Seeking out and combining the higher-value impact points for innovation.

ImpactTwo years can feel like a long time. Exactly two years ago I wrote a post called “Making the appropriate impact” discussing my nine different impact points for innovation.

I wrote at the time we can have surprisingly strong influence on impact, as we are in a highly connected world. It is through our organizing and influencing abilities we can all partly determine our innovation future.

I suggested we have nine impact points to consider:

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Beyond the previous boundaries of innovation

Innovation is increasingly moving beyond the previous boundaries of just being left to each organizations scientists or marketing departments, those days are seemingly long gone. Today and in the future, innovation is about open, inclusive, full of exploration and harmonization to extract the best results.

We seem to have really grasped and recognized the combination-effect that comes from the myriad of different linkages that is propelling innovation activity and bringing increasing confidence within the boardroom.

According to a recent PwC report, optimism has dramatically been raised around innovation, so much so the vast majority within the survey of 1,757 c-suite or executives respondents believe their aggressive growth plans will be driven by organic growth (93%) and not by previous means of M&A activity. They are talking more radical and breakthrough innovation. BCG in its 2013 report on most innovative companies is equally far more bullish on innovation.

My only wish is this all this optimism is grounded in reality and recognition of what significant changes are required in structures, processes and supporting mechanisms that this increased innovation focus will really require.  They will have to address the existing organizations constraints as well as rework the emphasis away from the efficient and effectiveness focus that has become engrained. This will require a very dedicated focus on understanding innovation management and what it really means, to translate this organic ‘wish’ into reality over the next five years.

The good news is, we have seen innovation maturing

We are certainly seeing innovation has moved well beyond just products. It is exploring the value of combining or even separating services, changing value propositions on a more consistent basis and exploring new business models far more openly. All these approaches to innovation are challenging and demanding far more constant reorganization around changing the innovation activities to meet the ‘breaking’ opportunities.

One innovation struggle is around ‘rigidity’ within the organizations.

Innovation requires a more fluid, adaptive and agile environment. This will require some significant changes within the approaches within managing within these structures and this takes a significant and dedicated approach to achieve. The end result is changing the way people are managed and valued. There is a need to draw in, to engage, more open to diversity in opinion and thinking and increased emphasis on fluid teams tackling issues and challenges in unique ways, not through standard processes and approaches.

Research led or technology – based standing alone is not enough in pursuing greater functionality or breakthroughs, we need to cooperate with all the relevant people and partners that can bring the innovation idea or concept to fruition. The opening up to greater networks, exploring relationships and allowing them to deepen becomes vital. Allowing time for these to work and build the essential trust needed equally will take time.

The shifts in innovation activity, seeking simplification

We are also seeing increasingly the disruptive era of simplification, which captures far more of the imagination and where the increased movement of future wealth generating opportunities lie by meeting targeted customer need. These are not ‘layering’ on features that have been the approach of the past, this is stripping away and rapidly breaking these back down into targeted applications that do the job, we the consumer or client wants, often willing to pay a premium upon.

Complexity is also changing, taking out the pain

Complexity should not be about customers having to work out how to understand something; it is using the smart complexity that sits behind the solution to allow us to focus on what we need to achieve, to then help us significantly deliver on our required needs. Smarter searches, algorithms, designing your own options all are giving us the complexity we need. Simpler, interactive interfaces to do the job we wish to do, not forced to spend time learning and doing.

Exploring the effects of reverse innovation and lean approaches.

Reverse innovation, jugaad or frugal innovation is where there is  a huge potential – still largely untapped in developed countries offering new avenues to real targeted growth. What about the strong underlying movement in start-ups that is far more ‘needs related’ or serving ‘unmet needs’ through lean approaches and customer development techniques. These are so much better understood than the approaches in the past, of simply cruising along for opportunity with a vague business concept.

Sharpening the minds, changing the mindsets.

Everything has become so much sharper in why we have to focus our minds down, it is far more on what and where innovation can give us the next growth opportunity and that comes from all the diversity we can muster. Managing in the global innovation space is no different; we can get far more quickly at answers on a global basis than at any time in the past. We are learning to tap into this global knowledge in different ways, it needs a dedicated focus and understanding, to find the unique mix that suits your needs and knowledge accessing and translating and then we are closer to the solutions that have the global unlocking key.

