DS+CO Roundtable: Is efficiency killing innovation?

Can you have both at once?

According to Blair Enns’ Innoficiency Principle, innovation and efficiency are “mutually opposable goals.” Put another way: Your average organization can only increase one at the expense of the other.

In our first-ever DS+CO roundtable, managing directors Malorie Benjamin and Rosi Statt and Chief Creative Officer Mark Stone sit down to talk about efficiency vs. innovation and how brands can strike a balance between the two seemingly opposing ideas.

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Rosi Statt:

We face the tension between innovation and efficiency all the time. Our clients really want us to be risk takers and get great results, but at the same time, they want to be as efficient as possible. They want us to use their budget in the best way possible. And we do the same thing when we’re leading our own organization. So this is a really good topic for us to discuss.

Our conversation is based off of Blair Enns’ Innoficiency Principle. I’ll read it just to be very straight about what it is, because he wrote it very nicely:

“Innoficiency Principle states that innovation and efficiency are mutually opposable goals. In any reasonable functioning organization, one cannot be increased without the other decreasing.”

I’m super visual, so I look at these things as like a seesaw: On one end is innovation, and on the other end is efficiency. And there’s tension between those two things.

So to get us started: Why does this matter? Why does this whole thing matter? And why should a CMO care about this topic?

Malorie Benjamin:

The biggest challenge I face is being asked to do both innovation and efficiency on a constant basis, without a very clear understanding of which is the priority. And they’re competing when it comes down to delivering the results clients are looking for.

Rosi Statt:

Mark, what about you? Is that something you feel like you’re facing?

Mark Stone:

It’s interesting that you say the seesaw, because one thing goes down, the other thing goes up. I could see that illustration. But the way that I think about it is that there’s a time and place for everything. Companies have not only the opportunity but the obligation to innovate or they’re just going to become irrelevant because so many things are changing, especially with technology.

If you just sit there and think that your current offering is going to be relevant forever—without putting any energy into innovating and focusing only on being super efficient—pretty soon, you won’t matter anymore.

At the same time, when you do come up with something that could be very innovative or very creative and disruptive, you have to introduce it to the world and deliver that service or product. So there’s a time to be efficient. Why can’t they live together? As a creative professional, of course I’m going to slant a little more toward innovating all day long. But I get it. There’s all kinds of opposing forces saying “drive the cost down.”

Rosi Statt:

Something Blair talked about that I found really interesting is that it’s not that innovation and efficiency can’t coexist. There’s a right time and place. I think there’s truth to that.

The problem occurs when you don’t understand that you can’t seek both at the same time. When you’re in the time of innovation, you will be inefficient—and when you’re in the time of efficiency, innovation will take a backseat. You can turn the dial up and then turn the dial back down, but both can’t be dialed up at the same time. What I’m hearing from you, Malorie, is that we or clients or even coworkers can’t prioritize the two. We want both.

So when we think of brands that are known for being efficient or innovative, what are some that come top of mind? Let’s start with innovative.

Malorie Benjamin:

For me, a brand that I think of from both an efficiency and an innovation perspective is Amazon. It’s synonymous with efficiency because we order the thing and it comes in immediately. But then you think about all the innovation that took place to actually get Amazon there.

Mark Stone:

Exactly.

Malorie Benjamin:

That’s the real crux of how I think about Amazon. Think about it in terms of all of the logistic backend information that has to take place—from information architecture, product fulfillment, logistics—all the things that happen to make it come to you immediately. We only think about Amazon in terms of efficiency, but think about all the innovation that led to that efficiency.

What’s interesting about Amazon is that they have such devotion to their customers. Everything they do is about their customers. And that’s what we also preach to our clients: how they can best support their own marketing efforts and be customer-centric, customer-first. That’s what’s going to sell your product, regardless of what it is.

Amazon does that—it’s core to their brand and how they speak about themselves. Whether you’re talking about Amazon’s fulfillment size, Amazon Web Services, their technology pieces, they’ve carved them out separately and with separate operations goals for innovative parts of the business: “What are we gonna spend?” “How do we manage this section where we’re innovating?” “How do we manage the sales, products, logistics?”

All of those things happen independently so they can focus on the areas where they’re meant to deliver without having competing interests. And at the top line, they’re all meant to drive sales, but they’ve found a way to carve out different pieces of the business to be really successful.

There are other brands where we also think about innovation, and I love Netflix as an example, because they were the first ones on their market. Everyone at this table went to Blockbuster on Friday nights and picked out their movies.

Mark Stone:

The DVD arrives after that.

Malorie Benjamin:

Yes, right. And then you move to the space where you order online and everyone gets their DVD in the mail and you think, this is so innovative. Who would’ve thought you didn’t have to go to the video store?

