roger trapp | forbes | 26 august 2015
This article was first published in Forbes
Now that just about every business seems to have realised that it is unlikely to survive, let alone flourish simply by doing what it has always done, the word “innovation” has become a standard part of the executive’s lexicon. Because of this – and the related fact that it means too many different things to different people – it has become something of a “motherhood” and “apple pie” issue. Just as it has become commonplace to talk of employees as “the greatest asset” and, latterly, as “talent”, so it is standard for companies to claim to be innovative. Even when they are serious about it, much of the discussion focuses on the mechanics of idea generation and exploitation – R&D pipelines, brain storming, market research and the rest – rather than what actually makes it happen.
According to a report published this week by PA Consulting, several factors are crucial for creating the environment for innovation. In particular, the study based on research among more than 750 business and government executives around the world stresses that “superior innovators ensure that innovation is a shared endeavour, not a siloed activity” solely the responsibility of the R&D department. As Jonathon Hogg, leader of PA’s people and talent team and one of the authors of the report, says, “You need the right ideas, but you need the right culture as well.” This inevitably stems from the leaders of organisations. “They have to create the right conditions and the right focus,” he says. Indeed, the study quotes Ian Rhodes, chief executive of McLaren Applied Technologies, as saying: “Leadership is the most important thing. If you have people who have a passion for innovation and can lead, that is 80% of the battle won.”
The study shows that many organisations are too risk-averse to make the bold investments in the ideas that will be truly ground-breaking rather than merely incrementally different. This appears to be a particular problem in the UK. In the survey conducted for the report, only in Belgium and Luxembourg were organisations more likely to talk about innovation than to do it. Such half-hearted approaches to innovation have a devastating effect. The report talks of an “innovation drain”, whereby – even when they have good ideas – many enterprises waste them for avoidable reasons. The consultancy reckons that UK organisations alone are “flushing some £64.7 billion down the drain each year” – equivalent to the global spend on cancer drugs or more than half the EU’s total annual budget.
The overall reluctance to invest in innovation is understandable enough. The financial crisis has hit confidence, while recent events in China will no doubt remind executives of the fragility of the world economy. This caution is often reflected in the make-up of executive teams, with inwardly-focused people concentrating on return on investment and delivering results to the fore. Hogg says that these attributes are needed, but he also points out that a company looking to innovate needs more of a mix. “You need some people who are exploring, looking at other industries, bringing ideas in. You also need others who are good at turning ideas into tangible things and others who are good at energising the business.”
How organisations can stop wasting their best ideas
download the report
Ensuring a business has the right balance in its leadership cadre is not as difficult as might be thought. “Organisations can plot where their team stands. There’s no excuse for not doing an analysis,” he adds.
The goal of the research was to identify best practices in innovation. The results suggest that the organisations that are best at innovation share a number of traits. They:
- Strive to be innovation pioneers,
- Often back high-potential but risky innovations,
- Learn quickly from mistakes in innovation, have the right mix of skills to make innovation happen,
- Harness digital technology to accelerate their innovation initiatives, and
- Put innovation at the heart of their corporate culture and mission.
While successful innovators are likely to have these characteristics in common, that does not mean that they will all end up having the same “innovation culture”. Hogg says: “It won’t look or feel the same in every case. It needs to suit your business.” However, there are general principles, and at the centre of these is encouraging people to produce and share ideas. In order to bring this about, adds Hogg, you need:
- Managers who can make that happen
- The right performance regime so that people are comfortable with and incentivised to look at things differently
- Most importantly, leaders who listen and are prepared to get energised by new things.
This might look a tall order to enterprises that are not already in the vanguard of innovation. But, based on its research and analysis, PA has produced a series of recommendations that can help businesses – whatever their sectors – transform themselves into “innovation leaders”.
Be visionary, aggressive and bold – whatever your purpose for innovation. Organisations should strive to make markets, dominate the competition and rethink how they are going to be profitable. Half-measure innovation will get you nowhere.
- Bring new life to the traditional board. As Hogg has pointed out, businesses need to balance more financially-minded people with those who are more creative.
- Look beyond your sector – and then keep going. Aneesh Kumar, vice-president of enterprise product solutions at Cigna, says in the report: “My approach is to look outside healthcare for inspiration – at consumer packaged goods, retail and financial services industries.”
- Measure by value, not financial calculation. While businesses obviously need to keep an eye on costs, having too narrow a focus on profit and loss, particularly in the early stages, can stifle innovation. They need to think differently from how they have in the past about what is likely to create sustainable success.
- Go beyond “token digital”. Whatever kind of innovation they are pursuing, businesses need to adopt a “disruption mindset” and look at whether digital technologies could make their existing ways of doing business more effective. An example is a cloud-based collaboration platform, “The Hub”, developed by PA for the National Institute for Health Research that allows 10,000 researchers to work together effectively to make the UK Government’s £1 billion annual investment more efficient.
- Fail safe, fail frugal. Organisations need to accept that failure is part of innovation and should not put careers at risk. Peter Erickson, executive vice-president, innovation-technology-quality at General Mills, says in the report: “We know we are going to fail. It is part of the process of truly innovating. We have spent a lot of time trying to get to those failures earlier in the lifecycle of an innovation, with a smaller financial cost.”