We are using the ability to engage, to explore and exchange through a variety of social mediums, we can collect and interpret larger amounts of data than ever before.

As growth comes increasingly back on the agenda for most organizations, it will come far more from exploiting through this organic growth approach. Yet to achieve the ambitious growth targets that many organizations are seemingly talking about, there needs to be a radical overhaul of internal innovation understanding and structures.

Revisiting past practices

All of what has gone on previously needs to be revisited and in many cases reworked through new practices, new systems and new measures. Organizations are coming rapidly to the point of needing to be innovation re-engineered to make the sizeable changes they must achieve to ‘allow’ organic growth to deliver.

Innovation challenges much that is presently established within organizations, there is potential higher risks, significant changes required to be enacted within the organizations, with a whole raft of different competencies and capabilities to be learnt to extract the ‘promise and value’ from the innovation needed.

We are forced to look harder for attracting growth into our business and innovation can provide the force if there is the commitment backing the rhetoric of needing organic growth to be the primary driver of over the next five years.

Innovation needs positive translation in its management

I am sensing a really positive shift in innovation practice. It does seem to have gone up a notch or two in its maturity and adoption within our organizations in recent months. Can you feel the changes or are we still at the intent stage? Are organizations fully commitment to what shifting to an innovation emphasis will mean? Or are we only at a recognition stage?

There are significant sets of issues needed to be addressed to really allow innovation to drive growth. Organizations need to consider very radical shifts in approaching innovation and its management to gain any momentum, so intent can meet these organic growth ambitions as suggested? For me, in the next twelve months it will be the level of activity to  begin to re-equip organizations will determine if this is a reality or just C-level rhetoric, worried over the alternatives of low or no growth prospects but staying risk adverse.

Strike! Innovation is on strike!

Many years back to sell newspapers, sensational headlines were conceived to get immediate attention so people would buy the paper. It went like this “Strike! Innovation is on strike! Read all about it”  Today innovation is actually on strike! Just take a look at this:

We are in the middle of an Innovation Strike -source Nesta.org.uk

We are in the middle of an Innovation Strike – source Nesta.org.uk

A strike of declining investment, of a lack of confidence, of not sharing in the belief innovation offers a solution to our continued problems of wealth creation, of economic growth, of galvanizing society.

So for many, innovation is actually on strike, we are not investing as we should according to a series of reports and analysis, focusing specifically on the UK economy, sponsored by Nesta. Nesta is the UK’s innovation foundation and they help people and organisations bring great ideas to life. They do this by providing investments and grants and mobilising research, networks and skills. They operate independently but are very central in shaping innovation thinking.

Extra! Extra! Read All About It! Innovation is on Strike!

Extra! Extra! Read All About It! Innovation on Strike!

You can “read all about it” through these links offered, firstly an Executive Summary and the downloading the full report from their site.

I offer a fairly extensive set of ‘extracts’ below, so read on:

Already a lost decade of innovation has occurred

According to Nesta “The UK economy has experienced a ‘lost decade’ of innovation, with new evidence showing that businesses had a crisis of confidence in the 2000s, prioritising cash and concrete over investment in innovation”.

* Nesta’s latest Innovation Index released back in 2012 showed that investment in innovation by British businesses has fallen (or collapsed) by £24bn since the recession began and has not recovered. This is five times the amount the Government spends each year on science and technology research.

* Recently a further view on innovation was expressed by Nesta in mid-March 2013 on how to use the Government’s purchasing power to boost Britain’s most innovative businesses, arguing there is a continued and urgent concern on how to get Britain’s businesses investing in innovation again.

Some major points summarized here

I cannot provide proper justice to these extensive reports or to all the contributors that make up its worth but let me attempt to pull out of these reports some headlines that seem to me the real underlying issues of why the UK, and many others, are in this period of innovation stagnation.

Nesta produces a highly valued innovation index for the UK, this showed in its third review

  • Innovation investment fell by 7% or £7.4bn between 2008 and 2009, as the recession began
  • A further fall of 14%, or £17bn, from 2009 to 2011, according to a survey of 1,200 businesses
  • After rising steadily from 1990 to 2000, innovation stagnated from 2000-2008 at 12% of private sector output

With a decline of £24bn, since the credit crunch in 2008, it is interesting that even in the period between 2000 to 2007 businesses investment in innovation had levelled off. Investments in fixed assets fell and became increasingly dominated by bricks and mortar at the price of technology. Companies accumulated cash and concrete in the 2000s, far from the age of innovation.

