Innovation

Innovation and how to manage it

Marko Rebane Marko Rebane

Food synthesizers, halo environments and a number of other exciting gadgets seen on TV seem like an unattainable dream a Star Trek fan might have come up with. But for how long?

If someone has an idea that solves a real problem and is needed, it’s likely only a matter of time before the new possibilities enabled by technology and science and market demand spur innovation and make the fantasy a reality. After all, touchscreens, voice-activated devices, automatic doors, GPS, video conferencing, real-time translation and many other “futuristic” technologies were once the realm of fantasy, existing only in the minds of writers for Star Trek.[1]

Innovation as inevitability

Planning, designing and visualising future events, sharing knowledge, cooperation and the pursuit of success and happiness are innate human traits. The outcome: is a globalised economy, increasing development of technology, accelerated changes in society, and sociocultural shifts. It also means shorter and shorter product life cycles and lifespans for corporate strategies. Market participants themselves constantly create innovation and demand it from others.  

One of the engines of capitalism is undoubtedly optimism, but it doesn’t always work in our favour. Emotions and cognitive errors are inevitably part of being human. At times, that can include excessive optimism – the better-than-average effect that often blinds entrepreneurs to competition and changes. The observation that 90% of drivers consider themselves better than average is probably familiar to you from research.[2] Similarly, Nobel Prize winner in economics Daniel Kahneman has noted from his interviews that 80% of the founders of innovative start-ups believe that their fate rests almost entirely in their own hands.[3]  

Actually that’s not the case and it would be easy to be caught napping and miss innovation by our competitors taking place right under our noses. Only 71 of the companies originally on the Fortune 500 list published in 1954 are still on the list today.[4] In other words, just 14% of the world’s biggest and most successful corporations were able to survive long enough for an employee to complete their whole career cycle there and retire.[5]

Catalysing innovation and introducing a new product or service to the market doesn’t necessarily depend on having great personal resources and making an arduous effort. Anyone with a good product idea but who doesn’t want to take on too much risk and responsibility can go to Quirky.com and realise the whole process or development and marketing through crowdsourcing.

Innovation starts from the person themselves

The entrepreneur and innovator Jay Alan Samit has built million-dollar businesses, turned whole economic sectors upside down, revolutionised government institutions, and has been in the vanguard of global trends for over three decades now.

Samit calls himself an “intrapreneur”. An intrapreneur is an entrepreneur who summons forth revolutionary changes in organisations, doesn’t wait until the company is attacked by outside forces. Any sustainable changes have to start from within the individual themselves. “Everyone thinks of changing the world, but no one thinks of changing themselves,” Tolstoy once said. Albert Einstein’s achievements were predicated on the view that:“The world as we have created it is a process of our thinking. It cannot be changed without changing our thinking.”

Samit says that radical change is summoned forth by people who understand how to analyse their internal value chain, to establish their unique skills and abilities and who then analyse sectors of the economy to find possibilities for revolutionary innovation.[6]

Innovation requires a favourable environment and leadership

Once an organisation realises that changes are needed and wants to summon forth the changes, it will need to create a conducive organisational culture along with the appropriate values, put an innovation strategy in place and build the innovation system (processes, methods and tools). Managers have to reflect a supportive attitude toward innovation, and make it possible (leadership, training, time, resources, creation of teams etc.) and recognise employees for contributing to it. In innovation organisations, employees learn to value themselves more, they have higher inner motivation, and they are more loyal, flexible and productive.[7]

For example, Grant Thornton’s brand-new CEO Peter Bodin has made a special point of developing a culture based on cooperation and innovation in the organisation, supporting the growth and positive changes among Grant Thornton’s member companies. “I’ve always believed that a sustainably successful business is based on right management, people and culture. My job is to create an environment at Grant Thornton that enables our member companies sand people to work together and create innovative solutions,” says Bodin.

