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Breakthrough Thinking to Take Your Business to the Next Level
By STUART CRAINER, DES DEARLOVE
McGraw-Hill EducationCopyright © 2014 Stuart Crainer and Des Dearlove
All rights reserved.
How We Got Here
Innovation matters—now more than ever. Few managers would argue with the assertion that innovation is a business imperative. CEOs, academics, and politicians can be heard waxing lyrical about the need for innovation in this or that company, industry, or even national economy. But why does innovation matter so much in today's business world?
The answer is surprisingly simple. Innovation is where the worlds of business and creativity meet to create new value. It really is as simple as that.
The word innovate first appears in the mid-sixteenth century. It comes from the Latin innovatus, meaning "renewed, altered," from the verb innovare, which comes from in ("into") and novare ("make new"). In other words, innovation is all about finding new ways to change things. One useful definition of innovation is "the creation of new value."
What makes this all the more relevant today is that we live in a world where we are constantly demanding new value from the products and services we consume. Think about it. When did you last buy a new phone that boasted "the same old tried and tested technology," or a car that proclaimed itself "just as good as before"? Our ancestors might have been persuaded by claims of constancy and old-fashioned consistency, but today we demand more.
Blame it on fickle consumers, if you will. Or blame it on progress. But there is a continuous ramping up of our expectations, and this includes a heightening of our expectations of innovation. Companies are in the front line.
And it isn't just that the competition might add a new feature or button to an existing product. Commercial life can be positively Hobbesian: nasty, brutish, and, increasingly, short. Entire product categories can disappear overnight. Remember the VHS player? Remember the cassette recorder? Remember buying film for your camera?
One of the biggest challenges in dealing with innovation is dealing with discontinuous innovation. When technologies shift, new markets emerge, the regulatory rules of the game change, or someone introduces a new business model, many formerly successful organizations suddenly become vulnerable, and some of them are soon consigned to history.
A key part of the problem is that dealing with discontinuity requires a very different set of capabilities from what we are used to. Organizing and managing discontinuous innovation requires searching in unlikely places, building links to new partners, allocating resources to high-risk ventures, and exploring new ways of looking at the business. These are very different from the conventional and traditional approach to innovation. Historically, a company simply hired some very smart people, put them in an R&D lab, and let them get on with it. That approach is no longer sufficient.
One of the great challenges facing managers today is: How does an organization start building the capability for discontinuous innovation?
That is one of the questions that this book seeks to help you address. But let us start at the beginning. Obviously, innovation is as old as human life. In fact, some people would argue that the ability to innovate is the distinguishing feature of humanity and that it is what has allowed us to dominate the world in recent millennia—for better and for worse. (Let us hope, too, that it is also the redeeming feature that allows us to learn the lessons needed if we are to sustain our planet in the future.)
Along the way, there have been several leaps of innovation. We can point to the innovations that enabled our ancestors to move from being hunter-gatherers to farmers, for example, and later to develop agrarian economies. We can point to rich periods of experimentation and innovation in art and science that produced the Enlightenment and the Renaissance. All these are a testament to human creativity and inventiveness. But it is innovations in the commercial and organizational realms that are our focus.
Innovation and Business
There is a paradox here. The fact is, business and creativity are uncomfortable bedfellows. Indeed, creative is often a pejorative term in business—think of "creative accounting" or the broad-brush distrust of "creatives" in many organizations. The stereotypical corporate world is full of buttoned-up suits and left-brained rational decision makers, whereas the world we associate with creative endeavors is populated with undisciplined, scruffily clad, right-brained mavericks. It is the seeming disconnect between creativity and business that makes innovation so difficult for companies (especially large companies) to understand and manage. Yet, manage it they must because the need for innovation is becoming more and more vital to the success of all organizations.
The reason is simple: the world is moving ever faster. One by-product of this is that competitive advantage is increasingly fleeting. In today's turbulent and complex business environment, smart firms know that if they fail to innovate—both in terms of their products and services and in terms of their systems and processes—they will lose out to competitors. That's why they invest time and effort in creating systems, structures, and processes to ensure a sustained flow of innovation.
At the same time, the way we think about, understand, and execute innovation is being shaped by new ideas and fresh points of view from leading researchers, practitioners, academics, and management thinkers. Together with new innovation practices, the latest ideas and thinking about innovation are dramatically changing the innovation landscape. It should come as no surprise that the way we understand innovation itself is continuously being innovated!
