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It’s Innovative, But Is That a Good Thing?

| On 24, May 2008

Cass Pursell(Or, Your metrics don’t go with those shoes)

I’ve argued in the past that creating and driving innovation shouldn’t be the goal, but that creating and driving sustainable growth should be. The problem with that position is, though, that not all growth is healthy or advisable. Therefore, I’d like to take the opportunity to amend my argument; let’s say that the new goal should be driving sustainable, appropriately targeted, growth.

Appropriately targeted growth is any growth that moves us toward the realization of a long term and (wait for it), yes, socially responsible strategic goal. Maximizing production through innovation is a long term strategic goal, but it’s also childish in its simplicity. Goals like that have more than once led us into a long dark alley that, with each step, further restricts our available set of choices and can ultimately lead us into a metaphorical kill-or-be-killed situation. We get into situations like these because we don’t take the time and expend the energy to develop mature, comprehensive, strategic goals. I re-present to you, ladies and gentlemen, Mr. Earl Butz.

In the early 1970s, a huge shipment of American grain to Russia and a coinciding drought in the Midwest caused a shortage, boosting farm prices to historic heights. Things got bad enough that the issue became politicized and President Nixon felt the pressure to act. Here enters Butz, who was handed a mandate to get prices down no matter what it took. The strategic goal, then, was simplistic: reduce the price of food. To meet that goal, Butz got innovative, and in 1973, a new farm law, the Agricultural and Consumer Protection Act, introduced the concept of target price subsidies.

And it worked quite well. Farm size increased exponentially. Larger farms could produce larger yields, and Butz innovated hard on this front to change the landscape of the American farm economy. He instructed farmers to think of themselves as businessmen, to plant corn “fencerow to fencerow,” to “get big or get out,” and to “adapt or die.” Butz was not at all worried about the drop in prices a surplus of corn would cause; in fact, that was his goal. To keep farmers happy, he created the “direct payments” system. Farmers grew as much corn as they could and then sold it on the market for a price that had dropped far below the cost of production, with the difference made up by the before-mentioned subsidies. The system was economically irrational but was on-point (and therefore successful) in terms of the strategic goal. In his time heading the USDA, Butz revolutionized federal agricultural policy and re-engineered many New Deal era farm support programs. By any definition, Butz was an innovator, and he used his innovation skills to further his organization’s strategic goal. But was that a good thing?

The problem is, processes are stupid. They don’t think for themselves, and they produce only what they are designed to produce. If you start with a simplistic strategic goal, your processes that are designed in support of that goal will go about the business of meeting that goal, and only that goal. Taking the time to think through all of the factors that are important to the customer before setting the strategy is critical. Do we want low food prices? Sure we do. But do we only want low food prices?

Since Butz, cheap corn product (along with soybean oil) has made processed food dirt cheap. In fact, a researcher from the University of Wisconsin found that with one dollar he could buy 1200 calories of cookies and potato chips but only 250 calories of carrots. For drinks he could buy 875 calories of soda but only 170 calories of orange juice. So yes, we have low food prices; the innovated farm policy effectively (and I have to believe, unintentionally) made the least nutritious food the cheapest food, which brings up serious social justice issues. As Michael Pollan says: “A public-health researcher from Mars might legitimately wonder why a nation faced with what its surgeon general has called “an epidemic” of obesity would at the same time be in the business of subsidizing the production of high-fructose corn syrup.” We’ve entered into one of those long, dark alleys, where our set of choices has effectively shrunk. To answer Pollan’s rhetorical question, we’re in that business because we set a simplistic strategic goal: lower prices.

Any well-functioning organization will be able to move in the direction of its strategic goals. People are smart, and people are innovative; they’ll take you where you want to go. So why not go someplace nice? Don’t just blurt out “lower food prices” and put the machine into motion. Say, “lower food prices, optimize nutritional value, ensure sustainability, etc.,” and create smart metrics that can measure your progress, then stand back a marvel at how good innovation in the service of sustainable, appropriately targeted, growth can look.