The instant gratification around that is amazing.

We get to the point where Netflix has mastered getting movies to people in the mail. They don’t have to go to the store, they can choose them ahead of time, they show up at your doorstep. The next logical step is streaming services.

But then Netflix missed the window on so many things. They had the market cornered for a very long time. We think about the number of years they were sitting at the top as an innovator in that space, and then they lost that because they stopped innovating.

They started looking at how to be efficient: “What are the things that matter to keeping our customers engaged and keep them subscribed to the service?” They forgot about things like advertising, making sure they had money coming in and they built this amazing production house. But they missed the market on a lot of key things that could have helped them propel the business forward, and now they have a lot of competitors that they’re sitting in that same space with.

Mark Stone:

That’s so relevant, because think about the world before Amazon, what it was like. Online shopping was quite a bit different. Remember the first time you heard about Amazon—you couldn’t even really wrap your mind around what it was. How could they have so many products? You didn’t realize that they were a storefront for other people but sometimes stock things and sometimes have warehouses all over the place. What a model. That took so much ridiculous creative thinking and innovating to even come up with.

And they could have just sat there and said “We’re just going to keep going with this.” But no, guess what? We’re gonna make a whole entire streaming service or AWS, which is a completely different business. Each one of those is lucrative.

So what are they gonna do next? I promise they’re not gonna sit there. They’re not the kind of company that’s going to sit there and say “Let’s wring all the efficiency out of this.” They are going to push, and then their next thing they’re going to come up with is going to raise a bunch of eyebrows, I’m sure. It’s probably in the middle of being designed right now.

Rosi Statt:

It’s interesting because you thought of innovation—you said Amazon fits in both categories. When I think of Amazon as a brand, I think of it as an efficiency brand. It’s known for efficiency, but I think what led it to that efficiency is the innovation.

Mark Stone:

Time and place.

Rosi Statt:

Exactly. When I think of other innovating brands, I think disruptor brands are actually pretty synonymous with it. Creativity and listening to customer feedback are part of a culture of innovation. And I think great ideas are born from customers who are experiencing points of pain. Amazon cornered that exactly. It’s reshaped the way you order anything online now.

Mark Stone:

You get something the same day.

Rosi Statt:

Or a day later. I don’t want to pay for shipping.

Mark Stone:

And that forced brands like Target to do the same thing.

Rosi Statt:

Exactly.

Mark Stone:

Everybody is delivering. It really changed things really quickly. I have a question for you. So take away the innovation and tell me one brand that is just pure efficiency without any innovating.

Rosi Statt:

IKEA is a brand that comes to mind. I think of IKEA as twofold. One, it’s efficient. They’ve figured out a way to source their materials to keep product costs low. They figured out an efficiency model to run their business. But on the flip side, their actual product offering carries that same thinking through. Because their products are minimal, they save space, they’re no frills. They get the job done.

Mark Stone:

Scandinavian.

Rosi Statt:

When I think of something that’s totally synonymous not only with how they run their business but also what they deliver, I think of IKEA.

Malorie Benjamin:

Walmart is another one. They innovated because there were a lot of things with their inventory system—yes, I’m a nerd, we all know this—that were pivotal when they started to be able to bring costs down. Having computerized inventory systems that allowed them to not have waste sitting on shelves or in warehouses when they weren’t able to sell it was part of their ability to bring efficiency to the market. I don’t know that you really get to an efficient point without the innovation to bring you there.

Mark Stone:

I love to hear that because I was ready for you to ask me the question about what’s a brand that is just purely focused on efficiency.

Rosi Statt:

So is that why you did it before I got a chance to ask you?

Mark Stone:

You know what, I couldn’t even tell you why. Because I don’t get excited about that. I haven’t made an emotional connection to it because they haven’t innovated or been super creative, and therefore, they haven’t hooked me. I’m not interested. I want to be drawn in in some way.

Rosi Statt:

So that leads me to the cultures of these two things. What are the important points of a culture of innovation and a culture of efficiency?

When I think of a culture of efficiency, I think of constantly seeking process improvements. You’re looking at the operations of things, you’re looking at “If we do this one way different, it would make things much quicker, which has a trickle-down effect.” That is one of those qualities of efficiency. Are there any other qualities you think of with a culture of efficiency?

Malorie Benjamin:

I would say scalability is the biggest piece. I’ve never worked at a Starbucks, but just based on the way I see it as a customer, every single Starbucks has the exact same layout. If you take employee A from store A to store B, you can carry over that experience consistently. They know where to find the things they’re looking for to do their job, they know exactly what the labels look like, how things are made. Scalability is a huge piece of that.

