29 May 2008

Management of innovation

By Jim Pinto

Innovation stems from a culture that encourages and breeds consistent business value improvement. In the new, fast-moving global environment, innovation is the key to generating growth and success.

Clearly, for the vast majority of companies, innovation is not just limited to disruptive technology changes. It includes the shifts that improve all products, services, and support mechanisms—infrastructure, manufacturing and production, marketing and sales channels, and delivery logistics.

Innovation is not just the occasional “eureka” moment; it includes the process of making improvements, generating new ideas, methods, devices procedures that yield major cost, or value shifts. In the organizational context, innovation links to performance and growth through improvements in efficiency, productivity, quality, competitive positioning, market share, etc.

While innovation typically adds value, it may also have a negative or destructive effect as new developments clear away old products or change old organizational structures and practices. The innovation process often stems from completely new thinking, which leaders cannot embrace.

Organizations that do not innovate effectively may be destroyed by those that do. Consider what happened to yesteryear’s giants like Westinghouse, RCA, and Western Union; they fizzled and withered away with antiquated products and services.

Innovation has ethereal and elusive characteristics you cannot “manage.” Dean Kamen, best known for his innovative inventions like Segway, pokes fun at the “management” of innovation. He essentially said innovation requires leadership; but management kills it.

Managers miss the point when they try to set aggressive improvement goals. What they achieve is incremental improvements in areas such as time-to-market, development cost, product cost, and quality. Those have value, but they are not the major shifts that bring significant change, explosive growth, and real leadership.

There is a serious gap between expectations and reality. Many innovation efforts end up not meeting expectations. The degree of success varies greatly among companies and even among divisions within the same company. The difficulty actually comes from the inability to manage innovation.

How is your company managing innovation? If you are still selling yesterday’s products with shrinking margins and complaining about an approaching recession, you are on the wrong end of the innovation-curve.

Related links:

• Innovation Keys to success:
  http://listpilot.net/c/ISA/2iwcU/w/isa.org/intechnews.cfm?id=7036
• The roots of American innovation:
  http://listpilot.net/c/ISA/vl0V/w/isa.org/intechnews.cfm?id=5003
• GE Innovation Features: Stories, Research, Technology, Solutions
  http://www.ge.com/innovation/index.html

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.