Why Best Practices can Kill Innovation.

Not too long ago, I was asked to take a look at what SAP was doing and see if I was interested in helping define how our company could leverage their "Next Generation" of ERP. To be honest, the thought of working on SAP was less than thrilling. But, I knew my boss, and I very much respected him so if he asked, then he must have seen something and the minimum I could do was look at it.

My hesitation stemmed from the perception of SAP as simply an ERP. SAP is a whole business built on defining the world's "best practices". The logic went like this... SAP's business is defining the "best ways" to handle functions which are not "core" to other businesses. Since these functions are core to SAP, they are able to spend massive amounts of R&D on these functions and with a customer footprint as large as SAP's, they are able to define best practice and productionize it into their product suite. The clients of SAP therefore benefit from best practices.

What I disliked about this is that, by definition, a best practice is a system/process which has already been done and repeated and proven to drive efficiency across several organizations. It runs counter to innovation. By implementing these best practices you will be as good as anyone else who also implemented these practices.

Now some would argue, that if it's not "core" to your business (aka "context"), then why would you care? Instead of wasting R&D on these, just focus on core competency of your organization and allow others define best practices for everything else. For example how many companies write their own Word Processors? This is true. But as the processes become larger and larger, they encroach on areas that are core to an organization and in the quest for efficiency, we turn a blind eye to opportunities for creating true differentiators. For example, if a company differentiates itself on it's "customer service" and it has implemented a best practice CRM suite, they have successfully become as good as everyone else who has implemented this suite.

By implementing the best of the best, they ignore opportunities to change their processes and truly differentiate the experience with the customer. Instead, they've become dependant on a third party to innovate on their behalf. Where is the line between context and core? And could there be elements in the context which can brought into the core?

So do you throw out everything and start from scratch? No. The key is to use it as a starting point only and allow for innovation from there. In some situations, if it's really core to your business then you may indeed have to start from scratch. Consider Google... Their "core" was in their proprietary advanced search engine algorithm. Google's business was not about servers or massive data warehouses. BUT rather than using "best practices" in data warehousing technology, and purchasing a massive data warehousing environment like IBM, Oracle or Teradata, they took many many many PC's, stripped them down, strung them together and created their own proprietary datawarehousing. NOT core to their business.... OR was it?

So back to SAP... It turns out that those clever folks at SAP have realized this as well. Their proprietary nature has given way to open standards which if their vision pans out, means we should be able to use their best practices as starting points. Through the SAP NetWeaver technology (SOA based ERP), companies will be able to to dis-assemble best practices and build unique and differentiated processes which can lead to a competitive advantage.

The big question though.... Will companies actually drive innovation now and take advantage of best practices as only a starting point? With all the hype SAP is putting behind NetWeaver, and the hype around SOA? I suspect for most big companies the answer is "no". Well at least not immediately. Why? Well, that's another blog for another time but it has something to do with our fascination on efficiency.