innovation

Definition -- "" 'Innovation', then is an economic or social rather than a technical term. It can be defined the way Jean Baptiste Say defined entrepreneurship, as changing the yield of resources. Or, as a modern economist would tend to do, it can be defined in demand terms rather than supply terms, that is, changing the value and satisfaction obtained from resources by the consumer."" -- Peter F. Drucker, Innovation and Entrepreneurship, 1985, Harper Perennial, p 33

Definition -- Innovation is putting invention to work in the business.

definitionsnew (Pontin, 2008) --

• Innovation is not invention, and still less is it scientific discovery. An innovation must be valuable, which means it must exist in a market or some more general social context of supply and demand. .
• Innovation encompasses ""new products, business processes, and organic changes that create wealth or social welfare."" - Economist.

• Innovation is ""fresh thinking that creates value."" - Richard Lyons, the chief learning officer of Goldman Sachs.

Innovation is disruptive --
For me (Pontin, 2008), neither definition (above) captures the discomforting novelty of true innovations. Innovation disrupts our existing way of doing business or creates entirely new ways of doing things. Always, innovations are embraced by those who find them valuable, are hyperbolized by the companies and organizations that benefit from their adoption, but are resisted by incumbent companies and organizations and conservative customers and users. When an innovation is sufficiently accepted by enough people, however, resistance to that innovation becomes feckless and fruitless--it amounts to an attempt to pretend that reality is other than how it is.

Context of innovation --
Every episode of innovation is always specific to a social system (such as a business-organization) and to one or more particular domains that are relevant to this social system (see technology). (Gupta, 2007, 886).

Process and outcome -- The term ""innovation"" refers not just to an outcome (novelty incorporated into the business), but also a process (how novelty comes about and is incorporated into the business).

Innovation as a strategic management competency --
See Hamel (2002, pp 281 - 323) for a model of innovation as a capability, which is essential to a strategic management competency.

Innovation as a discipline --
Innovation is not a luxury, a program, or something to be done 'on the side'. Business organizations must have innovation as a core competency in order to survive. This is due to the evolving, and thus dynamic nature, of the economy. Innovation is at the core of an overall strategic management competency. Following is a perspective on innovation - what drives it, related concepts, processes and constructs to facilitate it, and producing ideas to feed it --

• Creative destruction -- Evolutionary economics describes a dynamic economy where the primary force is creative destruction. An evolutionary algorithm is continually in motion. Business organizations must innovate, transforming themselves, in order to survive and thrive.
• Facilitating constructs -- The business organization is the object of strategy. The model hierarchy provides insight into the make up of a business organization. The political model, mental model, business model, and operational model all serve as guiding lights for inquiries necessary to understand, design, and innovate the business organization.
• Business design -- Design of the business organization is at the heart of innovation, as business model innovation is one of the strongest, if not the strongest, forms of innovation. The business model provides the construct to guide business organization inquiry -- including the comprehensive inquiry for assessment and design. Competitive advantage factors provide for explicit inquiry to innovate the business model to produce competitive advantage. The business organization transformation completes the innovation by putting the invention into practice in the business.
• Management innovation -- Management innovation brings about revolutionary new ways to manage business organizations - providing for previously unimagined capabilities from business organizations. New management techniques are being developed to produce business organizations better suited to a dynamic economy.
• Insight -- Innovative ideas come from insight. Though there is not a specific process to create innovative ideas, there are processes that create the precursors for innovative ideas, like insight.
• Pluralism -- Innovation comes from the exercise of the evolutionary algorithm within an organization.. For this algorithm to produce its greatest benefits, it requires a diversity of ideas. Diversity of ideas come from diversity in thinking and experiences. Thus innovation thrives on diversity of participants and methods to effectively encourage, capture, and nurture their ideas. That is where pluralism factors in. Explicitly putting pluralism to work for business organization innovation is disciplined pluralism.""
• Idea management -- Idea management -- idea development, stimulation, nurturing, etc. - is the foundation for innovation. It is the process which ""causes serendipity to occur"" to produce innovative ideas. Along with the insights produced, various forms of creative exercises can be employed to stimulate further idea development.
• Pursuit of ideals -- Cycles of idealism and realism prompt the innovation of the business organization -- the idealistic stages unleash creativity and unbounded designs, while the realistic stages capture the new design and wrestle it to the ground to make it implementable, i.e. make it practical.

