Making the leap: encouraging innovation08 | 2008 The 2008 Hay Group international client meeting saw some of the world’s foremost business theorists discuss the nature of innovation and how best to develop it within organizations >>
ContentsMaking the leap: encouraging innovation 2Part l: innovation is not... 4Part ll: what does innovation look like? 6Part lll: making innovation happen 8Conclusion 12
Over the course of two days, delegates were n Innovation in terms of productstreated to a range of theories on successful and services is not the sole destination.innovation from which emerged a number Change in the form of new processes,of common conclusions. approaches and ways of going to market is as important in steering organizationsn Often organizations get stuck in their to success. thinking on innovation, following conventional wisdom which has not While investment in R&D and reward always proven to be effective. programs will go some way to embeddingn Mirroring how your customers experience innovation within organizations, other life and helping them to ‘get jobs done’ in components such as visionary leadership a simple, low cost but highly effective way create an environment where employees are more effective when seeking to create feel they can take risks. Additionally, new products and services. practices such as identifying ‘hot spots’n The process of innovation is not a linear are as effective in delivering growth and one. Creating value through new ideas organizational improvement. and products is a more pragmatic process, involving the reconciliation of dilemmas and problem solving.What was needed, he argued, was an Ultimately Rifkin’s vision was ofindustrial revolution that combined the organizations, countries and regions ofcommunications revolution, already the world cooperating. “We are going toexperienced, with new energy. have to leap ahead of centuries of rivalry and distinguish between geopolitics andIt would not be long, Rifkin argued, biosphere politics. We cannot afford thosebefore the price of energy, climate change rivalries; we need to share and not fight overand logistics will condition every business remaining resources... we have one shotdiscussion. He invoked a vision of a world to get it right” he cautioned, “but not25 years hence where millions of buildings, much latitude.”shopping malls and technology parks allcollect and share their energy.
It became apparent that respondents all Creativity like so many things is nothad a long drive to work and they needed linear, he argued. It is stimulated bysomething to ward off boredom during that establishing diverse, inventive teams madetime. “Viscose and thick, these milkshakes up of different cultures and types of peopletook some time to consume and stayed and skills. Innovation was then generatedin the stomach for longer; they also fit through the reconciliation of the conflictsconveniently into a cup holder.” It was that would inevitably arise between both theclear, Christensen explained, that their individual and the team, and the differentcompetitors in the milkshake market ‘types’ of team members.were not other major fast food outlets,but bananas, donuts and bagels. In resolving those dilemmas, Trompenaars recommended the use of ‘critical oxygen.’Innovation within this context involved Team members discuss their colleagues’making the product even thicker; maybe ideas, first by identifying two positiveadding small chunks of fruit for added comments and then by raising criticisminterest and unpredictability. Moreover, through asking “how can I help you resolvemaking them available through pre-paid the issue of...” This might initially seemswipe cards at gas stations, enabling people contrived, Trompenaars acknowledged,to grab one at the same time as they got yet within his own organization it hadtheir gas would also boost sales. rapidly become second nature.“When companies segment their markets by There is no one approach that will ensurejob rather than by customer or product type, creativity, whether it’s centralization orit quickly becomes apparent that the market decentralization, or global versus local,is much larger, that their share of it is smaller he argued. Rather it is a combination of all,than originally thought and that their real a fluid arrangement that takes from bothcompetitors aren’t in their product category. in order to find the solution.They also understand the constraints thatkeep more customers from ‘hiring’ their “Yes we need global standards and yes weproduct for the jobs,” Christensen argued. also respect cultures. The most sustainable model is the ‘transnational firm’ – which consistently looks at local processes to see...linear what can be leveraged.” These firms did notJust as following business school formulae have headquarters, argued Trompenaars;could not guarantee successful innovation, they had centers of excellence basedICM delegates were told, neither would around the group.thinking in terms of absolutes. Creatinga sustainable culture of innovation Indeed, Trompenaars argued, creativeinvolves ‘thinking outside the box’ and organizations were loaded with dilemmas.crucially, resolving dilemmas, argued Fons Sustainable innovation involved pragmatismTrompenaars, expert on cultural diversity. and it meant migrating from culture to culture depending on the stage of anHe challenged the assumption that creativity organization’s life cycle and strategy.only emanates from those who are consideredto be ‘more intuitive, perceptive, thinking, Yet, while creating a sustainable culture ofextrovert, lateral and right brain.’ In reality, innovation was neither ‘reliably predictable’he argued people were an amalgam nor a linear process, delegates were assuredof many qualities. that there were ways to recognize it.
Think like a start-upCrucially, Christensen argued, disruptive That innovation is not just the ‘destination’innovation demands agility in the form of was a point acknowledged by many of thisnew ways of going to market, which is why it year’s speakers and workshops. New approachesis more likely to come from new companies. and processes are as valuable if they are“When an opportunity for disruptive growth to deliver organizational changecomes, market leaders fail to recognize and and improvement.capture it – they try and cram it into theirexisting business model.” By way of an example, Jack Welch of General Electric was cited for the bestIf your sales force is good at selling your practice approach that he had taken.existing products and brands, he explained, Rather than trying to create innovation foryou will be reluctant to dismantle it or build its own sake, clarity was necessary arounda new one to sell the new, disruptive product. why it was required. New products wereIt might also miss the essence of the disruption needed but so was innovation aroundor even feel threatened by it if it cannibalizes processes for delivering both local andyour existing products. It will either not sell global products.it or fail to sell it successfully. It was a point picked up by ProfessorSome of the financial analysis – for example Renée Mauborgne whose collaborationnet present value (NPV) and discounted cash with Professor Chan Kim famouslyflow (DCF) – which often informs strategy, produced Blue Ocean Strategy, ancan lead to bad decisions as the choice is international bestseller on innovation.rarely between ‘stay the course’ or ‘invest,’ There were innovative approaches andbut rather ‘invest’ or ‘decline.’ It is this processes that in themselves would helplegacy and baggage that hampers success. delegates move their organizations fromOrganizations stand more chance of the bloody and highly competitive redinnovating effectively if they thrive like ocean to new market space: the blue ocean.a start-up when making decisions.“ When an opportunity for disruptive growth comes, market leaders fail to recognize and capture it – they try and cram it into their ” existing business model.
