When we think of creativity, we naturally think of advertising and design, the latest visual to capture the eye of consumers: in other words, our thoughts go to the woo-woo of you-hoo, the stuff of gurus and ad agency "creatives." But this image short changes creativity; done properly, it is also the opposite of gimmickry: Creativity is also the art of faster / cheaper / better.

Everyone knows the stories of the New Idea: the Post-It, the iMac and all the rest; this is where we glimpse the glamorous sister of the Twins of Creativity. But today I'd like to celebrate the hardworking but fun-loving sister who is at work in the supply chain and in office management. She's the one who's eliminating waste and turning angry customers into loyal ones, who is reducing turnover and increasing job satisfaction, the sister that even the most conservative accountant can love.

BOTTOM-LINE CREATIVITY VS. COST-CUTTING

Speaking of accountants, don't mistake bottom-line creativity for the old "cost-cutting" or reengineering. First, if you attempt to impose solutions from above (cost cutting) or outside (reengineering), you lose the creative energy of the people doing the work, and may have them working against change instead of leading it.

Further, while you might succeed in cutting staff or costs, you simultaneously increase the costs of personnel (taking charges for layoffs and other restructuring), risk losing or demoralizing your best employees, and invariably lose word-of-mouth advertising and thus business.

With cost cutting you are sacrificing your people, morale and perhaps business, hoping the saving offset the costs. With creativity, you improve your people, morale and business and thus all savings are genuine.

THE COST OF BEING ORDINARY -- A CASE STUDY

Let's work through an example of what costs creativity can reduce, or, said another way, the exorbitant cost of being ordinary.

Let's pick some numbers: Assume we're working with, for the sake of round numbers a $100 million business, with a $5 million profit.

If a company invested in the typical top-line creativity of new advertising or design, it might increase business substantially, say another $10 million in sales and perhaps another million in profit. Terrific. But let's also get the other side of creativity involved.

BOTTOM-LINE CREATIVITY

WASTE REDUCTION

Say we could engage people from throughout the company in eliminating waste. What might that be worth? When Charlie Eitel (now CEO of Simmons, the mattress company) was CEO of a carpet company called Interface, he undertook a waste elimination program that saved over $50 million in three years (with total revenues of the company growing, at that time, toward $1 billion).

Working back from Eitel's results, we could assume that waste was had been 5% of the company's revenues, and that his alert and motivated team of experimenters spotted and eliminated over 40% of that waste. (Revenue for that period was about $800 million per year, times 5% = $40 million in waste, times 40% reduction.) Applying similar factors to our sample company...

ADVERTISING

Instead of increasing advertising spending, hardworking creativity can reduce it. By undertaking new and interesting projects, the company can generate W.O.M.P. (Word Of Mouth Potential). For one company I worked with last year, their innovative service initiatives were worth far more in publicity than the project budget for advertising. So I suggested they cut their ad budget in half, with a publicity budget of half of what is saved. Translating this into our example....

EMPLOYEE EXPENSE

As part of doing new and interesting projects, the company will attract the best employees and will be able to "de-hire" those that aren't interested in contributing. Further, the creativity swirling around the organization will apply to work arrangements and reward programs, causing morale to lift.

As I've studied the best bosses in America, I've come to understand that you can't be a great boss without being creative. (Can you be a great anything without being creative?) The best employees of the best bosses told me they routinely turned down offers from other companies (often with 20-30% increases in salary), in order to stay and see out the energizing initiatives of their current leadership.

For our example, let's assume that of all the management staff, five fewer will leave during the coming year, and that staff turnover will fall by one-third. (I've heard large numbers for the cost of turnover; for example, Development Dimensions International came up with a cost of $109,970 to replace a professional/manager. I've chosen a round and conservative number for managers, and for other employees a number closer to the Dept. of Labor's estimate of 30% of annual earnings.)

CUSTOMER SATISFACTION

Innovative employees are in a position to see additional sales opportunities or sales loses. (For example, a service tech alerts a sales rep that the customer is considering changing their system.) When things go awry, they can turn angry customers in loyal ones. They are also in a position to prevent the sort of errors that alienate customers. For instance, Federal Express undertook a creativity initiative to try to reduce the number of packages that were missing their assigned shipment flights. The employee-innovators slashed the number of errors by 58% (while simultaneously reducing the sorting staff by 47%).

For the sake of our example, let's assume that 10% of customers drop the company's products/services every year, and that innovative employees could save a mere one-quarter of them. If so, then we see...

CONCLUSIONS

In the starting point for our case study, the company was making a profit of $5 million per year. So creativity could add over $7 million, more than doubling profit.

Further, look back at our example of how top-line creativity might have affected profits: adding $10 in sales and $1 million in profits.

So, taken together, the original, ordinary organization would have made $5 million in profits.

The new, creative organization would make over $13 million in profit, the majority contributed by employees energized by better/cheaper/faster.

Further, not only is the company more profitable, but it is more fun: the joy of experimentation makes it a place where the best employees want to work and where the best customers want to spend money.

(Attempts to force cost-cutting on employees only make the company dreary -- a place that the best employees avoid. Even if HQ dictated cost-cutting in the amount that employees saved, it would come at a heavy price: not just damaged morale among employees, but diminished enthusiasm that is communicated to customers. On the other hand, by letting innovation bubble from around the organization, "faster/cheaper" becomes the partner of "better.")

So we come to the cost of being ordinary. Not only is there a major financial expense -- $7 million per year in lost profits in our example -- but there is a human cost, the lost opportunity of experimentation, the lost chance to make customers' lives better, the camaraderie, learning and joy that might have been.

THE COST OF BEING ORDINARY WORKSHEET