The Quest for Innovation and the Natural Order of Things.

Alignment in short and long-term strategies is the solution to keep efficiency without stifling innovation.

In companies, innovation is one of those topics where discourse and practice often present discrepancies. Everyone claims to encourage it, and many swear on the corporate altar that it's part of the company's culture. But in the trenches of day-to-day operations, the blitzkrieg of short-term demands imposes a search for ready-made formulas - out of fear of changes and for a supposed guarantee of proven efficiency.

The problem is that there's more than one cautionary tale about leading companies in their sectors that died clinging to their products of proven efficiency. Does this mean there's an opposition between innovation and efficiency? On the contrary, these qualities are intertwined, with the former directly serving the latter. However, in many companies, the achieved efficiency leads to such stiff processes that, ironically, they prevent an environment of innovation.

The Hitchhiker's Guide to the Galaxy’s author, Douglas Adams (1952-2001) had a great insight about technology published in his posthumous book, a compilation of articles called The Salmon of Doubt. In this work, the English writer talks about human reactions to innovation and shows how we become, as we age, uncomfortable with changes:

1. Anything that is in the world when you’re born is normal and ordinary and is just a natural part of the way the world works;
2. Anything that’s invented between when you’re 15 and 35 is new and exciting and revolutionary and you can probably get a career in it;
3. Anything invented after you’re 35 is against the natural order of things.

 Joking apart, I would say that companies that understand today's efficiency as the only measure of tomorrow are considering what is new as something against the natural order of the world. And this can come at a high cost.

Systematic Innovation vs. Romanticized View

Patron saint of modern business management and more relevant than ever, Peter Drucker (1909-2005) said that "the very foundation of entrepreneurship is the practice of systematic innovation". This means a deliberate and structured search for changes. In his book Innovation and Entrepreneurship: Practice and Principles, the Austrian presents seven sources of systematic innovation (and I give examples):

1. Unexpected occurrences — Unanticipated events

The properties of Viagra, originally tested as a heart medication;

 2. Incongruities — Something outside the logic or rhythm of the process

The container greatly cut the time and costs of loading/unloading cargo;

 3. Process needs — Improvement of inefficiencies

Strategically installed distribution centers allowed for faster deliveries;

 4. Industry and market changes — Unexplored opportunities

Shift from physical to digital platforms in content consumption (movies, music, etc.);

 5. Demographic changes — New demands

With increased longevity, services and products for the elderly;

 6. Changes in perception — Social trends

Consumers' socio-environmental concerns regarding products and services;

 7. New knowledge — Revolutionary inventions

Considering the impacts, we can say that the Internet falls into this category, as well as AI;

Each of these sources can overlap, and their importance depends on the occasion. Drucker knew that this systematization was crucial because the path to innovation is not linear, requiring all possible support structure. Unlike the romanticized view that innovation is the result of a solitary genius with a spark of creativity, changes are the result of collective work, research, trial and error, and, mainly, an attitude towards life.

It's also good to keep in mind that most innovations are not spectacular or disruptive - small improvements can also bring positive impacts. Especially if sought in sectors where the company already has competitive advantages and areas of expertise. These are situations where efficiency can promptly serve innovation, just needing to find a balance point between short and long terms.

The Time of Innovation and of Balance Sheets

All that is easier said than done, of course. A recent BCG study, conducted with over 1,000 senior executives from around the world, "Innovation Systems Need a Reboot", points out that 83% of companies see innovation as one of their top three priorities, but only 3% are ready for this task. Moreover, 48% feel that their organization has made efforts to align business and innovation strategies, but only 12% claimed to have achieved real impact.

This alignment of innovation strategies with the company's objectives also involves understanding the desires and needs of its customers and the regional and global landscapes. Only then is it possible to curb the managerial immediacy for efficiency and the lack of understanding of a project's potential. Not forgetting that the time of innovation is rarely that of the company's balance sheets.

The BCG report brings the case of the Indian giant Tata, from the automotive and semiconductor sector. With US$120 billion in the pocket for investments until 2027, CEO Natarajan Chandrasekaran has a clear vision about today-tomorrow balance: each division of the company must mediate an innovation portfolio with projects that offer immediate profit and attractive long-term bets. And all that with focus, according to the CEO: “Some bets are for us, some bets are not”.

 Which brings me back to Drucker. His systematic approach to innovation keeps companies mindful of process improvements (lower costs, higher profits) and the creation of new businesses. It's also essential that the company's culture truly encourages the constant search for the new. Considering change as something against the natural order of things is the first step towards fossilization, and in this case, though the first victim may be innovation, in a short time this attitude will also stifle efficiency.

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José Coto – Loymark CEO. With over 20 years of experience in business development and management, he has built a successful portfolio that includes nearshore digital and content production companies, education, and technology. As the CEO of Loymark, a technology company specializing in delivering top-tier resources and cutting-edge solutions to its clients' most pressing digital transformation challenges and opportunities, he leads a team of talented professionals who share his vision and passion for innovation and excellence.