Sunday, February 10, 2008

New Growth Theory for Restaurants:

The ancestor of every action is thought – Emerson

Paul Romer explains his New Growth Theory in an interview and uses the example of coffee cup lids.

“There are huge numbers of little recipes that all add up to create wealth. To illustrate that point, I use the example of coffee shops in the US where they have three different sizes of coffees that they sell and three different sizes of lids for the respective cups. Then someone came up with the idea that you could design the cups such that one lid fits all the three different cups. That idea saves time at the coffee shops. etc. It’s such little ideas, recipes which add up to help people have the things they like, like hot coffee a little bit more efficiently and at lower cost.”

Ideas, not physical assets are the new coin of the realm. Ideas create wealth and they do so in a non rival fashion, Only one person can eat a piece of bread, however and infinite number can make bread from the original recipe. Restaurateur’s need to view their ideas and not so much their output as their true contribution. The idea of the single lid has minimized storage and increased efficiency in coffee shops. What other ideas can be integrated in the restaurant every day?