Innovation and entrepreneurship have become the new ‘in’ things. Fads par excellence. Some suggest they may be the prime source of future competitive advantage in business and, as a consequence, an imperative no organisation can possibly afford to ignore.
I tend to agree – but with caveats. The need for innovation applies equally to the public sector and to civic society as a whole. Particularly the innovation of 2nd and 3rd order civilisational design.
There is little doubt that in certain fields the ability to innovate, thereby generating a continuous stream of new value-adding products, can be the difference between prosperity and irrelevance. Think computer software, fashion and pharmaceuticals, for example. Then again, the human global condition also obliges us to find alternative solutions to many of the problems our inventive minds continue to construct. Quickly too. Consider global warming, water and food security, poverty, autonomous weapons, terrorism….
But do we have the solution for you! Touted around universities, research laboratories, hospitals, farms, city halls, schools, corporations and government agencies, innovation is now the universally-acclaimed panacea. We cannot fail.
In reality the contemporary emphasis on innovation has been spawned by an irresolvable tension between the commoditisation of desire [post-industrial society’s fixation on and craving for novelty] and the concurrent need to curb such rampant materialism [because of the critical impact of the afore-mentioned issues on our civilization.]
This tension is intensified and made even more complicated by the fact that the burgeoning middle class in the world’s emerging economies are now beginning to demand, and can afford, a quality of life most citizens in post-industrial nations have enjoyed for some considerable time. In all conscience it is difficult to deny them their right to this.
Purely on this basis it is logical to suppose that these tensions will continue to deteriorate at least until global population numbers level out, some time after 2060 if you believe the latest, state-of-the-art, demographic modelling. The global population is set to hit eight billion people within the next two years. So we can safely assume that across-the-board innovation will be essential to peaceful global prosperity and societal advancement for at least the next 40 years.
But what is really meant by the term innovation? Typically defined as a process of discovery linking the re-assembly of knowledge (or the creation of novel ideas) with the capturing of their social and/or commercial value, innovation can range from continuous improvement – of products, processes and services – to the invention of entirely new models, markets, systems, philosophies, ways of seeing and even states of being. Think augmented reality and online avatars!
The latter type, popularly known as strategic or radical innovation, often rejects conventional notions, of competition or established hierarchies, for example, in order to redefine conceptual models. New truths, possibilities, spaces and roles arise from this process. As a consequence strategic innovation is often disruptive: overturning sacrosanct rules, long established habits and reshaping contextual conditions previously thought to be constant.
The idea of radical innovation is immensely attractive to that breed of multinational corporation intent on dominating a particular market, as well as larger equity firms and venture capitalists of course. Why? Smart game-changer strategies and keystone plays can render competitors almost entirely irrelevant, thereby guaranteeing rapid returns on investment. Which CEO, Board Chair, or venture capitalist would not want this wish granted?
Naturally, financial risks are correspondingly higher than those implied by continuous improvement efforts. But then the ROI for strategic innovation, by which I mean return on imagination of course, can be a quantum greater, assuming one has the courage to purposefully disturb the status quo. Just look at Richard Branson’s Virgin brand fashioned out of sheer British eccentricity, personal audacity, and a determination to craft a unique customer experience across a range of offers.
Then there is the potential accompanying such limelight: strategic innovation often elevates individuals and even entire corporations to positions of universal prominence. Public accolades linking professional success with social advancement cannot be easily dismissed in such a brand-resonant, media-savvy, celebrity-saturated world. Just look at Ashton Kutcher and anti-sex trafficking, Lily Allen and Syrian refugees, Leonardo Di Caprio and the environment, Bill Gates and Alzheimer’s disease, and Taylor Swift and sexual harassment, for example.
All of which sounds so easy. Just go out there and innovate. Be creative. Use your imagination guys! Well? What are you waiting for?
Naturally the textbooks are stuffed full of well-meaning advice, though most concentrate on tools and processes while ignoring most other critical intangibles.
As a result we are well schooled in the knowledge that trust emboldens collaborative practice – but are unsure how to nurture this. We recognise the role played by uninhibited ingenuity – but lack the confidence to put forward novel ideas. We appreciate the incredible power of globally distributed networks but still keep information to ourselves. We accept the notion that rules and regulations stifle creativity – but insist on adhering to archaic management protocols. And we ‘get’ the power of teamwork – but still insist on rewarding individual performance.
What then are the secrets of investing in innovation? What does it take for creativity to be routine? What are the innovation drivers that make companies as diverse as AXA, Apple, Atlassian, Microsoft, Sony, Alibaba, Modelez, China Construction Bank, Accor, Santander, Amazon and Alphabet so successful? And, by the way, how is it that the People’s Party in Brazil could engage citizens in bold experiments of participative democracy at a time when post-industrial nations, formerly recognised for their egalitarian governance systems, seemed hell bent on eroding hard-won rights and, in some cases, installing repressive regimes?
Clearly the real world is not nearly so neat and ordered as academics and consultants would have us believe. In spite of all the attention, one need only peruse the avalanche of web sites, conferences, wikis, blogs, books, articles and academic papers devoted to the subject, innovation as a literacy and embedded capabilities remains as elusive as the proverbial pot of gold at the end of the rainbow for most organisations and governments. Moreover, most innovation is still aimed at improving existing products, processes and services, yet these rarely deliver the kind of exceptional value captured after their initial launch.
