Does Your Firm Have What it Takes to Build Innovation Capability?

Tuesday, April 17, 2012 | Category :
    • Innovation
    • Blogs

by Peter Mulford

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Executives acknowledge that innovation capability is critical to remain competitive on the world stage in the future. But few realize that it will require challenging the processes and procedures that made their firms successful to begin with. Does your firm have the managerial capability to innovate? If so, do your leaders know how to create an environment in which innovation can flourish?

In our experience, for many firms the answer to these questions is no. And typically the problem is neither one of resources nor of creativity, but of management capability. Specifically, the capability needed to translate new ideas into value creation. Building innovation capability and mindset can be done, but it is not easy. Doing so requires a willingness to develop new skills, a willingness to do familiar things in new ways, and the courage to challenge much of the thinking and acting that made the firm, and its leaders, successful to begin with.

Innovation is the business discipline of doing things in new ways that create economic value. The two critical elements in this definition of innovation is that it is a “discipline,” and that its’ end must be to create economic value.

To this first point, we’ve noticed that for many managers innovation appears to be an elusive and intractable skill accessible only to “creative types” or focused within the R&D groups or other "special" groups and useful only for breakthrough product or service inventions. This perception is augmented by much of the literature on innovation and great innovators, and is subsequently discouraging to many managers. This perception is false.

The first step to creating a culture of innovation is to recognize that, similar to all business disciplines, innovation has a specific set of skills which can be taught, practiced and mastered. Moreover, these skills can be used to improve “everyday” systems and processes as readily as for breakthrough product and service innovations. However, these skills need to be recognized as important to business success just like any other skill (e.g. engineering). They need to be nurtured and constantly improved through professional development. And those who practice innovation skills, and become proficient, need to be rewarded for reaching high levels of proficiency.

To the second point, to be successful, all innovation efforts must be linked closely to the firm’s drivers of economic profit. As one executive told us recently, “Innovation is not about converting money into inventions. It’s about converting ideas into money.” Following this reasoning, innovation must be about solving problems or meeting customer needs in a manner to drives firm profitability. Unfocused innovation efforts such as “suggestion boxes” or “idea contests” often fail to stick precisely because they produce ideas that, while inventive, do not contribute to strategic execution.

A critical role for senior leaders in the organization is creating the strategic context for innovation. How do the new innovation activities fit with other initiatives in the organization? What are the boundaries for new opportunities i.e. markets, technologies, business models etc.

Executives recognize innovation as critical to business success. So what are the critical capabilities that need to be developed? And how can organizations build these innovation capabilities? I recently wrote an article for CLO Magazine entitled, Why Your Organization May Not Be Ready to Innovate where I identify the three critical skills and discuss how organizations can build innovation capability.

About the Author: Peter Mulford is an Executive Vice President and the Head of the Strategy Alignment & Business Acumen Practice at BTS.

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