Friday, April 07, 2006

Innovation Moves Centerstage
Companies are moving to become more innovative

There can be scarcely any doubt what the hottest mantra on the corporate landscape is, and will be for the next few years: innovation. Creating new products, services, business models faster - and more smartly - has rapidly climbed to the top of the corporate agenda.

Why is this happening now? Innovation has of course always been important in business. However, the world of business has arguably never been as competitive, and customers have never been as demanding as they are now. This means that any company that keeps serving up what is seen as "yesterday's" product is doomed. Simple cost efficiencies have become hygiene - what differentiates is the ability to create things that meet new needs, faster and better than the opposition can.

Also, the role of technology, even in the staidest of industries, is not to be discounted. Many activities we perform - banking, travel reservations, communicating with loved ones - have changed more in the last 10 years than they had in the previous 100. All these changes have primarily been driven by technology. The effect of this on the underlying industries - banking, travel, posts and telegraphs, telephone services - has been profound, and the companies that have survived have been the ones that innovated hard and fast.

As noted in my earlier post, innovation is today probably the most arcane of corporate skills - the one that is least understood, least structured and least algorithmic. Of course, it will not remain so for ever - with all the attention innovation is getting, this skill is bound to get more structured, and companies will figure out how to make innovation better managed, more predictable, measurable, repetitive, etc.

Already there are some new paradigms of innovation emerging, which promise to make it vastly more effective. Open innovation, which seeks to dissolve the impregnable walls of the corporate research laboratory that has traditionally been the stronghold of innovation, is gaining traction. In this model, innovations move both ways across corporate boundaries - the company imports ideas from outside, and also is more free in giving out ideas developed within. Procter & Gamble's Huston and Hakkab expound on their marvelously successful Connect and Develop paradigm, which leverages online networks of experts from all over the world, in last month's Harvard Business Review.

Many corporate shibboleths are being dispensed with. As Business Week says, companies are increasingly internalizing the truism that "If you don't fail occasionally, you're not pushing hard enough". This may just become the defining mantra of the new-age company.

Companies are also becoming more agile - the same Business Week article refers to a company that runs a restaurant chain, which has no corporate headquarters at all - the management simply meets in one of their restaurants! Fortune's Innovation Forum talks of how Boeing is speeding up design by using innovative collaboration techniques.

However, all this refers to a small minority of exceptionally enlightened (or exceptionally burnt) companies, and the bulk of companies are still mired in ways of doing things that have changed little in decades.

So, innovation will move over one day to cede the corporate throne to some new magnificent obsession, but that day is not likely to dawn anytime soon.