Seminar Report – The New Competitiveness: Innovation Ecosystems and Sustainable Innovation

Prof Hautamaki introduced the concept of global networking in value chain creation. With communication and technology globalization, resources are more easily accessed across borders and continents; value chains are becoming specialized and distributed all over the world. However, even so, within a country or state itself, resources are concentrated in knowledge hubs and Innovation Centres. Innovation Centres provide world-class ecosystems for innovation and global collaborations.

Prof Hautamaki further elaborated on the characteristics of Innovation Centres. Many of these innovation centres have precedence of success in the regions and prominence (usually coupled to institutions). More often than not, these innovation centres embody a culture of creativity and openness that attracts for people, entrepreneurs to combine and flourish ideas, with easy access/ engagement of investors. A competitive innovation ecosystem that encompasses each innovation centre supports continuity in renewal of businesses. In fact, he proposed an emerging framework for innovation: global networks/ knowledge hubs as schematically reproduced below.

Professor Hautmaki re-iterated that the crux of innovation does not lie within the hub itself, but rather, in the innovation ecosytems that surrounds the innovation centres/ hubs. Some of these factors of interplay in the ecosystem are shown in the schematic diagram below. He elaborated that it is critical to have a wide-enough market for new innovative products. If market is not large enough, one must be versatile to look for a ‘test-bed’ economy. To put it succinctly, an innovation system behaves like a community whereby successes are only possible when all components interplay well in a synergistic network.

With an understanding of Innovation Hubs and Ecosystem that serves as the infrastructure for innovation, Professor Hautmaki introduced the 4i model of innovation, which entails the flow of Ideas to Innovation to Implementation and back to Ideas in a closed loop.

Prof Hautmaki proceeded to explain the two modes of innovation. First, there was traditional model of innovation, starting with the birth of ideas, epitomized largely by MNCs and Co-operations. These innovations were driven by profit, economy and productivity based, driven by the values and demands of Capitalist societies for economic growth. What is of interest, is however the emerging model of sustainable innovation. Unlike traditional innovation, Sustainable Innovation sustainable innovation is driven by creativity and innovation in optimized harness of industrial capital, natural capital, human and cultural capital (encompassing diversity) to solve “wicked problems”. Prof Hautmaki quizzed that one does not have to look far to solve wicked problems; many of them are present in Millennium Development Goals, such as greying population, climate change, food security and poverty eradication.

As one would have noticed, the design process of a product in line with philosophies of sustainable innovation would requires a major paradigm shift from conventional innovation modes. It entails a design reprioritization from usefulness of the product, often served by development/ material properties, performance and technology to one which builds on the perceived value of the product, driven by user’s desires and what it means to their concept of life. Henceforth, it is important to blend people with disciplines and skills, like user- research and anthropology with engineering. This emphasizes the importance and interconnectivity of the innovation hubs and supporting ecosystem.

Innovation hubs and ecosystems must recognize, adapt and leverage on new drivers of sustainable innovation, projecting for current and future needs in order to stay relevant. Cultural and social expectations more often than not bring about new changes in consumer behavior, which then becomes the new “normal”. In my opinion, one of these major changes of the millennia the global connectivity and changes in private space of the user brought about by the proliferation of social media, such as Facebook. Another key facet of sustainable innovation is through growth and value creation- one that leverages on the combination of service economy and design thinking. A popular framework that companies employ in value creation is via the SMART framework- Simple, Maintenance-friendly, Affordable, Reliable and Timely-to-Market.

5 Keys to Innovation Every Business Needs to Succeed

Most organizations recognize the importance of innovation in advancing their competitive position or improving their business processes. However, many may not recognize that successful innovation is built on a framework of component functions, each of which is critical to the overall efficacy of the program. These functions, known as innovation framework components, individually define specific characteristics of the program and collectively describe the organization’s posture toward innovation.

One of the most basic elements of the framework, frequently overlooked, is the definition of innovation that the enterprise wishes to adopt or define for itself. This can (and probably should) vary dramatically from enterprise to enterprise. From the foundational definition of “a new idea, method or device” (Webster Dictionary), to “a change that creates a new dimension of performance” (Peter Drucker, leading strategy innovator) or the more action-oriented, simple but meaningful “idea applied” (we like this one a lot), each enterprise needs to create its own definition that is aligned to the objectives that their innovation program is targeting.

