Innovation only insurance against irrelevance

Innovation only insurance against irrelevance: isn’t merely a competitive advantage, it is the competitive advantage.

Extract from Management Innovation eXchange:

In the creative economy, innovation is more important than ever. Innovation is the only insurance against irrelevance.  It’s the only antidote to margin-crushing competition, the only hope for out-performing a dismal economy, and the only way to truly amaze your customers.  Innovation—in operations, products, business models and ecosystems—isn’t merely a competitive advantage, it’s the competitive advantage.  

We all get it: innovation is the lifeblood of every organization. Yet more often than not, when innovation occurs, it’s a “happy accident” rather than the product of a deep-rooted innovation competence.  Dig into the genesis of a paradigm-busting new product or service, and you’ll usually find that its success owes more to the indomitable spirit of a lone innovator than to the obliging climate of an inherently pro-innovation management model.

Fact is, most companies aren’t very good at game-changing innovation.  That’s why it’s usually the newcomers, rather than the incumbents, who upend industry rules (think of Apple in music, Amazon in web services, or Salesforce in enterprise software).  Want some hard evidence?  In one recent McKinsey study, only 24% of respondents felt that their company wouldn’t benefit from a more robust pipeline of new ideas.

For industry incumbents, the problem isn’t a lack of resources or a shortage of human creativity, but a dearth of pro-innovation values, processes and practices—and when innovation programs do get launched, like an internal venture fund or an idea wiki, they tend to either be organizationally isolated or easily marginalized.

Through the years, we’ve spoken to hundreds of individuals who’ve struggled to make their organizations more innovative—and most seem to end up deeply frustrated.  This is hardly surprising, because in may ways they’re confronting the same problem that faces an animal trainer who’s trying to get dog to walk on its hind legs.  With the right incentives, a canine will take a few halting steps on two legs, but the moment the trainer turns his back, the critter is down on all fours again.  Problem is, Fido has quadruped DNA.  Similarly, our organizations have efficiency DNA.  Operational goals like productivity, predictability and alignment are woven deeply into management systems and processes.  Innovation, experimentation and risk-taking—not so much. Until we solve this DNA-level problem, rule-bending innovation, when it happens at all, will occur in spite of the system rather than because of it.

Remember, the disciplines of management were invented, a hundred and more years ago, to drive variety out of organizations.  The goal was to excise the irregularities, in an effort to ensure conformance to work rules, quality standards, timetables and budgets.  Today, though, it’s the irregular people with their irregular ideas and irregular methods who create the irregular successes—and profits.  All too often, the quest to routinize the irregular ends up routing innovation.  The goal?  Organizations that are paragons of penny-pinching efficiency and bastions of rule-busting innovation. 

Over the past decade or two, companies around the world have invested an enormous amount of effort in retooling their operating models for efficiency and agility (think of all your company has invested in its ERP systems, in CRM, in cloud computing, and in business analytics).  To win in the years ahead, companies will have to devote a similar degree of effort, if not investment, to reengineering their management processes for innovation.  Businesses that falter in this quest will see their margins shrink, their customers defect, and their growth engine splutter.

Ultimately, every management process must be a catalyst for innovation.  The planning process needs to put a premium on game-changing ideas; the budgeting system needs to give innovators quick access to experimental capital; IT systems need to support idea sharing and the fluid formation of innovation teams; performance management systems need to track innovation performance at every level; training and development programs need to bolster innovation skills; market research and customer insight efforts need to surface the deep, unarticulated needs that open up opportunities for radical innovation; R&D and new product development must encourage the sort of perseverance that is often needed to turn nascent ideas into billion dollar businesses; the compensation process has to reward those who take smart risks; and the criteria used in hiring and promotion need to give weight to creativity and innovation leadership.

For now, too many companies are still approaching the innovation challenge in a piecemeal fashion—a web-based suggestions box here, an awards program there, and a corporate incubator over there, somewhere.  These efforts are typically incomplete (an idea market where the criteria and timetable for evaluating submissions aren’t clearly spelled out), or they’re isolated (an idea market that isn’t directly linked to talent management and resource allocation processes).  

As human beings, we are born with a creative impulse—with an innate desire to use our imagination to better the world around us.  Yet too often, our organizations end up being less innovative than the people within them.  Working together, we can change this.

In the M-Prize we’re launching today, we’re looking for examples and ideas that will help us how build innovation into the woof and warp of our organizations.  While there aren’t many businesses that have yet made innovation a true core competence, we can, with your help, build a composite picture of how every element of a company’s management model can be retooled to make it innovation-friendly.   While no one organization has put all the pieces of the innovation puzzle together, we should be able to assemble all of the pieces in one place—via this M-Prize challenge.  In doing so, we’ll give managers around the world the chance to identify the missing pieces in their own innovation programs, and to learn from companies that may have found a piece they’re still looking for.

More … http://www.mixprize.org/blog/innovating-innovation