Steve Denning, contributor to Forbes.com, has written a series of thought-provoking articles about the state of industry and innovation in the US (and Europe for that matter). It describes how traditional business thinking has helped contribute to the erosion of innovation and capabilities for US businesses. At a time when the economy is suffering, the earlier loss of technology and manufacturing expertise to cheaper suppliers in Asia has made it more difficult to lay the foundation necessary for growth: innovation.
Denning suggests it’s understandable why some of these decisions were made. Accountants and business management had incentive to go with lower cost suppliers. What was a saving on one component then became a set of components and then the whole assembly. Traditional business thinks in terms of money, and these moves seemed logical in an effort to improve the bottom line and make the company more profitable. Yet as a result of the extensive outsourcing, R&D capabilities soon disappeared as well, making it that more difficult to compete. Business advantages from short term financial thinking have put these companies at a disadvantage in the long run.
Denning calls for a variety of changes at both the individual and organizational level, but a fundamental need is what he calls ‘radical management.’ Essentially it’s design thinking for business management, but perhaps it’s terminology that doesn’t seem so foreign to business executives. It doesn’t use the word ‘design,’ a word that has many connotations, some of which are negative. At the core of radical management is the mantra ‘innovate or die.’ This is a message business has been hearing for a while…but how to get there?
Money is very tangible; it is easy to quantify so is therefore an easy measuring stick. Business hasn’t had the tools for understanding and measuring their organization’s ability to innovate. Designers will be familiar with the similar challenge of selling design to those asking what design’s ‘return on investment’ is. We’ve long known that we need to find an effective way to communicate with those who understand numbers. The dire challenges faced by business today add greater importance to ‘quantifying’ innovation. The financial challenges faced by organizations mean that every dollar, every euro spent will come under greater scrutiny.
Does anyone have the answer to this challenge? To push innovation we need to begin by innovating the way in which management analyzes design as part of other fundamental business operations. Perhaps like the term ‘radical management,’ we need to find the right language.
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