Vijay Govindrajan, the author of The Other Side of Innovation, sees three main traps for an organisation’s success. The first is the resource trap – companies invest too much into systems that are obsolete, ignoring new possibilities. The other is a psychological trap where long planning cycles do prioritise anything that was the foundation of organisation’s past success. The third trap lies in insufficient readiness for future developments. Past mistakes are also called the Rochester mentality – after Eastman Kodak, which missed the digital revolution (they were headquartered in Rochester, NY).

There’s rarely anything totally new under the Sun

Innovation is surrounded by a number of myths. Often it’s believed that innovation is something mystical that requires a Eureka moment, great resources, lack of restrictions for high-flying creative work, the involvement of the best experts in the field or a team working in total mind-meld.[8]

Actually there’s nothing new under the sun. Tom Freston, former president and CEO of MTV, has come up with a pretty prosaic but apt definition for innovation: it’s where you take two existing things and put them together in a new way. So if you take music and video and combine them in a new way, the outcome is a music video, a completely new market segment and significantly changed industry.

Most innovation is built on the successes that came before it and it is usually simply a new combination of the existing elements, the fruits of a disciplined approach and working cooperation. Often the answer to the problems of one industry lies in some other unrelated field – one only needs to be observant and have a methodical approach to the problem.

The applications of innovation are broad

Business can be viewed as the sum of links that generate value added: development, design, production, marketing and sales. To make business more effective, it is enough to focus and summon forth positive changes and innovation in just one link of the value chain. By concatenating and combining many different innovations across the value chain, the company will have likely created a sustainable competitive edge.

NASA has shared its technological patents with the public for the purpose of developing new useful products via crowdsourcing. Nike and Converse didn’t invent athletic shoes; they merely created something distinctive and superior through product design. Amazon has realised that the customer relationship is a genuine asset that can be aspired to in the digital distribution business (Amazon Prime programme).[9] Apple’s success demonstrates the competitive edge of integral solutions and ecosystems (iPhone, iTunes, Apple Watch). Use of YouTube’s free infrastructure for developing and transmitting market content has become an indispensable tool for many businesses.

Thus, questions of the different facets of business activity could be in the centre of innovation: where money comes into the business and how to ask for it from customers (business model innovation), is it possible to create value added in cooperation with others (networking innovation), how the company's key persons and assets should be organised and structured (structural innovation) or what is the company’s unique asset in production, service or supply (process innovation). Widespread forms of innovation include focusing on the functionality of the product or service, its uniqueness or quality, or connecting products into a united system (product/service capability and system innovation). Innovation offers abundant potential when aimed at the company's customers: how to offer support and leverage one’s offer (support services innovation), which channels to use to take the offer to the customer and user (sale channel innovation), how to portray the offer and the corporate identity (brand innovation), and how to create meaningful experiences for the client (client experience innovation). [10]

A beneficial change can turn into a billion-dollar business

The keyword of innovation is “beneficial change”. Change in oneself, the organisation, an industry, society, state or the whole world. Changes need management, a methodical framework and discipline to realise changes from the level of an idea to a positive success experience. Considering today’s open economy and mass markets, even the smaller innovation carried out can become amplified into the next million-dollar business.

 

 


[1] https://qz.com/766831/star-trek-real-life-technology/ (06.06.2018)

[2] http://www.sciencedirect.com/science/article/pii/0001691881900056(06.06.2018)

[3] Daniel Kahneman. “Thinking, Fast and Slow”. Penguin Books Ltd, 2012.

[4] Dane Strangler, Sam Arbesman. “What Does Fortune 500 Turnover Mean?”. Ewing Marion Kauffman Foundation, 2012.

[5] Antonio Regaldo. “Technology Is Wiping Out Companies Faster Than Ever”. MIT Technology Review, 2013.

[6] Jay Samit. “Disrupt Yourself”. Flatiron Books, 2015.

[7] Meelis Lang. “Innovatsiooni juhtimine” (Managing innovation). Subject taught at Tallinn University of Technology, 2018.

[8] Ibid.

[9] Jay Samit. Op. cit.

[10] Larry Keeley, Helen Walters, Ryan Pikkel, Brian Quinn. “Ten Types of Innovation: The Discipline of Building Breakthroughs”. Wiley, 2013.