Every company feels acutely the need to innovate, yet few succeed in building a culture that supports continuous innovation. Simplifying the innovation enigma is Scott D Anthony’s new book, ‘The Little Black Book of Innovation’. Long-time innovation expert Anthony draws on his research and fieldwork with companies such as Procter & Gamble to demystify the notion. He presents a simple definition of innovation, breaks down the essential differences between types of innovation and illustrates innovation’s vital role in organisational success and personal growth. In this interaction with Alokananda Chakraborty, Anthony, who is also managing director and head of the Asia-Pacific operation of innovation consulting firm Innosight, explains how corporations can successfully execute this game-changing strategy.
Innovation has always been important. Is it more important today, and if so, why?
Yes, it is absolutely more important. Innosight (an innovation consulting firm) research shows that the turnover of seemingly stable indices like the Standard & Poor’s 500 is dramatically accelerating. We project that about 80 per cent of the companies on the index in 15 years will be new. That’s really remarkable. If you don’t innovate, your company won’t be around in a few years. There’s more to the story. Think about how you do your job, how you communicate with your friends, and what you do during your spare time. I’m willing to bet it is changed a lot in the last five years and that it will change more in the next five years. Innovation is part of all of our lives, whether we like it or not.
Isn’t it a whole lot more difficult to make the case for innovation when the global economy is in the throes of a slowdown?
Actually, I’d argue that the slowdown makes innovation more important. We did some research for my 2009 book ‘The Silver Lining’ that showed a very high percentage of today’s great companies were born during economic downturns. I think the slowdown has made clear to an increasing number of companies that operational effectiveness is necessary, but not sufficient to sustain competitive advantage. Innovation has never been more important.
More organisations are talking about innovation today than ever before, but it seems that relatively few are succeeding at it. In your opinion, what is the biggest innovation-related challenge that organisations face today?
That’s a really interesting question. The problem I see is that many companies frame the challenge the wrong way. They think that their innovation struggles are rooted in a lack of corporate creativity. So they hold off sites to develop more “out of the box” ideas but wonder why a year later nothing has changed. The real problem inside most companies are the processes by which ideas are managed. Most companies have tons of great ideas, but the processes systematically root out the idea’s greatness. This is a solvable problem. We worked with Procter & Gamble from 2004 to help build what we call a “new growth factory.” That and related efforts helped to boost P&G’s innovation success rate from 15 to 45 per cent, and substantially increase the size of a typical project. Most importantly, P&G’s pipeline of new growth efforts is now sufficient to meet internal objectives.
So which is more important: a culture for innovation or processes for innovation? Why? What are some of the more important principles that a company must adopt to create a culture in which innovation flourishes?
Both are important and have to work together. Innovation is an intensely human activity. Robust processes without the right culture and mindsets deliver disappointing results. On the other hand, the right mindsets combined with a flawed process often leads to chaos and disappointing results. In terms of creating the right culture, I suggest looking at three things. First, make sure there is a common language of innovation. Most companies don’t even have a common language of the word “innovation!” Second, ensure that there is a tolerance for smart risk taking and experimentation. That means more than saying that it is tolerated — make sure incentives and reward systems are aligned as well. Finally, highly innovative cultures are externally oriented. That is, instead of saying, “We have these things, what do we do with them?” they say “We have identified this opportunity, how do we seize it?”
What is the leader’s role in innovation? What percentage of leaders do you think truly understand what this role calls them to do?
A company cannot be world-class at innovation without active involvement from its topmost leaders. Leaders have to role-model appropriate behaviours, work to break processes that are standing in the way of success, and personally engage in innovation activities. Look at the role Steve Jobs played at Apple. Now, not everyone can or should be like Jobs, but his intense involvement was necessary for Apple’s transformation over the past decade. I think about 10 per cent of leaders truly understand the demands that driving innovation place on them. The challenge is it is different from what got them the top job, so it doesn’t come natural to many of them.
What advice do you have for innovation managers or leaders who are trying to put innovation processes into place in their organisations?
Start small. I get really worried when I see a 100 person newly formed team working on innovation. Instead pick a few people to work on a project or two. Let processes develop organically. Treat the creation of innovation capabilities like an innovation effort, where you thoughtfully experiment with different approaches to see which ones work — and which ones don’t.
How does one innovate by spending less money? Is India really as innovative as we perceive it to be? A lot of the international literature on the subject seems to suggest that what you get in India is actually jugaad, which is not innovation because they are not scalable. What is your take on the subject?
My definition of innovation is “something different that has impact.” Jugaad certainly can fit that definition. There’s nothing wrong with finding clever workarounds, or borrowing ideas from other places. Ultimately, however, innovation does require sustaining energy and expansion, or the impact is muted. It’s hard work. After all, Edison said, “Genius is 1 per cent inspiration and 99 per cent perspiration.”
In terms of spending money, whenever someone bemoans their lack of financial resources I know they’ve gotten stuck in the “innovation dome.” That is, they are only looking inside their organisation or at big vendors. In our venture capital arm we regularly see fully formed businesses with websites, customers and revenues that have been built for less than $1,000. There are so many free or nearly free tools out there, that lack of financial resources isn’t an excuse.
It seems that innovation is easy to apply to products. But what about areas like sales, service, accounting and other less obvious areas?
If you go back to my simple definition of innovation, you see it applies to everything. Think about how Google came up with a new way to sell advertising, using an online auction model. In ‘The Little Black Book of Innovation’ I describe how a librarian at CNN found a simpler way to get information to journalists. In our consulting business we are regularly thinking of new service offerings, such as helping clients design and execute market–facing experiments. Innovation is really coming up with new solutions to old problems, so anyone can use innovation to their advantage.
What is happening globally today relative to innovation and what warnings or lessons are there for leaders?
The biggest shift is that the pace of innovation is increasingly, rapidly. Leaders just don’t have the luxury of spending months of analysis before making decisions. They have to make decisions with imperfect data, and react as circumstances change. This will place big stress on leaders who grew up in a different, slower era. It means being more collaborative, accepting failure and course correction, and being comfortable not having all of the answers.
Last but not the least what sort of skills will we need to remain competitive in the new world?
The number one skill that is necessary in my mind is adaptability. Your business has to change. Your business model has to change. The way you do your work has to change. We have to be comfortable with the new normal of constant change. While it can sound daunting, I am an eternal optimist. There is so much potential inside each of us to drive positive change. If that potential is channeled in the right way, the world is going to be a much better place. And the good news is the way to do this — to be better at innovation, adaptation, creativity, and so on - is well understood and documented. So it's just a matter of committing to it and doing it.