the system they were forced to used worked in a way that enhanced, rather than burdened their production (creating the need for workarounds).

If you know something. If you can measure something, then not acting on it means the measurement is meaningless to the organization, and should therefore be stopped. Having employees know that you know something and that your aren't acting on it is perhaps the most disconcerting data of all.

Measuring IT Value

Daniel W. Rasmus writes: I'm going back to April now as I clean out some old magazines. The April 15, 2007 issue of CIO magazine to be exact where they asked the question: IT Value Methodologies: Do They Work?

I will let you read those authors and their opinions, all of which are valid perspectives. Here's mine.

First, we don't understand the nature of information work. So attempting to measure the value of an IT investment within the context of a business invest that is itself vague (have you ever tried to justify a thought leadership marketing spend, or the "value" of better customer relationships - really) makes little sense. It is important first to understand the work. I have spent a lot of time consulting to companies who ask for suggestions of improvement on a process that, when the cards are all turned face up, shows they have no idea what it costs them to do business the way they are doing it, or in most cases, even how they are doing it (to make the metaphor work, they didn't know what their hole cards were).

What this means is we need methodologies that can capture current costs and practice, and then reflect forward improvements. The first organizations that adopt these will be the benchmarks by which others are judged - but that is very useful as today, executives too often go to arbitrary metrics like IT as a percentage of sales or other nonsense that is far from being tied to performance.

Second, IT as an investment. All investments require the expenditure of more money in a budget than was in the budget before. Trying to manage IT as an expense rather than an investment is great if you aren't trying to be innovative. Organizations looking to manage their demise efficiently are well advised to make sure they reduce their IT costs, until like other parts of their organization, they are no longer differentiated from competitors and therefore, no longer relevant to their markets.

Organizations that understand the potential of IT, regardless of their ability to measure its impact, understand that the trick is not to look just at things like "cost of ownership." IT is not a leased car (though some parts of it, like outsources mail may fit that metaphor). For a company driving innovation, collaboration technology is an indispensable tool in their arsenal. Their engineers, customers and business leaders can't over communicate. They need to share ideas, prototype, tweak, refine, and ultimately decide what to keep and what to discard. The investment in shared ideas, rapid communication and processes that help transform ideas into revenue streams - not a cost issue. An investment. See number 1, but also remember that how you do things today is in the context of either no, or older technology, don't sell the "what we couldn't imagine with our old processes" perspective short. IT can be a game changer, but that it about imagination, and unique use within an organization context - and you won't get to either if you only worry about cost.

Minimizing risk. Again, often seen as cost. If you are a US manufacturing company the risk is being US-centric. We can't fix our schools, encourage our children to become engineers or bring in thousands upon thousands of smart immigrants to fill open needs for US innovators. So we need to go to the innovators - where they live. That is an investment. It is a cost. It is also a way of mitigating risk in a real and tangible way - and the only way you are going to manage far flung employees is through communications and collaboration. You may not be able to put a real value on the IT side of that, and you know what, the business argument is pretty tough too. Its a bet, a hedge, and why can't we see IT like that too.

Third: Infrastructure and costs. We isolate and consolidate IT spend when we talk about infrastructure. A phone isn't used just to talk to customers, and neither is an IM system. We need to see infrastructure in light of overall IT objectives and not cut costs at this lowest level of implementation because we can't see how the extra server adds value to a particular business process. Keep track of how, when and why infrastructure is used, don't view it in the abstract.

Well, I can go on. And I will in time, as will my colleagues. What do you think about IT value measurements?