Innovation and the Dangers of Bad Metrics: The Apple Analogy (The Fruit, Not the Electronics Company)By
Innovation has often been killed by poor metrics, part of the innovation fatigue factor of flaws in judgment and vision. Poor metrics can include financial analysis that emphasizes short-term gains but overlooks the future. One way of illustrating the problem is with the “Apple Tree Analogy.” Imagine a fruit production company that is concerned with the rising costs of apple production and the poor efficiency of manpower at harvest time. A hot-shot expert steps in to shake things up and turn things around. Suddenly, executives in their distant offices see reports showing dramatic gains in the efficiency of harvesting (perhaps a measure of the time required to pick the fruit from a tree) and a sharp drop in harvesting costs such as expenses for ladders and labor. Wonderful news!
But what is the cause of the gains? If management is remote and not in tune with what is happening on the ground, they might rely on the metrics or key performance indicators to conclude that the business is healthier than ever and issue huge bonuses to the geniuses who transformed the apple business. In reality, the short-term gains might have come at a surprisingly high cost, namely, the future of the business, as shown below.
Sometimes dramatic cost-cutting efforts can lead to great short-term metrics and make a business seem healthy, when in fact, it is doomed by the very actions that gave it the short-term boost. Cutting down every apple tree in the orchard will greatly simplifying harvesting. No need for ladders at all! But the crops of the future have been wiped out.
Innovators in your company are the source of your future crops. Cutting innovation staff will always look attractive for the short-term, but can your future afford it?
Make sure you are using wise metrics in making decisions about innovation, research, and new product development. It’s a topic we address in Conquering Innovation Fatigue, and one of the important reasons why you and your team need to be familiar with this book.