Innovation mechanisms --
Innovation as a product of culture and methodology --
The culture of innovation tolerates failure and smiles upon creativity. But such a culture is not enough in itself: successful innovation also pitilessly rejects bad ideas when their promise has been exhausted and efficiently executes the development and commercialization of the best ideas. Wherever I go, innovators seem to instinctually recognize these paired demands of culture and methodology--and, more important, they burn with a passion for innovation itself. -- Pontin, 2008.

Exploration, Variation, Knowledge, and Innovation --
Innovation is an outcome of exploration. Exploration brings variety. Exploration is the ""pursuit of new knowledge, of things that might come to be known"" (Rothaermel, 2001, p. 689). Increases in internal variety entail new information and knowledge, which promotes innovation because organizations can improve on what they know and solve problems in new ways (Burns and Stalker 1961, March 1991, Utterback 1994, von Hippel 1988). By expanding the knowledge pool, a greater exploration orientation increases the odds of finding commercially valuable new knowledge combinations (Katila 2002, Katila and Ahuja 2002, Nelson and Winter 1982).
Source: Sidhu, 2007

Innovation, Adaptation, and Survival --
Organization survival depends on the ability to adapt to a changing environment (Schumpeter, 1950). In particular, greater exploration orientation is said to lie at the heart of a firm's adaptive ability because it generates requisite internal variety, allowing the firm to adapt to shifts in markets, technologies, and competition through innovation (March 1991, McGrath 2001).
Source: Sidhu, 2007

Schumpeter - knowledge creation and innovation in evolutionary economics (Fonseca, 2002, pp 14 - 16) --
A very different way of thinking about innovation is to be found in what has come to be called evolutionary economics, most notably in the work of Schumpeter (1934). He was interested in explaining why economic growth occurs, rather than simply ascribing it to an unexplained residual; his main contribution was to place innovation inside the economic system rather than considering it as an exogenous shock to which economic systems reacted. He argued that an economy could not be understood as an entity independent of society as a whole and that economic growth had to be explained in terms of the dynamics of scientific and technological innovation and the roles of entrepreneurs in organizations. For him, innovation was to be understood in terms of both social/organizational dynamics and individual psychology. Schumpeter distinguished between the entrepreneur who performed a role, and innovation, which was the outcome of entrepreneurial activity in organizations that possessed characteristics making it possible for individuals to take the role of entrepreneur. For him, the ""entrepreneur"" played a central role in the process of economic development. Several people could take this role and none would play it all the time. He therefore thought about economic growth in terms of dynamic processes, rather than in terms of the mechanisms that featured in neoclassical economics. Furthermore, Schumpeter addressed the issue of innovation within a systemic framework. An innovation could thus be a new output that the organization placed in its environment, a new input it received from the environment, or a new way of arranging its internal relations, including the psychological attributes of individuals.

Schumpeter was also the first to address the issue of knowledge creation, knowledge transfer and knowledge use, as underlying the process of innovation. In fact this is a central tenet of his views, making of the process of knowledge creation, particularly when embodied into some technological artifact, an endogenous phenomenon of economic realities. Even though he understood innovation as a linear path from basic science to a commercial application of scientific knowledge, he did not restrict innovation to purely scientific ventures. His definition of innovation comprised all ways of doing things differently.

Leadership and Innovation (Source: Barsh, Capozzi, Davidson, Leadership and Innovation, The McKinsey Quarterly, 2008, 1) --
McKinsey provides recommendations to close the gap between leadership's desire for innovation and the typical less than desired result. Building an innovative organization is very frustrating for most executives. Sustaining innovation to create real value at scale -- the only kind of innovation that has a significant financial impact -- is even harder.

Three people management fundamentals may produce the building blocks of an innovative organization.

• Step one: Formally integrate innovation into the strategic-management agenda for senior leaders. Innovation is then not only encouraged, but managed, tracked, and measured as a core element in a company's aspirations. Practical steps in this arena --
  
  1. Define the kind of innovation that drives helps meet strategic objectives. Direction towards objectives provides motivation.
  Add innovation t the formal agenda at regular leadership meetings.
  2. Set performance metrics and targets for innovation.


• Step two: Make better use of existing talent for innovation, without implementing disruptive change programs, by creating the conditions that allow dynamic innovation networks to emerge and flourish.
  
  Leadership behavior that sends the right signals: innovation is inherently associated with change and takes attention and resources away from efforts to achieve short-term performance goals. More than initiatives for any other purpose, innovation may therefore require leaders to encourage employees in order to win over their hearts and minds. The top two motivators of behavior to promote innovation are strong leaders who encourage and protect it and top executives who spend their time actively managing and driving it.
  