From our experience, recently affirmed by the Boston Consulting Group’s analysis of the world’s most seriously innovative corporations, there are four underlying causes for this state of affairs. They are (a) contextual conditions, (b) state of mind, (c) business praxis and (d) organisational design.
Contemporary business was long ago ambushed by its own success. It now finds itself cocooned within circumstances brought about by the rapidly converging processes of technology-enabled globalism.
Globalism is without precedent. It has catapulted us into a pulsating world of transactions and exchanges where geography is immaterial, a world typified by the need to manage relationships rather than objects. Indeed the things that matter today are diffuse networks, product co-design, open source learning, collaboration, the exponential speed at which new knowledge is created (and old knowledge is made obsolete), democratisation of standard business practices and society’s seemingly unquenchable thirst for novelty.
The challenge of innovating in this milieu, where a maelstrom of globally distributed information, talent and capital constantly changes, engulfing us in overwhelming variety and choice, presents extraordinary challenges for any single enterprise. Especially so as government regulators, in fear of becoming less and less relevant, burden innovators with a barrage of well-meaning legal hurdles and compliance costs, thereby adding to the uncertainty.
We did not anticipate this condition, nor were we prepared for its consequences. It has unsettled traditional patterns of human production and consumption causing intense social and environmental stress. So sudden was its genesis, so colossal its impact, that we are even now trying to take stock; still attempting to learn how best to understand and respond to its constantly shifting complexities.
In this context collaboration, not competition, is of the essence. It is incumbent upon each enterprise to collaborate with others, creating and capturing value wherever it can, exploring opportunities wherever they exist, connecting ideas, technologies and people in order to thrive from change. This is what contemporary innovation is about.
State Of Mind
After 300 years, the industrial economic paradigm is worn out. The World Wide Web, coupled with the convergence of digital and genomic code, virtual and augmented reality, and enabling tools like biotechnology, molecular engineering and robotics, have all diminished its legitimacy. Furthermore it fails the most classic of tests: it is quite simply unable to resolve the critical issues of our time.
Paradoxically, in the world of commerce and governance at least, industrial economism remains the most commonly used and unchallenged framework for explaining events like the financial crisis of 2008, even when such explanations do not equate favourably with observed reality.
It is almost impossible to liberate strategic innovation within the dominant industrial paradigm – and this at a time when whole-of-system innovation is most needed. Why? Because the language and praxis of industrial economism is set in past experiences rather than in future potential. Innovation contrived within this context invariably tends to focus on discrete projects aimed at growth or increased revenue rather than on revitalising an entire enterprise or industry or conceiving entirely new markets and other possibilities.
Fortunately a parallel universe is emerging in the minds of many entrepreneurs as we make the shift from industrial economism to a more regenerative, humanitarian-aware, planetary ecologism. Wired-in to new knowledge, systemically sensitive and cooperatively inclined, innovators in this space see peer-to-peer connections everywhere they look as well as openings for engaging collaboration on a vast and unprecedented scale.
Most corporations claim to use innovation as a driver of change. Three elements characterising conventional business practice clearly impede such efforts:
- Without doubt creative ideas are the seeds of innovation. Great ideas can surface by accident or by design. But while it is true innovation rarely emerges from barren ground, it requires far more than just having a creative or entrepreneurial organisational culture. While a conducive social ecology is vital for innovation to take root, creativity alone is insufficient. Innovation is a disciplined practice, a systematic process whereby great ideas are turned into real value. This is one of the most misunderstood factors of innovation. Getting teams of executives to wait for inspiration to come up with good ideas is one thing. Extracting value from these ideas is quite another.
- We still lack a sophisticated language for thinking and talking about strategic innovation. Most business language remains steeped in conventions and thinking habits that refer back to the industrial age. More often than not it is couched in the zero-sum language of growth, profits and competition. Meanwhile the processes of innovation have been democratised and are increasingly decentralized. Collaborative networks of open design and coordinated interaction are shaping new relationships and alliances between government, business and civic society. In this context using obsolete language from a bygone era is simply confusing.
- Modest objectives rarely result in breakthrough endeavours. A common problem of many entrepreneurial initiatives, especially start-up ventures, is that aspirations are set too low and possibilities defined too narrowly, if at all. More often than not the implicit aim amounts to no more than extracting greater value from existing product lines or market offers. Strategic foresight is too often ignored, thereby eliminating many counterintuitive possibilities. The lack of robust strategic intelligence, especially from customers, also limits what can be achieved.
Ironically we have not yet found a way of configuring large enterprises to take advantage of the extraordinary opportunities offered by globalism. Most corporations are dinosaurs awaiting their extinction. Because of this many businesses remain paralysed, distrustful, responding to shifting realities by mimicking competitors or by resorting to habits that served well in the past but that make little sense today.
Traditionally we designed our organisations for efficiency – not speed and certainly not innovation. In fact focusing on efficiency repeatedly ingrains practices and protocols that actively stifle creativity and hinder innovation.
Unsurprisingly the most innovative organisations know this. They constantly refashion boundaries, rethink roles, reinvent systems and revitalise processes, in effect redesigning their organisations for speed and adaptiveness. As a result, corporate research and design laboratories collaborate with customers and suppliers, share software code with programmers and tap into networks of scientists and entrepreneurs in order to find the best ideas.