May 2009

How to Manage Innovation?


By Professor Göran Roos

Find out more about our Innovation Management Program.

Professor Göran Roos will be teaching the module Value Creation & Business Model Innovation on September 12 – 13, 2009.

 

There are substantial drivers for innovating but also indications that it is difficult to innovate well.  One researcher concluded that, during the 1980s, American corporations wasted billions of dollars on failed attempts to innovate (Jensen 1993).  In fact, there is evidence that it takes as many as 3,000 raw ideas to produce one commercial success (Steven and Burley 1997).  This suggests that it is very difficult to get it right.

So What Does It Take to Manage Innovations?

Successful innovation management is primarily about building and improving effective routines. Learning to do this comes from recognizing and understanding effective routines and facilitating their emergence across the organization. Successful innovation management routines are not easy to acquire. Because they represent what a particular firm has learned over time, through a process of trial and error, they tend to be very firm-specific. Each firm has to find its own way of doing these things – in other words developing its own particular routines. The good news, though, is that there are some common themes in how to manage innovations well. But before we elaborate on these it is time to introduce some important distinctions, too frequently overlooked, i.e. those between research and innovation.



Innovation Is the Transformation of Knowledge into Money

The adaptation or adoption, by the organisation, of anything new that is being transformed or incorporated into products, services, processes, systems, structures, brands, IP, etc., i.e. into anything that the customer and / or consumer is willing to pay for or that reduces the cost of serving the customer / consumer.

Creativity Is Not Innovation

Creativity is an individual process. Everyone is capable of coming up with good ideas. But individuals do not innovate. Innovation is a group process for a simple reason. Individuals may have part of the solution to a problem but rarely does an individual have the whole answer.
Creativity requires:

  1. Domain knowledge expertise.
  2. Imagination, fantasy and the ability to allow the mind to wander from logical patterns.
  3. Interaction with people that hold domain knowledge expertise in other domains.
  4. Rational analysis based on a good feel for the target audience.
  5. Time.

Research Is Not Innovation

Research is the spending of money to generate new knowledge, be this technical research or market research. A good example of research organisations are some universities who absorb money and produce articles documenting new knowledge developed. It is quite common to be good at research and bad at innovation.

Innovation Is About Generating Cash through the Conversion of Knowledge into Money

When we look at firms that perform well in doing this, we found that they have some things in common:

  1. Clear innovation strategy
  2. True customer insights
  3. Knowing core competencies
  4. Best practice innovation management system
  5. Evaluation and measurement of the innovation activities and outcomes

In Order To Sustain A High Performance in Innovation It Is Essential To Have A Conducive Culture

Martins & Terblanche (2003) outlined the relevant components for such a culture as:

  1. Strategy-origin of innovation lies in shared vision and mission, which are focused on the future.
  2. Structure–flat structure, autonomy and work teams will promote innovation.
  3. Support mechanisms create an environment that promotes creativity and innovation.
  4. Behaviour that encourages innovation.
  5. Competition as an important aspect of the culture.

Concluding Remarks

Every firm has its own performance curve when it comes to innovation. Normally the best way of improving innovation performance is not to spend more money but to spend the present money better. The key to achieving this is to put in place a best practice innovation management system. The characteristics of such a system are relatively well known but few companies seem to have them in place.

References

  1. Jensen, M. C. (1993). The Modern Industrial Revolution Exit, and the Failure of Internal Control Systems. Journal of Finance 48(3): pp. 831–80. [As cited in Rosenbloom, Richard and Spencer, William (eds). 1996.
  2. Engines of Innovation: U.S. Industrial Research at the End on an Era. Boston: Harvard Business School Press].
  3. Martins, E.C. and Terblanche, F. (2003). Building organizational culture that stimulates creativity and Innovation. European Journal of Innovation Management.
  4. Roos, G. (2007). Innovaatiojohtaminen, Mallas ja Olut, No. 1, pp. 5–9.
    Steven, Greg and Burley, James (1997). 3,000 Raw Ideas = 1 Commercial Success! Research and Technology Management (May-June).

Copyright 2009 / Göran Roos.

This is an excerpt of the original article.  For full version, please email info@hseee.com.