Innovation Strategy: Toss old rules
Over the past three years, we have asked our clients, partners and associates, “Why does innovation fail?”
The most common answers we hear are: “Innovation is the responsibility of R&D or the technical area of the business.” “Business is good. We don’t need to keep innovating; we are successful with our current model.” “We are focused on our core and executing with what we have—we don’t have time for futures right now.” “We are focused on the basics.”
In our research with more than 50 companies striving to increase their innovation capacity, we continue to see a prevailing problem: The old culture of repetition, introspection and incremental variation doesn’t lend itself to making customer-friendly, service-oriented innovations.
The old rules simply don’t work anymore. In the 1980s and 1990s, management theory looked inward and reinforced the importance of competitive advantage from incremental process efficiencies and cost management practices. For most of the 20th century, that model worked well, as evidenced by the successes of central R&D organizations like AT&T Bell Labs, IBM Labs, Xerox PARC and others.
The majority of research on innovation practices reinforces the notion that innovation projects fail systemically due to managing them as raw technology projects. Organizations are not looking at those efforts as a systemwide adjustment, requiring balanced, open and communicative management that integrates the key knowledge and learning strands—technology, business process, customer relationships and marketing.
Today, the internal and centralized approach to R&D is becoming increasingly obsolete in most industries. More open forms of innovation are needed, in which there are no learning and knowledge capture boundaries. Learning to leverage external and internal ideas rapidly across organizational areas is critical for companies that want to lead in the new open, transparent economy.
RentaCar.com has innovated more openly around customer and presence. The company has placed car rental locations right in the neighborhoods where people live and work, rather than at airports. Companies like GE, Microsoft and Ford Motor—now faced with slower prospects for growth—have a CEO agenda for cultural innovation as a core competency across all business lines. New, holistic audit toolkits to measure an organization’s innovation capacity have been developed by the University of Western Ontario, providing insight into innovation effectiveness and efficiency.
Irrespective of the toolkits that are used, the important point for executives leading innovation to realize is that it’s all about leveraging knowledge across complex business systems, and that innovation can occur for competitive advantage along many different business dimensions.
As the Internet and highly networked economy intensify, service innovation developments will increase. Taking a look at IBM’s service science research being conducted by Jim Spohrer, the director of services research at IBM’s Almaden Research Center in San Jose is one good starting point. Service science is a new multidisciplinary research and academic effort that integrates aspects of such established fields as computer science, operations research, engineering, management sciences, business strategy, social and cognitive sciences, and legal sciences. Academics are starting to jump on this new services approach and its application of science to what has traditionally been considered human-to-human interaction.
“The science comes in through modeling. You model kernels of a work practice to gain insight and for the purposes of automation,” says Richard Newton, dean of the College of Engineering at the University of California, Berkeley. Modeling, simulation, abstraction, measurement and metrics, and process design and analysis will emerge as core disciplines of science-based services.
Timothy Chou, past president of Oracle’s On Demand business and author of The End of Software, is one of the thought leaders actively engaged in science-based services. Chou’s new book. Software is Free and Service is Not. with co-author Michael Rocha, to be released in Q3 2007, provides insights on the importance of holistic innovation capacity development.
Executives leading their innovation strategies must comprehend the complexity of innovation dimensions that can be leveraged for competitive advantage. What is clear: Any organization that has innovation as a core competency in only its R&D and technology centers is at risk, as competition continues to intensify in the quest for customer attention and share
of wallet.