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August 1, 2010
Industrial Automation: Small Is Beautiful
The phrase “Small Is Beautiful” comes from the title of a 1973 collection of essays by British economist E. F. Schumacher. It’s used to champion small ideas, in contrast with the “bigger is better” syndrome.
The question is, can large companies in industrial automation be innovative, or is small beautiful for innovation, too?
New, good ideas are not just extrapolations of old, good ideas. They are often the antithesis, and typically exploit the weakness of things they compete against. Key features and advantages may not even have been possible when previous ideas were developed; technology usually generates significantly lower prices and provides key new benefits and advantages.
How many engineers in a large company work 15 hours a day on a new idea? Where in a large organization can you find the innovation and passion that typifies the start-up? This is the primary reason why big organizations aren’t as innovative as smaller ones. At best, innovation is much harder for them. At worst, they crush innovation before it interferes with the status quo.
Especially in tough times, managers within large organizations push to stay within budget. Their survival instincts are to conserve, not to expand. Rather than risk disruptive change, their instincts are to push sustaining developments and incremental improvements. There’s always fear of competing with existing products (which may currently be contributing to the top and bottom lines). This is true especially if a new product provides the same functions at a lower price, without clearly expanding the volume. This often happens in specialized industrial applications when quantity requirements are fixed, irrespective of price.
New ideas compete against existing ones. The existence of “skunkworks” is usually a sign that the official org chart and budgets can’t really handle unplanned activities. It’s the antithesis of good management. New ideas are signs that the current success may be short-lived—which, of course, it is. What’s needed is enormous latitude for creativity that breaks past budgetary restrictions. Disruption must be promoted; a “bet-the-farm” strategy is often necessary.
Does innovation scale?
So does this mean that scale and innovation cannot coexist? Many people just give up when facing this dilemma, especially when the company is still profitable. Many choose to downsize, allowing the recession to be an excuse, and waiting for the “inevitable upturn.” Incremental “sustaining” developments are the usual response—cutting research and development (R&D), and curtailing advertising to preserve budgets. Many seek to stretch development money by moving offshore, where engineering per-head costs are significantly lower. But that simply cuts loose the innovators to form start-ups to develop their new ideas without organizational inhibitors.
With no organic growth, most large automation companies are following the strategy of acquiring smaller companies, expecting to extrapolate the smaller organizations innovations and success record through expanded sales channels and global coverage. But that usually does not work. The acquired company is inevitably forced to fit into the larger organization, with its hierarchy, budgets, policies, procedures and petty politics. The innovative leaders, the key movers and shakers who generated growth, inevitably exit, leaving only second-level followers to fit into the larger corporate hierarchy. The acquisitions typically stagnate and simply get absorbed into the bowels of the larger organization. Acquisitions that continue to generate profitable growth after being acquired are indeed rare.
More than ever, an organization’s success depends on its ability to remain an innovation leader. The global race to develop cheaper-faster-better products and services will demand sustained innovation in the new, “smaller is better” paradigm. This will determine tomorrow’s leadership shifts.
Jim Pinto is an industry analyst and commentator, writer, technology futurist and angel investor. You can e-mail him at: [email protected]. Or review his prognostications and predictions on his Web site: www.jimpinto.com.
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