The Keys to Successful Innovation

By : Jim Pinto,
San Diego, CA.

Innovation stems from a culture that encourages and breeds consistent business value improvements. In the new, fast-moving global environment Innovation is the key to generating growth and success. Here are the keys to successful Innovation.

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Check out, July 2007

Innovation stems from a culture that encourages and breeds consistent business value improvements. In the new, fast-moving global environment Innovation is the key to generating growth and success.

Clearly, for the vast majority of companies, innovation is not just limited to disruptive technology changes. It includes the shifts that improve all products, services and support mechanisms – infrastructure, manufacturing and production, marketing & sales channels, and delivery logistics.

Innovation is not just the occasional "eureka" flash - it includes the process of making improvements, generating new ideas, methods, devices procedures that yield major cost or value shifts. In the organizational context, innovation is linked to performance and growth through improvements in efficiency, productivity, quality, competitive positioning, market share, etc. Innovation is a key part of management; a masters in engineering management provides information on how to be innovative and effective in project management.

While innovation typically adds value, innovation may also have a negative or destructive effect as new developments clear away or change old organizational structures and practices. An innovation process often stems from completely new thinking which many leaders cannot embrace.

Organizations that do not innovate effectively may be destroyed by those that do. Consider what happened to yesteryear's giants like Westinghouse, RCA and Western Union; they fizzled and withered away with antiquated products and services.

Managing Innovation

Innovation has ethereal and elusive characteristics which cannot be "managed". Dean Kamen, best known for his innovative invention Segway, pokes fun at the "management" of innovation. He basically says that innovation requires leadership; but management kills it.

Managers miss the point when they try to set aggressive improvement goals. What they achieve is incremental improvements in areas such as time-to-market, development cost, product cost and quality. Those have value – but they are not the major shifts that bring significant change, explosive growth and real leadership. In his best seller "The Innovator's Dilemma", Clayton M. Christensen exposed a crushing paradox behind the failure of many industry leaders: By focusing on pleasing their most profitable customers, leaders pave the way for their own demise. How? By ignoring new, cheaper innovations that initially target small customer segments but evolve to displace leading products and services.

In a follow-on book "The Innovator's Solution", Christensen and co-author Michael E. Raynor discuss a solution to the dilemma. They suggest that innovation is not as unpredictable as most people have come to believe. Although the outcomes of past innovations seem random, the process by which innovations are packaged and shaped within companies is very predictable. By understanding and managing the forces that influence this process, companies can shape business plans that create truly disruptive growth.

In his book "Dealing with Darwin", Geoffrey Moore lays out some results of research on how companies can innovate. Innovation is not just about creating some new science or technology. In the postindustrial world, innovation is a survival tool for every type and size of businesses. Moore debunks several innovation myths: that R&D is a good indicator of innovation; that a "chief innovation officer" can manage it; that innovation has to be disruptive.

Innovation is disruptive

You've probably heard the story of the lost travelers who asked for directions and were told, "You can't get there from here". The challenge of innovation is perhaps best expressed that way – because new and innovative products and processes often mean reversing old management controls, changing organization structures, abandoning seemingly solid financial ratios, embracing completely new paradigms. Without abandoning old "maps", you just can't get there.

An innovative organization must move forward in the face of old management thinking, old financial ratios and guidelines and controls. During difficult times, downsizing, streamlining, and cost-cutting often get precedence over new ideas which are often seen (by old-fashioned managers) as impractical pie-in-the-sky.

Most companies find it very difficult to breed innovation from within, and can only do it by importing new leaders. But that usually starts at the very top, with selection of a new CEO by the board-of-directors of an embattled company. Clearly, much depends on that choice. And the new "turnaround" CEO often brings several other key managers, already attuned to the teamwork which is necessary for the process and cultural development of innovation.

Innovation is important for survival, but most businesses face the same challenge – overcoming innovation stiflers. Myopic managers continued to drive the annual planning process through a rear-view mirror, with budgets based on last year's financial ratios, tweaked to produce the desired profit, and at most making token contributions to innovation through R&D and new-project allocations. Too often mediocre execution produces poor results and innovation groups are quietly disbanded in cost-cutting drives to protect revenue streams from existing businesses.

Innovation does not depend on just one person, or even a few – it stems from a culture that encourages and breeds innovative thinking. Every organization has a unique ethos that drives its success or failure in the face of accelerating change. The culture is the collective personality which embodies the values, beliefs, philosophies, attitudes and operating norms. It boils down to "how we do things around here." When I was running Action Instruments, I remember a senior manager, a new hire, who quit because of the behavior of what he called the company "amoebas" who continued to do things "our way".

