Developing and implementing innovation: some issues to consider


My working definition of innovation:

Innovation is positive change resulting in new products, services or processes. [3]

It is well understood that to successfully implement positive change, staff must accept ownership of the change. Implementing and managing innovation, however, requires more than just managing change. Certainly the people or ˜soft management issues need to be addressed if an innovative culture is to be achieved (more of this later). Beyond that are several other key elements which must also be considered :

  1. How much innovation is needed for survival?

  2. What type of innovation is required?

  3. What are the different levels of innovation within the organisation and how are they integrated?

  4. Do organisational systems help or hinder the innovation process?

  5. Will staff development and training improve corporate innovation?

  6. How does innovation relate to client needs?

  7. How does the size of the enterprise affect its ability to be innovative?

  8. How important is speed of innovation?

The rest of this section will examine these questions.

How much innovation?

How much innovation is enough to ensure survival? The answer is, more than your competitors . Unfortunately , often we become aware of our competitors innovative efforts only when they appear in the marketplace . Consequently, organisations must always attempt to maximise their efforts to innovate to ensure their survival. Trying to second-guess your competitors by limiting your level of innovation can be fatal.

Figure 5.1 shows we could expect the level of innovation of a wide range of enterprises to be described by a normal distribution, where most companies fall within two standard deviations of the mean. Highly innovative organisations, represented at the far right-hand end of the curve, are rare.


Figure 5.1: Innovation levels among a large population of enterprises

Similarly, if we consider a single enterprise and the way staff contribute to innovation we might expect that the normal enterprise could be depicted in Figure 5.2. Furthermore, an enterprise with a low level of innovation would be as described in Figure 5.3 and a highly innovative enterprise would be as described in Figure 5.4.


Figure 5.2: Staff contribution to innovation in a normal enterprise

Figure 5.3: Staff contribution to innovation in a low innovation enterprise
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Figure 5.4: Staff contribution to innovation in a highly innovative enterprise

Types of innovation

Innovation can be divided into technological and corporate (or enterprise) innovation. [4] The first involves the development of new technology, whereas the latter refers to a culture that permeates the organisation.

Most people think of technological advances when they think of innovation, for example, Cochlear s bionic ear and Biota s influenza drug. Limiting our concept of innovation in this way is unwise, however, because it implies this is the only type of innovation that counts. Although technological innovation is important, the contribution to an enterprise of a truly innovative culture is at least equivalent to the contribution from technological innovation.

Of course it is easier to see and measure the results of technological innovation. As a consequence, governments wanting to support innovation tend to provide funds (such as research and development grants) for technology projects. This is based on the achievement of technological goals rather than an attempt to measure the benefits of developing a corporate culture of innovation.

Levels of innovation

Innovation can exist at a strategic, tactical or operational level within an organisation. Innovation at each of these levels will be of benefit to the organisation. Innovation at all three levels will ensure the company s survival and success.

Level 1: Strategic innovation

Some companies achieve a major innovation, a huge quantum leap, once or (rarely) twice in the enterprise s life span. Often these quantum leaps occur at start-up, providing these companies with a huge competitive advantage (for example, Cochlear and the bionic ear).

Quantum leaps often relate to a major technological advance, but not always. For example, during World War I, Australia could no longer obtain supplies of aspirin from the Bayer company in Germany and so sought expressions of interest from Australian companies. The Nicholas family in Melbourne took up the challenge and thus Australia had Aspro. This drug was the dominant over-the-counter painkiller for the next fifty years or so, and is a classic example of an innovation that was truly a
˜company maker .

Quantum leap or company-maker innovations are typically made by staff focusing on the strategic or big-picture issues. Unfortunately such quantum leaps are rare. Most companies never have the good fortune to experience this type of innovation.

Level 2:Tactical innovation

Other organisations achieve product or service innovation of a less extreme type, typically releasing new products or services that, although innovative, tend to be variations on an existing theme. There is nothing wrong with this. In fact, this is how the majority of companies innovate. Of course not all of the innovations at this level relate directly to the customer. Many are associated with making the business run more efficiently or, by reducing costs at one or more points in the supply chain, making the enterprise more competitive.

This level of innovation is more likely to be made by staff whose focus is on the tactical level of the enterprise. These innovations, although not as dramatic as the quantum leaps, occur much more frequently.

