The talk about “innovation” is so loud, that the word might become eroded soon. Yet, for many organizations innovation is a real path to get out of a situation of stagnation or shrinking income. This is not only true in organizations operating in crisis countries, like Spain. A recent conversation with German clients of the health sector there showed that “there is a real welfare transfer to China and India”.
There are several ways out of such a scenario, but one seems to lose effectiveness: restructuring and process optimization. We already saw in the last post on how to achieve more with less using organizational innovation that organizations that have already performed several times restructuring reach a limit where the improvements and gains are marginal. A classical economist would see here a good example of the law of diminishing returns. To the contrary, appliying more restructuring to restructured organizations can be counter-productive.
An innovative organization is not the same like an organization that innovates
Many organizations do have an innovation department, labs or at least a responsible person for innovation. This is generally the case at technology companies or those working in the biomedical field. In this post we are talking about innovation as a tool for organizational development, achieving superior results at a very bearable cost. This applies to every kind of organization –no matter which size or nature- from grocery shops to a corporation, from a dynamic start up to ministry: Innovative organizations are those were ALL their members are innovative.
Resistance is in management
In the former post we also learned that 85% to 90% of employees say that they are more productive and efficient when working at innovation projects. What else do they say? In a recent survey 65% said that they created feasible projects in a quick way and 90% want to participate in a change towards an innovative organization. Interesting insight. Where is then the famous resistance to change? Obviously at management.
How to create an innovative company in 5 steps: management first
If resistance to change for innovation is at management, the first of five steps towards an innovative organization is a full leadership of this transformation by the top management that has to assume the movement as strategic. When we say that management has to see this change as strategic and lead it we do not talk about the common place of consultants: you need the management’s support” and that the CEO appears at the Steering Committees of a project. No. Strategic means that management pays as much attention as to sales or costs. At IBM managers devote 55% of their time to innovation, according to Dean Crutchfield (The Fast Company).
Not only time is needed. Example too. This is why Apple created the “evangelist” job, famous because of Guy Kawasaki.
The absence of real dedication (not just commitment, we really mean dedication) is the reason why 50% of workers doubt that their organizations are ready to become innovative (source: VaC surveys)
All kinds of teams – change radically the way of working
If the management wants an innovative organization, it must accept that people have to devote a part of their time outside their usual jobs. Innovation comes from the interaction among different people with different backgrounds, interests and values. Not just the innovation, but the effective implementation of innovation. It is the way to avoid the classical power conflicts and competences arguments between departments. The Spanish pharmacy company Cinfa provides a good example. Yes, it is a company that produces innovation, but this does not mean that it was an innovative company; it just had a good R&D department. When the company noticed that new products from competitors were pushing its products out of the market, Cinfa decided not only to invest in innovation, but to transform the whole company into the R&D department. In fact, the R&D department has only 5 members. The key to success were the teams. The case can be read in this link .
Not everything is wonderful harmonic when working in innovation teams. In fact, at the beginning of the innovation process –especially if they have few experience- they invest a lot of time in negotiating roles and values among members and with the management. But once they work together as a group, the members start to work in fields that are new to them and they enter in a psychological process known as neoteny, which is nothing else than recover the ability of children to wonder about the new. On the other side, the blend of knowledge, experiences and values produces solutions that were not imaginable in the departments the members originally work at. In fact, surveys indicate that 95% of innovation team members discover talents and abilities in their peers they never noticed before.
Projects, projects, projects
Working in innovation teams 90% of their members feel more efficient and 85% feel more productive than in standard jobs. Innovations works better, when it is not a standard job, but a timely experience, with a starting point and an end. In other words, when we are in front of a project. If people work constantly in innovation projects and communities, they become routinely, loose fresh eyes and therefore they would lose creativity, efficiency and productivity.
Working by projects is important for economic and technical reasons: control innovation costs, ensure profitability, execute planning … in other words, implementing innovation. An innovative organization is not necessarily more creative –although without creativity there is no innovation- but it implements innovation more effectively.
When an organization’s innovation manager knows that all company’s staff is the innovation department, he can plan his projects knowing that he will have enough internal resources and knowledge, even with scarce budgets.
How many projects? An innovative organization is not the one that has more innovation projects. May be it has only one a year. We have to understand that innovation is a resource more of an organization, like money, machines or staff and it has therefore to be used within a meaningful strategy. The competitive advantage against other organizations is that it has the innovation resource, while competitors will lack behind or to spend money hiring qualified innovation staff or external consultants.
Don’t just focus on product or service
An innovative organization doesn’t have to come out with new products or new services. Look at Coca-Cola: the main innovation effort of this company is branding. Or take Apple and Nespresso; innovation is not in the product as it is mainly believed. Apple made a disruptive innovation in the distribution chain and attracted millions of customers to its i-tunes store. Nespresso innovated by transforming the perception of a product: coffee changed from a standard product (competing fiercely by price) to a product à la carte with high margins. The Nespresso machine is just the tool to sell coffee at really high prices. Therefore, an innovation manager has not only to work closely with the product manager. He will knock at the door of the sales manager and of the CFO; ideally he has to sit in the board with the CEO.
A non product/service innovation challenge is the one the medical instrument industry and the pharmacy industry have. They need to reach the final customer or patient, since the medical representative as a channel is losing effectiveness. We like to quote the case of Ikiria, a company we co-operated with and that could raise its revenues by 30% co-creating directly with surgeons the prototypes for their virtual surgery rooms. Surgeons became a far better channel than purchase managers, since they were Ikiria’s best ambassadors.
Another no product/service innovation is business model innovation, but we have written already much about it in this blog. But management itself is a new field for innovation. Juken Iturbe writes in his blog about companies without bosses . We never imagined that Gore Tex or General Electric would be companies with no bosses; companies that followed Semco’s (http://www.semco.com.br/pt/) path, a Brazilian enterprise that has been working without bosses for decades and making money.
Leadership and structure
In the previous post on innovative organizations we said innovation needs strong hierarchies. Isn’t this a contradiction with working in teams or without bosses? Don’t we read often that hierarchy kills innovation? If we understand by hierarchy a power chain as described by Max Weber when he coined the term industrial bureaucracy; undoubtlessly, hierarchies do not favor innovation.
Yet, a hierarchy represents value scale. Any organization, independently of its management model, has to be very conscious of the kind of value it delivers to its customers or stakeholders. Depending on this value it produces its own internal value scales and the kind of leadership that serves better to the value creation. For instance, a classical factory creates value by offering quality and price and captures value by economies of scale. This needs a strong control of times, machines and people and this leads to vertical chains and order or instructions based leadership styles.
And how are value scales at a fablab? A new kind of factory that works with a 3D plotter, where the owners of production are customers worldwide, that often co-create with third parties (designers, marketing experts, etc.) and also often work in virtual innovation teams. Without a hierarchy and a leadership among members the quality will not be ensured and commercialization will not work.
An innovative organization has to establish its hierarchies: with or without organizational charts. With a customer of us in the medical industry an hexagonal organizational chart was created. Six autonomous teams organize themselves in different clinical, administrative and research areas and their managers form another team: the top management. This organization lives together with a classical pyramid organization for those functions were the workers are not ready yet to work in an autonomous way due to technical reasons or to qualification.
Why didn’t we mention creativity?
Because much more qualified people has explained creativity many times and better. You can have a look at Google. The same is true for tolerance with errors or failure. In this post –like in all of ValuerCreation’s activity- we stress results, implementation and the ability of people to be innovative.