Staff do not like working for companies that are decidedly “non-innovative”, and many CEO’s do not want to be associated with such a company.
It is fashionable to be seen as being innovative.
Being part of an innovative team is exciting – it has an ability to inspire - so innovation has benefits that lie way beyond its immediate business benefits. I have often worked with highly innovative companies and individuals, and it is inspiring: it heightens the expectations of everyone associated with a company. So innovative companies are also often better companies to work for.
Since the Apple resurgence in the late nineties, the appreciation of innovation has accelerated. Apple has put the issue of innovation back into business thinking, in a very concrete, non-theoretical way. Even CEO’s who may have thought all the talk about innovation was excessive in the past, will today acknowledge how much Apple has done to elevate the importance of its role in business. The benefits are clear: consumers pay more than three times more for Apple products than for similar products from other brands – even if the Apple products are not 300% better! The incremental advantage of innovation is thus significant, even if we accept that its research and development costs are high to begin with.
More books have been written about innovation than about most business topics. More techniques exist to enable innovation than in most other areas of business. More management consultants focus on innovation than on most other areas of business.
Yet, most companies are not innovative.
Some companies are consistently more innovative than others. It does require a certain mindset to be innovative.
Sony was built into an iconic brand on the back of significant innovations like the Sony Walkman, the compact disk player, the VHS cassette, Trinitron and Bravia television sets and video games. Over many years - starting in the sixties - Sony became one of the most innovative companies on earth.
Yet, Sony has been unable to sustain its heritage of high innovation. Was it only because of the leadership of Akia Morita? Probably not, but he clearly played a pivotal role in driving innovation – even in elevating Japan as a whole out of the cheap copying and manufacturing era.
A brand like Virgin Atlantic introduced many “firsts” in the commoditised space of airlines. This made the airline the industry standard for innovation for many years – emulated by many other airlines over the years. Airlines like Emirates and others, used Virgin as the standard to emulate. Yet, today Virgin can hardly be called innovative.
In the pharmaceutical and biotech industries, companies make good profits with new treatments based upon breakthrough scientific research, which is often constituted of new technologies and on “fusing” insights from different disciplines. It requires a certain aptitude and an “open-mind” to benefit from convergent insights.
Similarly, the convergence of technologies enables companies in the media, entertainment, consumer electronics and telecommunications industries to create breakthrough products. Yet, it happens far less than we expect - partly because many companies are still parochial about their industries. Consumers - that generally approach brands from a problem/ opportunity solution viewpoint - do not think in “category” or “industry” “boxes” like many businesspeople do.
Gillette has been the most innovative male grooming company for very long, and even compared to other product categories, Gillette is highly innovative.
Gillette is also one of the most profitable fast moving consumer goods brands. Yet, to this day, it still invests heavily in research and development to retain its advantage. It clearly understands what gives it its advantage as a brand.
3M is historically one of the most consistently innovative companies, whether it is in products we all use and know like “Post-it” notes, or whether it is the hardware in a new handset that we are not even aware of.
In South Africa, a bank like FNB has become highly innovative over the last two years, and recently won a global award for being one of the most innovative banks in the world. The Bank achieved significant growth because of it.
So innovation makes companies profitable, yet most never become innovative and others find it difficult to sustain.
Why? You need to have a clear plan about how to make your company innovative. It is not a “quick fix” or it does not lie in simplistic notions like giving people time to fool around - it takes insight, leadership, thinking, planning and execution.
In short, one must work toward increasing your “innovation index” as a company. This consists of a set of factors that you need to understand, coordinate and implement.
Talk is cheap! Incremental innovation is rare in companies, let alone revolutionary innovation.
The number of product and/ or service innovations that have increased sales and revenue for companies are far less than the discussions about it. It is rare to find a company that has a consistent output of innovation – even within pharmaceutical companies innovation are becoming more difficult today.
In many industries, innovation has almost “died out”, compare most companies in categories like airlines, personal products, household products, liquor and soft drinks. That is why it is exciting to find companies like Unilever and P&G starting to innovate more and more in emerging markets.
If companies stop innovating altogether, they implicitly accept a gradual commoditisation and erosion of value for the consumer.
So why do companies fail at becoming more innovative?
I believe it is because many companies view the issue of innovation simplistically, they do not realise how fragile the mix of circumstances are that enable significant innovation. I am becoming more convinced that innovation is the result of a “collective culture” or “state-of-mind” within a given eco-system, albeit a company, country or community.
It requires a lot more than a few passionate individuals to make a company innovative! It requires a set of circumstances that enable it to happen, albeit in looking at unusual solutions to problems or in putting the structures and mechanisms in place to implement an innovation.
So to become innovative, a company needs to fundamentally look at its culture: innovation has to be at the core of its DNA.
We can therefore talk about an “innovation index”, or an “ii” for a company: an “index” that will assist a company to evaluate its innovation propensity and then to put the mechanisms in place to change that.
So what must a company do to increase its “ii”?
An “innovation index” can assist us to review how companies enable or detract from their ability to innovate.
I am convinced the “fragility” of innovation means one simple change can have a very destructive - or very constructive - impact on the propensity and rate of innovation.
One small thing can destroy the innovation index of a company.
Most companies do not know how to retain their innovation index when they go through a major change like the death of a visionary CEO.
Pointers to start putting the building blocks in place to increase your company “ii”.
A CEO - and senior executives - that allow the kind of thinking that stimulates innovation, from anyone and anywhere. Yet, this also needs to be balanced by efficiency: although many companies spend heavily on R&D, very few really see consistent results from that. So vision alone is not enough. Today, in the pharmaceutical industry, many companies spend heavily on R&D, but do not generate many innovative products.
A company culture that allows exposure across traditional boundaries of industries and insights enables innovation.
A company culture that allows new ideas to come forward, with a nurturing process to evaluate and cultivate them in a managed and objective way enables innovation.
Then a company requires an “eco-system” that enables innovation. Without such a support structure, even the best CEO will not be create an innovative company.
- An objective and transparent way to evaluate and operationalise ideas.
- A good balance between ideas and the resources required too produce and market them.
- An infrastructure that supports innovation. Does the structure allow for it, or can ideas get lost, get stuck, without being given a fair chance to work? Do you know what process to follow for a “go” or “no go” decision?
- Systems and processes that supports it. Does the relevant departments - from generating financial support structures, specifying infrastructural requirements, to producing prototypes, enable innovation?
- The people processes that enable/ stimulate/ operationalise innovation – do they exist and do they operate well. Are people able to dedicate time to new ideas, or are people to busy with general operational work?
- Do you have processes that can translate even a spark of an idea into an operational implementation plan?
- If none of these are possible, is the company open enough to explore joint ventures or alliances with partners that can enable innovation? More and more large companies understand their very strengths may “kill” new thinking even before it gets out of the starting blocks. If that is so, accept it and create alternative ways to become innovative.
A system that rewards innovation – celebrate innovation and people who think different. We all have this innate ability: reward it and grow it.
This article was first published in Volume 1 Issue 01 of The SA Leader magazine.