Level 3: Operational innovation

The third level of innovation relates to the small improvements made to existing methods of operation or processes to optimise products and services. Whereas the previous level of innovation might involve purchasing new equipment or developing a new product line, this last level of innovation typically consists of changes to make the equipment run more effectively or minor improvements to products.

Small innovations are typically made by staff at the day-to-day operational level. It is very common in organisations that have a truly innovative culture. Although none of the innovations are large, when considered as a total their cumulative value is often the greatest. Which level is best?

It would be wrong to say that any one level of innovation, whether strategic, tactical or operational, is more important than any other. The very best companies seek to innovate at all levels. They realise that although quantum leaps are very important (if they can be achieved) it is regular tactical and operational improvements that drive the enterprise and ensure the survival of the organisation.

With rapid developments in computers, the Internet and telecommunications, it might be suggested that continuous improvement is pass , that only a quantum leap in technology or business planning will ensure corporate survival. If we step back for a moment, however, and think about the situation logically, it should be obvious that an enterprise must use every weapon in its innovation armoury. The only sensible strategy is to innovate at all levels of the organisation.

In the swiftly moving world of the Internet, it is certain that companies which make a quantum leap in innovation are able to position themselves very strongly. However, many of the high- flying Internet stocks that were the darlings of the market just a short time ago have already faded and will soon be just a memory. As this new market sector matures, the survivors will be measured by the standards applied to all businesses (such as growth, profitability and cash flow). Once most of the quantum leaps have been made, innovation in these companies will be reflected by the optimisation of their systems (continuous improvement) and new minor variations of the successful business models (new products or services based on an existing product).

Microsoft constantly brings out new versions of its products. These are improvements on the past but not always a quantum leap. Yes, I m sure Microsoft is still searching for the next quantum leap, but in the meantime it continues to progressively improve its product range. Microsoft, like all organisations that hope to remain successful, will attempt to innovate at all levels of the enterprise.

Figure 5.5 represents graphically how strategic, tactical and operational innovations combine to optimise the competitive position of an enterprise relative to its peers. Figure 5. 5(d) shows how an enterprise that is innovative throughout all levels of the organisation will dramatically outperform competitors who limit their innovation strategies to only specific parts of the enterprise.

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Figure 5.5: Representations of how strategic, tactical and operational levels of innovation combine to optimise an enterprise s competitive position

One characteristic that many enterprises exhibit is the belief that any and all innovation is the responsibility of the Research and Development Laboratory or the Design Centre . This, of course, is a result of senior management believing that technological innovation is the only type of innovation. Not only does this limit the total innovative effort within the enterprise to a sub-optimal level, as explained above, but it also subconsciously provides an excuse for the remainder of the staff to ignore innovation. This is analogous to the way staff in some organisations see quality as being the responsibility of the Quality Department.

In organisations that have research and development departments, it is important for senior management to communicate to staff that this is only one aspect of the organisation s innovation strategy, and that all staff have a responsibility for innovation irrespective of their position within the organisation.

Clearly, although research and development departments may achieve innovation at the tactical or (occasionally) strategic level, and are a very important component of an innovation strategy, they often do not contribute significantly at the operational level. Conversely, some organisations focus solely on innovation at the operational level via continuous improvement programs. These projects may exist under various names (such as quality circles, TQM, cross-functional groups and self-managing teams ) but all aim to achieve innovation via continuous improvement at the operational level.

It is important that senior management recognise the need for an integrated innovation strategy that encompasses all levels of the enterprise.

Systems

Many organisations throughout the world have implemented systems based on the ISO 9000 series of international standards. Such systems are designed to standardise the day-to-day operations of an organisation, and in so doing reduce the variation in product or service quality. It is quite reasonable to ask whether this process of standardisation limits the ability of an organisation to innovate. The short answer is no , systems do not inhibit innovation. There is a proviso, of course, and that is that the systems are well designed and properly implemented. Systems can and do inhibit innovation if they are excessively rigid. Well designed systems, however, do not inhibit innovation and will actually support the process.

The International Standards Organization has recognised the need for the ISO 9000 series and similar systems to support innovation. The revised standard ISO 9000 (2000) is less prescriptive, and one of the major changes is the increased focus on continuous improvement and meeting customer needs.

