The Innovation Challenge – business imperative of fad?

Why is innovation such a hot issue for companies? There is a notion that companies which achieve innovation excellence combined with operational excellence gain a valuation premium – this is being supported by a growing body of research. So the obvious question is how do companies attain innovation excellence?

There are many challenges and issues that face companies who want to become innovative – several of the main ones are:

* What is innovation?
* Is innovation about product and technology innovation or is it much more?
* How do I make innovation part of the corporate fabric (sustainable) versus another fad?
* What role do external partners play in driving innovation?

Many definitions are in existence – according to Peter Drucker, innovation is change that creates a new dimension of performance. What we do hear from executives is that innovation must be focused on ultimately delivering competitive advantage and creating increased value.

It is becoming accepted that innovation is about generating something that will either result in step change developments or continuous improvement initiatives.

Earlier discussion, papers and examples focused heavily on product innovation, in particular, the development of new consumer products e.g. the iPod or the Razr phone, and new technologies. In fact innovation, to deliver maximum value, should be focused on the core business areas of the company. Therefore technology becomes a key enabler, however, at times, a breakthrough technology can become a driver for business change, but the default should be to focus on the business. A good schema for this purpose is:

* Business model
* Processes
* Marketing
* Organization
* Product

Various models have been developed to enable the systematic tracking of innovation initiatives – one recently developed is the Innovation Radar developed by the Kellogg Innovation Network

it is easy to talk about innovation and create impressive marketing statements, but if a company is serious about making innovation a key part of the corporate DNA that can be sustained through changing business cycles, then the leadership must be committed to making the appropriate cultural changes. This is where many companies become stuck, due to their unwillingness to make the necessary core changes. Firstly, it is about leadership – innovation must be communicated, by the CEO, as a key strategy and the CEO must become the key champion. A recent IBM study found that for innovation to work it must be orchestrated from the top. (Global CEO Study – Expanding the Innovation Horizon – March 2006)

This is then backed up by the mechanisms that give people the time and space, recognition and motivation that will drive the right behavior. Some of the change areas that need to be considered are:

* Inclusion on job specifications
* Reward and recognition systems including bonuses, awards and reviews
* Symbols – e.g. work spaces and branding
* Corporate language

Another good practice to ensure sustainability, is to develop an over arching Working Model/Framework that captures not only all the aspects of innovation but the key change mechanisms that together will drive many of the processes and change initiatives.

Everyone recognizes that external collaboration is a key element in successful innovation. However the ambition is proving to be hard to execute, many companies from GE to Safeway are finding that it is a serious challenge to bring in the skills and the culture to deliver effective collaboration. By embracing collaboration and pushing its limits, we exponentially increase the amount of resource and brain power that is focused on finding that innovative idea. For ideas to be fully accepted a company must develop a culture that accepts ideas from any source and moves away from the 'not invented here syndrome"

Extensive collaboration also allows you to sense and source capabilities/ideas from a wide range of sources within and external to your industry's ecosystem. This may involve collaboration with a wide variety of organizations; such as:

* University Research Centers
* Venture Capital firms
* Companies in adjacent industries
* Organization networks

Two emerging trends in this area, are the creation of Innovation Groups, that are specifically responsible for external collaboration, amongst other things, (e.g. P&G has created the role of Technology Entrepreneurs) and Corporate Venture funds. Unlike the Funds created in the dot com era, these funds are predominantly designed to interface with the investment community to identify compelling start ups and to co-invest. The primary motivation is early detection of these emerging technologies rather then a investment profit motive.

In conclusion, innovation excellence is clearly a business imperative. However, many critical success factors exist that determine whether a company can develop a sustainable innovation based organizational culture and achieve innovation excellence; these include:

* Development of an overall Innovation working model/framework and processes
* Strong and consistent leadership
* Pushing external collaboration boundaries
* Effective organizational and cultural change

If you would like to learn more about how you can Developing a Sustainable Innovation based Organization,

please email: innovation@transtechusa.com