Effectiveness VS Efficiency: Striving for greater efficiency when there is a much more effective option available may be disastrous [GUEST POST]

July 20, 2020 ~ Written by: Dr. Constantinos Pantidos

Approx. Read Time: 13 Minutes

Preamble

Regular readers are aware that the agenda of the Business Brain Model is to play a role in cross fertilizing some of the knowledge originating in the world of neuroscience into the world of business. Within this, we have covered quite a spectrum of topics including several on values in business. What we have yet to do is solicit additional contribution of thought in these areas.

With all of this in mind – I am, particularly, pleased to present the below Constantinos Pantidos authored article. Dr. Pantidos is the Founder of Brand Aviators, a brand strategy agency that helps clients around the world build their brands “neural equity”. Dr. Pantidos is also a post-graduate university lecturer on strategic marketing, consumer behavior, and consumer research.

– W.B. (Bud) Kirchner

Effectiveness VS Efficiency: Striving for greater efficiency when there is a much more effective option available may be disastrous

* Written by: Dr. Constantinos Pantidos

There is a huge gap in business between what is known and what is actually put into practice. One reason for this is that a new idea may cause fear as it makes us feel that our established principles might be wrong and, by extension, our life is destabilized. While continuity brings safety, change is venturesome, risky.

However, in all times, but particularly in a time of unprecedented change, reaching for greater efficiency when there is a much more effective option available can be disastrous. To avoid such a situation, a company has to adopt critical innovations as early as possible. The more it delays, the more resources it will need to cross the chasm. At some point the amount of money needed will exceed available resources.

Effectiveness applies when a company determines which opportunities, methodologies and goals it will pursue. Efficiency is related to the slope of the current learning curve. Effectiveness deals with sustaining a strategy – efficiency with the present exploitation of resources. Moving to a new technology almost always appears to be less efficient than staying with the present tech because of the need to bring the new technologies up to date. The possible temporary decrease in productivity always makes the existing technologies appear more economic to protect than to invest in the new one, at least until competitors adopting the new technology gain the upper hand. In fact, conventional financial theory has no practical way of taking account of the new opportunity cost of not investing in the new tech.

What makes the decision even more difficult is the fact that it is being made by people who are linked to the existing status quo and it requires resources be reallocated from existing projects that enjoy the support of the top management.

Real innovation often requires a change in our current behavior and this causes discontinuity and disruption, which the normal upgrading of existing business does not require. While innovators are disruptive and venturesome, skeptics value order and stability as many innovations fail or they may have hidden consequences.

It is true that most innovations fail. However, the ones that succeed explode in ways similar to viruses. As people tend to follow other people, the rate of growth of successful innovations is sudden and dramatic. Sales follow an exponential progression. Once the market moves to replace the old technology with the new, demand for the new innovation vastly outstrips supply.  Until a certain critical point is reached, clients do not need to convert. But as soon as companies start to follow, there is no way back. The problem with most companies is that they don’t know the limits of the existing technologies and when they operate at the limit of the technologies, no matter how hard they strive, they cannot advance.

Thus, while many innovations fail, so do the companies that procrastinate too long. The question is how: how can we best harvest the benefits from innovation? The answer is by avoiding the traps that the innovators and skeptics normally fall into.  

Traps for the innovators

A good innovation is not enough to achieve success. Many important innovations have failed for years, decades, even centuries before people rediscover them, not because a market was not ready for them but because the innovators did not know how to diffuse them. Here are some of the traps innovators fall into:

1. Innovators tend to be innovation-centered instead of focusing on the client’s needs and how technology helps satisfy these needs. The truth is that the skeptics of new technologies can teach us a lot.
2. Innovators believe that their innovation will be an instant hit. In reality, the innovators must have a high degree of empathy, patience and persistence. This is one of the reasons most innovations come from smaller companies. While large companies discontinue many promising projects as they do not work immediately, smaller companies have the chance to revisit their innovations again and again till they make them match with the clients’ real needs. Innovation success is positively related to the level of effort the innovator puts into its diffusion.
3. Innovators do not pay enough attention to finding who are the people / companies that can extract the most value from the application of their innovation and what the most appropriate message is to package the information about it. Although the innovation may be applied to many different industries, innovators must start in a niche and then dominate a number of such niches to actually shake the system. As Malcolm Gladwell says, the world might seem unmovable but all it takes is a subtle push at the right place and the world can tip.
4. Innovators undervalue the importance their own image plays in the success of their innovation. In reality, clients first accept the innovator and then the innovation itself. Thus, the innovator must first build credibility and trust.
5. Innovators underestimate the emotional needs of the clients. Instead, innovators must understand and address not only the functional needs of the clients but their emotional needs and cultural values. In particular, innovation must be balanced by a promise of safety.
6. Innovators think their innovation can reach most individuals or companies in one go. Instead, innovators must focus on segmenting the market according to their risk behavior. In the meantime, the engagement of opinion leaders saves time, effort, magnifies the result and increases the feeling of safety, among other things.

