Understanding, Defining And Achieving Innovation

You may have heard the story of famous Wall Street banker J.P. Morgan and the shoeshine kid.  According to the story, Morgan was getting his shoes shined, and the shoeshine kid asked Morgan about the latest stock tip he heard. This made Morgan realize that something was very wrong, that if even the shoeshine kid was in the stock market, then everybody else was too and the market was seriously overbought.  He promptly sold all his holdings and was able to avoid the stock market crash a few weeks later.

I always liked this story and often share it with my consulting clients to make a point about either a market being overcrowded or a concept being overused.  In this instant, what made me think of it was a job posting for a junior position looking for people who are “experienced in innovation” and would “add new innovations to the organization.”  (I especially loved the new innovations idea.  Who wants old innovations anyway?)

It is really getting annoying to see the word “innovation” misused in places where it does not belong. Unfortunately,  innovationmania is all around us.  There are innovation workshops that almost guarantee that all participants will be great innovators at the end of the program.  Self styled “innovation consultants” are everywhere, and can apparently make entire companies innovative overnight.  The first ever Innovation Turkey Expo was held in Istanbul earlier this month, which was really an expo of inventions, but innovation sounds much cooler than mere invention.  Corporate executives talk to business TVs and magazines to announce that their firm is in the innovation business.  Even politicians are making an extra effort to attend events that have innovation in the title somewhere, such as the National Innovation Initiative, because, it is hip, it is cool and it makes one look like they are keeping up with the times.

But seriously, what is innovation?  In “Innovation Is… Hmm…“, we briefly talked about how most companies and their employees are clueless as to what it is and what it really means for their organization and that it is the leadership’s responsibility to define what innovation should mean to the organization in general and each employee in particular.

A useful first step to understand innovation is to look at its etymology:

innovation (n.) mid-15c., “restoration, renewal,” from L. innovationem (nom. innovatio), noun of action from pp. stem of innovare

innovate (v.) 1540s, “introduce as new,” from L. innovatus, pp. of innovare “to renew, restore; to change,” from in- “into” + novus “new” . Meaning “make changes in something established” is from 1590s.

So, etymologically speaking, innovation is taking something that already exists and turning it into something new by making changes. This definition is further elaborated in the 2005 edition of the Oslo Manual, a joint publication by OECD and Eurostat.  The Oslo Manual, taking a broad approach, defines innovation as follows:

“An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.”

The manual distinguishes innovations in four different areas: product, process, marketing and organization.  Definitions of innovation in these areas are fairly MECE (mutually exclusive, completely exhaustive.)

“A product innovation is the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics.

A process innovation is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software.

A marketing innovation is the implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.

An organizational innovation is the implementation of a new organizational method in the firm’s business practices, workplace organization or external relations.”

The Oslo Manual also lists a number of changes that are NOT innovations.  I cannot help but be amused when I think about the many corporations and executives who call themselves innovative and brag about it all over the media, simply because they did one of these things below:

  • It is not an innovation to stop doing something, even if it improves a firm’s performance. Innovation is something new, not abandoning the old.  Example: an electronics manufacturer discontinuing a line of product.
  • The purchase of identical models of installed equipment, or minor extensions and updates to existing equipment, are not process innovations. This is not something new, it is simply more of the same.  Example: a steel mill expanding capacity by adding another furnace.
  • A change in the price of a product or in the productivity of a process as a simple result of changes in the price of factors of production is not an innovation. Example: a computer manufacturer can now produce the same model of laptop cheaper, because RAM prices have dropped.
  • Creation of a unique product in order to satisfy a specific demand by a specific customer is not a product innovation. It is another story of course, if the customized item displays attributes significantly different than previous products made by the firm.  Example: an automobile company builds a custom car for a wealthy customer.
  • Seasonal and other cyclical changes in design that are routine for the industry in general are neither product nor marketing innovations. Example: an apparel manufacturer switches from the summer line of products to the new fall line.
  • Trading of new or improved products is not a product innovation for a wholesaler, retailer or logistics firm, unless it is a new line of goods, not previously sold. Example: an electronics retailer starts selling the next generation LED TVs.

Another confusion I come across frequently is mistaking invention with innovation, such as the Innovation Expo mentioned earlier. The two are related, as  innovation refers to the successful implementation of something new, whereas invention refers directly to the creation of it. Not all inventions turn into innovations; if an invention is not economically feasible or practical, it will not be implemented, however novel or beneficial it may be.

Based on all of the above, here is my definition of innovation:

Innovation refers to an idea, method, system or product that;

  1. is new,
  2. has been successfully implemented,
  3. results in a net benefit.

Now that we have a better understanding and definition of innovation, next comes the question: how can a business achieve innovation and become an innovative company?

In Strategy Is… Hmm…(Part 2), we saw that businesses have three strategic resources: people, processes/information, and finances.  In the innovation context, the most important of the three is people.  With the right people, it is possible to upgrade the other two resources, and similar to strategic planning, the company can start thinking of innovation as part of the business – ongoing, habit and consistent – not as a “project” that has a start and a stop.

So, finding the right people is key.  Job postings looking for people “experienced in innovation” and would “add new innovations to the organization” is probably not the best way to go about it.  How a firm can find the “right” people is something that many have different opinions on.

Tony Golsby-Smith, founder and CEO of Second Road, a business design and transformation firm based in Sydney, Australia, thinks that the best way is to hire people with humanities backgrounds.  He criticizes the education system because it focuses on teaching science and business students to “control, predict, verify, guarantee, and test data”, instead of teaching students how to deal with ambiguity and the unknown.

