This is an excerpt from my essay on “How to encourage innovation in an organization”.
The word Innovation comes from the Latin word innovare meaning “to renew or change”. It implies innovation must bring in change in people’s choices and behavior, which may add up or contradict to their existing norms.
The need for innovation in an organization cannot be stressed enough. Innovation is considered as a source of competitive advantage in the dynamic market conditions and is a necessity to survive and grow in the corporate world. It is a prerequisite to advancement and development. It is because progress can only be made when an organization enhances its existing practices and norms in the form of product development, service enhancement, administrative or management practices etc. Companies and countries that constantly innovate manage to maintain economic robustness (Ahmed and Shepherd, 2010). Therefore, it can be summarized by saying that innovation is all about finding solutions to present problems, improving existing conditions, and winning unanticipated situations; all leading towards organizations advancement and economy’s growth.
Here are a few practices that can steer an organizations’ path towards innovation:
Effective innovations start small: It is one of the Principles of Innovation introduced by Drucker (1985) in his book ‘Innovation and Entrepreneurship’. It means that no matter how big the idea may seem, its implementation should be on a small scale in its early stages. This practice saves time, resources, and money as the success of the innovation is uncertain. It is evident from the Amazon Inc. policy about teams where only a small team experiments with an idea and analyzes its viability. Its CEO has established the “two-pizza team” rule, which means that teams must be small enough to be fed with two pizzas (Lee, 2016). This is the reason that Amazon ranks on 1st for the “World’s Most Innovative Companies” this year (Fast Company, 2017). Small groups comprise of the ideal mix of skills while utilizing maximum communication and responsibility among members (Quinn, 1985).
Minimum Viable Product: This is a well-known strategy for innovation in Product Development where organizations’ design new products with just sufficient technologies in the initial launch and gradually upgrade the features with revenue, time and feedback. Given the risky nature of innovation, it is reasonable to create the product with the available resources instead of spending years of money and research into it (Patel, 2015). Besides, in today’s highly competitive and advanced market, it is only a matter of time when the rivals come up with the same innovation. Amazon followed the same strategy with its innovative store concept called ‘Amazon Go’ which could work in various retail stores, but Amazon’s initial approach is to open only one store. Based on its success, it will launch thousands of stores with time (Lee, 2016). Similarly, Apple is also famous for using this strategy since its first iPhone launch which aimed to get the responses from the early adopters on its rudimentary yet pioneering technologies (Freedman, 2013).
Age: Age is negatively proportional to organizational innovation Pierce and Delbecq (1977). It implies that the higher percentage of old employees, the more bureaucratic and inflexible structure gets, leading to less acceptance of innovations and policy changes. Youngsters are adaptive, tech-savvies; willing to take risks and possess better cognitive abilities (Damanpour and Schneider, 2006). Older employees may hinder the implementation process as they are accustomed to existing systems psychologically. Therefore, infusion of external fresh blood is vital for an organization to innovate constantly.
Open Innovation: Since the past decade, the concept of Open Innovation has received a lot of recognition. It is defined as “the leverage of capabilities and expertise of others to deliver differentiated and meaningful innovation” (Perkins, 2008). It implies, to globalize innovation by internalizing communities and capturing value from their expertise. The communities include supplier, consumers, competitors, manufacturers’ etc. Firms have now realized that secrecy reduces potential and efficiency and through collaboration, many business orthodoxies, norms and beliefs can be challenged and reevaluated, thus enabling innovative thinking (Gassmann, 2006). Vanhaverbeke, Van de Vrande and Chesbrough (2008) suggest a wide range of sources like purchasing marginal shares in high-tech companies, investing in venture capital funds, financing innovative projects at colleges or research labs and so on. This way, the firms can capitalize on such innovations in its early stage. According to Gassmann (2006), early supplier’s involvement in innovation increases innovation performance and acts as a source of competitive advantage. A case study research by Dodgson, Gann and Salter (2006) on Procter & Gamble provides an ideal example where the company transformed its R&D mission to a ‘Connect and Develop’ which resulted in huge success and development through unique, externally drawn products and expertise. It gathered vast sources of information by organizing an expo where suppliers, researchers, small firms and young amateur researchers were given a chance to showcase their ideas and make connections. This led to a massive success of over 2000 ideas for P&G technologies. Therefore, open innovation provides benefits like increasing the pool of knowledge; reducing the cost of internal R&D with greater focus on capturing value (Tidd, 2014).
