In Praise of Resource Constraints

Limitless material resources are not only unavailable most of the time, they may actually be a hindrance. And remaining lean and mean can often be a blessing.

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“You get what you pay for” best summarizes the traditional management orthodoxy that team performance is strongly linked to material resources. After all, it makes intuitive sense that a team’s access to money and equipment is a key determinant of good results. So when a project is lagging behind, a commonly observed reaction among managers is to drive it along by making more (rather than fewer) resources available. Resource constraints, on the other hand, are seen as having a fundamentally inhibiting effect.

But the problem with the resource-driven mindset is that managers can easily fall into the trap of giving free rein to team members — “throwing money at the problem” — in hopes of procuring innovative outcomes. When projects fail, rationalizations often start with excuses such as “We ran out of money” or “If only we had more time.” In such cases, the resource-driven mindset may well have backfired. Resource adequacy is in the eye of the beholder, and if a team has the perception of inadequate resources, it may easily be stifled.

Actually, we believe that resource-driven thinking has so dominated the research agenda that it has clouded our consideration of many situations in which scarce resources (precisely because they are scarce) are desirable, potentially leading to breakthrough performance. One way to think about innovation productivity is to consider a large company that invests, say, $100 million to generate a new product that a startup might only be able to create with sweat equity. Consider, for example, the relationship between the Swiss pharmaceutical giant Roche Holding Ltd. and the Silicon Valley–based biotechnology firm Genentech Inc. According to a Roche executive, the rationale behind Roche’s major investments in Genentech was that the latter was able to earn significantly better returns on research and development than Roche did. Similarly, IBM Corp. discovered decades ago that adding programmers to a software project that was late did not help. Indeed, progress slowed even more.

Innovation Despite, Or Because of, Limited Resources

Resource constraints fuel innovation in two ways. In a 1990 article in Strategic Management Journal, J.A. Starr and I.C. MacMillan suggested that resource constraints can lead to “entrepreneurial” approaches to securing the missing funds or the required personnel.

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