Three Innovation FAQ's

Here are three frequently asked questions on how to spur innovation in organizations.

1. Are there schemes that organizations can set up to get employees to generate ideas?

Of course there are. However, when organizations do something like this they have to be very careful of unintended side-effects. Say for example, you paid for each new idea. You would get tons of ideas. Some employees might give up concentrating on their day job and only generate ideas. Say you paid for implementable ideas. Who would act as the filter on these? If this is not judged fairly, it could lead to demotivation and a lack of trust in management.

So if you come up with schemes for innovation they need to be authentic to the core values of your organization. This is not easy. Often some cultural change and a revised view on organizational learning is required.

2. How do you get staff to participate in these schemes?

My advice is to start with a scheme that is relevant to the employee in such a way that it links a corporate objective to something within the capability of the employees. Then keep the rewards aligned to the normal outputs of the employee. In this way the chance of an unintended consequence is reduced.

Show the employees that they can be rewarded for innovations in their day-to-day activities. Over time this gives you an innovative capacity throughout your organization. This is not a quick 'ideas competition' and then everything is OK and we can go back to our desks.

Remember innovation is as much about execution as it is about ideas. So start getting people to innovate locally and they will grow in this ability each and every day. Then when you really need the big ideas they are ready and willing participants.

3. What are the support mechanisms?

Encourage learning and experimentation. If you approach something as an experiment from which are are going to learn, you can't fail. You need to look at the failed experiment and ask "what have we learnt from this? What would we do differently next time?

So for support you need to develop a tolerance for failure and an ability to unpack the learning experience. Obviously, you need to be able to withstand the failures so the experiments need to be carefully structured so as not to put the whole organization at risk. Over time as your capabilities build, you will become more proficient at structuring things so that you can take slightly bigger risks.

You also need to allow the employees time to consider the possible innovations they would like to recommend and experiment with. And then they need the time to do so. This is why a firm like Google gives employees 20% of their week to pursue their own interests. Of course, not every firm can be that generous but you can see the enormous commitment to slack resources. If everyone in your firm is stretched to breaking point, don't expect much innovation.

Frameworks

Strategy was easy in the '70s. According to the Boston Consulting Group all you had to do was "milk your cash-cows, get rid of your dogs, and turn your question marks into stars". This well-known BCG matrix was perhaps one of the first strategic frameworks. It was effective because it provided people from different backgrounds a common language to use when analyzing problems.

Many other frameworks have followed. Perhaps the most famous is that of Michael Porter who analyzes organisations in terms of five competitive forces; competitors, customers, suppliers, substitutes and new entrants. Porter also set out numerous ideas about value chains. His latest works concentrate on country and regional competition.

I mentioned the need for an innovation value chain in an earlier article. This article investigates how you can use an anlysis of your present value chain to give ideas for places to innovate.

The starting point of the analysis is to describe your existing business within your existing industry. Any one of a number of frameworks can be used. You can even develop one of your own. The important thing to remember is that the framework helps to establish a common understanding of the organisation in its competitive environment. There is a lot of value in having the discussion with your teams in order to develop your own framework. Although this is time consuming.

I find the one suggested by Alex Osterwalder to be quite useful in financial services.

Clients are considered under the sub-headings of relationships, segments and distribution channels; products and services are considered under the sub-heading of offer; operations is considered under the sub-headings of resources and competencies, partner networks and known issues; finally an understanding of the financial implications to revenue and expenses.

This nine point framework lets you ask key questions of each item. "In respect of [each of the nine]: what can we learn from our competitors and other industries? What would our organisation and industry look like if we moved to this? Do we have the experience and capability to do this? What are our risks if we do nothing while others do this?"

For example, "In respect of distributing equities, what would our organisation and industry look like if we distributed over the internet? Do we have the experience and capability to do this? What are our risks if we do nothing while others do this? What happens to the revenue and expense cycle from doing this?"

So the role of the framework is not simply to describe what happens today, it helps focus our attention on what could happen into the future. It gives us a common language on which to base our discussions. The key questions for strategy are; Do we have the common language today to hold this discussion; Is it rich and diverse enough to consider the changes taking place around us; Do we have the desire to develop our own framework; Will doing so be beneficial or simply too time consuming?