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Serious Play

Innovation has become the new ‘in’ thing. Some suggest it may be the sole source of future competitive advantage and consequently an imperative no organization can afford to ignore. I tend to agree. Furthermore I believe it applies equally to the public sector and to civic society as a whole.

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 condition also obliges us to find alternative solutions to many of the problems our inventive minds continue to construct. And quickly too. Consider global warming, water, food, poverty, terrorism….

But do we have the solution for you! Innovations-R-Us. Touted around university campuses, research laboratories, hospitals, farms, city halls, schools, corporations and even government departments, innovation is the cock's crow at dawn from which only the deaf escape.

In reality the contemporary emphasis on innovation has been spawned by tensions between the commoditization of desire (post-industrial society’s fixation on and craving for anything new) 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. Meanwhile sheer demographic momentum will increase the world's urban population by 3 billion people over the next 40 years (90 per cent of these in poor cities) and absolutely no one has a clue how a planet of slums, with growing food and energy crises, will accommodate their biological survival, much less their inevitable aspirations to basic happiness and dignity.

Purely on this basis it is logical to suppose that these tensions will continue to worsen at least until global population numbers level out, some time after 2060 if you believe the latest and most sophisticated demographic modeling: the world’s population will have reached seven billion people by the end of 2012. 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 50 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 virtual 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 can be disruptive: overturning sacrosanct rules, long established habits and reshaping contextual conditions previously thought to be constant.

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 competition entirely irrelevant. Which CEO or Board Chairman 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, audacity and a determination to craft a unique customer experience.

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 business success with social advancement can not be so easily dismissed in today’s brand-resonant, media-savvy, celebrity-saturated world. Witness Madonna, Bono, Steve Jobs, Anita Roddick or Linus Toorvald, 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 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 recognize the role played by uninhibited imagination - 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 still insist on adherence to archaic management protocols. And we ‘get’ the power of teamwork – but still insist on rewarding only individual performance.

What then are the secrets of investing in innovation? What does it take for creativity to become routine? What are the innovation drivers that make companies as diverse as Threadless, Cirque du Soleil, Apple, Virgin, Semtec, Cabbages & Condoms, Toyota, Agricultural Bank of China, Infosys, GE, Procter & Gamble, eBay and Google so successful? And how is it that the People’s Party in Brazil can engage the community in bold experiments of participative democracy at a time when post-industrial nations, formerly recognized for their egalitarian systems, seem hell bent on eroding citizen’s hard-won rights and 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 look at the avalanche of web sites, conferences, wikis, blogs, books, articles and academic papers devoted to the subject) innovation as an embedded capability remains as elusive as the proverbial pot of gold at the end of the rainbow. Furthermore most innovation is still targeted at improving existing products, processes and services, which rarely delivers exceptional value.

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) organizational design.

Contextual conditions:
Contemporary business was long ago ambushed by its own success. It now finds itself cocooned within a condition brought about by the rapidly converging processes of technology-enabled globalization.

This condition, which I call globalism, is without precedent. It has catapulted us into a vibrant world of transactions and interactions where geography matters little - a world characterized by the need to manage relationships rather than things. Indeed the things that matter today are diffuse networks, co-design, open source learning, collaboration, the exponential speed at which new knowledge is created (and old knowledge is made obsolete), democratization of standard business practices and society’s seemingly unquenchable thirst for the new...

The challenge of innovating in this environment, 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 250 years, the industrial economic paradigm is worn out. The World Wide Web, coupled with the convergence of digital and genomic code and enabling tools like biotechnology, molecular engineering and robotics, have 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 economics remains the most commonly used and unchallenged framework for explaining events, even when such explanations do not equate favorably 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 revitalizing an entire enterprise or industry or conceiving entirely new markets.

Fortunately a parallel universe is emerging in the minds of many entrepreneurs as we make the shift from industrial economism to global 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 scale.

Business praxis:
Most corporations claim to use innovation as a driver of change. Three elements characterizing conventional business practice clearly impede such efforts:

  1. Without a 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 organizational culture. While a conducive social ecology is vital for innovation to take root, creativity alone is not sufficient.  On the contrary, 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 sit around and come up with good ideas is one thing. Extracting value from these ideas is quite another.
  2. 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 competition and profits. Meanwhile the process of innovation has been democratized. 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.
  3. Modest objectives rarely result in breakthrough endeavors. A common problem of many entrepreneurial initiatives (especially start-up ventures) is that aspirations are set too low and possibilities defined too narrowly. More often than not the implicit aim amounts to no more than extracting greater profits from existing product lines or market offers. Strategic foresight is often ignored thereby eliminating many possibilities. The lack of robust strategic intelligence, especially from customers, also limits what can be achieved.

Organizational design:
Ironically we have not yet found a way of designing our organizations to take advantage of the extraordinary opportunities offered by globalism. Most corporations are dinosaurs awaiting extinction. Because of this many businesses remain paralyzed, 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 organizations 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 organizations recognize this. They constantly refashion boundaries, rethink roles, reinvent systems and revitalize processes, in effect redesigning their organizations for speed and addictiveness. As a result, corporate research and design laboratories routinely collaborate with customers and suppliers, share software code with programmers and tap into networks of scientists and entrepreneurs for the world’s best ideas.

This kind of cooperative innovation, where the processes of innovation are democratized, is no longer a fringe activity but essential to remaining competitive in a globalised world.

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