But the term’s definition is clearly not enough and is only one of the elements of the overall framework that companies must assess and customize to their individual challenges, objectives, operating model, and culture. Some of the other critical components include:

1. Strategy – Alignment is key

Every enterprise defines its own value chain within the market and develops strategies to execute within that value chain. Innovation plays a role in this strategy and ideally enforces it with contributions that enhance the company’s competitive position or improves its internal effectiveness. The enterprise must target its innovation resources to align with its overall strategy. It needs to communicate clearly its challenges and articulate objectives for the solutions it is seeking, so that enterprise resources can focus on delivering innovation targeting those specific objectives. Within the strategy framework pillar the company has to define success criteria for innovation across time as well as the criteria for idea selection and program governance. Innovation strategy development falls on the shoulders of executive leadership.

2. Process and Tools – The foundation for success

Innovation processes and tools must rise to the level of the innovation itself. A suggestion box won’t work. Because innovation contributors are naturally resistant to inefficient and arcane interaction tools, this aspect of the framework is ultra important to get right. Investment in the right solution yields substantial results, a high level of participation and with it, large pools of idea contributions. AT&T, for example, operates one of the largest (with over 120,000 active participants) innovation crowdsourcing platforms and operational systems called the Innovation Pipeline (or TIP). If implemented internally, the development of such processes and tools is best addressed by company’s innovation resources (e.g. within the CTO organization), not by the Project Management Office (PMO). Alternatively, it can be sourced from trusted partners who can integrate the tools and processes in a way that meets the company’s specific innovation goals.

3. Inducement – A call for leadership

Participation in innovation is key to its success; mass participation is nirvana. Crowdsourcing has proven invaluable to solving extremely complex problems precisely because of the cumulative effect of mass ideation. Methods to induce participation vary dramatically across company cultures, but two of the more effective approaches include broadly publicized contributor recognition (with or without financial reward) and an opportunity by the contributor to participate in the execution of the idea throughout its lifecycle. Company leadership, including areas of the HR organization, has a critical role to play in developing and managing this framework component.

4. Culture – New behaviors and attitudes

The belief system within the company is the component most resistant to change. In all likelihood, the behaviors and attitudes that prevail have developed over an extended period of time, likely across several management chains and have been documented to produce certain predictable, albeit unremarkable results. Change in culture necessary to support peak innovation effectiveness will in most cases be highly disruptive to the organization and will cause discomfort and possibly displacement. Aspects such as intolerance of failure, “CYA” tactics, group-think behavior and hyper-individuality are cancers working against an effective innovation culture. All need to be uprooted without demoralizing the entire organization. This challenge can only be addressed by a leadership team with a visible and artfully communicated commitment to the changes they are championing.

5. Collaboration – The value of connections

Enterprise innovation must develop connected relationships with external sources of ideas and know how to avoid the “not-invented-here” pitfall. The most valuable external resources include customers and their corresponding centers of innovation, but also suppliers, partners, academia, and the general developer community. For organizations which accept radically open innovation (Gartner Maverick Research -Radical Openness, September 2012 [registration required]), partnerships can extend to virtually all segments of the industry and all willing participants, including virtual “innovators for hire.” Developing and managing these partnerships most often is best facilitated through special-purpose teams organized specifically for this mission. For example, AT&T has created a Foundry organization to support this framework pillar.

Innovation is considered to be a natural product of interactions among highly creative people. Whereas creative contribution is an important component in the overall effectiveness of a program, in and of itself it is not enough to assure the program’s success. In fact, an argument could be made that it is even secondary to a well executed set of component activities within the overall innovation framework. On the scale of an enterprise, management expects results from an innovation program to have a significant amount of predictability. An innovation program can only deliver predictably consistent results when it is managed against a well designed program framework that is aligned with the company’s objectives to harvest and apply innovation.

Solving the Innovation Dilemma

Most people and most organizations want to be innovative.

After all, those who are first to market with a new product typically get the best returns, and those who develop new and more innovative processes can typically provide much better quality at much lower costs.

Similarly, those who create a management system that promotes an innovative culture can more easily achieve and maintain a competitive edge.

But consider how infrequently innovations such as those listed above happen…

Clearly innovation is challenging for all organizations, large and small; and the challenges are not always easy to identify.

For example, it might seem logical to surmise that a common barrier to innovation is lack of time or poor time management, and lots of organizations cite the lack of time and attention to innovation as a major barrier.

“People are too busy to think about innovation,” they say. “If my boss’s boss is too busy to think about new and better ways of doing something, I better be too.”

Of course this is a good recipe for keeping things exactly the way they are while the world passes by… and frequently results in an organizational belief that there “is no time,” so no one bothers to identify potential solutions or ways to become more innovative.

But dedicating resources to innovation does not seem to work that well either. It may foster a creative environment, but this does not necessarily translate into more workable innovations.

