Why innovate?
Innovation seems to be on everyone’s agenda. Almost every product description, mission statement, and political speech contains a sprinkling of “innovation”. Yet, in general, all is not well in established organizations and the situation is not improving.
Unusually, in a financial statement this spring (2022), the UK Chancellor of the Exchequer (Finance Minister) at the time was much more explicit, saying in a substantial passage on the topic:
Over the last fifty years, innovation drove around half the UK’s productivity growth.
UK Chancellor of the Exchequer, Spring 2022
But since the financial crisis, the rate of increase has slowed more than in other countries.
And our lower rate of innovation explains almost all our productivity gap with the United States.
Right now, we know that the amount businesses spend on R&D as a percentage of GDP is less than half the OECD average.
And that is despite us spending more on tax reliefs than almost every other country.
Something is not working.
But all is not well in the United States, either. According to multiple surveys over several years by Innovation Leader, the membership organization for innovation professionals in established organizations, based in Boston, Massachusetts, there is a consistent set of obstacles to innovation which are proving stubbornly persistent. These include: politics, turf wars, and lack of alignment; lack of support at multiple levels in the organization; inability to identify opportunities or to act on them; shortage of skills; and other factors.
Historically, there’s plenty of evidence and understanding that the economies of countries which adopted innovations arising from the “industrial revolution(s)” (of which there have been several) grew substantially faster than those of countries which did not. That’s at the macroeconomic level. Yet, at the microeconomic level, in organizations/corporations/companies, innovation is not working well. In the important distinction between start-up companies and established organizations, a common saying is that: start-ups know how to start, but not how to scale; and established organizations know how to scale, but not how to start.
What do we know?
Many established organizations have set up innovation initiatives in an attempt to emulate start-up behaviour, but many of these collapse after a few years. In those organizations, there is often a wide range of views about the importance (or unimportance) of innovation, but more general agreement about the perceived lack of effectiveness of their innovation activities. While some of the identified obstacles to innovation are causes, and others are symptoms or consequences, of those difficulties, these are all largely tactical and operational issues.
Importantly, it is slowly being recognised that the problem lies elsewhere. In most organizations there is little or no consensus about how innovation contributes to the achievement of the purpose of the organization. So, the strategic basis for innovation in most established organizations is either weak or non-existent.
There’s a widely used saying, originating in military doctrine:
“Strategy without tactics is the slowest route to victory.
– (possibly) Sun Tzu, the Chinese philosopher and warrior.
“Tactics without strategy is the noise before defeat.”
Until we address the strategic basis for innovation in established organizations, it is unlikely to be successful.
Organizational innovation (corporate innovation, innovation management, or whatever we call it) is still an immature discipline. However, there is a body of knowledge about innovation which is largely ignored by most people in established organizations. Instead, they are overly influenced by thinking appropriate to start-up companies which operate in a different context. So, for example, the language which they use tells people that they must take more risks and become more comfortable with failure. This makes no sense to most people in established organizations, and is not even true!
There is much more detail behind this, based on broadly accepted models of how innovation happens. In essence, based on the work of Everett Rogers, there are multiple categories of adopters of innovations as they diffuse through populations. Also, based on the work of Geoffrey Moore, there is said to be a “chasm” between visionaries (“early adopters”) and pragmatists (“early majority”); it is known as a chasm because it is difficult to cross! This is largely due to there being substantial differences between the criteria for adoption of an innovation by visionaries and by pragmatists; indeed, some of the criteria are inverted.
What can we do?
These models provide a basis for identifying the categories to which an organization belongs in its various areas of operation and a platform for formulating a strategic basis for innovation in the organization. This is no substitute for the tactics and operational activities of current innovation initiatives, nor does it challenge them. On the contrary, it gives them direction. The majority of the resources (time, effort, money, etc.) expended on innovation are still most likely to be expended on tactical and operational activities. But without a consensus on why they are being done, much of it is likely to be ineffective and wasted.
A change in understanding and the formulation of a strategic basis for innovation is likely to require only a small proportion of those resources, yet it has the potential to increase radically the effectiveness of innovation by multiplying the effectiveness of all of the other activities.
It’s an opportunity to improve discontinuously innovation management itself by managing its transition, from being a “nice to have” capability which is proving difficult to operate, to being a “must have” capability which is generally accepted as necessary and is operating effectively.
As another saying goes:
Meta-innovation is still in the chasm.
Let’s do something about it!
Author: John W. Lewis, D.Phil., Dept of Engineering Science, University of Oxford, is a strategic innovator and applied physicist. Neat Strategy’s current focus is on organizational innovation, also known as corporate innovation or innovation management, helping leaders to focus on the innovation opportunities which present the most benefit and value to an organization.
In this article, Innovation thought leader, John W Lewis, has developed a more circumspect, observational and curious style, consistent with how he thinks about innovation.
Interesting, insightful perspectives shared – a thoroughly enjoyable read.
Good to know.
Thank you, Ben.