Strategic Elements of Innovation
Innovation is a paradox with precepts easy to comprehend but difficult to implement. Often, and incorrectly, innovation is delegated to the ranks of the technical community. In reality, harvesting the economic potential from innovations, requires the entire enterprise to innovate. Specifically the coordination of technical and commercial efforts becomes a critical success factor in making innovation successful. In fact, commercial innovations like new business models, leverage technical investments yielding more sustainable financial outcomes.
The components of successful and sustainable innovation are fairly obvious and even common sense. First the enterprise must want to innovate as a key part of their strategy. This commitment must begin with top management and be continuous and long term in nature. Desire without commitment wastes the organizations time and energy and squanders shareholder value. Since people innovate, not buildings, infrastructure, systems etc. the individual, and collected talents of the organization’s human capital, represent the raw material of innovation.
More important than the raw skills of people is their innate curiosity and desire to understand changes surrounding them while being part of an enterprise focused on converting these changes into advantages. These advantages benefit the enterprises customers, markets, communities, shareholders and employees. Unless the advantages from innovation have a broad impact over time they’re unlikely to be significant or sustainable. The advantages do not need to be large just real and broad.
Once strategy and people are in place the systems and procedures by which the enterprise conducts business must facilitate innovation. Knowledge is the root of the innovation process and systems supporting data gathering, information assembly and understanding allow ideas to be transformed into meaningful innovations. The curious mind can not create advantage from change if the change can not be understood. “Knowledge Management” has become a key core competency for industry “innovation powerhouses” like P&G and will soon be a condition of simple existence for most enterprises. This is a direct and unavoidable outcome of the 1990 “tech revolution” (which actually began in the 1970s).
In addition successful innovation requires the enterprise to avoid “self-inflicted injuries” such as:
- Arrogance, especially by the leadership team.
- Setting unrealistic expectations. Innovation is not easy, quick or large (at least initially).
- Simplicity is mandatory at all times. Being “clever” invites expensive failures.
- An unwillingness to recognize innovations must be for the present first. The future will take care of itself.
- Inability to calculate and manage risk. Successful innovators are not “risk takers” but “risk managers”.
However, the reality is all innovations start small and in the beginning, those that become big, are indistinguishable from those which stay small. Finally, unless an organization is capable of successful systematic organizational and business innovation it can not create sustainable shareholder value over time. Reinventing the business to lead events in the world and marketplace requires a sense of constant urgency and willingness to embrace change, in effect creating the future.
Unless an organization is capable of successful systematic organizational and business innovation it can not create sustainable shareholder value over time. Reinventing the business to lead events in the world and market place requires a sense of constant urgency and willingness to embrace change.
Key concepts in creating the future are:
· The “Silent Revolution” has condensed the timeline for innovation. Abandonment must occur frequently and rapidly including everything about the business not just it’s products.
· The six classes of opportunities must also be considered in the context of new information, geography and changing demographics. This context must be considered explicitly and focus on challenging the basic assumptions about the business held by management.
· The power of processes – bringing about key resources, fostering disciplined decision making and collaboration and allocating resources is more important than at any time in the past and growing in importance as information becomes more dynamic and impacting.
· Innovation in the “Lego World”, or the world of integrated solutions derived both internally and externally, is about building relationships and inventing white space not about helping a product survive one more round of improvement.
Finally, the entrepreneur creates new wealth by four primary means, which can be practiced by the firm, as well as, external to it:
· Abandoning ongoing efforts to make room for innovation,
· Continuously seeking opportunities found in change,
· Converting those opportunities into value for customers.
· Strategically allocating resources.
Connecting resources from externally derived sources has now become a new competency requires for creating a sustainable advantage.