The Innovation Solution
Businesses today must operate in a world of intense competition. Add in the vagaries of an economic downturn and the marketplace can seem more like a jungle. But can strategy guide a business operating in a "jungle" environment?
Is this the best time to focus on innovations or would it be better to wait for more stable market conditions? Stuart Crainer spoke recently with Costas Markides about the best way to manage in the current business climate.
How important is strategy in order to compete in today's marketplace?
In uncertain environments, companies need a strategy. If the economic environment is good, and everybody is growing, you can grow without even having a strategy. But if you are in a jungle, if you are in a crisis, that's exactly when you need a strategy. But looking beyond strategy, innovation is the first step a company should take.
Why innovation?
I've always believed that innovation is the answer to every organisational problem - because innovation is about growth. If you think about it, if the people operating a business are not growing, innovation will not happen. I've been studying innovation for 20 years, and most would agree that it's a very crowded field.
Are there ways your approach to innovation is different?
There are two areas to which I think I bring a differentiating element to the core study of innovation. The first is that when you look at the work of other academics and consultants, they talk about innovation in general. I believe that there are different kinds of innovation, and the mechanism you need to achieve one kind of innovation is different from the mechanism you need to pursue another kind of innovation.
Can you clarify that point?
For example, my last book was on business model innovation - how companies develop new business models - and I wrote about what companies need to do to achieve that. My previous book was about radical product innovation and how to come up with new radical products. My prescription for how to achieve radical product innovation is totally different from how to achieve business model innovation. So, I don't think it's right to talk about innovation in general and tell managers that any one approach is what they need to do to become more innovative. Those who study innovation and those who try help companies to innovate need to be more specific about what kind of innovation is most needed and then give the appropriate advice to companies. That's one of the things that I do with my innovation work that separates me from others.
And the second way you are different?
The other thing that I think differentiates my work is my view that innovation is much more than creativity. A lot of published work is about how companies can come up with new ideas about business models, about products - about anything; and brainstorming, visioning and breakthrough thinking are helpful in generating new ideas. However, even though I think it's important to come up with new ideas and it's an important part of the innovation process, it's not enough. Most of the problems arise after people in business come up with the radical new ideas; what really determines whether a company is innovative or not occurs in the implementation stage.
You're saying that it's not just coming up with a new idea: you have to put it into practice.
Absolutely. For example, let's say you operate an established company and you devise a new business model. The issue for you is not only how to come up with the new business model but what to do with the old one. Do you abandon the old one - how you operate your business today - so you can move 100 per cent into the new one? Or, do you continue with the existing business model while also phasing in the new one; and, if you move this way, how do you operate with two business models at the same time? That's where I try to focus my work: on the implementation issues of innovation.
How many different kinds of innovation are there?
At the very least, I think companies need to start thinking about product innovation being different from technological innovation, from process innovation and from business model innovation. For me, those are the four big ones. I'm sure there are more and finer divisions others could cut innovation into.
Is implementation the point at which most innovations fail?
Absolutely. The problem for companies is not so much coming up with new ideas. When I go into companies and ask the senior managers what they need to do to achieve a certain kind of innovation, amazing as it sounds, in five minutes, they can tell me. They don't need to read any books, they don't need to go to visit any other business. Minutes after I ask what needs to be done to innovate, managers can (and do) tell me, "We need to do X, Y and Z". Then I usually move on from there and ask of them, "Well, in this X, Y, Z, have you taken this step or have you initiated that action?" In more cases than not, they have no answer. That's why I say that new ideas are just one part of innovation. New ideas are exciting because they usually are accompanied by new knowledge. But the problem for managers is not knowledge. The problem is action. Innovation is difficult because people usually know what they have to do to achieve it, but they still do not do it.
That behaviour seems to work against the best interests of the company and everyone who works there. Why does this happen?
Managers do things that are based on past experience and habits, repetitive things; but innovation is something that requires people inside a business to do something completely different. Innovation can require, quite possibly, changing the culture, changing the way managers or others work and so on. Innovation means change. Managers are very good at doing better and working harder at what they've always done. Innovation is about doing things slightly or radically different, and that's where the problem is.
Then how does one begin to innovate?
First of all, at the very minimum, an organisation has to put in place an environment that supports and nurtures innovation; and by environment, I mean a certain culture with certain kinds of incentives along with certain processes that promote innovation. That's the very minimum. But sometimes when I tell companies that they have to establish these things, some managers develop the attitude that the organisational environment must be completely right before innovation can occur.
And it doesn't?
I can give lots of examples of organisations in which the culture and the structures were not optimal, and yet certain individuals took it upon themselves to drive innovation. So, ideally, companies need the right culture and incentives and structures; but over and above that, you need individuals who are willing to go beyond the constraints that any organisation places upon them in order to take action - to start working on the X, Y and Z that I cited earlier. Sadly, there are very few people out there willing to stick their necks out and really do things differently.
Do you consider yourself innovative?
I would certainly describe myself as a creative person in that I do come up with a lot of ideas; but, by definition, I'm an academic, and we are not very good at implementing things. So, I wouldn't say I'm an innovator. "Innovator", for me, defines someone coming up with new ideas and implementing them to derive new value. The first half is creative thinking, the second is action; both of them together is innovation.
How do you generate your ideas about strategy and innovation?
I get ideas by working with people (such as senior managers), by writing cases on organisations and by observing problems that organisations have in day-to-day life. For example, many companies want to get people to cooperate, not allow themselves to become locked in organisational silos, which is a big problem in many businesses. Usually, in such cases, I ask senior managers how many of them have two, three or more children. Almost all of them do, so then I ask whether their children cooperate. "Yes," they say. Then I ask if their children operate in little silos. Their reply: "No, it's amazing how they all cooperate." At which point I try to get them to explore what it is they do as parents to encourage their children to cooperate. I mean, it's common sense, isn't it? At the end of the day, there are things that you do at home to get people to cooperate; these actions are exactly the same things that I think you need to do to get cooperation in an organisation.
You think outside the organisational box, don't you?
Yes, and I advise others to do the same. Look beyond companies. Look beyond the business environment. You will be amazed if your thinking ventures into non-traditional business environments, such as the family; you'll find you get lots of ideas of what people need to do in the business environment to achieve some of the things they want to achieve. Consider a business school such as London Business School, where you have a class of 50 to 60 students from 50 or 60 countries with different backgrounds and so on: such diversity should be a fertile ground for idea generation and idea promotion and things like that. That helps keep my thinking fresh.
Then you certainly value new ideas.
As I mentioned, it's the starting point for innovation. At the end of the day, innovation boils down to an individual having an open mind and looking for ideas everywhere. Ideas are everywhere - in the business world, in the family, in the economic environment; everywhere you look, there are new ideas, new ways of thinking about or doing things. It's just a matter of having an open mind to absorb new ideas and to utilise them for those management applications that can help business prosper. If you can engage new ideas and put them into action in order to serve customers and society in better ways, you'll find that innovation truly is the answer to almost every problem facing your business.
Costas Markides (cmarkides@london.edu) holds the Robert P. Bauman Chair of Strategic Leadership and is Chair of the Strategic and International Management faculty at London Business School.