Why Innovation Matters

I believe that most, if not all, innovations occur as the result of an individual or team’s passion to solve a problem and improve how we live. Innovation matters because it advances our health, wealth and happiness. (This trio of fundamentals comes from Frank Moss’s vision for MIT’s Media Lab) 

Over the long run, innovation is essential to dispelling complacency and moving forward. And in the networked, experience oriented, hyper competitive global economy, our understanding of the long run is quickly shifting from decades to months 

Well thought-out strategies are necessary and important to achieving success, but they must be constantly informed, challenged and updated by innovative concepts and models to stay relevant and avoid stagnation. This is true for all organizations, including companies both large and small, governments, academic institutions, social networks and families. In a journal article I wrote last summer, I discuss the “complacency gap” and the idea of creating “innovation farms” to ensure that a constant flow of refreshed business models are delivered to an organization. New ideas introduced on a continual basis will incur failures, but will also help to solve the cannibalization of existing processes or successes that organizations face when updated business models and customer experiences are introduced. With an innovation farm, the capacity and appetite for innovation is built into the thought process of the organization. 

These are not revolutionary ideas, as most will agree innovation does matter. However, the challenge lies in the definition, measurement and execution of innovation.  How do we identify innovative organizations?  Boston Consulting Group’s recent study on innovation supports the notion that companies think innovation is important, but they are becoming frustrated because they lack the ability to measure it. Bank of America landed at #41 in this year’s rankings, with no financial services firm listed on the top 20. It’s interesting to note that 80% of this measure is derived from peer ratings. Does this mean that banks believe that they are inherently less innovative as an industry group?  If this was the perception 12 months ago when the study was conducted, how does it change today, with the changing landscape in financial services including fewer larger industry players?    

Boston Consulting Group combines their analysis with a study on measures themselves, which suggests companies lack a focus on execution. The issue with execution is of particular interest to me. Is this about leadership and commitment, the ability to execute and incentives, or a combination of all of these factors?  By ‘leadership and commitment’ I mean the willingness of senior leaders to commit to a particular innovation or business model and keep the organization focused on it at all costs. ‘Ability to execute’ refers to whether the organization has the necessary people, process and technology to execute, and to what extent they are limited by legacy infrastructure. Finally, ‘incentives’ are all about rewarding individuals and teams for making bold moves even if some of them fail.

So who is innovative? How do we know? Are there universal measures? Do customers and shareholders measure and respond to innovation? How can we be more innovative?

In my opinion, Leander Kahney has it right in his book Inside Steve’s Brain as he analyzes an interview between Steve Jobs and WIRED that was conducted over 12 years ago. 

“For Jobs, innovation is about creativity, putting things together in unique ways. “Creativity is just connecting things,” Jobs told Wired magazine. “When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something. It seemed obvious to them after awhile. That’s because they were able to connect experiences they’ve had and synthesize new things; And the reason they were able to do that was that they’ve had more experiences or they have thought more about their experiences than other people…. Unfortunately that’s too rare a commodity. A lot of people in our industry haven’t had very diverse experiences. So they don’t have many dots to connect, and they end up with very linear solutions without a broad perspective on the problem. The broader one’s understanding of the human experience, the better design we will have.”