The Impact of Scarcity on Innovation

DroughtIn times of cut backs, innovation projects can suffer. While it also opens up opportunities, cutting back on innovation now can hold companies back once the economy picks up again.

Those were some of the observations that came from #innochat, a weekly Twitter conversation on a selected innovation topic.

Moderated by an expert in the field, the chats are well attended and draw practitioners from all over the world. Some of the countries I saw represented this week were the U.S. (of course), Portugal, Germany, the UK, and myself here in Ireland.

This week’s moderator was Gwen Ishmael (@Gwen_Ishmael), Senior VP, Insights & Innovation at Decision Analyst. The framing post for the discussion is here.

Scarcity Related Trends

Ishmael’s first question was, what scarcity related trends are people seeing? While some answers — funds, people, time, for example — seemed obvious, some surprising replies came back.

My favorite came from Achim Muellers (@AchimMuellers). “In times of crisis, open-mindedness tends to be a scarce commodity,” he said.

Cathryn Hrudicka (@CreativeSage) said she is “seeing lots of scarcity as a mindset, in all sizes of organizations.” But it is more of a reality in small businesses and non-profits, she added.

Jose Baldaia (@Jabaldaia) said there is a “scarcity of leadership and good resource management.” While Ishmael pointed to a “scarcity of patience.” Companies want things faster, she said. Michael Dugan (@SaveInnovation) agreed and said it can prevent innovation projects from proceeding.

Baldaia also spoke of a “scaccity of critical thinking [that] leads to assumptions which are inhibitors of innovation.”

“I think there is a scarcity of clarity or certainty about the best way ahead in many areas,” said John Lewis (@JohnWLewis).

But one comment proved to be a running theme for the hour: “One thing we don’t have a scarcity of is data — we now have Big Data, Lean Data and everything in between,” said Ned Kumar (@nedkumar).

“Data yes, but insight is scarce,” replied Stacy Leidwinger (@StacyLeidwinger). “We have masses of data,” Lewis agreed. “But I find it hard to get excited about that.”

“We need insight in to behavior, not just data,” Leidwinger said. And data keeps growing, Kumar said. “I don’t think many companies are ready for the abundance of data.”

Why is Innovation Cut Back?

Ishmael then asked why companies cut back innovation in times of scarcity. “Because they think innovation requires a lot of financial and human resources,” Baldaia said. Resources are diverted to prop up current initiatives, said Eric Shaver (@ericshaver).

Others, myself included, spoke of the security found when companies stick with what’s certain and avoid risk. “When in doubt, people tend to go with what they think is tried, tested and true,” noted Kelly Burroughs (@KellyBurroughs). “To many, boldness at a time of scarcity can seem reckless or even just inappropriate, even if it’s the real remedy,” said Adam Hansen (@adhansen). “In times of trouble, F.U.D. might cause one to revert,” according to @JustJimCo.

Meanwhile, pressure to meet short-term goals can impact long-term projects. “Fincialization of the US economy is driving companies to focus even more on the short term than before,” said Jose Briones (@brioneja).

Another problem is the personal perspective of those in charge, he said. “Most managers expect to be somewhere else by the time the long-term results of their decisions are apparent.” Brenda Young (@4byoung) agreed. There is “very little downside for managers who kick the problems down the road.”

Successful Scarcity-Driven Innovation

Ishmael then asked for examples of successful, scarcity-driven innovation. Two India-based examples popped in to mind: One was of Tata Motors, the company that makes cars for the Indian market at a fraction of the cost Western companies, the other was of the concept of Reverse Innovation. Hansen cited clay-pot refrigerators that cool food without electricity in Africa.

“Non-profit managers know more about innovating with scarcity,” said Hrudicka. Other examples cited were crowdfunding and micro-finance.

“Start-up companies are scarcity driven just by their situation. At some point, Facebook was scarcity driven,” said Burroughs.

Scarcity in one area can help those in another, noted Lois Martin (@LoisMarketing). “My firm has rapidly grown in recent months as clients have outsourced,” she said. “Like it or not, automation in general, when cheap labor becomes a scarce resource,” said Mueller.

However, Mike Parker (@Sysparatem) urged skepticism about claims of constraint. “[I'm] not sure I know a company that doesn’t have scarce resources. It’s like the tax man asking a farmer if he’s had a good year,” he said.

Encourage Innovation in Times of Scarcity

The final question asked what can be done to encourage innovation when resources are scarce or diverted elsewhere.

Quoting an unknown author, Deepak Patel (@3DeeQuotes) said, “If necessity is the mother of invention, scarcity is the mother of innovation.”

“Begin by asking questions,” Martin said. She can provide value to clients because she is “on the outside looking in.” While there was a general consensus to share knowledge and best practices around innovation, Hrudicka advised starting small to build confidence before moving to bigger innovations.

The “key is also to show in ‘VP-friendly’ terms the roadmap that justifies the allocation of time and resources,” said Briones. But Muellers was more adventurous: “Be prepared to stick your neck out!”

Image of drought courtesy of Bert Kaufman on Flickr.

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