There’s also a lot of using your own level of thinking to contribute to things. There’s an expectation that your value is in the ability to deliver the thing, whatever we’re creating. The value is in doing that right over and over again versus your thoughts and your own contribution to how things could move.

Mark Stone:

I love your engineering brain, because you think in a different way than I would about it. What you say does make a lot of sense. When I think about a culture or an environment that is more focused on efficiency than innovation, I think about running the other direction. As a professional creative person, I’m paid to tap into ideas that would have come from my kindergarten self—when there were no rules and nobody telling me I shouldn’t be thinking that way or doing it that way.

When you think about breakthrough ideas, it’s never a straight line. It goes all over the place. You can think about something as hard as you want, you can try to stay focused on it and the idea might come, but the idea probably won’t come right then, so go do something else and get distracted.

I guarantee, if you were a fly on the wall watching the whole creative team for a couple of days, you would think they’re wasting time. But really, they’re solving creative problems. And if you’re in an environment that is prizing efficiency over innovation and creativity, some people are going to love that. They’re gonna think we’re making more money that way or whatever, or we’re just making it easier and repeatable. People who are highly innovative and creative are going to so say “This is not an environment that’s conducive to breakthrough ideas.”

Malorie Benjamin:

That makes a lot of sense. I also think the problem-solving piece was interesting, because those are two areas that are still very connected. Whether it’s a culture of innovation or a culture of efficiency, it’s still solving problems. They’re just very different problems.

This is not to say that ideas aren’t valued, but ideas are not the thing that’s sold. We’re typically solving the problem of how to do it better, faster, smarter versus how we come up with a new thing. Sometimes the new thing is too ambiguous for me to understand, to wrap my arms around. I need your team to come in and put some guardrails around it so then I can say “OK, I can refine that.”

Now, how do we take and move that forward? It’s funny you call it a seesaw. I think of it as a continuum. At different points in time, you have to think about where you are on that continuum of innovation versus efficiency and how you need to scale based on the circumstances you’re sitting in.

Mark Stone:

Rosi and I had a brief discussion about this beforehand, and she referred to what I was saying as more like a flywheel than a seesaw.

I’m always accused of being an Apple fan person—I’ve sold myself to them and their whole ecosystem and everything. But you think about the innovation that had to happen and the breakthrough idea of even inventing the iPhone, and then suddenly, they’re designing a music service and they tie that into the phone and then they just keep building this ecosystem.

But at some point, you’ve got to cross the threshold. You have to be able to distribute (the phone) and you have to be able to drive the cost down and get them into more hands quicker.

Rosi Statt:

Time is not limitless. There are still guardrails. When we think about an innovation culture, what are some of things within an innovation culture? Are there certain qualities that you feel better support that type of thinking?

Mark Stone:

I think it’s just a general understanding of what you’re trying to do at that point—employees come in and know what they’re trying to accomplish and what they’re being assigned to.

If I think about our company, we’re a creative marketing agency. We use technology and we use efficiency at times, but we’re also trying to use creativity and innovation to solve problems for our clients. If they could do it themselves, they wouldn’t hire us.

That (culture) attracts a certain kind of person who knows they have the support of agency leadership to be able to do those things. We’ve created an environment that allows that to flourish instead of cutting it off and saying “Don’t think about it too much. Just get it out the door, be fast, all we’re going to do is be a burn-and-churn and get things out as fast as possible.”

Rosi Statt:

Like a versioning house.

Mark Stone:

There’s a time and place for that, but that’s not us. Looking at it through our lens, I think those contingents have to be there, and there has to be buy-in from the very top, from the board of directors and the CEO, that this is what we’re asking people to do.

It’s OK if their journey takes them for a run in the middle of the afternoon, because they need their brain to be thinking about something else while they’re solving this. Ultimately, they’re going to come back and they’ll have a whole entire page of things.

It’s different than saying “I need to see you in your seat, at your desk, touching your keystroke every so many seconds to make sure you’re working.”

Rosi Statt:

You’re making me think of Severance right now. “I don’t even know what it is I’m doing here.”

Mark Stone:

Exactly. I don’t know if that answers your question, but when I think about the environment, it has to support that kind of thinking.

Malorie Benjamin:

One of the interesting points of the article is the concept of “freedom to fail” and whether some cultures support that, too.

Mark Stone:

I love that.

Malorie Benjamin:

Whether you’re talking about a company culture or a larger context, one of the things they discuss in the article is the American culture. It allows you to fail, because people forget about your failures later on.

They used a bunch of really good examples. As long as you succeed last, that’s the thing they focus on or remember you for. I think that’s also important, and that’s part of what I think we embrace. There are a lot of ways we look at creativity in an agency, whether it’s coming up with the right marketing mix, the right media mix, the right media plan, the right creative solution. All those things have that in common—there will sometimes be opportunities where you don’t hit it out of the park. That’s the flexibility that needs to be provided in a culture for innovation to flourish.