This book captures some of the most significant ideas and perspectives that have transformed the innovation landscape in recent years, as well as those that will shape it in the coming years. As a result, it offers a lens through which we can understand an emerging set of ideas that will have—and are already having—a profound impact on the future of business.
So why is the impact of innovation so profound? To answer that question, you have to take a hard look at the capitalist system.
The Austrian American economist Joseph Schumpeter (1883–1950) coined the phrase "creative destruction." Today, it is almost as familiar as Adam Smith's "invisible hand" as an explanation of how capitalism works. And yet, how many times have you heard the phrase without considering the role of innovation in the capitalist mantra?
Innovation can be seen as the driving force behind Schumpeter's gale (as the forces of creative destruction are sometimes known). Taken as a whole, innovation is the animating wind of progress. If we break it down into the smaller storms of progress, then each new innovation can be seen as a small tornado.
There is nothing new in this. Far from the sun-kissed streets of California's entrepreneurial powerhouse in Silicon Valley, there was an earlier whirlwind that is much less appreciated today. The origins of the first explosion of commercial and industrial innovation occurred in Britain in the eighteenth and nineteenth centuries, during the Industrial Revolution. The winds of change it gave rise to blew around the world, having more influence in creating the British Empire than Britain's military might.
The Industrial Revolution was an outpouring of new ways of thinking and working as much as it was of sweat and blood. Indeed, our modern sense of creativity, with its connotations of newness, originality, invention, and progress, was forged in the fire of commerce. (Ironically, during the Industrial Revolution, artists, rather than inventors, explorers, entrepreneurs, or industrialists, became the role models for creativity. But the industrialists kept the patent on innovation.)
Those same winds of creative destruction are still at work, constantly rampaging through the world economy. "Creativity and doing things differently are, if not identical, then nearly synonymous," says Jonothan Neelands, professor of creative education at the United Kingdom's Warwick Business School. "Doing things differently suggests a more creative approach to the world of business, but it is also a recognition that we cannot in any sphere of our lives continue as if we are not facing political, economic, social, and environmental crises that may engulf us. We are being battered by Schumpeter's now constant gale."
Time and time again, innovation unlocks the social and economic building blocks and reconfigures them for a new era. Throughout history, periods of social turmoil and change have been preceded by—or have given rise to—explosive bursts of innovation. Think of the Renaissance of the fourteenth century, the Age of Enlightenment in the eighteenth century, and the Industrial Revolution—or the current digital revolution, for that matter.
So, what do we know about innovation? Given that it is integral to the human condition, the answer is, surprisingly little. But there have been a handful of individuals whose track record suggests that they are worth listening to and learning from. One man with a genius for innovation was the American inventor and entrepreneur Thomas Alva Edison (1847–1931).
Sweat and Toil
"Genius is one percent inspiration and ninety-nine percent perspiration," Edison famously observed. This remains one of the most quoted—and insightful—observations ever made on the subject. It is testimony to his special place in the pantheon of innovation, too, that the lightbulb that he invented has become synonymous with new ideas and innovation. No examination of innovation could be complete without mentioning his precocious talent and his voracious appetite for fresh thinking.
To understand innovation, Edison's own life is instructive. His observation about the effort required to turn ideas into innovations was also the maxim by which he lived. By the end of his extraordinary career, Edison had accumulated 1,093 U.S. and 1,300 foreign patents. The inventor of the phonograph and the incandescent lightbulb also found time to start up or control 13 major companies. His endeavors directly or indirectly led to the creation of several well-known corporations, including General Electric and RCA. Consolidated Edison is still listed on the New York Stock Exchange.
Telegraphy was the catalyst for Edison's greatness. Edison was a natural with the Morse key, one of the fastest transcribers of his day. As a night-duty telegrapher, Edison was required to key the number six every hour to confirm that he was still manning the wire. Instead, he invented a machine that keyed the number for him automatically and spent his nights indulging himself at the local hostelries. Fired from a succession of jobs, he crossed the United States, working as a freelance telegrapher. Louisville, Memphis, Nashville, and Boston—Edison passed through them all before finally coming to rest in New York. He had by this time filed for his first patent—an automatic vote recorder for the Massachusetts Legislature.
