Diminishing Marginal Returns and Entropy.

A long established principle of classical economics. The more we develop something, and the better we get a it, the smaller the benefit of each incremental improvement becomes over time. I really love my latest iPhone, but it hasn’t changed my life the way the first one did. There are now more apps than I can count, but very few do something remarkable.

I am more efficient at what I do than ever before at what I do, but the challenge is that what I do is not as exciting to me as it was when I first set out.

It can be insidious. We progress more slowly, until we end up at a standstill without noticing.


Tomorrow is not there just to have a chance to be better at what I do today, it offers the prospect of noticing things that I won’t notice today.

At any one point I have a choice. To remain secure in what I know, and use it to advance in areas I understand; or to step into areas I don’t understand in the anticipation of finding something new and worthwhile that doesn’t just make be better at my current game, it changes the game.

Stepping from one area into the the other is a constant small act of courage.

The Productivity Paradox

The media is alive this morning regarding the long standing issues we have on productivity. Emphasis is on how lack of productivity is restricting income growth which is restricting the economy. First port of call is whose fault it is, and the default route that it’s all about low cost labour.

Probably, all of these things have a degree of truth to them, but in the scheme of things are secondary.

Productivity is low because we are still trying to improve the things we have been doing or making, rather than doing or creating new things.

at GrowHouse, we understand the power- and the limitations – of improvement better than most. We keep our process excellence ninjas keen and hungry, but in the end, improvement is an exercise in diminishing marginal returns. Get even close to six sigma measures, and getting incremental improvement on 97%+ levels of efficiency is an exercise in rock breaking.

Innovation on the other hand creates a class of activity that resets the game. Not only do we start with new services and products, but we have a whole new field on which to let loose the ninjas.

But innovation – and it’s big ugly sibling invention – require different skills, mindsets, and leadership. they have higher levels of risk, and require purpose and passion.

We have a paradox – most of the measures we take to motivate improvement kill the creativity on which innovation thrives:

  • Have people work for an expected reward.
  • Focus people on the expectation of being evaluated.
  • Deploy lots of checking and surveillance.
  • Make them follow a limited range of processes
  • And make it a competitive exercise.

(a major nod to Margaret Heffernan – “A bigger prize”)

If we really want to improve productivity, we need to innovate at every level. To explore possibility, and let people’s imagination loose.

Most of our structures, management processes and leadership practice pay lip service to this, and fall back on an evaluation mindset. It is the same principle that applies to the way we are educating tomorrows staff – and it’s substantially flawed and counterproductive.

The fast growing economies have cottoned on to this – China, Korea, and the like. they are changing the way they collaborate, create and lead. We need to do the same. Doing more of what we’re doing won’t solve it.

We’re running a series of exploratory conversations with people to explore possibility. The first is in Derby on 28th May, and we’ll be running the next in London. If you want to explore that space where knowledge ends, and possibility begins, we’d love you to join us.

New Games

Rohit Talwar was speaking today NextGen in Derby – appropriately at the Silk Mill – the world’s first factory.  The core of his message is similar to the conversations we have with clients – how to entertain the possibilities that are emerging, and to hold in mind both the need to maximise today’s performance whilst leapfrogging to the new games we can play that make our (and our competitors) current models obsolete..Here’s a presentation from him released earlier this year.  If the one from today is released, i’ll post it.