Innovation is the act of creating something new that has practical and sustainable value. In the context of a commercial business, innovation is one means by which companies can stay competitive by continuously looking for better ways to satisfy their customers.
Innovation is neither a scarce resource nor the province of a select group of ‘innovators’; everyone innovates all the time.
Out of the blue we may be struck by sudden insight or come up with a novel way of tackling a problem. A young child constantly innovates because, by definition, he or she is continually finding solutions to challenges never before faced.
As we become older, however, we accumulate knowledge and experience, which requires us to innovate less. We become comfortable with the way things are and may even start to fear unexpected or unwanted change. The same can happen to organisations.
Most companies are born with the intention of bringing about change – by offering a new product or service, exploiting latest technology, transforming business models or generally filling a gap in the market.
A new company’s workforce is highly motivated and collaborates freely in order to fulfil the vision of its founders and share in its rewards. As the company grows, however, management structures are introduced, the focus of which is to defend established revenue streams rather than exploring new avenues for growth.
What was previously an open flow of information is now filtered through need-to-know hierarchies. When achieving short-term financial targets distracts attention away from long-term endurance, the risk of catastrophe looms.
This is not inevitable but there are some spectacular examples of late – Kodak and Nokia come to mind – that illustrate the trap that companies can fall into when they fail to stay alert and adapt to evolving market trends.
Management is the problem
Management expert, Dr. Gary Hamel, cites management as the prime inhibitor of innovation.
“Management was designed to solve a very specific problem – how to do things with perfect replicability, at ever-increasing scale and steadily increasing efficiency,” he says.
According to Hamel, management as a discipline was designed over a century ago as a means of getting people to follow the goals of the organisation. Today, however, the challenge is how to build organisations that enable creativity and initiative and “mobilise and monetise the imagination of each employee.”
This cannot be done in a half-hearted way – for instance by establishing a token ‘innovation committee’ (an oxymoron if ever there was one) or even by creating an autonomous ‘new ventures’ division; it must become embedded in the culture of the entire organisation – part of its DNA.
There are examples of companies that have achieved this. Google famously encourages its employees to take 20 percent ‘Innovation Time Off’ to pursue projects of personal interest that might benefit the company, and long before this 3M and Hewlett Packard were implementing similar schemes. These are the exceptions however.
Research conducted in 2007 by management consulting firm McKinsey revealed that although 94 percent of senior executives recognised people and corporate culture as the most important drivers of innovation, two-thirds were disappointed in their own ability to stimulate innovation in their organisations.
If we accept that anyone and everyone can and does innovate constantly, logically the companies best positioned to drive innovation are those with thousands of employees, each a source of ideas that could benefit the organisation. However, the common view of large organisations is not that of the nimble innovator, but one of bureaucratic sloth.
This suggests that the issue is not a shortage of ideas, but the inability or unwillingness of management to tap into its own talented resources.
Company leaders must embrace newness, encourage innovation and spend their time actively managing and driving it. Innovation metrics and targets (financial and behavioural) should be built into corporate scorecards in order to hold leaders accountable.
Technology now provides us with powerful social networking and employee collaboration tools that can be used to incubate company-wide sharing of information and ideas. The app-store model could be implemented within a company to collate and evaluate new business ideas.
Most important, however, is the need for leadership to inspire employees with a vision of an ever-changing environment, of which they are a part and towards which they are able and expected to contribute.
Great leaders are not measured by financial targets, charisma or the quality of their vision, but by the response of the people that follow them. The leader’s most important role is to establish a bond of trust and instil in people an energetic desire to create the future.
Most companies will not do this. It is a sad reflection on the corporate state of mind that it often takes a crisis to spur management (or more likely, shareholders) to take action.
Finnish manufacturer Nokia, which commanded the global market for mobile handsets for over a decade, failed to adapt adequately to the market shift to smartphones following the launch of the Apple iPhone in 2007. In 2010 it replaced its CEO and did what many would have once thought was unthinkable and joined forces with Microsoft in order to (with luck) survive.
Kodak’s story is even more poignant. It is a deep irony that Kodak invented the digital camera in 1975 and holds over 1000 patents in digital imagery. The 130 year-old company was always technically highly innovative, and clearly foresaw the trend towards digital technologies, but it was so heavily invested in film technology – essentially a chemical process – that it became strangled by its own legacy, failed to chart a effective path to the digital world, and has now filed for bankruptcy protection.
The lesson of these and other similar stories is clear: lead constant innovation – in your products, in your business models and in your business thinking. And remember that yesterday’s innovation quickly becomes tomorrow’s legacy.
By Ian James, Gordon Institute of Business Science