||Insourcing Innovation -- The Innovation Race
Winning the Innovation Race
The act of innovation is an act of conceiving the future, which is what great companies do. They give birth to new ideas that, when commercialized, improve the quality of life for their customers and themselves. This is why we don’t fault any executive or manager for passionately embracing innovation as a critical business success factor.
At the highest level, the capital available for innovation can be the difference between business as usual and business as exceptional. We define “business as usual” as performing just well enough to stay alive or make a small profit. “Business as exceptional,” on the other hand, is the state a company achieves when it enjoys greater profit margins by virtue of greater innovation.
Exceptional companies, in turn, invest a portion of their good profits into driving successive waves of innovation. Like a snowball effect, greater net profitability for each innovation, and more innovations, drive what we can characterize as the dream of every business to become a consistent cash machine through changing times.
Management guru Peter Drucker once said that innovation is the only competitive advantage a company really has, because quality improvements and price reductions can be replicated, as can technology. Therefore, if a company could have just one major capability, it should be innovation. In his book, Managing for the Future, Drucker makes two related points: 1) Every new product, process, or service begins to become obsolete on the day it breaks even and 2) Making your own products, processes, or services obsolete is the only way to prevent your competitor from doing so.1
Creative destruction. Planned obsolescence. Making something new under the sun. Call it what you want every business alive should be making its own wares, as well as its competitors’ wares, obsolete. There’s not a CEO who would disagree, because they all know that innovative companies enjoy greater growth and success.
But despite almost excessive lip service to the importance of innovation, there are a few curious questions. Why, if innovation is so critical, do so few have a process for teaching it to people? Why do fewer rather than many understand how innovation really happens? Why do so few measure and manage innovation to their own satisfaction?
In Innovation 2005, the Boston Consulting Group (BCG) reported the results of a global survey on innovation. From a group of 940 executives, 74 percent said that their companies planned to spend more on innovation. Yet fewer than half of these said they were satisfied with their historical return on innovation spending.2
The call of this report is like the call of so many others. Find a way to get more out of your innovation investment. Shorten the time between innovation development and innovation commercialization (the concept- to-cash cycle). Develop a culture of people who innovate freely and effectively. Bring the proportion of innovations attempted to innovations made much closer to 100 percent. Most important of all, measure the process and outputs of innovation better. (See Appendix 1, The Economics of Innovation.)
The central theme of this book is that all the current calls for innovation lead to one place: the need for a world-class methodology that can bring all the elements of innovation success together. We believe and argue that TRIZ (short for Teoriya Resheniya Izobretatelskikh Zadatch in Russian) is that methodology, because it’s the only approach that enables a corporation to concertedly and productively converge on the right innovative solutions, in all areas of what it means to be a business.
We spend a lot of time throughout this book showing you why this is true. For now, we make the simple observation that much of the thinking, literature, and practice of innovation is in a free-form state. While there are many different approaches to facilitating the innovation process, none is globally considered to be the most rigorous, reliable, replicable, and scientific one.
Business leaders have scientific methodologies for improving performance and solving problems, but they don’t have an analogous methodology for improving innovation. What you do have is a belief that innovation is an act of creation, not systemization, and that’s why innovative capability can’t be programmed into an organization the way, say, quality improvement methods are. Or at least that’s the predominant thinking and practice in business today.
1 Drucker, Peter, Managing for the Future (Plume, 1992), p. 281.
2 “Innovation 2005,” Senior Management Survey, Boston Consulting Group, 2005.
back to top