The optimisation horizon

red-sea-monster-serpentOne of my first jobs was as a programmer for an Oil company. There were no computers, the title referred to the fact that we programmed the delivery of oil products to various depots around the country, where the road tankers would get filled to deliver to petrol stations and customer sites.

I was responsible for the coastal ship deliveries. I had a telephone, paper and a pencil. I’d phone up the depots to get the latest readings, then figure out how much of which product had to go on each ship, by when, so that we didn’t run out. It was great fun, I was basically getting paid to do puzzles and talk about football all day, and it worked pretty well. I only made one mistake and sent about 12 years supply of paraffin to Elsemere Port.

It was also amazingly inefficient, by today’s standards. I don’t know but I am guessing today this is all done by software, certainly with minimal human intervention.

The same was true at my next job. We had a building full of people to run something that today would be a small startup. Over the last 30 years we’ve seen the relentless optimisation of work, through the advances in technology and the application of management ‘best practice’. Hordes of MBA students have defined and honed every process in every organisation to drive out variance, reduce costs, minimise employees, and maximise automation. The efficiency of modern organisations is truly breathtaking, their ability to consistently deliver quality and reliability at scale and anywhere in the world is a marvel.

This focus on optimisation has led to bigger and bigger organisations able to operate globally and to deliver increased profits and returns to shareholders. Some would say that it has also led to soulless companies, who fail to engage with customers or to nurture their employees. Profits have come before people, process before passion.

But are we now reaching the end of the road for this industrial approach to business? Reducing costs is easy to start with but the last 10% is a lot harder than the first 10%. Removing variance by standardisation also build rigidity into your process and structures. Automation removes people that provide the human touch customers value. You can keep on ‘salami slicing’ your costs and people but eventually you run out of salami.

Some companies are reaching the end of the optimisation taper, where the increments to be gained are less than the cost, or are simply not there. Better, faster, cheaper always used to win but not any more. When everyone can deliver world class service at commodity prices, you have to be different. The market demands experiences, relationships, intangibles. It wants something new.

And there’s the rub. You need to innovate but you are built to do the same thing with relentless efficiency. You have to experiment, take risks, try stuff out but you want a process you can execute brilliantly. Only there isn’t one.

You can’t optimise your way to innovation

It’s been a good trip but now we’ve reached the optimisation horizon. There’s no more ocean to sail across, we’ve reached the edge of the map. And we all know what it says there …

Beware! Here be Monsters!

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