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 Driving Innovation Vol 3 Issue 1- Jan 2007 By Kevin S. Liskowich Innovate or evaporate. It's a message that has grown continually louder for companies. Technological advances and market globalization have put added pressures to focus on innovation. And while the impetus is on action, understanding the reasoning behind an organizational focus on innovation is a key determinant to its success. Why Innovate? In a joint effort with the Human Resource Institute, the American Management Association researched the driving forces behind innovation. The Innovation Survey 2006 asked organizational leaders about the reasons for pursuing innovation in their own organizations. Their top reason was the need to respond to customer demands. The survey also revealed that customer demands will become even more important in the next decade. Similar findings were identified in a Conference Board study of 100 firms, primarily from the US and Europe. The research revealed that customers were major factors for the companies' innovation goals. Among the top objectives identified were: Improving customer satisfaction via new processes (79%), Increasing loyalty among current customers (73%) and Identifying new customer segments (72%). When asked about the external drivers of innovation, the predominant role of 'customer demands' again rose to the fore, ahead of important external factors such as 'technology' and 'pace of change'. The important role of customers also appears in the 'collaboration/alliances with customers' response. This driver is of particular interest partly because it's seen as becoming relatively more important over time and partly because it highlights a trend in today's marketplace the fact that companies are increasingly forming partnerships with customers in the innovation process. The Role of Technology The rapid spread of technology is driving companies to compete in marketplaces where 'the next big thing' can change whole industries. Business analysts and forecasters Marvin J. Catron and Owen Davies reported that the product design and marketing cycle--from idea to invention to innovation to imitation--once took 30 to 40 years. Now it's closer to 30 to 40 weeks. Experimentation via computer simulations and virtual techniques is helping to bring new products to consumers more rapidly and with less expense. Rapid prototyping and combined technologies quickly produce items that can be tested in real conditions, not just virtual ones, making it a more effective method for certain products, such as drugs and new synthetic materials. But moreso, technology's role in innovation is as a facilitator. Technical advances such as computer-aided design and the ability to share ideas in real time are allowing companies to shorten the time it takes to introduce new products to the market. This role was highlighted in a 2004 Conference Board survey, which found that 50% of respondents use the Internet for team collaboration and 56% use it for idea-sharing. Top Talent: The Creative Class In a world in which innovation becomes ever more important, so does the need to compete for the kind of talent that makes innovation work. This talent pool consists of members that experts call 'the creative class' -- the outside-the-box thinkers and the managers who know how to set up organizations in ways that optimize innovative impulses. To attract and retain these individuals, organizations need to become 'employers of choice' for creative workers. But this task is becoming more challenging with the increasingly free flow of talent across international borders. Once the leaders in attracting top talent, North American firms are suffering in today's reverse brain drain. Where at one time people with technology and engineering skills left India, China and Russia to find new opportunities in higher-wage countries such as the US, today most of the foreign students who have learned valuable skills in Western companies and educational institutions are heading home‹and bringing their newfound knowledge with them. In his book The Rise of the Creative Class, author Robert Florida stated, "The key to economic growth lies not just in the ability to attract the creative class, but to translate that underlying advantage into creative economic outcomes in the form of new ideas, new high-tech businesses and regional growth." The tool he developed to measure these capabilities, The Creativity Index, is a mix of four equally-weighted factors: the creative class share of the workforce, the high-tech industry, innovation measured as patents per capita, and diversity. This composite indicator is a better measure of a company or country's underlying creative capabilities than the simple measure of the creative class, because it reflects the joint effects of its concentration and of innovative economic outcomes. Used as a baseline indicator, the Creativity Index serves as a barometer of longer run economic potential. What Hinders Organizations? For some organizations, the path of innovation can be a bumpy one. Much of the time these obstacles hinge on poor planning and preparation. The Conference Board study identified the top barriers to innovation as: lack of organizational alignment (52%), insufficient resources to pursue new ideas (51%), no formal innovation strategy (49%), and a lack of goals and measures (44%). Innovation experts Liisa Valikangas of the Woodside Institute in California and Michael Gibbert of Bocconi University in Italy put forth that there are also common traps organizations fall into that curtail innovation.