Clearly it is important that the improvements achieved as a result of innovation are captured and properly integrated into the day-to-day operations of the organisation. Good systems ensure that as improvements occur they are incorporated into standard operating procedures and all staff use them. It would be a dreadful waste of effort if the innovative ideas generated within the organisation were lost because the enterprise did not have systems in place to capture them.

So the answer to the question regarding the impact of system standardisation on the ability of the enterprise to innovate is that good systems are essential. The best companies not only capture the benefits of their innovation in their standard operating procedures, they also have procedures for innovating .

Studies have shown that innovation in the best companies is not a haphazard process. [5] These organisations recognise that by standardising their approach to innovation they consistently achieve better outcomes .

Staff development

Training can improve the level of innovation in ways that might not be obvious at first glance. Organisations operating in highly technical or specialist fields can improve their potential to innovate by increasing the technical knowledge of staff. Training may also teach staff how to think more creatively. Staff learning to work better in group situations may also improve the quality and quantity of innovative ideas as a result of better teamwork.

Perhaps the less obvious benefit of training is how it improves the level of staff motivation. Psychologically, when management increases the level of training and development, staff who benefit from the training feel more favourably disposed towards the company. The company is doing the right thing by them so they want to do the right thing by the company. Hence, if an organisation shows increased commitment to its staff over time by boosting the level of training, staff react more favourably towards the company. As a result of this higher level of motivation and commitment, it is easier to implement change and to innovate.

Meeting client needs

  • Peter Drucker [6] said that the two essentials of an organisation are marketing and innovation:

  • marketing to find out what clients require and to meet their needs;

  • innovation to ensure an ongoing capability to meet their future needs.

Innovation is really about better meeting clients needs (that is, what they really need, not just what we think they need).

Market leaders consistently attempt to predict what clients will want in the future. It is difficult for clients to tell you what they want if it hasn t yet been invented. This is where good market research allows companies to detect future trends and then use their knowledge of cutting edge technology to develop truly novel products.

Meeting client needs may be achieved via innovation at the operational, tactical or strategic level.

At the operational level, process optimisation may well improve an existing product or the way it is delivered to the client. Remember how Ford dramatically improved the reliability of Jaguar cars by improving the electrics? This is an excellent example of process or product optimisation. However, achieving ongoing process optimisation over an extended time period is difficult. Why? Because it is difficult to keep staff motivated and focused on any single project for a long period. Why don t many champion teams win consecutive premierships (the Brisbane Lions being an outstanding exception)? The issue centres on motivation. For organisations to achieve ongoing process and product optimisation it must become part of their day-to-day approach.

The Japanese did this with the quality circles and TQM concepts they initiated in the 1950s.

At the tactical level, organisations will often develop a new variety or model to meet a perceived market need. Perhaps food companies provide the best examples. Remember when muesli bars first came onto the market? The initial ˜ vanilla varieties were quickly followed by yogurt-coated bars; later we saw ˜ breakfast bars and ˜energy bars. Companies with a strong marketing focus typically do this type of innovation very well.

Strategic innovation in relation to client needs is certainly difficult to achieve. Why? Because this is not about finding new variations on a theme ”it involves a quantum leap. Usually this innovation must be conceptualised by the inventor . Examples include the Sony Walkman, the bionic ear and the retractable syringe.

The obvious conclusion is that innovation that is not customer focused is a waste of time.

Organisational size

It is simplistic to say that as organisations become larger they become less innovative. The reality of the situation is less clear-cut , because it is not organisational size per se that affects innovation but rather the characteristics that are often associated with size.

  • There are at least three interrelated issues affecting the innovative capabilities of larger companies:

  • As companies grow larger, there are typically more staff, more levels of management and longer lines of authority. Consequently the nimble footedness of the smaller organisation can be lost as it grows.

  • Longer lines of authority, due to more levels of management in the typical hierarchical organisational structure, not only inhibit communication in both directions but also inhibit decision making.

  • As more people have to be involved in decisions, the speed of decision making decreases.

Innovative organisations do not deny the potential for these problems to exist ”they acknowledge them as a fact of life and they set about eliminating them.

Smaller companies typically exhibit faster decision-making and better communication than their larger siblings, so large organisations that wish to remain innovative and exhibit rapid decision making need to operate like a combination of small companies.