Traps skeptics often fall into

And here are some of the traps that present success and the success of the past can inflict on us:

1. Skeptics may believe that there will be enough warnings about a coming change. As we have seen, successful technologies that manage to replace older ones diffuse rapidly when their time has come.
2. Successful companies and individuals may be carried away thinking that their clients will stick with them even if the value they provide is reduced over time.
3. Conservative clients may think that as most innovations fail, the risk of jumping to them is greater than it appears, as our ignorance of a new technology is underrated. In fact, companies fail because they stick to the methods that made them successful. There is a false sense of security in sticking to the existing technologies. However, the opposite is also true: often there is a greater risk involved in sticking to the existing technologies long after they have been surpassed by new ones.
4. Sceptics might think they can react fast enough to adopt the new innovation when it gains momentum in the market place. However, anticipation is everything in business. The more we delay, the more resources we have to use to catch up to the point where it becomes impossible to adapt to the new technologies.
5. Successful clients sometimes do not realize that new criteria are needed to evaluate new methodologies. In fact, old ideas are normally the tools with which new ideas are evaluated.
6. Successful clients might think that they can avoid problems by adopting an incremental approach. They believe that if they reject innovation, they will be better off most of the time. However, the incremental approach is doomed to fail and often skeptics cannot withstand the huge, rapid changes brought about by discontinuities.

So how can we take the best from both worlds? There is a great solution that helps companies take advantage of innovation: test the innovation at a limited level. This can reveal the value the innovation adds without taking any significant risk. Thus, in parallel with frantically protecting their existing business, successful companies might selectively identify and try in practice and on a limited level, technologies that may be needed to replace the existing ones before it is too late.

What does the future of innovation look like?

Two great sources of innovation appear to shape major trends in technology and beyond:

1. The combination of different scientific disciplines creates new knowledge by leaps and bounds. Silos among the sciences are being broken. It is in the interfaces of sciences that opportunities exist.
2. This in turn will help to better decipher the operations of the brain, the most irreducible element in business and life. All behavior, emotions and thinking derive from neural activity. In a time of unprecedented advances in technology, it seems we need to go back to biology for new answers.

A model that combines these two forces by establishing the links between many scientific disciplines to provide the most integrated framework for predicting behavior and the success of new products in the marketplace is THE WHEEL OF MOTIVES™:

Being rooted in biology and the order the brain projects onto everything around us to bring together for the first-time people, products, brands, concepts, THE WHEEL OF MOTIVES™ helps compose syntonic symphonies instead of dissonant noise. For more information visit www.brandaviators.com

Bibliography

• Malcolm Gladwell, The Tipping Point: How Little Things Can Make A Big Difference, Abacus, 2010
• Crossing the Chasm: Marketing and Selling Disruptive Products to Mainstream Customers, 3^rd Edition, Harper Business 2014
• Goeffrey Moore, Strategies for Developing, Leveraging, and Surviving Hypergrowth Markets, Collins Business Essentials, 2005
• Constantinos Pantidos, Living Brands: How Biology and Neuroscience Shape Consumer Behaviour and Brand Desirability, Lid Publishing, London 2018
• Richard Foster, Innovation: The attacker’s advantage, Summit Books, 1986
• Everett Rogers, Diffusion of Innovations, 3^rd Edition, The Free Press, 1983

* Dr. Constantinos Pantidos is the founder of BRAND AVIATORS™, a brand strategy consultancy whose client list includes some of the world’s top CPG companies, such as Coca-Cola, Unilever, Johnson & Johnson, Heineken, L’Oréal, and PMI. He led the team that developed THE WHEEL OF MOTIVES™ the first tool that integrates neuroscience into strategically understanding categories and positioning brands and align all consumer touchpoints the neuro-language of the brand. A post-graduate university lecturer, Constantinos teaches subjects on strategic marketing and brand management, brand identity design, brand leverage and rejuvenation, consumer behavior and consumer insights. Constantinos is the author of the groundbreaking book Living Brands, How Biology and Neuroscience Shape Consumer Behavior and Brand Desirability.