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March 2003    Main Feature
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No. 71
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Managing editor:
David J. Skyrme

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Innovation On The Radar Screen:
The Concept Whose Time Has Come

Debra M. Amidon

"In a peaceful world...
If you’re not part of the future,
then, get out of the way!"

- John Melancamp

As most would expect, it was Peter Drucker who place innovation center stage. Oh, many have written previously - but mostly about technological innovation. But Peter had something else in mind - a new orientation to the concept of innovation and learning in the Harvard Business Review (Jan-Feb, 1995):

"Every organization - not just businesses - needs one core competence: innovation.
And every organization needs a way to record and appraise its innovative performance."

Of course, it may have been Fortune magazine (March 1997) that called it first in the business press:

"Innovation is the spark that makes good companies great. It's not just invention, but a style of corporate behavior comfortable with new ideas and risk...Companies that know how to innovate don't necessarily throw money into R&D. Instead, they cultivate a new style of corporate behavior that's comfortable with new ideas, change, risk and even failure."

By 1997, the assessment tool for Knowledge Innovation® had been produced in Innovation Strategy for the Knowledge Economy - now in six languages. Also, in 1997, we produced the research report with case study examples - Creating the Knowledge Based Business considered 'The KM Bible' by reviewers. We also surveyed knowledge professionals and discovered that 'Innovation' was ranked the number 1 benefit of knowledge programs, ahead of efficiency decision-making, responsiveness or flexibility.

Most recently and cited in the new book, The Innovation SuperHighway, there are many research, consulting and technology firms that have discovered that innovation is the process! Examples follow.

PriceWaterhouseCoopers 'Trendsetter' (June 2001)

"Innovation pays off handsomely for the 75 per cent of Fast-Growth Companies Making it an Organization-Wide Priority."

PwC's survey of 427 CEO's of fastest growing US businesses over the last 5 years also showed that:

  • 55 per cent of these companies innovate through new product development methodologies.
  • 51 per cent innovate with employee recognition/award programs.
  • 46 per cent innovate with strategic alliances.
  • 34 per cent innovate through innovation specific communications.

The distinguishing characteristics of these innovators? Use of the Internet, Use of Investments and Use of International Business. But, according to PwC, because these fast-growth companies' innovation programs have yet to reach maturity, "the best is yet to come".

Gartner Insight Volume 4, Issue 3 (March 2002)

"Innovation is an emerging core competency. Leading enterprises will have a dual focus: embrace the innovations of others and drive the marketplace with their own innovations. Active management of innovation will become a required competency for all enterprises during the 2002 to 2007 planning horizon."

Other conclusions:

  • A corporate culture that knows how to profit from innovation is a company's best sustainable competitive advantage. Innovation is not just about good ideas; it's about uncovering creative ideas that make money.
  • The capacity for continuous innovation requires the integration of management processes. The key to growing innovation is to optimize the overall performance of the value chain by improving the components themselves and the links between them.
  • Technological innovation cycles affect how innovators take risks and how consumers adopt new methods. Managers who track innovation characteristics (capability, complexity and network effect) can get a jump on their competition.
  • Enterprise innovation is a competitive differentiator in the knowledge economy. There are 11 emerging practices that can contribute to the success of enterprise innovation programs.

Morgan Stanley Dean Witter Global Valuation and Accounting (October 2000)

FASSTEST® Attributes for Business Success:

  • Flexibility - Getting comfortable with change.
  • Agility - Improving reaction times.
  • Scale - Building revenues, squeezing costs.
  • Scope - Conquering new lands.
  • Talent - Bulking up the brainpower.
  • Education - Sharing the knowledge.
  • Servicing Customers - 'Customers are King'.
  • Tech Edge - Continuous innovation.

(® FASSTEST is a registered trademark of Morgan Stanley Dean Witter).

Accenture and the Talent Foundation (November 2002)

Bain & Co's Innovation Study, published in Harvard Business Review, Oct 2002 found that 80 per cent of the top 500 companies list "Innovation" as one of their top three priorities in 2002 -2003. This is echoed in a report published by Accenture and the Talent Foundation that found 96 per cent of business leaders ranking innovation among the top-ten items on their corporate agenda. Other findings:

  • 61 per cent of executives believe the importance of innovation has increased since the onset of the economic downturn in 2001.
  • Respondents suggested that they find it difficult to drive innovation due to a lack of time (53 per cent), fear of risk taking (38 per cent) and a shortage of funds (33 per cent).

