This has prompted me, like many others, to think deeply about innovation: both its clear benefits and its potential difficulties. My conclusion is that we need to drill into innovation to discover ‘innovation-for-increased-value’; or IFIV (I pronounce it “eye-five”).
We need to innovate not just for efficiency – more for less – but more importantly for increased value. This means creating products and services that are more valuable in terms of their features, and deliver more to the consumers who purchase them – more for more.
IFIV is an economic imperative in creating greater collective prosperity and a moral imperative in enabling individual prosperity and the dignity of work.
Efficiency is essential for successful economies. Every day, businesses introduce automation and process improvements that use fewer people to deliver the same services to more customers. They are right to do so, as delivering more for less increases productivity and improves overall living standards. These efficiencies are happening so rapidly in today's economies, and through trade across economies, that central banks fight the spectre of deflation, because delivering 'more for less' results in lower prices for the same goods.
Increased productivity raises overall living standards. However, it can have unfortunate impacts for the individual who is unskilled, lives in a weak employment market, or has been out of work for some time. For these individuals, productivity increases take the potential of a job even further away and significantly lower their wage-earning potential. As the Luddites of the early 19th century concluded, productivity through technological innovation terrifies in particular the least able. It makes the possibility of long-term personal unemployment very real for less able individuals,
Luddites have, of course, been proven wrong many times over the last two centuries, as we pursued productivity and continued to create jobs. But today, many less skilled Australians have already lost their jobs due to automation and improved efficiencies within business, and not yet found their next job. Some of these may never be employed on a substantive basis again, and may end up surviving on the Australian Disability Support Pension. So, the Luddites have been at least partially right.
The IFIV approach is a complement to innovation for efficiency. IFIV is what can be born from the capacity that innovation for efficiency frees up. To pursue IFIV, we must not turn the automation clock back or shy away from efficiency (innovation-for-same-value), but rather balance our attention on efficiency with an equal attention on increased value.
IFIV represents imaginative and bold investments in the future potential of our products and services to deliver improved customer experience and livelier societies. I am not suggesting that IFIV lies in luxury products and services per se; rather in products and services that most of us want to and can buy, but which constantly have more value embedded in them.
What are examples of IFIV? At the simple, every day level: baristas that make a better coffee; more sophisticated cars with more features or new types of engines; lower-carbon energy; and gyms that cater to our individual preferences and inspire us to do more exercise are all IFIVs.
These examples illustrate the economic imperative of IFIV, as it can span all dimensions of our economy.
The power of IFIV is that it creates products and services that deliver much more for more, not more for less. IFIV creates more jobs, and often ones that we have never imagined.
Given the value and dignity of work, the IFIV’s capacity to create more work – more jobs for individuals – represents its moral imperative. We must innovate not just to improve our overall quality of life as a society, but also the quality of life of each individual. IFIV will ensure that the Luddites are largely or entirely wrong about innovation.
Businesses, entrepreneurs and individuals can do this through a focus on, and commitment to, the creation of higher value products and services that require more jobs in their production, delivery and support. Innovating to employ as many people as possible in the creation of value will not only result in better products and services, but will also generate employment and incomes, create a little price inflation, and reduce the pressure on the tax and welfare system to redistribute income.
Descartes observed some 400 years ago: “I think, therefore I am”. Looking forward, we might well say “We innovate, therefore we will be”.
IFIV!