So how do large companies structure themselves to maintain the flexibility, speed and nimble footedness of their smaller competitors? In other words, how do large companies make themselves small again? The answer lies in the four inter- related issues that are outlined below.

1. Communication

Small companies can maintain personal communication between staff. As companies increase in size it becomes more difficult for senior management to maintain personal communication at an optimal level. Consequently, management tends to resort to other communication tools, such as newsletters, email and memos, to supplement personal communication. An organisation with ten staff does not need an in-house newsletter or intranet, an organisation with 100 staff probably does, and one with 1000 staff definitely does.

Why is personal communication so important? Remember, innovation is a cultural issue. Staff have to want to help the company. This is an emotional decision each person in the enterprise has to make. If the boss takes the time to speak to staff in person it makes them feel more important. Often it is not so much what he or she has to say but the fact that the boss actually made the effort. By taking time out of their busy schedule to talk to staff, the boss is sending a very powerful message showing staff that they are important.

The other aspect of personal communication is that up to 80 per cent of it comes from non-verbal cues. Body language is a key aspect of effective communication that is absent from other forms of communication. Newsletters and other techniques are fine for transferring information but the loss of these non-verbal cues limits their effectiveness. Email at least has the benefit of being interactive, and senior executives of larger organisations, such as BHP, encourage email communication from staff at all levels of the organisation. This is probably the best alternative to personal communication and, although inferior to the latter, it certainly shows senior management s intent.

2. Decision making

Decision making only slows in larger organisations if the decisionmaking power stays at the top. If authority for decision making is properly delegated to the various levels of the enterprise, this slowing of the decision-making process is largely eliminated.

Entrepreneurs in small companies often exhibit very good decision-making abilities . Unfortunately many of these same entrepreneurs are reluctant to delegate authority as the organisation grows. This is recognised as one of the main reasons many small companies choose to stay small.

3. Structure

Small organisations tend to have a flat structure. Why should a large company imitate this? Because it improves communication, reduces costs and generally makes enterprises more efficient.

It should be noted, however, that it has been suggested that this process was overdone in the 1990s. Many organisations have unwittingly reduced their intellectual property by eliminating middle management.

4. Bypass mechanisms

Organisations, especially larger ones, can help overcome structural inefficiencies by developing bypass mechanisms to facilitate decision making. Conceptually, these are similar to heart bypasses that bypass blocked arteries. They take different forms depending on the organisation (for example, a direct email line to the boss is appropriate and effective for some organisations whereas others may solve the problem by having the senior management located physically close to the innovative hub of the organisation). Blockages should not exist, but unfortunately in many enterprises they do. If for some reason they can t be eliminated, then a bypass mechanism is a good option.

Speed of innovation

There is little benefit in being second to market with a new service, or in inventing a new pharmaceutical product only to find your competitor has successfully patented it. Speed is of the essence. In fact, one of the most important criteria for judging the innovative capability of an enterprise is speed of innovation . Being slowly innovative is not acceptable.

The ability to shorten project timelines is an essential attribute in today s competitive environment. Think of how quickly computers become obsolete, replaced by a new superior model (these days it almost seems that by the time you buy one, it s obsolete).

It is my experience that the key to optimising timelines is combining good project management with effective operating systems. Whether we are talking of process optimisation, the development of new varieties or of strategic innovation, the curse for all organisations is slippage (that is, small delays occurring time, after time, after time).

Innovation, by its very nature, is an interactive and iterative process, and without very tight project management, delays will creep in.

So timeliness is not about just having technically competent staff and good ideas. It is about effective implementation. Companies such as Woolworths seem to do this better than most and can do it repeatedly. Not only do they manage the projects well, but they also implement effectively.

[3] Similar to the definition of R Carnegie & M Butlin, Managing the Innovative Enterprise , Business Council of Australia Innovation Study Commission, Melbourne, 1992.

[4] R Carnegie & M Butlin, ibid.

[5] G Hamel, Leading the Revolution , Harvard Business School Press, Boston, 2000.

[6] P Drucker, Innovation and Entrepreneurship: Practice and Principles , Heinemann, London, 1985.




Innovation and Imagination at Work 2004
Innovation and Imagination at Work 2004
ISBN: N/A
EAN: N/A
Year: 2005
Pages: 116

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