Is innovation more likely to occur when labor is at capacity, under capacity or over capacity? Is the type (product vs. process) and magnitude (large or small) of innovation dependent on the headcount cycle? Does innovation take longer or shorter from start to finish based on capacity?
These questions arose as I began some early stage work with Jonathan Terrell, Infohrm’s own Innovation Fellow, around the correlation between changes in headcount and stock price and volume fluctuation of publicly-traded companies. Given the staggering unemployment, continued mass layoffs and expectation of a jobless recovery – the question and consequences are particularly relevant.
There are obviously a multitude of factors, including a firm’s culture and capital allocation, that influence innovation. However, my underpinning hypothesis is that headcount is also a strong factor and that the type of innovation is also correlated to capacity. For example, I would predict that companies that are understaffed would be more strongly correlated to process and efficiency innovation gains vs. new product development innovation.
Measurement in the area of innovation is difficult, especially when viewing it through the human capital lense. Where does innovation start? Where does it end? I don’t imagine that innovation will ever be captured in a complete and telling formula but I would like to understand how this current business cycle may impact future innovation. Do Googlers still allocate 20% of their time to innovation? What about doctors, researchers, scientist and engineers?
Tags: Innovation, labor economics