The United Nations is experiencing a “severe cash shortfall” and “could run out of money within months.” As a result, the UN is looking for ways to cut costs, especially in an uncertain funding environment where many countries, including the United States and China, are slow to remit their annual contributions. One of the major cost cutting strategies the organization is employing is a relocation of its staff from “high-cost cities to more affordable, strategically located regions.” The UN Fund for Population Activities (UNFPA) is one of the UN agencies that will relocate some of its staff from New York City to Nairobi. The UNFPA highlights some benefits for this move on its website including, “savings on staff-related costs, office rental, and travel.” Although other benefits are noted, in light of the UN’s current cash crisis, cost savings clearly emerge as the most critical factor.
This is a textbook case of efficiency innovation.
In our book, The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty, we describe three types of innovations: market-creating, sustaining, and efficiency innovations. At any given moment, most organizations manage a portfolio of these types of innovations but during times of financial difficulty, efficiency innovations are prioritized. Consider how these innovations differ.
Market-creating innovations target nonconsumers–people who can’t afford existing products or services on the market. They are engines of growth and economic expansion. For example, personal computers, smartphones, and mobile money are all examples of market-creating innovations that made computing, mobile telephony, and financial services available to a population of people who, historically, couldn’t afford them. These innovations require significant investments and the impact is less assured than sustaining and efficiency innovations.
Sustaining innovations build on market-creating ones. These innovations typically make good products better as they add features to existing products on the market that are targeted at demanding customers. Although these types of innovations require investments in R&D and marketing, they require less of an investment than market-creating innovations and have a ready market of customers. For example, when a computer manufacturer adds advanced processors or larger memory chips to their product, they’re investing in sustaining innovations that make the product better. These innovations are important for keeping an organization vibrant and are typically sold for more profits, but they tend not to drastically expand markets or help organizations in a cash crunch. That’s the work of efficiency innovations.
Efficiency innovations help an organization do more with less. The organization typically maintains its existing set of customers but it changes the way it operates so as to reduce its overall cost of operations. For example, when companies decide to leverage automation technology or outsource certain operations from one region to another because of lower labor costs, they are investing in efficiency innovations.
Although the UN isn’t a traditional organization known to invest in innovation in the way a for-profit corporation would, it’s important to recognize that every organization invests in innovation. We define innovation as a change in the process by which inputs of lower value are transformed into outputs of higher value. With that definition, it’s clear that innovation is the lifeblood of every organization.
A helpful way to think about it is that market-creating innovations prioritize access for people, sustaining innovations prioritize improvement of the product, and efficiency innovations focus on enhancing the process.
Considering the different types of innovations, it’s easy to see how the UN’s pending decision to relocate some of its staff to countries with less expensive housing and labor costs is clearly an efficiency innovation. Efficiency innovations may help the UN stay afloat temporarily, but they won’t solve its deeper funding crisis. With only 49 countries paying their dues on time in 2025–a pattern, not an exception–the organization must rethink its business model to ensure long-term sustainability.