Another remarkable example of Open Innovation is from Coca-Cola who is embracing innovation from both sides; the customers and the entrepreneurs. It has invested in supporting startups in various cities around the world that build up innovative strategies to boost Coca-Cola’s brand vision of Happiness. Meanwhile, its pioneering freestyle dispenser machine introduced in 2009 has assisted in obtaining its customers’ feedback. The machine allows users to select and mix flavors of their choice and suggest a new flavor for Coca-Cola products. Additionally, the consumer preferences can also be synced to their mobile app and be used on any machine around the world (Elmansy, 2016). The company tracks the suggested flavors and their demand levels, and considers them as a new product line. Thus, such interactive relation with the external environment is the very essence of Open Innovation.
Reducing Bureaucracy: Bureaucracy is often referred to as the enemy of innovation (IBM, 2015). It is because Innovation constantly challenges existing norms, principles, and demands risk-taking which clashes with the concept of bureaucracy. Hamel (2014) describes a bureaucratic situation as where job position defines worth, power is concentrated, employees strive for promotions and higher compensations, and rules frame every activity. He clarified that control and freedom are equally important but managers often consider them as mutually exclusive. Decisions in a centralized structure involve various approvals and delays. Tests which could be executed in hours may take weeks in bureaucracies. This also increases the level of costs and risks for the organization (Quinn, 1985). According to Rangus and Slavec (2017), Deconcentrated decisions are positively correlated to innovation and employee involvement. In the innovation process, Decentralization facilitates initiation and implementation (Pierce and Delbecq, 1977). Therefore, the diffusion of authority is imperative for encouraging breakthrough solutions to a problem.
Attitude towards failure: An organization’s approach towards failure is crucial towards fostering innovation. It should make its employees feel comfortable with the fact that they can experiment with new ideas without fearing any penalizing consequences (Szczepańska-Woszczyna, 2014). Managers of innovative organizations should train their employees to handle failure through behaviors like optimism, persistence, confession, and prevention (Bradberry, 2016). It is because implementing an idea and failing it is far better than not trying at all. Google has proclaimed itself as a company which celebrates failure through test and learn process. For example, Google Buzz tool was an extension to Gmail but failed and was shut down in 2011. However, it helped in developing Google Plus, which is now being widely used (McKinsey&Company, 2015). Furthermore, it is said to even reward its employees for failing in its Google Labs. They believe that if they don’t, then the employees will not dare risk-taking and make revolutions, they will hold on to a lost idea by dreading the consequences (Grossman, 2014). Amazon also embraces failure as many of its services failed and transformed into something new and better (Davis, 2016).
Organizational Culture: Designing a culture which promotes innovation is an essential element in order to succeed. Organizational culture typically is defined as “a complex set of values, beliefs, assumptions, and symbols that define the way in which a firm conducts its business.” (Barney, 1986). According to Brame’s (2017) article on corporate culture and its effect on innovation, an organization needs to explicitly devise a clear and succinct vision statement for its employees at all levels of the organization. Moreover, it should repeatedly promote the values and apply in all of its decisions; and when necessary, change them for improvement and growth. The values should, therefore, encourage innovation and creativity. Google is famous for its innovative culture which is evidenced in an interview-based research by Steiber and Alange (2013) where Google employees rated the organization culture at 1st for its influence on the company’s innovation. All employees were clearly aware of the company’s mission and aims and shared the same beliefs and values. Notions like ‘do no evil’ and ‘we can change the world’ are inscribed in every employee’s mindset directing their behavior in the desired direction. They have coined the term ‘Googleyness’ based on such values.