There has been an increasing disconnect between the UK’s financial sector and investment in innovation and technology. The 2008 financial crisis has turned into the longest downturn in modern times.

We are seemingly caught between the two sides of an argument, Plan A for recovery based on austerity or Plan B based on stimulus. We see the continued consequences of the hardening push for austerity  in nearly all the Mediterranean Countries, let alone the severity of the austerity part has continued consequences in the UK and the USA . As we debate this two dimension view there are crucial ways everyone is losing ground, especially to the developing world and its significant focus on its innovation activities.

Nesta argue for Plan I to be the ‘missing part’ for the UK to thrive as a productive, dynamic economy.

The report lays out in significant detail the areas of potential focus and why and what they can be achieved to reverse this set of trends on innovation investment and regain economic growth within the UK.

Firstly dealing with the question of innovation

  • The ability to turn ideas into useful new products, services and ways of doing things is the wellspring of prosperity for any developed country
  • The companies that invest most in innovation tend to grow faster than ones that don’t; and the countries that invest most in innovation do as well
  • Nor is it a coincidence that many of the nation’s doing best today in innovation have articulated a clear vision of where they think their future wealth and jobs will come from
  • Countries as diverse as Korea and Finland, Israel and Singapore have sustained a mood of optimism and possibility through the crisis, and given business a sense of the future gains that make investment today worthwhile.

A growing reality or a self-preservation attitude still prevails.

  • Unfortunately the current economic debate in the UK has pushed innovation and questions of long–term growth to the margins
  • But if we want to take advantage of the opportunities on offer in the next decade from new technologies, new markets, and new ways of doing things, we have to face up to the gaps, the failings and the many ways in which institutions and markets aren’t well designed to make the most of new ideas. They stay stuck in the past.
  • It is hard to calculate precisely the size of the gap, but some of the analysis that follows suggests that in the UK, they may be under–investing in innovation to the tune of £38 billion a year.
  • Transformation from industrial decay shows that change for the better can happen relatively quickly where there is the will. Currently we leave to many as “walking dead” and badly under support those in finance and resources required that show the way forward to ‘regenerate’.

The prize according to Nesta’s report is what innovation still offers us

Innovation drives economic growth. source- Nesta.org.uk

Innovation drives economic growth. source- Nesta.org.uk

  • First, the continuing advance of information technology is showing no signs of slowing down. Moore’s, Metcalfe’s and Gilder’s ‘laws’, which predict that processing power, bandwidth and network connectivity will increase exponentially over time, still appear to be in full force and can open up a dizzying range of possibilities
  • The huge potential of ICT is just one aspect of innovation. Other technological developments, from new advances in life sciences to the emerging disciplines of nanotechnology could have just as large an effect.
  • During this phase it may be the ability to integrate different technologies that will be critical — from genomics and proteomics to bioengineering. New materials, including graphene and other carbon structures, may lead to dramatic breakthroughs in manufacturing.
  • Social innovations also offer great potential. The wastefulness, in both human and financial terms, of the way we run our healthcare systems, the way we care for old people, and the way we treat the most excluded in society, is huge
  • The right social innovations could unlock as much value as many great social innovations did in the nineteenth century. During past periods of rapid change, like the mid–to–late nineteenth century, radical social innovation and reform proved essential for the full deployment of technological innovations, from industrialisation to the railways. The same is very likely to be true as the world gropes for a new approach to growth.

Most of these innovations will create benefits not just for those who develop and commercialize them, but also for those that can effectively deploy them, and build new services and businesses around them.

The poor state of the UK innovation system needs rethinking

The interplay of resources, people, ideas and markets in which innovation happens — much isn’t working well according to the report. What can be improved?

There are three broad ways in which the innovative capacity of the UK can be improved:

  1. Investment: increasing how much the UK invests in innovation
  2. Systems: upgrading the system of innovation so that these investments go further, including greater demand
  3. People: changing the underlying cultures and skill sets to be more innovation– friendly

Making the innovation system work better

The second factor suggested, that holds back the UK’s ability to innovate, is the structure of their innovation system and is worth one additional comment — it is the combination of the involved organisations, their links and forms that determine how new ideas become reality. For over a hundred years, commentators have noticed a contrast in the UK between the world of ideas and the world of implementation– what a lovely observation that is!

