management

I’m coming to believe every good is a convenience good. A recent New York Times article reported that Nordstrom has integrated their in-store inventory with their online supply, meaning that anyone can get access to the entire inventory from any “location” — a physical store or online. They also report that Nordstrom’s management believes that this “innovation” has helped change their same store sales from a “negative growth” (don’t you love that term!) of 11.9% to a positive growth of 9%.

The other day I was on the phone with my insurance company because they had rejected, for a second time, a procedure for my son which was performed by a physician who they claimed was “out of network” — let’s call him Dr. Brown. But, as I logged into the firm’s web-site (again), I was able to easily find Dr. Brown who was “in network”. As I had done a few weeks before, I mentioned this to the customer service representative, and she was not able to look at the web site from her computer, so I had to read her the name, address, and phone number so that she could contact him and make sure that he was “in network”. 

A guy I used to work with left an all-hands meeting one day. The company had just announced a layoff (it was long enough ago that this was still stunning, not an everyday occurrence like it is now). He turned to me and said, “They always get rid of the mailroom guy.”

What he meant was that the burden of whatever circumstances caused the company to cut back fell on the lowest-paid employees. And whatever mistakes the mailroom guy had made, they hadn’t caused the company’s distress.

Walk into a Barnes and Noble you can find dozen of books on innovation. There are books from teaching the ‘how to” to creative thinking”. Not many good ones simply because the subject is a moving target with rules being broken and created everyday, existing tools are getting obsolete, and best practices are often worst practices. Much that is held as common wisdom regarding how purposeful or successful innovation happened is wrong. This is not to say that all organizations are not innovative; obviously many are not thanks to our management systems and education.

This post is co-author Joseph Calandro, Jr., author of Applied Value Investing (NY: McGraw-Hill, 2009).

One of the most important and overlooked innovations in business are the innovations in internal controls and measurement. The duPont company famously invented their duPont formula which helped their executives to understand exactly what was driving financial performance in their business; which divisions were making good margins; which consuming too much capital.