The way forward is often to eliminate those resistant to change, which is often seen as heartless. If results are not achieved the change is seen as a mistake and the new leader gets ejected. But by then several good people, key elements of the company, have already been exited. So "re-wiring" the culture for innovation is fraught with danger. And indeed, that ’s what makes a successful innovative culture so significant and powerful.

Innovation Objectives

In this globally competitive age, everyone wants to stimulate innovative thinking within their organization to generate improvements that achieve increasing growth and profitability. Innovation — the ability to define and create new products and services and quickly bring them to market — is an increasingly important source of competitive advantage.

Tom Peters cites several bold innovation objectives – notable among them: Speed of innovation (product development time should be reduced by 50%); Premium products (through service, quality, and enhanced innovation, achievement of differentiated, higher price, and higher value-added plateaus); people and organization improvements (reduction of management layers by 50%, get people on profit-sharing programs); paperwork reduction (reduce paperwork and procedures by 50%).

There’s a serious gap between expectations and reality. Most innovation efforts end up not meeting expectations. The degree of success varies greatly among companies and even among divisions within the same company. The difficulty comes from the inability to actually manage innovation.

Innovation keys

In today’s fast-paced business environment, innovation is the key element which helps a company not only to survive, but thrive. Success comes from new products with innovative differentiation, agile business processes, expanding markets and sales channels, all of which are vital for achieving competitive advantage.

Innovation has been viewed as a creative process that leaps from the minds of a few imaginative people. But in today’s global business environment, innovation must be developed as a reliable, measurable process that yields consistent, positive results. Here are three keys:

  • Start at the top. The "innovation champion" must be the CEO, demanding new thinking and measurable results. Every senior manager must be committed.
  • Incentives: Implement incentives to adopt innovative behaviors, and disincentives for lack of results.
  • Companywide: Innovation is a process that must involve the whole company.
The global market has become so competitive that U.S. companies can't compete with expected margins against local competitors which have huge advantages, including lower labor costs and government subsidies. They must compete on value through technology and innovation. And too, innovations must have a sustainable advantage because the best ideas and technologies spread rapidly around the world. Only a consistent and predictable innovation process enables companies to succeed. Investments in innovation are now as important as sales and marketing.

In the past when quality and cost were limiting factors, innovation was about developing new products and then putting them through production improvement processes to reduce costs and ensure quality.

Today, innovation is much more than just products. It's about taking corporate organizations which were built for efficiency and rewiring them for creativity and success in fast-moving business environments. It ’s about reinventing business processes, building entirely new markets and generating new supply chains that meet global customer needs. More important, as the Internet and globalization widen the pool of possibilities, it's about selecting and executing the right ideas and bringing them to market quickly and effectively.

The Apple Ethos

In January 2007, once again Apple stole the limelight by introducing the innovative new iPhone. With powerful and well established major competitors – the likes of Motorola and Nokia – Apple introduced a new design which is expected to capture significant market share. The launch in July 2007 was itself an example of Apple's innovative marketing prowess, and the results have again boosted Apple's image as an innovation leader.

Consider the way of thinking in the Apple culture; you can see it both the hits and misses. The Lisa and Newton were both recklessly ambitious projects which failed. But both pioneered features like the mouse and a graphical user interface which had previously existed only in research labs. Apple has always had a grander vision. It wasn't enough to create good products; the aim was to reinvent the products. They were not afraid of risk. Often key decisions were based on personal likes and dislikes, not just of Steve Jobs and senior managers, but others who "owned" the projects. At Apple, there is no micromanagement – responsibility is pushed down; talented people are let loose.

Apple's biggest accomplishment can't be measured by growth of product revenues or design awards. The biggest long-term impact derives from the company's culture of innovation and its existence as an incubator of the best designers and engineers. When Apple's talent moves on, they take some of the culture with them and go on to create great products elsewhere. And even when they've exited, the Apple culture still thrives.

Developing an innovative culture takes dynamic leadership with the vision, strength and stamina to imbue an organization with that special something that makes the difference.

The Importance of Innovation

More than ever, an organization's success depends on its ability to remain a global innovation leader. The global race to develop cheaper-faster-better products and services will demand sustained innovation, and will determine tomorrow's leadership shifts.

The benefits of Innovation generate growth and success for the winners, and inexorable decline for those who base their plans on yesterday's paradigms. Study your own company's innovation processes and you’ll get clues about its future growth and success.

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Copyright 2006 : Jim Pinto, San Diego, CA, USA