The goal of Efficiency Innovation is to reduce the cost of making, selling and distributing existing products and services. Efficiency Innovations almost always cuts the number of jobs in a specific role, because the easiest and most cost-effective way to do this is to automate. We want to be able to do the more (or at least the same amount of work) for less cost, and inevitably this means fewer people in the process we automate. When we get this right we free up capital to either do other things or to show more profit.
Efficiency Innovation drives are often forced actions, and everyone knows that there is no other way for the organisation to survive. If not done in dire circumstances, those whose jobs are in danger will push back and often push back hard!
Unless you have the means to show that the rationalisation will not mean that people will lose their jobs, you are in for a tough time – but if you have the unwavering support of your management team, it’s not that bad.
The better response would be to ensure people that they will not lose their jobs, but that after re-skilling, they will be able to do better and more meaningful work (their reward for the sacrifice). That in-turn unlocks new potential for the organisation (the organisation’s reward for the painful process), this type of initiative do not have to be that difficult or painful.
The problem with Efficiency Innovation is that it’s an investment with a diminishing return; you can only rationalise so much or automate so much or scale down so much before you have nothing left but a broken system.
By all means, do improve efficiency – you have to, it’s the way you get the last pound of flesh, but that is all that it is.
Efficiency Innovation pays off quickly, but it becomes more and more challenging to get real ROI out of their innovation type as time goes on.