FAST Company Magazine 2nd Annual Global Readers' Challenge

Finding what's behind 'fast growth' companies this magazine reports (in Issue No. 50) that most success is directly related to innovation - and the way it has been redefined.

"Powerful ideas and personal commitment are what propel industries, companies, and individuals into the future."

Its 2002 challenge attracted more than 1,400 entries and 20,000 online comments from people in 30 countries and 45 states. It concludes that champions of innovation share the following characteristics:

  • The Power of Persistence - the founders, CEOs, and presidents are building their companies for the long haul.
  • The Thrill of Invention - the breakthroughs of these leaders and technologists set new standards of performance.
  • The Value of Values - these leaders made the right moves by doing the right thing.
  • The Rewards of Solving Problems - where most companies saw problems, these innovators saw opportunities - and created solutions.
  • The Business of Culture: - the most exciting ideas and companies are about style and substance, fashion and functionality.

French Caldwell, VP at Gartner

Reporting on several sources:

  • In 1999, US organizations spent over $250bn on research and development, according to the US Department of Commerce, and this is growing at over 8 per cent a year. The return on investment for successful R&D is extremely high. Companies generate $18.70 in sales for every dollar of investment in R&D.

  • Innovative companies, defined by "percentage of revenue generated from products less than 5 years old", experience profit growth at four times the rate of non-innovative organizations (Source: Business Horizons, 1996).

  • Innovation is a critical issue for senior executives. A survey of 400 companies found that 70 per cent of companies' mission statements and top objectives mentioned innovation (Source: Watson Wyatt Survey, 1998).

  • And yet, few companies have the processes and infrastructure in place to manage innovation. A survey of 350 organizations found that less than 15% of companies have any IT systems in place to manage innovation, and only 40 per cent have established any formal procedures (Source: CBI and 3M Innovation Survey, 2000).

  • Companies who establish process knowledge management for innovation will experience three times the revenue growth.

Linking Knowledge Management and Innovation

As the last bullet above indicates knowledge management and innovation go hand in hand. This is something that we at ENTOVATION have been saying for over a decade. Yet although there are as many definitions of KM as there are professionals, few have incorporated - as have we - the basic principles of innovation (i.e., knowledge creation, conversion and commercialization) into the definition. Our definition of knowledge and innovation management:

The creation, evolution, exchange and application of new ideas into marketable goods and services for:
  • the success of an enterprise
  • the vitality of a nation's economy
  • the advancement of society.

Hence our focus on Knowledge Innovation®. Knowledge Innovation® embodies the concept that innovation is the one competence needed for the future. It addresses the all the fundamental management dimensions in the process of innovation - the creation and conversion of ideas into viable commercial products in addition to building a foundation for future sustainable growth. It recognizes that knowledge is the core component of innovation - not technology or finances per se. Nurturing and managing the flow of knowledge may be the most distinctive competence of the decade.

We've published ten definitions of innovation that can be found at: http://www.entovation.com/innovation/10definitions.htm.

Also, a good source of precise definitions is provided by the IASP.

We've also tracked how innovation is permeating the marketing messages of companies.

Marketing Messages

Here's a small sample. Check here for more.

"Be Innovative or Be Gone", Chemical Banking Corporation (Fortune, November 1995)

"With innovative solutions, we're helping companies like yours improve operations and increase profits", CSN International (Fortune, June 1995)

"Don't Imitate, Innovate", Hugo Perfume (Filene's television commercial - October 1995)

"INNOVASIAN - Southeast Asia with experience", INNOVASIAN Travel, Inc. (Travel & Leisure magazine, June 1996)

"More Innovation per Mile", Hertz Rent-a-Car (Forbes, February 1997)

"Innovation and imagination", Ciba Speciality Chemicals (Financial Times, July 1997)

"New merchandise daily - 2 patents every 24 hours", Lucent Technologies (Business Week, August 1997)

"We turned a centuries old idea into a twenty-first century innovation", Texaco (Airport advertisement, December 1998)

"When Innovation is always beautiful", Lancôme (Radio advertisement, November 1999)

"I Am Your Idea ..... Innovation Delivered", Accenture (advertisement campaign, 2002-3)

"Here's to Irish Innovation", Bennigan's Restaurant menu (2002).

The Bottom Line

You need both innovation and knowledge management working effectively in harmony. When you consider your innovation processes, consider how knowledge is created and transformed into value. Consider how the knowledge flows can be improved. When you review your knowledge management, consider how well it addresses the flow of knowledge between your customer's customer and R&D and back again as enhanced products and services.

Innovate your knowledge management and knowledge manage your innovation. That way you get the best of both worlds.


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