Financial Times

Innovating your way to the top

 

With the global economic slowdown, the need for innovation is even greater today. If you’re looking to maintain your market share, and perhaps post growth despite the recessionary environment, innovation is key.

To understand why innovation is so crucial to success, INSEAD and Roland Berger Strategy Consultants looked into the innovative policies and practices at nine large multinationals widely respected for their innovative skills: 3M, Research in Motion, Genentech, Unilever, SAP, Bosch, Nokia, Infosys and Toyota. The result is a new book called Innovating at the Top: How global CEOs drive innovation for growth and profit, whose purpose is to identify the values and methods the CEO finds most compelling and useful to promote innovation.

Top-down approach

While there is no silver bullet for innovation, the book’s co-author Soumitra Dutta, the Roland Berger Chaired Professor in Business and Technology, says the consensus among the nine featured CEOs was that certain conditions do favour innovation and can therefore increase the probability of success.
He adds that these CEOs view innovation as part of the core portfolio of responsibilities, so they see innovation in the company in a very broad sense, not just in a very narrow technical product sense, and they see their roles as being the champions of innovation in the entire organisation.

Olli-Pekka Kallasvuo, CEO and chairman of Nokia, however, advocates incremental changes as innovation may be difficult to accept. He dismisses the notion of ‘if it ain’t broke, don’t fix it’ as sheer complacency; and instead recommends “challenging and questioning” the current paradigm.
Even when the CEO has set the stage for innovation, employees on all rungs must celebrate the newly-installed innovation culture. Nokia’s success story can be linked to one of its four core values: passion for innovation. Biotech giant Genentech credits its success to never accepting the status quo, never accepting conventional thinking and conventional wisdom.

Sharing knowledge

As innovation begets innovation, CEOs too believe in engaging more innovation partners by sharing knowledge. “We have learned that sharing knowledge is the best way to get knowledge,” says Henning Kagermann, co-CEO of SAP. “If you feel you have to protect yourself, you have already lost half of the game. The point is to be faster than the others through openness and sharing.” Though SAP protects itself with a few large joint-development partners such as Microsoft and IBM, 90 per cent of the time, it extends an open door.

Similarly, Genentech publishes discoveries and inventions at an early date, relying on the patent system for necessary intellectual property (IP) protection. This open policy engenders professional relationships with leading academic institutions which may participate in joint research projects, thus helping to advance the biotech field.

“In general, what you find is no one company can do it alone,” says Dutta. “So you have to be able to collaborate and compete with your peers. But a lot of the interesting innovation happens when you work in close partnership with people in organisations who are your suppliers or who are your customers and who can perhaps help you in getting products to market faster.”

Embracing diversity

Just as knowledge sharing is important, so too is diversity, which promotes friction – the good kind – and cross-fertilization. However, integrating personnel of different nationalities can be a challenge, especially with companies which have employed a homogeneous workforce. But Franz Fehrenbach, CEO of Bosch, who puts one of its core values as cultural diversity, says you have to embrace cultural change. A sound strategy, considering that the company’s future growth will be in emerging markets.

Appoint the CEO as the innovation champion; Celebrate an innovation culture; Engage more innovation partners by sharing knowledge; Organise diversity to promote positive friction and cross-fertilisation; Use customer needs to drive simultaneous R&D and Business Model Innovation; Set high-quality standards and demanding challenges; Encourage youth and keep a challenger mentality;
Appoint appropriate decision-makers and encourage transparent information-sharing; Use processes judiciously, and incentivise people to innovate continuously
Nokia’s Kallasvuo dislikes the term “off-shoring”. “If you are a global company and you have operations everywhere, the whole concept of off-shoring becomes irrelevant … There is no off-shoring, you’re just present in different places.”

One can go on innovating, but the circle would not be complete without customer feedback. Fujio Cho, chairman of Toyota Motor, observes that “innovation, based on the needs (of customers), is faster, cheaper and a more dependable approach.”

(Courtesy – INSEAD Knowledge).


 
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