It was in New York that Edison formed his first partnership with Frank L. Pope, a noted telegraphic engineer, to exploit their inventions. The partnership was subsequently absorbed by Gold & Stock, a company controlled by Marshall Lefferts, former president of the American Telegraph Company, who paid $20,000 to the two partners for the privilege. Recognizing Edison's ingenuity, Lefferts conducted a side deal with him, securing Edison's independent patents for the then princely sum of $30,000.
In 1870, with the benefit of some financial security, Edison hired Charles Batchelor, an English mathematician, and the Swiss machinist John Kruesi. He signed patent agreements with Gold & Stock and Western Union; took on a business partner, William Unger; moved into a four-story building on Ward Street in Newark, New Jersey; and started inventing on a grand scale. The fertile mix of minds at Ward Street quickly produced a stock printer, quadruplex telegraphy, and a machine to enable the rapid decoding of Morse.
The 1870s were the most creative period of Edison's life. Needing to expand his operation, he moved into buildings in Menlo Park, a town 24 miles from New York on the New York and Philadelphia Railroad. The name Menlo Park has become synonymous with innovation. It was there that Edison and his team perfected the phonograph. The patents were filed in December 1877, but Edison barely paused to draw breath; he began to experiment with incandescent filaments and glass bulbs. While he was still some way off from developing what would become the lightbulb, Edison managed to persuade a consortium that he could produce a commercially viable lighting system based on such a product. As a result, he signed a rights and remuneration agreement that laid the foundation for the Edison Electric Light Company.
In reality, Edison was far from developing such a product. Time passed, with Edison continuing to make favorable noises about progress, although he was actually making little headway in the lab. Feeling the pressure, at one point he retired to an under-stairs cupboard, took a dose of morphine, and slept for 36 hours.
It was on Wednesday, November 12, 1879, that Edison finally produced a bulb that remained lighted long enough to be considered of commercial value. It lasted for 40 hours and 20 minutes, and within two months, he had extended its longevity to 600 hours. Visitors trekked to Menlo Park to gaze in wonder at the lights that lit the roadway. Sadly, what followed for Edison was not the triumph of his invention but a period of protracted patent litigation that lasted more than 10 years.
The invention of the lightbulb and the formation of the Edison Electric Light Company marked the pinnacle of Edison's achievements. However, he did continue to invent. In the years that followed, a succession of new innovations emerged: DC generators, the first electric lighting system, electrical metering systems, alkaline storage batteries, cement manufacturing equipment, synchronized sound and moving pictures, and submarine detection by sound. His labs also threw off a slew of great minds, most notably Nikola Tesla, who was famed for his work on the Tesla coil and AC induction motors. The Wizard of Menlo Park, however, never quite recaptured the brilliance of his earlier years. Edison died on Sunday, October 18, 1931, working to the last.
Lessons in Innovating
So what are we to take from this remarkable innovator's life? Perhaps the greatest lesson of all about innovation: that a great idea leads to a genuine innovation only if it can be commercialized. Undoubtedly, a large part of Edison's genius lay in his realization that innovation alone was insufficient for commercial success. Edison focused on creating commercially viable products. To do so, he assembled a team of brilliant minds at Menlo Park. In effect, he created the first product research lab—a forerunner of facilities such as the celebrated Xerox PARC at Palo Alto, California. It was a practical and commercial approach to invention that proved to be immensely successful.
While it seems obvious that innovation without commercialization is a rather empty experience, it is worth noting that there are many, many innovations that fail to be commercialized or that are commercialized, but not by their creator. In their book Fast Second, Constantinos Markides and Paul Geroski developed this theme, pointing out that the originators of innovations as diverse as the jet engine, the typewriter, the pneumatic tire, and the magnetic tape recorder were not the people who eventually led these creations to mass commercialization. "The individuals or companies that create radically new markets are not necessarily the ones that scale them up into big mass markets," observed Markides and Geroski. "Indeed, the evidence shows that in the majority of cases, the early pioneers of radically new markets are almost never the ones that scale up and conquer those markets."
Even with the caveat that innovation does not always lead to commercialization, innovation the Edison way provided the blueprint for the twentieth-century corporation. Innovation was neatly corralled under the umbrella of R&D. Groups of R&D technicians and scientists—geeks, we would call them today—worked on innovation and then passed the fruits of their labors on to the rest of the organization.
Excerpted from THINKERS50 Innovation by STUART CRAINER, DES DEARLOVE. Copyright © 2014 Stuart Crainer and Des Dearlove. Excerpted by permission of McGraw-Hill Education.
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