Innovation Management – Part 2

By Fundisile Serame

This part of the Innovation Management Series addresses the first phase of the ‘Innovation Value Chain’. This stage is called Idea Generation. There are two key things each organization needs to address in the Idea Generation phase: 1) source of high-quality ideas, and 2) key performance indicators for ideas generated. In other words, where does the firm originate its new ideas? How does it measure its innovation performance?

Let us for a moment consider: where do sparks of good, high-quality ideas come from? This is a question that all organisations are intrinsically interested in, whether they admit it or not. The fact is, innovation is not a linear process. Innovative ideas can emerge from desperate spaces. In a corporate context, these sources can be in-house within a unit, collaboratively through cross-pollination across units, or they can come from spaces external to the firm. While some environments seem to breed innovative ideas effortlessly, others tend to squelch new ideas.

It is natural that managers would look first look in their immediate space, inside their own functional groups or business units, for creative sparks.  They prefer to talk to their immediate colleagues rather than reach out to counterparts in other departments or divisions as they tend to have a pretty good sense of what’s around them. There is also a certain level of comfort that comes with the knowledge that a unit is within the manager’s sphere of control, and that control is lost once that boundary is transcended.

After all, innovative systems have proven to gravitate towards the edge of chaos. However, companies that majorly lean on ‘inside unit’ innovation approach tend to experience a shortage of good new ideas. Research by Morten & Birkinshaw (2007) on the subject found that this is partly due to the inability of managers to forge adequate quality links and networks with others outside their company. Those in search of the bigger sparks need to realize that great innovation is ignited when fragments of ideas come together, be it through internal or external networks.

For an organisation to develop ideas, they need lots of other ideas to connect to those it already has. This is no different from how a human brain functions. There has to be some sort of a fertile environment where these random ideas collide, a system of incubation where one hunch can be connected with another hunch lurking in someone’s mind to create new forms. There exists an interrelationship between innovation idea quality and idea providers’ network connectivity, as one 2009 German study found.

Great drivers of scientific innovation have been historically attributed to increase in connectivity, allowing for individuals to borrow from other people’s creativity to create their own. Organizations get smarter by creating liquid networks and ‘accidental connections’ both internally and externally to improve on quality of ideas going through its innovation funnel.

Internally, this is achieved through cross-unit collaboration wherein insights and knowledge from different parts of the same organization are combined in order to develop new products and businesses. However, this is not easily achieved in big firms as decentralized organizational structures and geographical dispersion make it hard for people to work across units. Getting outside of your comfort zone and making connections to get perspectives is what every organization should strive for. Companies do need to assess whether they are sourcing enough good ideas from outside the company and even outside the industry. They need to tap into the insights and knowledge of customers, end users, competitors, universities, independent entrepreneurs, investors, inventors, scientists, and suppliers.

Though there is evidence that an external ideas sourcing strategy is perhaps the most critical, many companies still do this poorly, resulting in missed opportunities and lower innovation productivity. In part this is due to companies suffering from the damaging “not invented here” syndrome.

Sony is an example we can learn from. After having had an impressive track record throughout the 1980s for developing new-to-the-world products such as the Walkman and PlayStation, the company suffered from this syndrome as admitted by its former CEO Sir Howard Stringer. Even as rivals were introducing next-generation products such as the iPod and Xbox, they continued to believe that outside ideas were not as good as inside ones. Thus, it missed opportunities in such areas as MP3 players and flat-screen TVs and developed unwanted products like cameras that weren’t compatible with the most popular forms of memory at the time.

For a firm to have an understanding of their strong links when it comes to idea generation, it has to candidly introspect and ask itself three key questions:

* Do people in our unit create good ideas on their own?

* Do we create good ideas by working across the company?

* Do we source enough good ideas from outside the firm?

Answering these key questions will involve identifying key performance indicators for each source, i.e. the number of high-quality ideas generated within a unit, across units and externally. Once the organisation has done its introspection and determined if it’s an idea-rich or idear-poor company, it needs to develop strategies that will help leverage its strong links and fix its weak links.

Companies that rely on in-house (unit-based) ideas, for example, need to build external as well as internal cross-unit networks to generate ideas from new connections. They need to figure out their approach to ‘democratizing’ their innovations and whether building external networks should be based on solution-network or discovery network approach. These two approaches are distinct in that while solution-network is geared toward finding answers to specific business problems, discovery network is geared toward unearthing new ideas within broad technology or product domain.

When all is said and done, a firm’s performance on idea generation is highly dependant on their ability to foster an innovative cultural environment. Some environments are powerfully suited to the creation, diffusion and adoption of new ideas while others are not – which tends to be the case with big firms. On how this kind of culture can be fostered, for starters – firms need to spend less time in formal meeting rooms to encouraging creativity.

They need to nurture the spirit of the ‘coffee space’ and to think of innovation as something that happens all the time, not just on special “creative” days. As for emerging markets, like Lesotho, local companies could greatly benefit from developing innovation strategies that seek to leverage knowledge, creativity and experience of networks both locally and of other leading emerging markets especially in markets that have stagnated and growth opportunities remain elusive.