According to Golsby-Smith, people with humanities backgrounds who studied topics like Shakespeare’s poetry, Da Vinci’s paintings, history of the Roman Empire or political philosophy, have learned to grasp and manage big concepts, as well as how to apply new ways of thinking to difficult and unconventional problems.

Complexity and ambiguity. Too many companies lack the scope of understanding to stop problems before they start, because their people are too focused on immediate tasks, or buried under so much data that they can’t see warning signs. Any great work of art — whether literary, philosophical, psychological or visual — challenges a humanist to be curious, to ask open-ended questions, see the big picture. This kind of thinking is just what you need if you are facing a murky future or dealing with tricky, incipient problems.

Innovation. If you want out-of-the-box thinking, you need to free up people’s inherent creativity. Humanists are trained to be creative and are uniquely adapted to leading creative teams.

Communication and presentation. Liberal arts graduates are well-trained in writing and presenting, making them natural fits for marketing, training, and research. A focus on writing helps people develop persuasive arguments, and a background in performance gives people great presentation skills. And an understanding of history is indispensable if you want to understand the broader competitive arena and global markets.

Customer and employee satisfaction. To “get under the skin” of customers and employees to discover their real needs and concerns demands… you need keen powers of observation and psychology — the stuff of poets and novelists.”

Geil Browning,  founder of Emergenetics International, and the co-creator of  Emergenetics Profile, a psychometric thinking and behavioral workplace assessment tool, approaches the issue from a different angle.  In her article titled “You’re Wired To Be A Leader“, Browning talks about research that tells us that there are seven brain attributes—thinking and behavioral tendencies—people take advantage of to a greater or lesser extent, when faced with issues:

1. Analytical thinking is essential to making more objective, less biased decisions. This is the function that helps you look at existing research and data, examine options, and question what will or will not work.

2. Structural thinking ensures that you come up with a plan that is doable. It is the methodical, sequential process that helps maximize results, and minimize pitfalls.

3. Social thinking allows us to listen, build successful teams, relate to people, and develop and inspire others.

4. Conceptual thinking is right-brain, visionary thinking that jumpstarts innovation. Ideas that connect the dots and come out of left field can invigorate your organization.

5. Expressiveness is a behavior style you use to communicate your ideas. It affects how you relate to people and sets the course for the way you speak with others.

6. Assertiveness is a behavior style you use to put your ideas to work. An effective leader is assertive enough to make things happen, but not so assertive that others are stymied.

7. Flexibility is a behavior style you bring to the way you get things done. It determines not only your openness to other points of view, but also your ability to thrive in undefined (or very defined) situations.

More often than not, a company will not have a mix of employees in such a way that all of these brain types are adequately represented.  Most businesses tend to hire similar types of people, with similar thinking styles.  For innovation, an organization will need people with advanced “conceptual” type of thinking abilities, as Browning explains above.  These conceptual people will have different way of looking at things where they generate ideas, notice trends and data points others would miss, and tie them all together to come up with solutions that fit the big picture nicely.  They enjoy challenges and focus solutions at an idea level, but not at a process level.  They are not detail oriented, but if their ideas can be picked up by other people in the organization who ARE detail and process oriented, innovation will most likely occur.

Browning lists a number of useful interview questions to ask to identify strong innovators, but also cautions:

“If you want innovative ideas to surface in your company, it is your job to cultivate an atmosphere in which all types of creativity are valued. Before you hire your perfect candidate, make sure your organization is truly ready to hear new ideas.

One note of caution: look for competence, not just blue-sky thinking, because ultimately you need ideas that will benefit your bottom line. Experience with real world solutions is a bonus in any job candidate.”

Douglas Merrill, CEO and founder of ZestFinance, a Los Angeles-based financial services technology company, echoes Browning’s recommendations but articulates it in a very different way.  In his article “Why Hiring People Who Annoy You Helps You Innovate“, Merrill lists his three rules to follow when innovating an existing brand or starting something new:

Hire People Who Annoy You.  Research shows that diverse teams tend to come up with a wider variety of answers, and, thus, are more likely to find the surprising winning idea. The converse is also true: If you build a team that looks alike, thinks alike, and wears the same shoes (pardon the pun), you will get groupthink and generate only one answer, and hope it’s the right one.

Social psychology has taught us that we tend to like people who are similar to us, and the higher the similarity, the more likable the person. This suggests a hiring strategy–hire people who annoy you. As long as you’re ensuring they are smart, the people who annoy you represent the diversity you and your company require.

Don’t Copy, Remake. There is an entire cottage industry devoted to teaching you how to be innovative… They tell you what was done, not why it was done… Don’t copy the surface behavior–understand the goals, and do them in your context.

Don’t Create, Listen.  The purpose of innovation is not simply to build something new, but to win new customers, new markets, or new products. While you think you may know what they want, in reality, you don’t. Rather, you knew what customers wanted back when the company started, but now the only people who really know what customers want are the customers.

So how do you find out what the customers want? My advice would be to nix the focus groups. While they’re generally not representative of your actual customers, it’s also true that humans can’t describe what they don’t know… In many cases, you can see what customers want by watching their behavior.”

There is no reason to be confused or misdirected by all the hype about innovation.  Innovation is real and it happens every day, all around us. If we understand what innovation really is, and what it means for our business, then all it takes to achieve it is to have the determination to reshape our organization and hire the right people to lead the way.

To borrow from and paraphrase Shakespeare, be not afraid of innovation: some businesses are born innovative, some achieve innovation and others have innovation thrust upon them.  Does innovation lead to greatness?  I do not believe that it is sufficient, but it is very much necessary.

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