Begin a Systematic Innovation Practice: Step Three
By Praveen Gupta
Developing a systematic innovation strategy from scratch is a challenge many companies are facing in today’s fast-paced world. This series of articles will focus on the steps a company should take in creating its own innovation practice, one that is developed specifically for its product, process or service. Step one is identifying the company’s type of innovation. Step two is scouting and strategizing for innovation. This article examines step three – commit to, and cultivate, an innovation environment.
The art of innovation is a well-known phenomenon that many people know and practice. Some do more than others, some practice personally while the others do at work, and some do it without knowing that they are being innovative. Similarly, corporate leadership practices innovation inadvertently or consciously. Just like walking, jogging, running or racing utilize different faculties, level of energy and intellect, it is the acceleration of innovation that need be mastered in global competitive environment.
With an understanding of the types of, and strategic planning aspects of, innovation, the next step for a company’s leadership is committing to innovation for its value proposition. The challenge is clearly laying out the value proposition – why should a company commit to innovation, what should be the return on innovation and how does innovation affect employees?
Reasons for Innovation
The corporate objective of making money can not suffice for a company’s meeting its obligations to its stakeholders. Making money by cutting costs hurts employees, making more money through mergers and acquisitions is not necessarily a long-term strategy, and growing business while creating more jobs without making money does not appear to be a viable approach. The commitment to innovation must be driven by sustaining profitable growth and creating jobs. Eventually, business and society do complement each other. Without societal contributions business is a non-value entity in the community; without creating value through businesses a community will not develop.
Innovation to sustain profitable growth requires new products and services to expand opportunities to serve customers – innovative approaches to reduce costs and strive for perfection makes the growth rewarding. New products or solutions can be an activity primarily assigned to dedicated resources with participation from other employees; however, cost reduction and perfection require the intellectual involvement of all employees. A company’s leadership must commit to innovation at the product and the process level, embedding innovative thinking in everything that occurs in the company.
Committing to creating jobs drives a business’ growth. Producing more value to grow profitable revenue is a better approach than making money selling an idea or building a widget by exploiting cheap resources. Creating jobs also requires the leadership to think beyond making numbers. Otherwise, people become head counts that are easily chopped, thus limiting innovation.
Organizational Alignment for Innovation
Once reasons are understood, responsibilities must be assigned to accelerate innovation both in the process and product areas, innovating new product concepts and innovating new process capabilities. The organizational alignment must address the following aspects explicitly:
Revenue growth through innovations
New product innovations
A typical organization includes a chief operating officer (COO), chief financial officer (CFO) and chief executive officer (CEO), where the COO’s role is to make money, the CFO’s is to count the profit and the CEO’s role is not clearly defined. When Lou Gerstner took over IBM’s sinking ship in 1993, he strengthened key customer relationships, besides leading restructuring the company. CEOs normally create revenue growth opportunities. The most common approach for dramatic growth is realized through mergers and acquisitions (M&A). Today, corporations realize that M&A must be supported with strong organic growth through innovative products and services. A path for organic growth must be established that is missing in most organizations. Many organizations hold on to an old innovation strategy too long.
The path to organic growth begins with listening to sales staff, distributors, customers, users and suppliers, observing market trends and engaging employee ideas for identifying new opportunities. Nurturing creativity, enlisting employee ideas, exploring new opportunities and developing new products becomes the way of doing business. Innovative thinking becomes an explicit expectation of every employee. Figure 1 shows the organization for organic growth.
Establishing Key Measures of Innovation
Innovation measures vary from company to company. The underlying intent should be to establish a minimal set of measures that inspire innovation, monitor innovation activities and maintain accountability for results. Knowing measures alone does not affect activities, it is the effective use of measures by leadership that will accelerate innovation. At the operation level, measures could be recognition, incentives, ideas per employee and revenue growth. However, revenue growth alone without profit can discourage innovation; revenue growth must be profitable as well. Measures like profitable growth and return on investment in innovation can also be good measures. The returns can be calculated as profitable growth over the investment dollars in research and development, and innovation-related activities.
Protecting Intellectual Property
Within 15 years of the United States declaring independence in 1776, several patent acts were passed. A Patent Office was formed as a precursor to the current United States Patent and Trademark Office. According to Abraham Lincoln (the only U.S. President to be issued a patent), the patent system “added the fuel of interest to the fire of genius.” The significance of protecting intellectual property was recognized early. Similarly, businesses committing to innovation must also recognize the significance of protecting their innovations from unauthorized use without being compensated for the intellectual property.
Businesses need to focus on protecting useful intellectual property. Fundamental innovations that are more scientific in nature may not be protected, while platform and derivative innovations that have significant economic ramifications must be protected. Variation innovations have a limited life and may not be worth protecting. Establish clear criteria for what to protect, what to hide and what to use without protection.
Educating Employees in Innovation
Every person is born creative. People do innovate for themselves, so they are not totally ignorant of the innovation process. People have not thought hard enough, however, to formulate their process of innovation or creative thinking. Innovation has been sporadic and rare.
In order to keep up with the growing demand for innovative solutions and services, employees need to learn a framework of innovation that allows them to utilize their intellectual and material resources to develop innovative solutions when needed, rather then randomly developing an innovative solution. Employees need to accelerate innovation using a holistic process that is easy to apply and good enough to produce significantly innovative solutions that can generate economic value directly or indirectly.
Organizations must establish a training program in innovation for executives and employees. Employees directly involved in design and development must master innovation skills and achieve certain competency levels. Employees involved in innovative improvement must also understand the framework, corporate expectations and use of available resources. Two important aspects of training in innovation are creating awareness to continually identifying opportunities for innovation and inspiring employees for creating usable innovative solutions quickly.
Committing to innovation implies understanding the causative relationship between innovation activities and results, aligning and allowing human resources to innovation activities, establishing key drivers and having a system to protecting intellectual property. Cultivating innovation means creating awareness of innovative thinking through training and education, and nurturing intellectual engagement and innovation through support and resources.
About the Author:
Praveen Gupta is the lead author of Business Innovation in the 21st Century that organizes various aspects of innovation from concept to commercialization. He is the president of Accelper Consulting, which provides training and consulting services in innovation and teaches business innovation at Illinois Institute of Technology, Chicago. Contact Praveen Gupta at praveen (at) accelper.com or visit http://www.accelper.com.