In a previous post I discussed that ideas, always and everywhere, are far more valuable than their mere execution.
You may want to re-read that post as this one builds upon its foundation, especially the comments from Thomas Sowell and Paul Romer.
Before you proceed, please take a look at this short Super Bowl ad for Bud Light.
The distinction between ideas and knowledge may be subtle, but perhaps management consultant Sid Caesar clarified it best when he quipped:
The guy who invented the first wheel was an idiot. The guy who invented the other three, he was a genius.
Charles Murray, in Human Accomplishment, explores fourteen of the world’s most important meta-inventions that occurred after 800 B.C. until 1950, essentially cognitive (not physical) tools for improving the world around us:
- Artistic realism
- Linear perspective
- Artistic abstraction
- The novel
- Arabic numerals
- The mathematical proof
- The calibration of uncertainty
- The secular observation of nature
- The scientific method
All of the above are nonrival goods, meaning we can all utilize them at the same time without their being diminished—your use of the alphabet does not inhibit mine. These ideas changed the world, creating untold wealth. They were also the contributions of an incredibly small number of individuals—4,002 to be precise, according to Murray.
In the arena of business management, ideas have an enormous capacity to apply knowledge to knowledge, thereby increasing innovation and wealth.
Management consultant and author Gary Hamel has identified 175 significant management ideas between 1900 and 2000. He applied three questions to each idea to create the most important advances:
- Was it a marked departure from previous management practices?
- Did it confer a competitive advantage on the pioneering company or companies?
- And could it be found in some form in organizations today?
Think of the global impact the following dozen management innovations have had, which all met Hamel’s criteria:
- Scientific management (time and motion studies)
- Cost accounting and variance analysis
- The commercial research laboratory (the industrialization of science)
- ROI analysis and capital budgeting
- Brand management
- Large-scale project management
- Leadership development
- Industry consortia (multicompany collaborative structures)
- Radical decentralization (self-organization)
- Formalized strategic analysis
- Employee-driven problem solving
Economist Paul Romer is right, innovation rests on individuals’ ability to create and test ideas, thereby creating new knowledge and wealth. Even something as prosaic as a pill bottle can become the genesis of a new idea that creates value, and even saves lives.
Deborah Adler’s grandmother mistakenly took her grandfather’s prescription medication Amoxicillin by accident. While Adler was working on her MFA thesis, she came up with an idea for an easier-to-read, user-friendly pill bottle with color-coded rings and other safety features. Target was so impressed with her redesigned bottle it bought the design from her. In the autumn of 2005, the bottle was displayed in the New York Museum of Modern Art.
Business is about people, ideas, and things, not land, labor, and capital. Yet ideas are not easily measured or quantifiable, so they are not given the resources they deserve by many organizations. Creativity and dreaming take time, which does not enhance conventional productivity statistics.
But in an intellectual economy, creativity is what propels economic growth. Tim Delaney, Vice President, Executive Designer, Creative Development with Disney says:
The success of the Walt Disney Company has centered on two basic fundamental concepts: our ability to be great storytellers, and the constant and the vigilant search for exciting new ideas.
This is how you can say with complete confidence that ideas are always and everywhere more valuable than their mere execution.
It’s worth asking again. What percentage of your firm’s human capital is devoted to creating and testing new ideas versus merely executing old ones?