Innovation: It Matters

Innovation is hot. Perhaps too hot says the Wall Street Journal’s Leslie Kwoh, who declares, “Innovation is in danger of becoming a cliché—if it isn’t one already.”¹ Innovation, she elaborates, was mentioned 33,528 times in last year’s quarterly and annual reports, up 64 percent compared to five years ago. But for all the talk, there doesn’t appear to be much action. Kwoh goes on to cite a survey in which most executives concede that their companies still don’t have an innovation strategy. One executive went so far as to concede that his industry is “. . . kind of stuck in the past,” an assessment that could well be applied to a number of industries.

Right now, the past is a dangerous place to be. As former Harvard professor John Kao explains in Innovation Nation, “Only yesterday, we Americans could afford to feel smug about our preeminence. . . . That was yesterday. . . . You know the world has changed when the Chinese politburo—historical bastion of Marxist-Leninist-Maoist thought—puts innovation squarely in the middle of its next five-year plan . . ..” Kao’s book-length description of the international innovation-race is intended to wake U.S. policymakers to the fact that our stuck-in-the-past complacency puts us in serious danger of becoming the “Detroit of nations.” Distilled to its essence, his message is this: innovation matters.

The message applies equally to your industry and your company. In today’s world of global competition, innovation is the key to survival and growth. That’s why forward-thinking companies have installed dedicated innovation officers. They recognize that innovation is the principal driver of the competitive advantage they seek as they jockey for position with their traditional competitors. They understand that innovation is required to compete with novel industry entrants. And they realize that two billion smart, ambitious, innovative Indians and Chinese have only just begun to compete with us for customers, capital, and commodities. In short, they know that innovation matters and that it’s going to matter even more in the years ahead. And you should know it too. If you want to avoid becoming the “Detroit of companies,” you’d best follow in the footsteps of the Chinese politburo and put innovation squarely in the middle of your next strategic plan.

A fundamental first step is to understand what innovation means. One way of defining it is the formula:

Innovation = Ideation + Implementation

Most people equate innovation with the first half of the formula. They think of it as simply dreaming up a new idea. But, as one wag put it, “Any idiot can have an idea in the shower.” Ideas don’t do anyone any good until they’re implemented, which is why the second half of the formula is included. And not just any idea will do. Innovation is about generating and implementing ideas that provide value to your customers, your company, or both.

So what’s all this ideating and implementing about? To what sorts of things are we trying to add value? I’ll answer these questions in detail in future posts. For now, remember that the “5P’s”—Product, Process, Policy, Position, and Paradigm—account for most kinds of innovation. Product and service innovation is self-explanatory. Process innovation pertains to production processes, marketing processes, and so forth. Policy innovation is about things like hiring and compensation policies, risk policies, and decision-making policies. Positioning and repositioning have to do with innovating where, relative to competitors, your company and its products are positioned in the minds of customers and other stakeholders. Finally, paradigm innovation concerns crafting and implementing new or improved business models.

Asking after innovation targets is important, but the more important question is this—how does one go about innovating? Again, more on that later. Here, I simply want to emphasize that innovation has become a sophisticated and manageable process. All manner of advanced tools (like IdeaScale) and methods exist to provide managers with ways to manage the innovation process and build their organization’s innovation capability. In fact, the practice of innovation has advanced to the point where it deserves to be treated as a professional discipline, on par with other organizational disciplines like operations, marketing, law, and human resources.

So which way should you go? Kwho or Kao? Cliché or capacity building?  Should you dismiss innovation as a trite, overused buzzword? Or is it better to embrace the idea that innovation matters and start constructing your company’s capacity to innovate? You know where I stand.

¹(Kwho’s article was written in 2012. I first published this post a decade ago, but I think it’s worth repeating today.)

Kevin Holt specializes in collaborative innovation. He helps clients create innovative strategies and solutions by designing workshops that employ the “3Ps”—meeting, group, and task PROCESSES are mapped to electronic brainstorming groupware and other collaboration PLATFORMS and implemented by a facilitator who assembles a cognitively diverse group of PEOPLE. Kevin is the author of Differentiation Strategy: Winning Customers by Being Different, published by Routledge in 2022. He received an MBA from Arizona State University and a BS from the University of Wisconsin-Madison. For more information, visit coinnovationconsulting.com.