Last week, the New York Times published an op-ed piece from Harvard Business Professor Clayton Christensen. The column describes how there are multiple forms of innovations – Empowering, Sustaining, and Efficiency – and while job growth is created by empowering innovations, the common measurements we use invent efficiency innovations, which eliminate jobs.
To be sure, as long as there are consumers and investors, we will always have the need for more efficiency, and when that happens, there will be a loss of jobs.
However, Christensen points out that many of the financial metrics we use to allocate capital were born from a time when capital was a scarce commodity, and therefore needed to be deployed in a manner that was most efficient and emphasized short-term gains rather than long-term investment.
The irony of our current economic cycle is that just when we need to stimulate innovation and the resulting job growth that successful innovations create, there are many billions of dollars currently parked and sitting idle on corporate balance sheets. This brings into sharp relief the problem with injecting capital – a plentiful resource today – into the economy as a means for generating job growth.
It’s as if our leaders in Washington, all highly credentialed, are standing on a beach holding their fire hoses full open, pouring more capital into an ocean of capital. We are trying to solve the wrong problem.
This brings to mind the adage popularized by Stephen Covey – another innovative thinker: “if a ladder is leaning against the wrong wall, every step we take gets us to the wrong place faster”.
In the past 20 years, businesses have embraced the philosophy that you can’t improve what you don’t measure. The new problem is, given the abundance of capital, how do we create and adopt new measurements?