One organization created an innovative think tank with 12-14 people led by a senior executive. After two years they were disbanded because while they came up with some innovative ideas, none of them were financially viable; and in other similar instances, many of the best ideas were ruled out only to be brought to fruition by other companies!

So it would appear that time alone is not the culprit; and organizations may give innovation too little time, or too much.

So, you might ask, what can an organization do to improve innovation levels?

One of the first requirements is strong and empowering leadership, which must provide three important things:

The amnesty that people often need in order to take the risk of putting ideas and observations on the table

Awareness of the threats from the changing environment and the opportunities that may arise

Awareness of likely or potential marketplace constraints

For example, when Xerox PARC created the mouse, it was, quite simply, amazing… , despite the fact that it cost $300 to build and only worked for a few weeks. But, since they had a generous budget these factors were acceptable.

Yet to make the mouse truly innovative required something quite different: constraints. Steve Jobs had the vision to add the constraints: the mouse must be buildable for under $15 and operate reliably for two years.

Perhaps the in-house innovation team (above) that was disbanded because none of their ideas were financially viable simply did not realize that the ideas were not yet complete… that marketplace or other types of constraints were in play.

For successful innovation, you need people to seek out the real-world constraints that must be respected in order to actualize the idea. Until the idea can work within the constraints – like Apple’s mouse- it is still in the germination stage, not yet a true innovation.

Another catalyst to innovation is fear of loss… as one company observed, “When our very survival was at risk, we began to implement a program of Continuous Improvement that called on everyone to contribute innovative implementable ideas!”

Because they had nothing to lose… because they had to develop new and better ways of operating in order to survive, they did!

Similarly, a start-up company with few resources must innovate or quickly wither away.

Applying the same concept to an organization that is not experiencing dire circumstances, it is most often true that, in order to develop a truly innovative culture it must be less scary for people to try something new and risk failure than it is to stay with the status quo. To create this condition, leaders must provide amnesty to reduce the risk of sharing new ideas.

Of course it also helps if the status quo looks pretty untenable. Never waste a crisis, and if you don’t think you have one, look further around you.

Change is inevitable; a threat is always on its way!

Process innovation also requires getting close to the customers or people doing the work.

To be able to create or develop more innovative work processes, you must go to the work. ‘Go to Gemba’ (or the work place) is Toyota’s mantra. You must go and watch the work flow in order to understand the processes and the problems that workers grapple with. You must see for yourself in order to envision a better product or process.

Along the same lines, simply asking customers what they “think they need” or what they want is simply not going to be enough. They cannot innovate for you – you must go and watch them use your product to really understand the market.

Finally, when striving to increase an organization’s innovation level, it is also important to recognize that outsiders often come up with the best innovations, because they have no ties to the status quo.

As many have said, it is easiest to think outside the box when you are from outside the box.

But outsiders often have a difficult time effecting real change because they are outsiders. A senior manager of a once innovative company wryly observed, “We say we like to bring in outsiders with fresh ideas, but when they share them we explain that’s not the way we do it here.”

Innovation Strategy Models Need Innovative Leadership Guides

Innovation strategy models usually follow this uninspired recipe
– let’s encourage employee ideas, throw together a business case,

justify the costs and operating budget, dish-up a marketing
strategy and production project plan, hope for the best.

There are other organizations who believe in innovation
strategies which heavily depend on setting up and managing
arrangements, special relationships or partnerships with their
supplier community. I am not trying to find fault with those
methods, however, my argument is with those who are supposed to
act as the agents of innovative leadership.

What is the purpose of an innovation strategy? We innovate to
take advantage of the opportunities caused by change. For
example, prayer is a strategy we use to cope with our personal
challenges. And “prayer”, as philosopher, Soren Kierkegaard so
aptly observed, “does not change God, but it changes him who
prays.”

Simply stated, it is not the strategy that changes, it is we who
change as we employ our strategy and use it to encourage,
energize, enlighten and engage ourselves to strive for achieving
its objectives. In a word, our innovation strategies can not be
expected to change the world, our strategy must compel us to
change the ways we think about, react to and perform in the
world.

“Without change there is no innovation, creativity, or incentive
for improvement. Those who initiate change will have a better
opportunity to manage the change that is inevitable.”
– William Pollard

Innovative Leadership Guide-1: Thinking through your innovation
strategy model

“Innovation is not the product of logical thought, although the
result is tied to logical structure.”
– Albert Einstein

Your innovation strategy model must enable you to execute four
essential tasks:

It has to help you recognize the components of a changing landscape [explore],
It must expose you to the needs imposed upon your ecosystems by the change [create]
It should usher you through the changes you hope to exploit [ implement],
It must empower you to adapt to the changes in your marketplace and your offering [supervise].

