A recent article in the Wall Street Journal highlighted the problem we have today with innovation. Indeed, this once worthy term is being degraded by CEOs, consultants, marketers, and journalists for whom it is the buzzword d’jour. The term “innovation” has been deeply devalued—to the point of being a slogan or aspiration. Also, for all the use of the term, it is clear that firms are having lots of problems managing innovation. They’re spending heavily and complaining about how little they are getting back. Abuse of the term “innovation” is leading to dismal outcomes, cynicism, and wasted money. Studies show that despite huge sums spent on ideation software, stage-gate systems and consultants a majority of executives are dissatisfied with the results. Dissatisfaction among employees is even higher. The reasons are many.
Firstly, most people today still associate innovation with R&D and invention. For example, in a lot of Spanish speaking countries, the governments, large enterprises and executives commonly use the expression I+D+i. In fact some governments also have special tax incentives on R&D spending; but no rewards for spending on innovations. If we really read the expression I+D+i carefully, it would mean “innovation” is less important than R&D. This is wrong.
Inventions and patents that are not commercialized have very little value. Since 2005, consulting firms—Booz Allen, McKinsey, BCG, CapGemini—have been publishing yearly data about innovation practices within large global firms. Data from Booz Allen shows us that there is no correlation between R&D spending and financial performance among the top 1000 global firms. Based on this they created two categories of firms – innovators and spenders. Innovators spend much less money in R&D as compared to their peers and have a better financial performance while the ‘spenders’ spend a lot of money in R&D but have poorer financial performance.
Innovation is more than R&D. Innovation encompasses R&D, products, processes, services, supply chain, marketing, business models and others. These are just opportunities for innovation activities. In fact, Innovation is a discipline. It is a discipline that can managed and mastered like other management disciplines.
Many disciplines operate in the world of business, and their evolutions provide insights into the development of innovation as a body of knowledge and field of practice. Marketing, for example, has a conceptual framework (the “4Ps”) and a unique vocabulary. It has developed practical methods (e.g., segmentation) and tools (e.g., conjoint analysis) that practitioners master through formal study. Subfields of marketing such as advertising and consumer behavior have broadened the discipline. Academic departments have formed to increase the body of marketing knowledge and to pass it on to others. Journals, professional associations, and conferences dedicated to marketing have emerged over the years.
We have witnessed a similar evolution with the quality movement. Corporations that took quality seriously made it part of their cultures—embedding the “discipline” in their thinking, planning, and behaving. Today, quality is no longer an empty buzzword or organizational aspiration, but a solid and respected discipline that produces measurable benefits for companies and their customers.
Like other disciplines, innovation can also be mastered. The good news is that the road to mastery in any discipline is the same:
- Mastery is the result of leadership desire, choice and commitment.
- Mastery requires years of effort.
- Mastery requires a cadre of experts to lead the way.
- Mastery requires a broad-based understanding of principles and methods of the discipline among employees.
Like marketing and quality, innovation has been following an evolutionary path. As a discipline, it is perhaps midway along its evolution path—where the quality movement was twenty or so years ago.
Disciplined corporate innovative efforts can be traced back to Thomas Edison’s first “invention factory” at Menlo Park, New Jersey. Bell Laboratory and the R&D centers of, DuPont, Etc were its offspring. By the 1980s other tools of the innovator’s craft were being adopted by new product developers. It wasn’t until the 1990s, however, that academics began publishing thoughtful and practical books that explained innovation as more than R&D or invention, but as a process, and told executives how to harness it in service of corporate strategy. The explosive emergence of eBay, Google, Facebook, and Amazon made it clear that innovation is not simply about physical products and technologies, but extends to services and business models. So, today the word innovation is sizzling hot and on every executive’s lips. Academics are studying and writing about it, and today’s employees have some useful principles, methods and tools to work with.
Despite the availability of principles, methods and tool, several obstacles impede progress in handling innovation as a discipline. The biggest obstacle of them all is the failure of most executives to recognize and support the “soft” side of innovation. Executives are investing substantial time, money and energy on resources, processes, and metrics but most ignore the values, behaviors and workplace climate—aspects of culture—that make those investments pay off. Several studies support the conclusion that enterprise culture is the primary driver of innovation. The fact that successful innovation is one part principles, methods and tools, and another part human creativity and insight is the greatest impediment to innovation in large companies. To capture the potential of innovation, leaders must bring these two very different parts together.
Below are some questions to think about:
Is Innovation mostly ad-hoc or is it treated as a business discipline within your firm? If innovation is not disciplined, how can you educate your executives about this? Does your firm’s culture support innovation? What are your specific challenges?