About Hay Group’s global innovation survey Over a period of three months, companies we studied had reached the Hay Group polled 67 companies from level of embedding innovation into parts around the world and across all major of their organization. sectors. We surveyed 540 executives and conducted in-depth discussions with a Hay Group found that organizations can segment of them. At the ICM in Rome, be defined either as innovation ‘autocracies’ we also surveyed 220 delegates as a point or as ‘democracies’ – a rarer occurrence of comparison. Our objective was to with only six per cent of our respondents understand why organizations often fail classified as such. when they set out to innovate. In innovation autocracies, power resides Hay Group found that embedding at the top. A select few decide what the innovation does not always succeed, innovative ideas are and allocate resources as most take the approach that has made to ideas. A minority are considered capable them successful for the last 50 years. In fact, of innovating. the structure and approach of industrial-era Innovation democracies run against the grain. organizations, where specialization and Power is dispersed across the organization departmentalization rule, is toxic and everyone is responsible and accountable to innovation. for embedding innovation. People decide on As a result, frontline managers are being which ideas they are going to support and asked to innovate but have no idea where to resources are allocated according to that start; fatigue sets in and initiatives fail to go support. In short, innovation democracy anywhere. In fact, only 20 per cent of the is about the power of the many.Innovation: how the 20scores breakdown Strategy 10 16 21 Key: Climate 15 10 Innovation democracy 21 GIS average results Process 19 10 Target score Rome ICM delegates 20 Ideas 18 10 0 5 10 15 20 25 Like innovation ‘autocracies,’ many organizations excel in ideas and process but fall short on strategy and climate. Respondents were polled on their approach to strategy, climate, process and ideas. The blue innovation democracy bars relate to the average score of the four companies that achieved 80 points or more in the global innovation survey (GIS). It is agreed that the GIS, including the survey instrument, the data and output from the GIS, and the reports of the results of the survey, shall be the property of Stratage Inc. Stratage hereby grants to Hay Group a non-exclusive, non-transferable, worldwide, perpetual, paid-up, royalty-free right and license to use the data and output from the GIS for Hay Group’s own business purposes.
Strong leadership was required to build Unilever’s Diego Bevilacqua gave a real lifecultures of innovation and encourage example of innovation in his organization,innovative behavior. The HR function was where the focus was on business improve-frequently identified as a ‘culture steward,’ ment through innovations in leadership,essential to the embedding of innovation governance, culture and organizationalnot just through organizational values and process. Making changes to these aspects ofbehaviors but in looking at leadership the business stimulated significant growthcompetencies. “We have got to make the for the group around the world and enabledCEO responsible. How can HR help coach Unilever Foodsolutions to then innovate inleaders, provide feedback, advise?” Ulrich brand, services and products.asked delegates.He outlined a leadership checklist fororganizations looking to grow and competethrough innovation: “Do we: exhibit strongcommitted leadership? ‘walk the talk?’ have achampion who dedicates 20 per cent of theirtime to change? have leaders who pay attentionto change in terms of passion? have time aswell as focus? and do we have a sponsor whopermits that champion to put time intothe change?”
Africa Helsinki Dallas GB08/049 | version 2 | 08 September 08 | Global brand teamCape Town Istanbul EdmontonJohannesburg Kiev HalifaxPretoria Lille Kansas City Lisbon Los AngelesAsia London Mexico City Madrid MontrealBangkok Manchester New York MetroBeijing Milan OttawaHong Kong Moscow PhiladelphiaJakarta Oslo ReginaKuala Lumpur Paris San FranciscoMumbai Prague San José (CR)New Delhi Rome TorontoSeoul Stockholm VancouverShanghai Strasbourg Washington DC MetroShenzhen ViennaSingapore Vilnius PacificTokyo Warsaw Auckland Windsor BrisbaneEurope Zeist CanberraAthens Zurich MelbourneBarcelona PerthBerlin Middle East SydneyBilbao Dubai WellingtonBirmingham Tel AvivBratislava South AmericaBristol North America BogotaBrusselsBucharest Atlanta Buenos AiresBudapest Boston CaracasDublin Calgary LimaFrankfurt Charlotte SantiagoGlasgow Chicago Sao PauloHay Group is a global management consulting firm that works withleaders to transform strategy into reality. We develop talent, organizepeople to be more effective and motivate them to perform at theirbest. Our focus is on making change happen and helping people andorganizations realize their potential.We have over 2600 employees working in 86 offices in 47 countries.Our clients are from the private, public and not-for-profit sectors,across every major industry. For more information please contact yourlocal office through www.haygroup.com.