Characteristics of an Innovative Culture Beyond a focus on customers, developing a culture of innovation depends on a number of other factors. Teamwork and Collaboration Teams and work groups are critical in their ability to encourage and support innovation. These groups are most likely to be innovative when they're able to integrate people with diverse perspectives and allow them to effectively swap ideas and expertise. Cross-functional teams may be especially good at arriving at new ideas that are both innovative and practical. Diversity Michael West, professor of organizational psychology at Aston Business School, reported that most creative teams are drawn from diverse backgrounds. These teams bring a broad range of skills and knowledge to projects, offering many creative solutions because they approach problems with different perspectives. And when diverse employees relate to diverse customers, companies can tap into new product ideas and markets. Appropriate Resources The right balance of available resources is important. Having too few resources hinders innovation, but having too many may also be a kind of obstacle. Too little, and employees have to devote time and energy to seeking other resources. But levels beyond the "threshold of sufficiency" have not demonstrated a positive effect on creativity. For example, employees with long spans of time in which to come up with results may lose motivation. Communication A truly creative culture tends to be distinguished by open communication and the free exchange of ideas among different parts of the organization, among team members, and up and down the corporate hierarchy. Ability to Select the Right Ideas Innovative firms have in place the right processes to quickly cull through ideas and select those to shepherd through to fruition. Some experts advocate creating a defined portfolio of innovation approaches. Technology also plays an important role in idea evaluation. Fostering of Creative People Not only do companies need creative people, they also need a corporate environment that is conducive to helping people live up to their creative potential. The freedom to fail without heavy penalty can be a powerful support to eventual success.Not only do companies need creative people, they also need a corporate environment that is conducive to helping people live up to their creative potential. The freedom to fail without heavy penalty can be a powerful support to eventual success. Freedom and Risk-Tolerance The autonomy to work toward goals is an important feature of an innovative culture. However, research also shows that employees' creativity is enhanced when their goals are clearly specified and they're granted freedom to pursue those goals by whatever means they decide. Organizations must also be willing to allow a certain amount of risk-taking. Risk implies the danger of failure, but innovative companies know that failure is as essential a part of the growth process as success. Ways of Measuring Results Innovation and its impact can be measured in a number of ways. These include customer satisfaction, innovation as a percentage of profits, total number of employee ideas submitted annually and the financial impact of implementation. Whatever the measures, some experts say evaluation should take place through three different lenses‹the resource view, the capability view and the leadership view‹to provide a multi-dimensional perspective. Ability to Balance Incremental and Breakthrough Innovations While radical or breakthrough innovations can reap handsome financial profits, the largest percentage of revenue is still more likely to come from incremental innovation Balancing efforts to capture the advantages of both can be a wise but challenging goal for organizations to pursue. Leadership and Accountability The ability to foster creativity and innovation is among the top competencies required of leaders today, and this ability will become considerably more important over the coming decade. However, leaders too often have the opposite effect in organizations, inhibiting or disrupting innovations by setting up bureaucratic barriers that squash creative ideas before they're given a fair chance. To avoid this problem, some companies have specifically designated leaders such as a chief innovation officer. Many firms are also working to change their corporate culture to make innovation everyone's job. Motivation and Reward Systems While there is no definitive answer on the most effective means of rewarding employees for innovation, the most commonly cited rewards are non-financial. Some experts argue that companies who focus too much on providing extrinsic rewards such as bonuses risk destroying employees' intrinsic motivation. If companies do decide to use financial rewards for innovation, they should recognize that there is a fine line between too much and too little. In some cases, the bonus can become a larger focus than the innovation itself, while the absence of financial incentives may dampen motivation. |
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