InnovationArticle published on 10/04/2023

Innovation is a buzz word used in every meeting and it is impossible to imagine a discussion without it. Today, every political speech needs the mentioning of the word innovation. But what actually is innovation and why is it so important that companies and organizations innovate and that we as a society remain innovative?

Let's take a look at the Merriam Webster dictionary. Here we learn that innovation is, among other things, simply "the introduction of something new". This should not be confused with the invention of something new, because inventions can disappear into drawers, either one's own or that of a competing company. Only the introduction and establishment on the market, i.e. the presentation of the invention and its acceptance by the consumers, turns an invention into an innovation.

According to the Finnish expert team on innovation software at Viima, innovation describes a process that starts with an idea, which is continuously refined, questioned and reshaped until it becomes a usable product. The product, in turn, must be constantly tested, analyzed and improved on the existing market in order to survive in the harsh reality of consumer society. Only when the new product asserts itself in its sector and, ideally, dominates it, the prerequisites of an innovation are met.

In order to be able to carry out innovation in an organization or a company, it makes sense to take a closer look at the four key aspects of innovation management: the capabilities, the structures, the strategy and the culture.

Capabilities

The term capabilities primarily refers to the different skills and resources of an organization to create and manage innovation. An important part plays human capital, as it is particularly the skills of individuals as well as those of a team that shape and determine innovation to a great extent. Both the know-how and the practical skills determine the aspect of innovation capability. This also includes the available tacit knowledge within an organization as well as the available financial capital with which innovation can be implemented.

Structures

In order to make the best use of the above capabilities, appropriate structures are needed. This includes a well-designed organization, the right processes for decision-making, and the right infrastructure for implementing new ideas. These structures can be a multiplier or a hurdle. Innovation teams must be able to act quickly and should be able to make their plans independently of traditional decision-making cascades in the organization, because these are often too rigid or too slow.

Strategy

Strategy describes the long-term path that an organization wants to take in order to achieve a specific goal - making optimal use of existing capabilities and structures. In order to set up an innovation strategy, first there must be clearness about the goals that need to be achieved and a vision and mission must be defined. Second, a suitable market needs to be chosen that will be served in the future, i.e. for which market should the innovation be introduced and which customer needs must be satisfied. Last but not least, the unique selling point or proposition (USP) needs to be defined, telling the customer what makes the own innovation so much more attractive compared to the competition that it achieves added value on the market.

These first three steps are aimed at basic, so-called core capabilities. In addition, however, a successful innovation strategy also requires general capabilities such as knowledge, various skills, and research and development in order to reach the desired goal. Knowledge of internal structures and how to link and integrate them, as well as how to manage them, may be the last point, but nevertheless a key point. Much of what is in innovation strategies today is derived from game theory. So it comes as no surprise that the book by A.G. Lafley and Roger L. Martin on the strategy decision cascade is called “Playing to Win”.

Culture

When you take a look at innovative companies and see what makes them so successful, the culture of innovation within the company always plays a big role. But what is it and how do you establish a successful innovation culture?

As Phil McKinney described very well in his 2016 blog "Innovation Culture: What Does it Mean and Why Does it Matter?", the key components of an innovation culture consist of:

1) Ownership

2) Embracing Ideas

3) Communication

4) Resource Commitment

Employees need to know that they are valuable and important to the company. Creating a sense of ownership for everyone is a process that affects the overall attitude of each person in the company. Identification with one's own company and the formulated goals is an important step in the willingness to contribute and not just "make money". This results in a higher self-esteem and the self-confidence to be allowed to express ideas, even if they initially seem unfeasible.  These ideas must be taken up by management and seriously discussed and weighed up, even if or precisely because they sound “bad”.

Innovative companies are characterized by the fact that they seek out and promote the dormant knowledge and ideas of their employees. In 1981, for example, the chemical company BASF in Ludwigshafen am Rhein established the "Felix Findig" program. Under the company suggestion scheme, employees were asked to submit their suggestions for improvements on topics such as site safety, promoting cooperation or, for example, optimizing production. The best suggestions were implemented and rewarded with bonuses and prizes. The program existed for 25 years before "Felix Findig" was allowed to go into well-earned retirement. However, the system of collecting and rewarding ideas is still active and very successfully implemented today. In 2019, 7,000 suggestions were submitted to Ideas Management, of which around 4,000 were implemented. According to BASF, the proposed improvements enabled to achieve savings of app. 32 million Euros. 

Communication can act as a motor for innovation and thus, promote it. The exchange and willingness to discuss ideas within the staff must be present at all times. However, it is important that it does not just remain a discussion of ideas; the implementation of good ideas is also essential. Sometimes it is worthwhile to bring together personnel from different areas in creative working relationships. From this, new ideas can be developed and often problems can be solved through innovative solutions. It is also important that communication channels are kept open and communication is not stifled within an organizational unit.

But ideas and collaborative discussion and stimulation are of no use if the company does not provide the appropriate resources for realization, because ideas must be able to be tested and revised. Since resources are finite, in addition to availability, only promising ideas should be developed further. In order for management to be able to make such a decision, there needs to be a decision-making basis for every innovation project.

A true culture of innovation creates an environment where creativity and risk-taking are encouraged and innovation thrives throughout the company. No member of the company should be excluded from this process. To move forward, employees must understand the next step in the process and be willing to collaborate and take responsibility.

Conclusion

Innovation...is not just something new. Innovation is a process in which a new value is created. This can be, for example, the renewal of a product or service developed from creative ideas. The implementation can be based, among other things, on new processes or techniques. This requires various skills and structures. In order to innovate effectively, a strategy is needed and the chances of success increase when employees live by this strategy and develop a corresponding culture.

Fazit

Innovation…ist nicht nur etwas Neues. Innovation ist ein Prozess, bei dem ein neuer Wert geschaffen wird. Dies kann z.B. die Erneuerung eines Produkts oder einer Dienstleistung sein, die aus kreativen Ideen entwickelt wurden. Die Umsetzung kann u.a. auf neuen Verfahren oder neue Techniken basieren. Dazu benötigt es verschiedene Fähigkeiten und Strukturen. Um Innovation zielgerichtet zu betreiben braucht man eine Strategie und die Erfolgschancen steigen, wenn die Angestellten diese Strategie leben und eine entsprechende Kultur entwickeln.