  Difference in creativity and intelligence matter far less for innovation than connections and networks. Ideas seem to spur more ideas. Networks generate a cycle of innovation. Effective networks allow people with different kinds of knowledge and ways of tackling problems to cross-fertilize ideas. By focusing on getting the most from innovation networks, leaders can therefore capture more value from existing resources, without launching a large-scale change-management program.

  Shaping social networks is both an art and science. Any network is unpredictable, and, in the end, impossible to control. An innovative social network does not replace hierarchy, but the network of information and knowledge is more distributed and employees participate actively in innovation. Designing an innovation network follows the four critical steps:
  

  1. Connect -- Seek out right-brains, left-brains, idea generators, researchers, experts, and producers. Include multiple levels of seniority, skills, and performance. Define one network or include subnetworks devoted to specific areas.
  2. Set boundaries and engage -- Define role of network in meeting strategic goals, establish network goals and objectives, define clear expectations, establish time frame and commitment required. Plan how to establish trust among network members and engage them quickly.
  3. Support and govern -- Define network's sponsorship and leadership. Determine technology support required for network members. Determine role of face-to-face meetings. Define additional support as necessary. Define key knowledge and information inputs -- both internal and external to the network.
  4. Manage and track -- Define how mebers will be recognized for their contributions. Establish performance-management criteria based on both individual and grout successes. Establish tracking criteria. Define timing for assessment, review, and modification of the network, and determine who will have these responsibilities. Decide how new members enter network and current members leave. Plan process to facilitate network and its impact.

  There are several archetypes of individuals required for an effective innovation network:
  

  • Idea generators -- prefer to come up with ideas, believe that asking the right questions is more important than having the right answers, and are willing to take risks on high-profile experiments.
  • Researchers -- mine data to find patterns, which they use as a source for new ideas and insights.
  • Experts -- value proficiency in a single domain and relish opportunities to get things done.
  • Producers -- orchestrate the activities of the network. Others come to them for new ideas or to get things done. Producers are the most likely members of the network to be making connections across teams or groups.



• Step three: Take explicit steps to foster an innovation culture based on trust among employees. In such a culture, employees understand that their ideas are valued, trust that it is safe to express those ideas, and oversee risk collectively, together with their managers.
  
  Executive trust and engagement were the mind-sets most closely correlated with a strong performance on innovation. People engage with those they trust more than those regarded as experts. Cultural attributes that inhibit innovation: bureaucracy, hierarchy, and a fearful environment. Executives must focus on the risks of innovation as much as on its opportunities. Demonstrating active learning from innovation failures is essential. Leadership skills include coaching subordinates and facilitating collaboration across silos.
  
  
  When top management reinforces leadership role-modeling and formal organizational mechanisms to promote innovation with commitment and energy to build capabilities for specific tasks, the combination can yield impressive results. Top leadership teams build more innovative cultures in several ways:
  
  • Embrace innovation as a top team -- making it a core part of the strategy and model and reinforce this with their behavior.
  • Turn selected mangers into innovation leaders -- making networks more productive.
  • Create opportunities for managed experimentation and quick success. The goal is not go get it right the first time but to move quickly to give as many influential employees as possible a positive experience of innovation.

Types of innovation --

• Research -- Research is mentioned here to emphasize what innovation is. Since innovation is putting invention to work in the business, research per se is not innovation. It can be a precursor to innovation due to the inventions and knowledge it can develop. Thus the inventions created or the insights gained from research can be applied to the business, resulting in innovation.
• Basic physical technology -- may be invention put to work within the processes of the business to further develop organizational capabilities.
• Process - Process innovation includes minor process improvements, reengineered processes, those modified or developed by kaizen events, up to those processes forming the competitive value system of the business like Dell's supply chain, Wal-Mart's distribution system, or Lexus's customer service system.
• Offering - Offering innovation brings new value to the commodities, goods, services, experiences, or transformations provided by the business organization to its environment. From a systems perspective, offering innovation improves how the business organization fulfills it function within its environment.
• Business - Business innovation refers to business, business organization, business concept, business model, and business design innovation which produces a competitive advantage based on how the business is defined, designed, and carried out by the organization.. Prior to the arrival of the internet, several business models were not possible. After its arrival, new businesses formed and existing businesses transformed to take advantage of what this new technology enabled in business models.
• Management - Management is a social technology. Its innovation has brought about some of the most profound and lasting innovations in all of business. Management innovation can be defined as a marked departure from traditional management principles, processes, and practices -- a departure from customary organizational forms that significantly alters the way the work of management is performed. See management innovation.