Designing an innovation policy

So within the report there are many policy suggestions but the aspect that stands out for me come in the way the Nesta’s reports suggest four design principles for effective policy development

A design that involves arranging fundamental elements according to a few overarching rules or ‘design principles’, and then they suggest we all furiously set about adapting and improving them in the light of experience. Keep it simple, effective but well focused.

The four are summarized here:

  • Experimentation. Innovation is a risky business. Breakthroughs only come from a willingness to push at boundaries, to take risks, and, sometimes, to fail. What matters is not backing winning projects every time, but backing a good portfolio of projects. Experimentation is not easy, especially in an adversarial political system, that is often very risk adverse due to this. Risks need to be taken in the face of huge challenges like ageing or climate change, as well as in making the most of great new opportunities like the Internet of Things or synthetic biology.
  • Entrepreneurship. Entrepreneurs are essential to an innovative economy: they don’t usually come up with ideas, but they do work out how to put ideas into practice. Entrepreneurship is also important to good innovation policy-making. The flip–side of an experimental innovation policy is the need for entrepreneurial leadership and challenge within the system. Entrepreneurial leadership within the system can be valuable. These kinds of entrepreneurial figures provide a valuable antidote to consensual policy that works primarily with incumbents.
  • Openness. Good innovation policy cannot be made by government alone and certainly cannot be delivered solely through state bodies. Innovation flourishes when businesses, research organisations, and intermediaries such as standards bodies and trade bodies come together to identify and address major challenges. What is important though is government cannot rely simply on assembling interested groups – this risks capture by incumbents and vested interests, it needs a very open platforms where all can participate, working towards their goals but recognizing the essential need of all the diverse participates on the platforms.
  • Ambition. Finally, innovation policy needs ambition, with the right mix of challenge and focus. Government’s power as a leader, as a customer and as a regulator matters as much as it’s narrow role as a supporter of research and development. Finland, Korea and Israel are all countries that have managed to make this a reality. In all cases, leadership has come from the top but been broadly based.

Making policy needs to guard against certain common present barriers

The process of making innovation policy must be future–focused. The value of foresight exercises are recommended which are not great at predicting the future but better at making those who undertake them recognise the future when it manifests itself

Policy also needs to be aligned. A frequent complaint made by foreign businesses looking to make major R&D investments in the UK is that government policy is poorly aligned: helping to orchestrate such things as land, planning, training, supply chain development, and links to universities

It seems UK innovation policy lags behind that of Germany and Japan for example, both of which use grand challenges as a way of organising and focusing innovative activity.

The report finishes the discussion section with this before it moves into specific proposals.

The endless public debates over responses to the economic crisis needs to change if we are to put in place a sustainable alternative to stagnation. We need business leaders who are willing to prioritise the case for innovation over other issues such as top rates of tax or regulation. We need to use critical moments of choice, we need to restore faith and trust, we need to unlock this huge cash pile sitting on many organizations balance sheets.

And we need political leaders with a deeper understanding of innovation (at present only a tiny fraction have direct experience), and an appetite to advocate it. Innovation needs political and public advocacy and argument if it’s to be widely supported.

In summary

Nesta are a tireless champion of innovation. The whole understanding that if innovation stagnates so does the chance for recovery, for wealth creation and growth in jobs, and in our economic activity. We are not ‘stretching’ for a better future, we are sitting back waiting for the right ‘fundamentals’ to return. They will not unless we decide to open up and reinvest in ‘things’ that have perhaps higher risk but contribute to changing today’s lack of dynamics.

This report might focus upon the UK but much of what it argues applies to most of the developed nations in Europe and North America.

We are told our corporations are awash with cash; our governments are strapped for revenue generation activities. Plan A requires austerity, Plan B needs stimulus but their balance requires what a Plan I can offer. To regain growth but at the same time manage what we have more wisely.  We need to balance all three.

I can only recommend you spend some time on the Nesta web site and value, as I do, their focus on innovation in solutions, stimulating debates, conversations and well-structured reports. They are one of the best sources to go, for appreciating the complexity of innovation and being able to “see” where innovation lies, at the heart of all our futures.