Innovative leadership means finding clearly defined pathways
through the territories you operate within – this includes the
environments of your organization, partners, markets and
end-customers. Innovative leaders channel or direct the shared,
received and transmitted energies found in their ecosystems of
profound knowledge, work processes and social relationships.

Innovation leadership uses the innovation strategy model as a
guide towards:

1) Directing innovative activities; 2) Developing crucial systems, resources and assets; 3) Disciplining the process, purpose and players of innovation

Innovative Leadership Guide-2: Reacting to your innovation
strategy model

Your innovative leadership team uses the innovation strategy
model to tweak, adjust and maintain its course towards
successful outcomes. The most effective strategy models provide
leaders with:

Windows on historical, internal and external circumstance [Realities];
Mechanisms to control and adjust to changes [Dynamic Controls]
Applications of energy to inspire, relieve and educate [ Leadership];
Metrics which expose exchanges, dependencies and transfers [Ecosystem Management];
Revelations of beliefs, meanings and feelings [ Coordinated Communications];
Relationships between the observed, measured and assumed [Progress Dashboards];
Opportunity “areas” where the strategy can be executed [ Organic Leveraging].

“Cast aside those who liken godliness to whimsy and who try to
combine their greed for wealth with their desire for a happy
afterlife.” – Kahlil Gibran

If your innovation strategy model depends on a “kiss from the
muse”, a “bright idea” and some similar “eureka” experience, you’ll
have very few and far between innovations emerging from your
organization.

Innovative Leadership Guide-3: Performing on the promises of an
innovation strategy model

“Never before in history has innovation offered promise of so
much to so many in so short a time.”
– Bill Gates

Back in the Industrial Age, we followed a series of steps, made
use of equipment and mechanized systems and relied on prodigious
amounts of fiscal and human capital to achieve the promises of
success. We may live in a different era, I call it, the
Imagination Economy, yet we need the same amounts of effort and
focus to realize our goals.

A few years ago, our competitive advantages were based upon our
ability to shape raw information into forms of relevant,
applicable knowledge. Today, we compete against the imaginations
of others – we have to slice and dice knowledge and blend it
with universal wisdom, intuitive know-how and meaningful
what-ifs to produce sustainable, profitable, productive
innovations.

In the Imagination Age, innovative leadership will be called
upon to map-out the complexities, model optimal congruencies and
mold evolutionary conceptualizations of our world. Leaders will
meet the many challenges of this new Age by seeing people as
four dimensional beings – that is, as physical, intellectual,
spiritual and developmental entities.

Innovative leadership will use their innovation strategy models
to fully exploit and leverage the many strengths of their
available human capital assets – intellectual and physical assets
[think and do], production and social assets [process and
interact], as well as, innovative and developmental assets [learn and imagine].

“Innovation is the specific instrument of entrepreneurship. The
act that endows resources with a new capacity to create wealth.”
– Peter F. Drucker

A model for your innovation strategies is an essential
ingredient in your organization’s competitive recipe – without
such a model, your business will lack the flavor of innovating.
Your customers, constituents and communities may begin to
perceive the staleness of your old, crumbling offerings and stop
putting your products on their shelves.

You need to mix together all the elements of an innovation
strategy model listed above and use these innovative leadership
guidelines to manage and energize your strategy. Innovation is
industry and it requires persistent, determined effort. And just
like the industries of old, innovation can follow a process, it
can use capital assets, it can be measured or assessed and it
can be led and managed.

The Psychology of Innovation

On the practical applications of innovative ideas and the creation of value… and why the 21st century is the century of innovation

Innovation is not just creating something completely new, but creating a product that will be of value, especially commercial, economic, practical or social value. Thus creativity when associated with value and enterprise is innovation and an innovative product is “useful to others”. Innovation could lead to enterprise and commercialization as innovative products are commercially viable. Whereas an invention is creation of something new, innovation is the creation of a product or service that is valuable and useful to consumers. New and innovative products are sometimes radical and revolutionary, although there is incremental innovation that improves systems or products that already exist. Innovation helps in creation of commercial, practical or social value by implementing new ideas.

Innovation is applied invention and helps to create a new product to fill the unmet user needs in the market. An invention is a new product but could be a valued solution to a problem and only by becoming commercially, socially or practically valuable, an invention is transformed to innovation.

This discussion is based on the psychological basis of innovation and although innovation would be associated with creativity, creativity is a trait in humans and innovation is ‘what you do’. Thus innovation is a form of action that requires creativity, enterprise and radical thinking. Thus innovation being focused on creation of a product is action-oriented whereas creativity is thought-oriented. Enterprise is necessary to turn a creative idea into an innovative product that will have significant value in the short or long term. The psychological process of turning an idea into an innovation goes beyond the creative process and involves practical planning of designing and marketing the product to make it commercially viable.

