The question of how to balance innovation and process is an age-old management argument in companies of many types, but is especially critical in software and hardware companies.
Which is more effective: a “looser” work culture which allows experimentation and “constructive failure”, thereby fostering innovation — or a more tightly-controlled environment that puts a premium on efficient use of all resources, whether they be time, money or human?
As usual, it depends on the situation
It’s impossible to generalize an answer to this question. If you do, you will usually be wrong. We all have preferences as to how we like to work. Some of us thrive with total flexibility that can sometime cause a corporate culture to resemble total chaos. Others can become very uncomfortable without well-defined processes to guide the day. But it’s very important to look past your personal preferences in management/work style and culture. Independent of these preferences, what does the business situation itself call for? There are number of factors that I recommend be considered in your analysis:
Level of competition & the key components of it
How competitive is your market segment? Is the winner in your segment going to be the one with the most innovative product — or the lowest costs? It’s important to understand the competitive landscape of the market segment when deciding how to tightly to manage your company. If the runaway winner is going to be the company with the best gee-whiz software application or widget then it’s probably important to manage to maximize innovation with a less-constrained approach. If you believe that the ultimate winner will be the company that can wring the most pennies of out their costs to offer the lowest price point, then efficiency and cost controls can often be derived best by tightly controlling your processes. An individual analysis of the details of your competitive situation needs to be made by every company in their unique market segment and point-in-time.
Staff Composition
What are the tendencies of your staff? Depending upon how you respond, my advice may be somewhat counter-intuitive. The important thing to remember is that process and innovation ARE BOTH IMPORTANT and need to be balanced. So if your staff is composed of “type-A’s” who are very innovative but have a tendency to run in their own direction, it might be important to rein them in a bit so that your balance doesn’t get too far out of whack. Similarly, if the staff is made up of very conservative folks who tend to be comfortable with the status quo, it might be important to shake things up with open-ended , “out-of-the-box” goals to get them out of their comfort zone — if you hope to wring any innovation out of your internal staff. Otherwise you might need to “purchase” your innovation through acquisitions or other strategic partnerships.
Market maturity
Are you at the beginning stages of a market segment in which the most important needs of the marketplace have yet to be met? If this is the case, maximizing innovation may be critical to deciding who will win and who will fail. In this case any process which might slow potential innovation should be avoided–even if you’re process-oriented by nature. On the other hand, what if you’re in a very mature market where the needs of the customer have largely been met? In these cases the need to be a low-cost producer often puts a premium on process if you’re going to maximize financial results. Innovation usually only occurs in baby steps in mature markets, often not amounting to enough to “move the revenue needle” for the business and may require outsized investments to yield even modest results.
Stage of company development
Just as market maturity should be considered in your decision, so to should the stage of your company. Companies tend to go through a number of growth phases and often reach inflection points at certain levels of revenue and staffing, where additional processes need to be added or chaos (and not the good, innovation-rich kind) ensues. Once you’ve added the appropriate level of structure/process to stabilize the business, you’re generally good to go for quite a while, until you reach that next inflection point. This gives you an opportunity to retain as much operational flexibility as possible which will enable maximum innovation at that company size. If you accept my thesis that there is a natural tradeoff between innovation and structure/process, the trick is to only add the MINIMUM amount of process required to stabilize company operations at that particular inflection point. Unfortunately, the human tendency for managers when things are starting to look a bit “out of control” is too over-correct and add levels of process more appropriate for a much larger organization. Guard against this!
In summary the answer to this very important question is highly dependent upon the specifics of the situation of a particular company. As I stated earlier, innovation and process are both important to EVERY tech company. It’s not a question of one or the other; you always need some combination of both.
But if forced to generalize on my own philosophy in running software and hardware companies, I have a bias toward a MINIMUM level of process that is appropriate. While I personally prefer an environment which is flexible and initiative-friendly — I also believe that most of the time this works better in a tech company and it’s usually easier to add process than turn back the clock and remove it. So in a coin-flip situation I’m going to lean toward flexibility. But this flexibility needs to be enveloped with just enough process appropriate for the particular situation, to ensure that company resources aren’t wasted and that chaos doesn’t consume the company.
That’s my take on the process vs. innovation balance–what’s yours? Post a comment with your own views.
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