Secondly, the culture of an organization should be such where the top management engages with non-managerial level employees; especially the ones who directly interact with the customers. According to Quinn (1985), familiarity and experience reduce risks so when employees come up with risky innovative ideas, top management view them as troublesome even if they encounter the same risk with other business decisions.
Being people-focused: Another Principle of Innovation is to be both conceptual as well as perceptual (Drucker, 1985), i.e. analyzing figures as well as people. An innovative leader does not focus only on profits and gains. The reason why Amazon surpassed Google and Apple in being the most innovative company is that of its one simple goal: meeting people’s needs (Lee, 2016). Most companies are obsessed with their competitors’; to always remain one step ahead, whereas Amazon is said to be obsessed with its customers i.e. anything that makes their life better and convenient. It engages in producing only those innovations which customers will actually be willing to buy. During conferences, CEO Jeff Bezos leaves one seat empty at the table; they consider it as the customer’s seat (Anders, 2012). Furthermore, most large companies like Hewlett-Packard, Sony and 3M now rely less on market research and more on lead customers when introducing new innovations. Small groups work observantly with lead customers; learn of their responses and feedback, and quickly adjust changes the product/service or the entry modes into the market. It is because conducting market research in advance for a completely new innovation does not guarantee accurate results (Drucker, 1985).
Abandon waste: In order to maintain the health of an organization, the top management must evaluate and remove anything that is out-of-date, useless, unproductive, as well as any errors, failures, and mislead efforts. It may include wasteful resources, practices, process, and technologies, activities or distribution channels from the organization (Drucker, 1985). This practice can be compared with an organism’s system which needs remove its waste products, or it poisons itself and dies. This process should be carried periodically depending upon the size of the organization. It is to be noted that one must first identify the problem and find its root cause in order to filter the relevant activity. This is largely possible by the R&D department since it carries out all the analysis. Hence, Google has completely transformed its HR practices based on the analytics and almost every decision is data-driven. Thousands of surveys and research are undertaken throughout the year (McKinsey&Company, 2015).
Recruiting policy: No innovation strategy can be effective if the organization doesn’t hire the right employees. HR strategies significantly impact innovation at a workplace. An organization should hire and retain employees who are creative and willing to think outside the box. They should be loyal and intrinsically believe in the organization’s objectives. Such employees facilitate innovation and are an asset to the organization. According to Pierce and Delbecq, (1977), intrinsic motivation is positively connected to innovation. Google considers its employees as sources of innovation and competitive edge. Its hiring system ensures that it selects only intellectual, competitive, self-motivated individuals who are passionate about their goals. Various selection techniques and hiring committees are involved in selecting an employee. Apart from their credentials, candidates’ googleyness is observed and after selection, an extensive orientation process is involved to help them build their network. (Steiber and Alange, 2013).
Establish an Innovation Department: An organization, no matter the size, should assign a separate manager and/or department for nurturing innovation; particularly the ones meant for advancing new products, services, or business. All ideas should be reported to the Chief Innovation Officer instead of the line manager who is already responsible for existing operations. This may be considered an unconventional idea in some companies but not in the innovative ones. There are various reasons for this approach; given the preliminary stages of innovation and its exploration, the problems or hindrances it encounters are to be dealt with attentiveness and patience. The executives in the duty of existing businesses or products will have no time or insight for the new project. They can’t risk their existing obligations and commitments. A perfect example of this practice would be of P&G, Unilever, and 3M etc. They establish a new venture as distinct business right from the beginning and hire a project manager for it. This helps in allocating all resources towards the innovative project and prevents any disruption to the existing business (Drucker, 1985).
Therefore, this essay can be summed up by a quote – “The only thing that is constant is change.” ~ Heraclitus
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