I ran into this a while back.
I was struck by this:
One of my CFOs once told me that the return on new capital investment is long term and the success rate has a high variance, while the return on “maintenance capital investments” required to keep existing production facilities running is short term and has a low variance.
In “Knowledge and Power” George Gilder quotes Peter Drucker saying this; “No one, but no one know less about your business than your CFO.” Gilder goes on to explain that Drucker was saying that the financial people in the office only deal with accounts., numbers, that by the time the CFO sees them are useless for anything other than seeing what has happened in the past.
I’ve posted about that great movie “Executive Suite, where the company is facing the same issues and deals with them in the correct fashion. Well at least it worked in the movies.
The real world is more complicated. All too often the CFO is the guy that gets put in the corner office of the Csuite. From personal experience, that doesn’t end well. Trying to run a company by looking through the rear view mirror leads to some strange things. To say nothing of a lot of financial maneuvering rather than actual working on making things more productive.
So how DO you keep from having your shop from becoming suddenly obsolete? It’s not easy. One thing to do is allow the production management and engineering people time to think. It’s nice to think that you need to maintain a high level of productivity, but the constant push for new projects and more work leads to burnout and overwork. The problem with that is that when you are pushing to get things done all the time it’s all too easy to just travel down familiar paths and build the “next one” just like the “last one.” Giving engineers some sabbatical time between projects allows for some time to rethink and maybe try new approaches.
You should also allow the production and engineering dept’s a slush budget. This is money not dedicated to a particular project, but set aside as ‘fooling around” money. Innovation is fooling around, more often than not and allowing for that kind of thinking allows the creativity to flow. The problem is that the typical corporate culture is mired in Taylorism. All productivity all the time. Which is just plain stupid when you are trying to develop product rather than just produce it. Sort of like this:
I can’t think of any way to kill your company’s innovation than to follow the precepts of that article. The more you screw over the creative types, the less they will look out for you. Which means that you will be the one left holding the bag. If you don’t provide a fertile ground for innovation there won’t be any innovation and, in the end all that will happen is maintenance engineering and retreading. I’ve seen it in action and while things can go that way for a long time, in the end it’s not going to end well.