Innovation involves the stages of brainstorming of a creative idea, problem solving, processing or developing it to come up with something radical and different and then developing a business model to help meet market and user needs. Creativity as a thought process is the first step of innovation. Innovation usually involves a new idea, method or product and either the art, technology or business of introducing something new. When ideas are translated to innovation, value is created and this forms the potential for business. Innovation is creation of a product with inherent value and this is done by considering what product will be of value to the user or will be successful in the market. It could be argued that even creativity is responsible for creation of products with aesthetic value or artistic value. Well, that is true but the value created by innovation is probably more objective, because innovation creates economic, commercial and social value.

The psychological processes in innovation differ from creativity as the action-oriented nature of innovation will have to be directed towards fulfilling a user or market or product need. In creativity, the only goal seems to be the creation of the product, although creative products like books can also be market directed. Innovation is specifically focused on meeting user needs, it is action-oriented, so it is based on applications or practical purposes. Whereas creativity being thought-oriented, primarily fulfills the needs of the creative artist and is directed internally, innovation is about the world and fulfills the needs of the user and market and is thus directed externally. Creativity also does not involve a focus on commercialization whereas innovation is about developing the commercial value of a product.

Creativity is the basis of art, architecture, poetry and any artistic or scientific activity for the matter. Innovation is invention with added value, is based on action and is thus more practical in its applications and tangible in its usability. Creativity and creative products are more abstract and not too well defined or tangible as far as their applications are concerned. The only application of creativity seems to be aesthetic pleasure and creativity is the basis of the aesthetic value of any product, including an innovative product. It is when creativity helps make products that are significantly useful to the market that it evolves to an innovation. Thus creativity is the foundation of all innovation, however creativity is not based on innovation. Creativity is the first step towards innovation and innovation is focused on delivering exceptional product or service to the value chain. In innovation, value is added for both user and developer.

The different components of innovation are creativity, radical thinking, business model, user needs, market, design and practical applications. Any new product will have to be well planned in terms of design and application and the business model guides the innovation to market launch and profitability. Thus the ultimate goal of creativity is providing aesthetic pleasure to the users or perceivers and the ultimate goal of innovation is meeting user needs and deriving profitability through commercialization.

Innovation could be about a radically new product or an incremental improvement, so innovation is about improvement whereas creativity is focused on originality. However the most original products are also considered as the most innovative. For example Apple Inc.’s design of iPhones and iPads are among the most original and that is why the most innovative. Thus originality is a common factor in both creativity and innovation and it is the basis of self-expression in creativity and the basis of a business model in innovation.

Innovation is frequently about revolutionizing drastically what already exists. The most innovative products bring about a paradigm shift in technology, or other market and sometimes ‘create’ market needs, rather than simply follow or meet the needs. Apple successfully created market needs for new technology and new design by integrating user expectations. Thus innovation not only meets market needs but can create new market needs and change market dynamics. Innovation is a commercial and business process, whereas creativity is more of a personal process and creativity itself cannot change the market, whereas innovation can change market dynamics significantly and can in fact change the world. Innovation is about evolution and progress of an industry, whereas creativity is more of about the evolution and progress of a creator’s mind.

Innovation is necessary in technology and in every industry to keep the pace of progress in human civilization. Innovation is usually preceded by an invention, whereas creativity is preceded by incubation and organizing the thought processes. Innovation is capable of revolutionizing the market, any industry and set the direction for future technologies and products. Let’s talk about search engine technologies by Google. That’s an innovative technology which brought about considerable profits to Google and thus transformed from a mere technology invention to innovation. So success of an invention defines an innovation. Innovation is used not just in technology but in architecture, automobile industry, engineering, and in all other fields and the primary goal of innovation is progress and also profitability by meeting or creating market and user needs.

The most successful companies thrive on innovation and cannot survive in the market without innovation. Today’s market is an innovative market and the focus is on competition in innovation. Whether it’s Samsung and Apple competing for the most innovative product in the market or two lesser known advertising companies competing for the most innovative advertising campaigns, innovation is the pulse of modern businesses. Even in the 20th century, innovation was not so important and the focus of businesses was on growth, strategy and advertising with emphasis on quality of products.

Quality management is what drove the 20th century businesses. This has changed significantly as businesses have now realized that to reach to the top and to become a powerful force in the market, quality and strategy are not enough. The 21st century will truly be the century of innovation.