An enterprise can set a strategy to transform its entire operation in two modes: Efficiency-seeking, or Innovation-seeking.
By this reasoning, digital transformation would follow the same maxim, since changes to the retail processes or factory operations would seek to enhance either efficiency or innovation, much like changes to the IT estate of the business.
Efficiency begets more efficiency
Since Deming put forth the Total Quality Management principles, virtually all of our industrial capacity has become obsessed with efficiency — eliminating as much waste of time, materials and resources from their supply chains as possible.
Efficiency-seeking starts with targeted, measurable objectives for improvement — KPIs like cost reduction, fewer days of sales time, higher throughput for production lines. In digital transformation terms, this means lower IT labor and infrastructure cost, faster issue resolution times, higher throughput of new software features that generate revenue.
All good things to strive for, yes, but there’s a problem with basing a digital transformation solely on efficiency.
Our digital evangelist friend Miko Matsumura stated this dilemma quite clearly (I think it was at a SoftwareAG conference) a few years ago, in that you need to get your company’s technology strategy “off the ROI crack pipe.”
An IT function that looks at itself in terms of the corporate balance sheet inevitably prioritizes hard dollar cost savings versus its overall impact on agility and resilience, which are perhaps more important long-term efficiencies for survival. But there’s an even bigger market-wide force of consolidation to account for here.
“A superefficient dominant model elevates the risk of catastrophic failure,” says Roger L. Martin in a recent Harvard Business Review article. Martin cites the Pareto Principle, in which a constant drive for efficiency leads to heightened concentration of zero-sum market winners.
If an entire technology sector is solely playing for efficiency, the winners may continually churn through all available talent resources and drive out innovation, with customers and the societies they inhabit ultimately suffering. Fortunately, there’s a balancing force of innovation that brings new ideas and startups into the market.
Innovation is hard to maintain
The larger the company becomes, and the more momentum it gains, the harder it becomes to turn the ship to meet emerging opportunities.
“Technological innovation is more tied into the mainstream operation of the economy, and thus more closely linked to considerations of economic efficiency,” says Matthew Yglesias in Slate. “But it’s still a fundamental error to confuse the two, and to think that wringing the inefficiencies out of our resource-allocation system are either necessary or sufficient for fundamental growth.”
An innovation-seeking mode of digital transformation involves building a sustained capacity for capturing novel ideas, conceptually developing and testing them, and reliably turning the best ones into products and services that delight customers.
I was recently talking to a vendor about their own fast-moving automated supply chain for software, and how their innovation talent was the ‘magic ingredient’ that would need to destabilize the automation at regular intervals to allow the software to evolve with faster turns to meet growing needs.
Indeed there is no magic formula for innovation, but the recruitment and retention of innovative talent is clearly a function of company culture.
The most innovative people are drawn to problem variety and have a great disdain for corporate formality and controls. This is why startups and specialized consulting or design firms may be able to retain more innovative team members, who are willing to trade off some of the stability and guaranteed compensation of a large company for more at-bats in higher-risk arenas.
Enterprises can build an IT innovation muscle within their companies by reliably setting aside significant parts of all willing employees’ schedules to learn about new technologies, experiment with novel ideas, and collaborate with peers from other teams.
Other companies allow time and authorization for participation in open source projects. It’s a great way to keep talent immersed in current developments. For some developers, the ability to participate in open source isn’t just a perk anymore — it’s a career requirement.
IT can do both modes
Of course, in making such either/or comparisons, I forget that our digital transformation efforts can be both efficient and innovative at once. Our human capabilities are as ephemeral as elastic microservices architectures.
Take retiring technical debt through Cloud-Native development, for instance. You might see it as an efficiency-driven exercise of refactoring and retiring the ‘as-is’ monolithic systems in favor of a more efficiently scaling ‘to-be’ software environment, and indeed, this involves disciplined automation and measurement.
In cloud-native environments, this ‘to-be’ end state is anything but standardized, and the brightest minds available must strive for total observability across an architecture — rethinking systems design from the metal up to achieve the highest levels of optimization.
Some corporations even set up an Innovation Group for the cool kids to play with new toys, leaving everyone else in IT in an efficient mode of maintaining support for existing systems. Let’s not revisit that ‘Bimodal IT’ separation anxiety right now though, a practice both me and Jason Bloomberg have thoroughly unfollowed as a red herring that crushes morale.
Digital transformation employs both efficiency and innovation modes simultaneously. Learning from observability and quickly reacting to customer feedback in production to improve system performance, and then presenting and releasing alternative features to users without wasting precious time or resources — that’s a combination of tight engineering, issue resolution and empathic design that satisfies both modes.
The Intellyx Take
Digital transformation isn’t a whipsaw between efficiency and innovation modes. It’s clear a business can’t survive without some balance of both.
Call it ‘innoficiency.’ Or ‘effivation.’
Like a soccer player who may start out naturally kicking better with one foot, developing into a great footballer ready for any game will require well-rounded development on both sides.
Enterprises can realize operational efficiencies, and turn faster on retiring obsolete products and technical debt, while introducing innovative new services and retaining the best talent and productive partnerships.
© 2021, Intellyx, LLC. Intellyx retains editorial control over the content of this article. Get our Cloud-Native Computing poster. If you are a vendor seeking coverage from Intellyx, please contact us at PR@intellyx.com. Image source: Maarten Takens, flickr creative commons.
