5 June 2008

Pursuit of Innovation

By Jim Pinto

In this globally competitive age, everyone wants to stimulate innovative thinking within their organization to achieve increasing growth and profitability. Innovation–the ability to define and create new products and services and quickly bring them to market–is an increasingly important source of competitive advantage.

In his best seller “The Innovator's Dilemma”, Clayton M. Christensen exposes a paradox behind the failure of many large companies: By focusing on pleasing their most profitable customers, they pave the way for their own demise. They ignore new, cheaper innovations that start by targeting small customer segments but evolve to replace leading products and services.

Innovation is important for survival, but most businesses have to work at overcoming innovation stiflers. Myopic managers continued to drive the annual planning process through a rear-view mirror; budgets based on last year’s financial ratios tweaked to produce the desired profit. At most, token contributions are made to innovation through new-project allocations. Too often mediocre execution produces poor results and innovation groups are quietly disbanded in cost-cutting drives to protect revenue streams from existing businesses.

In a follow-up book “The Innovator's Solution”, Christensen and co-author Michael E. Raynor discuss a solution to the dilemma. They suggest that innovation is not completely unpredictable. Although the past innovations seem random, the process is very predictable. By understanding and managing the process, companies can develop business plans that stimulate and create disruptive growth.

Innovation does not depend on just one person, or even a few. It stems from a culture that encourages and breeds innovative thinking. Every organization has a unique ethos that drives its success or failure in the face of accelerating change. The culture is the collective personality which embodies the values, beliefs, philosophies, attitudes and operating norms. It boils down to “how we do things around here.” That culture has to include the seeds of Innovation.

However, “re-wiring” the culture for innovation is fraught with danger. The innovation process eliminates those resistant to change. If results are not achieved within the planned timetable, the change is seen as a mistake and the new leadership gets ejected. But by then several good people, key elements of the original culture, have already exited and the company fails–it’s neither the old nor the new.

Tom Peters cites several bold innovation objectives – here are some:

• Speed of innovation: Product development time should be reduced by 50%.
• Premium products: achieved through service, quality, and enhanced innovation, differentiation which allows higher price, higher value-added plateaus.
• People and organization improvements: reduction of management layers by 50%, get people on profit-sharing programs.
• Paperwork reduction: reduce paperwork and procedures by 50%.

In this global business environment, if your company is not pursuing innovation then you’re on the way down. And out.

Related links:

• Book : The Innovator’s Dilemma:
  http://www.amazon.com/exec/obidos/ASIN/0060521996/jimpintocom/103-0805027-7623017
• Book: The Innovator’s Solution:
  http://www.amazon.com/exec/obidos/ASIN/1578518520/jimpintocom/103-0805027-7623017
•  What are the most effective approaches to drive an innovation pipeline?
  http://www.innovationtools.com/Community/PanelDetails.asp?a=319
•  ISA InTech eNews – Innovation key to success:
  http://listpilot.net/c/ISA/2iwcU/w/isa.org/intechnews.cfm?id=7036

Behind the byline
Jim Pinto is an industry analyst and founder of Action Instruments. You can e-mail him at jim@jimpinto.com or view his writings at www.JimPinto.com. Read the Table of Contents of his book, Pinto’s Points, at www.jimpinto.com/writings/points.html.