Strategic Management Insights
Building Innovation Capacity
Building Organization-wide Innovation Capacity
Innovation: Creating NEW value, by doing different things (products/services,...etc.), or doing things differently (business model/processes...etc.) [NEW does not necessarily mean original; it just means you haven't used it/done it before in your context.]
Global CEOs are facing unprecedented challenges and uncertainty in today's business environment. To deal with the increasing complexity, the most important leadership attribute is creativity, according to corporate leaders surveyed for the IBM 2010 Global CEO Survey. Since the 2007 economic downturn, the leaders who have been thriving on chaos are those who are placing more focus on encouraging and supporting ongoing innovation in their organizations. Leaders who are supporting open innovation are doing even better.
Open innovation is more likely to produce sustainable, strategically aligned and accelerated innovation, according to a growing body of research. Many view it as a logical extension of the organic growth of information systems that today seamlessly connect all disciplines and functions in an organization. Organizations are already practicing open innovation in many respects. Personal workspaces are opening up to new ideation processes through work circles, groups, and networks. Through these Information flows open networks are already informing the innovation process.
For many organizations, however, collaborative efforts are more likely to be focused on the design and engineering process. Collaboration on innovation tends to be more through organic growth in information flows and happenstance. As a result, innovation often results in shortfalls. Shortfalls in market intelligence, for example, may result in a product that does not fully meet customer needs. Systems thinking provides a way of closing these innovation gaps by coordinating complex flows of people, information and processes within organizations. Importantly, a whole systems approach creates more value in the innovation process by aligning innovation with strategic direction.
It also creates empowerment and buy in. People support what they help create. It is not hard to imagine the organizational good will and team synergy that is created when teams across the globe collaborate on a significant innovation. In contrast, lack of coordinated effort in the innovation process can create ongoing friction in the organizational gears that erodes performance.
"There are, of course, innovations that spring from a flash of genius. Most innovations, however, especially the successful ones, result from a conscious, purposeful search for innovation....Purposeful innovation resulting from analysis, system, hard work, covers at least 90% of all effective innovations!" Peter Drucker
Having a clear strategic direction should in itself be innovation, as a good strategic direction should guarantee NEW future value, not just business as usual. Collaborative innovation can further enhance that future value. Yet while collaborating on an engineering project seems a logical extension of an engineer's linear and ordered world, the unpredictable and dynamic nature of innovation can make collaboration more challenging. Opening innovation up to collaboration appears to be inviting chaos. This is where systems thinking comes into its element. Systems thinking excels at finding order in chaos.
Specifically, systems thinking maps your full organizational potential to innovate and identifies leverage points that can be applied to synergistically tap into this potential. By assessing how your organizational system interacts with the innovation process, the best collaborative opportunities to improve innovation can be identified. Strategy and innovation are symbiotic. In fact, innovation is required at every stage of the strategic management process.
Moving innovation out of the garage
Applying systems thinking to innovation may require a shift in your mindset. We often try to recreate the solitary yet nurturing environment of the proverbial garage where Steve Wozniak invented the Mac—and only mom is allowed in for fresh baked cookie breaks. Now we want to bring the whole system into the garage!
Collaborative innovation is crowding out the solitary inventor for good reason. The whole systems approach goes beyond strategic alignment to continuously increasing the strategic value in the innovation process. It applies foresight by assessing how interactions will affect the system as a whole. In an open system, continuous feedback and gap analysis contribute to the creation of a culture of innovation. Open innovation does not just respond to a challenge but more efficiently and proactively identifies product and service challenges.
Peter Drucker’s Seven Sources of Innovation
Peter Drucker’s identification of the major sources of innovation provides one useful tool to start assessing how your organization collaborates on innovation on a systems level. What systems, processes and people feed into these sources of innovation? How do they feed into your innovation process?
1. The unexpected
3. Process needs
4. Industry market and structures
5. Demographic changes
6. Changes in public perception
7. New technology and scientific findings
Numerous other resources flow into the innovation process—marketing, engineering, strategic planning, performance measurements and gaps, creating a circular feedback loop that provides continuous support for innovation. In this way, systems thinking mimics the natural interdependence found in nature. Let's not forget that Steve jobs also dropped by the garage with information on customer needs (marketing input), available materials (engineering input) and most likely customer feedback and returns.
In April’s MIT Sloan Management Review, the authors of The Collective Intelligence Genome argue that today’s businesses do not know how to use and leverage collective intelligence and crowd wisdom. This lack of collaborative knowhow is precluding organizations from extracting the full strategic value from the innovation process. Google, Linux and Wikipedia are recent and great innovations that apply collective intelligence. In each case, technology helps set rules and boundaries and control the flow and processing of information. And all three platforms continuously innovate and improve based on the input from collective intelligence.
If you are like most corporate leaders, you recognize that a bright future depends on your capacity to innovate. Naturally, you are focused on how your strategic planning process can rally your resources around innovation. We innovate to create NEW value. When we create new value by implementing new ideas — i.e., doing things in new ways (new ways of getting things done), or doing new things (new products and services) —we innovate.
Many executives mistake creativity for innovation and, as a result, fail to activate the right leverage points to optimize innovation processes. Simply put, creativity is the act of coming up with new ideas. When these new ideas get implemented and consequently create new value, then we innovate — but only if your organizational architecture supports innovation.
What is your organization’s capacity to innovate?
An example some elements of organizational architecture needed to achieve an organizational capacity for innovation.
The Haines Centre for Strategic Management provides the Consulting, Training and Coaching to help you to build your Organizational Capacity for Innovation.
For a more detailed discussion, please contact us at:
Tel: 65 - 63322 033