Rosi Statt:

Have either of you ever had a client who’s allowed you that space?

Mark Stone:

A space to fail? I think so. You’ve got clients that are willing to look for the big idea and they know you’ve got to push the boundaries. You may not come up with a singular idea that spectacularly fails, but you might come forward with a couple of ideas (that fail) along the journey.

Rosi Statt:

I ask that question because there’s so much pressure on CMOs today. They’re now at a different level. They’re at the business table now, and I don’t think that always was. And when they’re at the table and part of the leadership of their organization, they’re looked at for results: “I want to understand exactly what I’m getting for the money I’m giving you.”

I think tracking and all the things we can do now start to take away the freedom for failure, the freedom for creativity. Because now I expect results—I know that’s possible. When it wasn’t possible, it seems like there was a little bit more space to try things.

I’m not saying that means we shouldn’t track those things. But then it goes back to the continuum: When is the time to try different things? And when do we need to just go after it and get efficient?

Malorie Benjamin:

One of the interesting points that you said, Mark, is that when clients let you come up with creative ideas, it’s OK to fail on those. This is where it’s really interesting, because I think the second half of the marketing continuum gets a lot of pressure for performance.

Mark Stone:

You’re right, it does.

Malorie Benjamin:

There’s a lot of leeway to say “Let’s have a big idea” and “Let’s have creative be the thing that moves us forward.” We’re totally invested with that big idea. But at the end of the day, they want to know “But how’s that thing performing?”

Mark Stone:

Ideation to execution.

Malorie Benjammin:

Yes, and that doesn’t continue across the same level of expectation. Big idea, they’re all on board with that. Then we get to the delivery of it.

But that big idea, maybe it was never designed to actually deliver the end performance. Because it’s a brand concept and that’s great, and they really do need brand support but they don’t really have the patience to sit and wait for that to come full funnel or to build whatever direct response they’re looking for.

So I think it’s really interesting that you asked that, because sitting in my seat and owning the product areas and departments I support right now, that’s a huge challenge. There’s not a lot of leeway for that.

When we go back and say the creative isn’t working for this particular aspect of the campaign, it becomes a deep conversation with the clients on why that upper-funnel big idea isn’t driving the thing at the bottom and doesn’t translate.

Mark Stone:

It has to translate somehow. There’s an opportunity for creative—and for the people who are thinking of these ideas—to more tightly collaborate with technology and the media people who deliver the ideas. We have moments where we do that well and moments where we could more deliberately force those collisions of thinking. But that’s a really important thing to think about, because there is pressure, no doubt. What’s the tenure of a CMO? It’s not very long.

Rosi Statt:

It’s between two and three years now.

Mark Stone:

Yeah. And so if the board of directors is watching the business not perform the way they think it should, if they’re sitting there and being boring all the time, they aren’t leaning into innovation and ideas.

Rosi Statt:

There’s a risk in not innovating.

Mark Stone:

They have got to differentiate themselves from their competitors. And in order to do that, they’ve got to find that void in the market. It often takes a lot of innovation and creativity to find that and to bring that point of differentiation forward.

Rosi Statt:

So when we think about what to do next, after hearing Mallory’s point of view, Mark, is there something different you would do as you move forward?

Mark Stone:

This conversation has reinforced where I came in after I read this article. There’s a time and place for it.

If you’re asking what a brand or what a CMO should be doing, they should be trying to discover where the opportunities are to innovate and not get stagnant and not become irrelevant—and then to find the areas where you cross that threshold, where it’s time to start thinking about efficiencies.

There’s no reason why they can’t do both. Maybe not at the exact same time, right? But otherwise, what’s going to happen to them? What’s going to happen to that brand? It’s going to become irrelevant and we won’t be talking about it again.

Malorie Benjamin:

I couldn’t agree more. I think it’s about understanding the right time and place for efficiency versus opportunities for innovation.

Brands need to understand and embrace what part of the budget (those things fall into). I kind of love the Amazon model of breaking things apart and saying “OK, what amount of the budget are we willing to invest in innovation?” or “What part of the budget are we willing to invest in potential prospects, thinking innovatively?”

That money has to be looked at from a marketing perspective very differently than how we would look at the money that’s driving efficiency.

Rosi Statt:

Do you think you will? Do you think you’ll ask clients that in a different way now after this conversation?

Malorie Benjamin:

Sure, I’d be glad to.

Rosi Statt:

Have I had a positive impact?

Malorie Benjamin:

You have, always. Every day, Rosi Statt.

Rosi Statt:

No, but for real, are you going to do this?!