Renewal and innovation: A condition of the health of nations

Firms and organisations, indeed whole nations, have to adapt fast to changing situations and demands. That means constant renewal. Everyone can succeed, some more than others, as long as they bear in mind the following key organisational principles. 

For a nation to be healthy requires an ability to renew itself constantly. This applies to companies, organisations, governments, indeed everyone. The need to innovate is obviously not new. The fathers of management, be it Frederick Taylor, Henri Fayol or Joseph Schumpeter, wrote volumes on how innovation affects production and economics.

And managing innovation has been central to management studies since the early work by Tom Burns and George Stalker on innovation management, the SAPPHO studies in the UK comparing successful and unsuccessful innovations, or the work carried out for the Apollo and Gemini space projects in the early 1960s. But innovation has become an even bigger imperative than it used to be in OECD countries, and this is for at least three reasons.

First, the economic landscape is changing. Globalisation, the rise of China and India as economic powers, and the geographical relocation not just of production, but R&D too, pose a major challenge for the “industrialised” world. There are new technology leaders, like Korea in the applications of broadband, or Singapore in biotechnology.

Second, customers for new products, systems or services, and citizens as clients of government have become far better informed and more demanding about both design and quality.

Thirdly, the possibilities offered by information and communication technologies enable a much faster diffusion of innovation worldwide, so much so that the sources of innovative ideas crop up in places where we do not necessarily expect them. Take SMS (short messaging systems), some of whose best innovations come out of Manila, or the Indian movie industry. Or consider Ireland, which has emerged as a hub of activity in IT and pharmaceuticals, much to the surprise of many economists.

The trouble with innovation is that while it is becoming ever more important for success, it is a very risky enterprise. The traditional literature exploring the subject all draws discouraging conclusions: the prospects of the innovator “making it” are slim. Overall it appears from most research that the probability of economic success from innovation is between 20% and 30%. The implication is simple: we need to have the guts to live with risk if we want to innovate for our health!

We must learn how to improve our chances of success. The good news is that three decades of management literature have produced a lot of insights on how to do this. There are hundreds of good ideas, and they can be summarised into eight categories.

The first, appropriately, is leadership. Successful innovation requires a clear vision defined by the leadership of the organisation as well as the creation of an environment where this vision can be shared by colleagues and collaborators. This combination of vision and environment is what I call the “strategic context”. Organisations rely on it to harness their creativity. Without a clear strategic context, creativity may blossom, but it will be disjointed. Strategic context gives purpose and direction, benchmarks and role models. It measures progress and shows the way ahead.

The second strategic point is to learn how to manage risk. This includes ensuring that the senior and junior players in an organisation act as innovators and entrepreneurs, and that they can inspire their collaborators to do the same. All of us have some entrepreneurial talents, some of us more than others. Those who have a lot probably take the jump and start a venture (whether in the profit or non-profit domain). But most of us need the security of a larger organisation combined with stimulus to bring out the best in us. Taking risks is not just about jumping in foolishly, but assessing in a cool and rational way what the risks are and preparing contingencies to cope with all kinds of uncertainty.

Innovation inevitably starts with creativity. Many of us have some creativity and it is the organisation’s role to provide an environment where we dare to be creative. There are tools that can help us achieve this and break out of set patterns. We know that exposure to information can stimulate creativity, for instance, though information overload can stifle it. Rewards and recognition can help, as can identifying role models for people to follow. Pressure also renders us more creative, as long as escape vents are provided along the way.

Innovation is essentially an “enterprise of the enterprise”: it is a risky effort that must be borne by the whole organisation. This organisational integration is a key concept for innovation. A lot has been written on the different ways of organising: one can be functional, project oriented, networked, etc. But the most important insight for me is that to implement innovation the whole organisation has to take ownership of it. Innovation cannot be delegated to a development group, task force or marketing department. From the first spark of inspiration to the full readiness of the product, service or system, top and operational levels have to be mobilised together if the innovation is to work.

Then comes implementation. Echoing Edison and other great inventors-entrepreneurs, everyone knows that success is 2% inspiration and 98% perspiration. We also know that the best ideas can be overtaken by events. This is why, under situations of high uncertainty, project management is so vital. Managing the unknowable requires astute knowledge management, as well as skill in handling stakeholders, being flexible and so on. Time is also an ever scarcer resource and, to be innovative, speed in implementation must be central, though without compromising design quality.

Productivity in project management under uncertainty requires excellent management of the information flows. If innovation is a production process, then information and ideas are the raw materials to be transformed into (better) goods or services. Access to good quality raw material is paramount. This may mean bringing people together in the same physical space. Though banks and financiers still often band together, for instance, internationalisation has made such centralising more elusive, despite the advantages of proximity.

But global networks offer other benefits in terms of ideas and tapping expertise. In today’s world, marketers in Europe will collaborate with software designers in India, production plants in China and suppliers in the United States. Learning how to manage these geographically dispersed teams through a better use of IT is a major challenge, since playing too locally can cut you off from potential collaborators, whereas spreading out too finely can erode your influence and could cause you to lose your product to someone else.

Once you have executed your idea and produced your good, you will expect to reap the reward of your efforts, right? Well, it is not quite that simple. Again, you must be organised. Free markets are all very well, but intellectual capital is vulnerable. You will need to protect your innovative ideas. Patents or copyrights might not be enough. Let us be realistic. In many cases and countries the value of these legal tools is limited and enforcing them is expensive and wastes valuable time. After all, can you really prove you have been plagiarised, or that your idea was the original one? There are simple tools and techniques to consider: trade secrets, brands, monopolising resources, captive markets, speed to development, etc. It is wise not to depend on any one of these, but a combination would offer fairly good protection.

Last but not least in this list of categories is the market. This is by no means an afterthought. It is my conviction that high-class communication with the customer, the user, the citizen or anybody who influences buying decisions throughout the whole innovation process is absolutely fundamental to success. Lose contact with the clients and your magnificent breakthrough will be doomed. Call it marketing. In a competitive world where complete originality and genius are rare, good marketing is the innovator’s most important weapon for success.

Innovation is good for your health. Manage it and look after it properly. Even if your specific innovation does not change the world, keeping these eight categories high in mind could help you transform your organisation from a mere business into a thriving enterprise.

*Arnoud De Meyer has published widely in the field of Technology Management and Innovation and has contributed to the start up of several entrepreneurial ventures.

References

OECD (2004), Patents and Innovation: Trends and Policy Challenges, Paris.

©OECD Observer No 243, May 2004




Economic data

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