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7/29/2019 Characteristics of an Innovative Culture
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Human Capital StrategieHuman Capital Strategiess
CharacteristicsofanInnovativeCulture
In todays fastpacedbusiness environment, innovation is a
prerequisite for success and perhaps even for survival.
Thatswhy innovation has found itsway to the top of the
agenda at organizations around theworld.Once considered
primarily an output ofR&D labs, innovationhasbecome a
corporate priority that touches every facet of and, indeed,
everyemployee
in
an
organization.
HHumanuman RResourceesource IInstitutenstitute5959 Central Avenue
Suite 201St. Petersburg, FL 33710
727.345.2226www.HRInstitute.org
Issue No. 292March 2006
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Introduction
Intodaysfastpacedbusinessenvironment,innovationisaprerequisiteforsuccessandperhapseven
forsurvival.Thatswhyinnovationhasfounditswaytothetopoftheagendaatorganizationsaround
theworld.OnceconsideredprimarilyanoutputofR&Dlabs,innovationhasbecomeacorporatepri
ority that touchesevery facetofand, indeed,everyemployee inanorganization.Externalconstituents, too
customers,academia, thegovernment,vendors,evencompetitorsareplayingagrowingrole incompanies
creativeprocesses.
TheAMA/HRIInnovationSurvey2005foundthatmorethantwothirdsofthe1,356globalrespondentscon
sideredinnovationeitherextremelyimportantorhighlyimportanttotheirorganizationstoday.Yet,those
impressivenumbersseemmodestwhencomparedwithrespondentspredictionsaboutthefuture.Abouthalf
ofrespondentsthinkinnovationwillbeextremelyimportanttotheirorganizationsin10years,and35%sayit
willbehighlyimportant.
TheAMA/HRI survey,combinedwith16 indepth interviewsandanextensive literature review,clearly
showsthataninnovativeculturehasvariouscharacteristics.Theabilitytofocusoncustomersisviewedasthe
toprankedfactorfordevelopinganinnovativeculture,accordingtothesurvey.Thisisnosurprise,giventhat
othersectionsofthesurveyshowthatcustomersarethenumberonedriversofbusinessinnovation.
Buttheinnovationliteratureshowsthatafocusoncustomersalonedoesnotguaranteethataculturewill
beinnovative.Currentcustomersmaynotseethepossibilitiesofmajortechnologicalparadigmshiftsandmay
havefewinsightsintohowcompaniescanexpandintonewmarketswithaverydifferentsetofcustomers.
So, organizations also need to have enough resources, teamwork, communication, autonomy and other
qualitiestoallowinnovationstoflourish.Thetablebelowillustratesarangeofinfluencesrankedaccordingto
theimportancethattheAMA/HRIrespondentsassignedtothem.Inthispaper,weexaminetherolethatmany
ofthesefactorsandsomeadditionalonesthatshowupstronglyintheliteraturereviewprocessplayinshap
inginnovationfriendlyorganizationalcultures.
Factors TodayIn TenYears
Customer focus 1 1
Teamwork/collaboration with others 2 2
Appropriate resources (time and money) 3 6
Organizational communication 4 3
Ability to select right ideas for research 5 4
Ability to identify creative people 6 5
Freedom to innovate 7 7
Ability to measure results of innovation 8 8
Encouraging both small ideas and big ideas 9 9
Innovation accountability/goals 10 10
Culture of risk-tolerance 11 12Organizational structures 12 11
Diversity 13 13
Balancing incremental improvements and breakthrough discoveries 14 14
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Both the AMA/HRI survey and the re
searchliteraturereviewshowthatteams
andworkgroupsarecriticalintermsoftheirabil
ity to encourage and support innovation. Of
course, not all work groups are created equal.
Theyremostlikelytobeinnovativewhentheyre
abletointegratepeoplewithdiverseperspectives
andallowthem toeffectivelyswap ideasandex
pertise (McLean, 2005). Crossfunctional teams
maybe especially good at arriving at new ideas
thatarebothinnovativeandpractical.
Teams probably wont be successful unless
they have the support of leaders who provide
CustomerCentricity
Currentandpotentialcustomershavealwaysdriveninnovationincompaniesinthemod
ernage,buttodaysorganizationsaretakingtheideaoffocusingoncustomerstoanew
levelbycapturingtheirideasoractuallyallowingthemtoinnovateintheirownbehalf.
Somecompanies
look
to
lead
users
or
luminaries
to
help
them
innovate.
GEs
healthcare
division,forexample,callsuponpublishedscientistsanddoctorsfromwellknowninstitutionsto
attendadvisoryboardsessions,wherediscussionsoftechnologicaladvancescanleadtonewGE
products.BMWhasreachedouttocustomersviaatoolkitonitsWebsitethatallowscustomersto
proposeandexpandnewideas.Notonlyisthecustomerking;nowheismarketresearchhead,
R&Dchiefandproductdevelopmentmanager,too,sumsupTheEconomist(TheRise,2005,p.
59).
Tappingintotheinnovativenessandimaginationofcustomerscangeneratetremendous
value, said Harvard Business School professor Stefan Thomke. He recommends encouraging
customerstodesignwhattheywantwithstateoftheartsoftware.Itcouldgenerateinnovations
thatsuppliers
simply
cannot
imagine
today
(Speeding
Up,
2004,
p.
8).
Somecompaniesarealsoworkingtocreatenewproductsandservicesgearedmorefor the
individualtastesofcustomers.Inwhathasbeencoinedamassmarketmutiny,customersare
clamoring for thehostofpersonalizedproductsthatcompaniesallowthemtocreate.Suchcus
tomization hasbecome a trend in the clothing, music and telecommunications industries. Re
searchbytheconsultancyBrandKeyssuggeststhatbetween1997and2005therelationshipbe
tweencustomizationandbrandloyaltygrewfivefold(Laue,2005).
And then theres the trend toward design thinking, an increasingly popular notion for
boostinggrowthandinnovation.Theideaisthatweareevolvingfromaknowledgeeconomy
toanexperienceeconomy.Thisneweconomyisincreasinglycustomercentricandfocusedon
deliveringnotjustgoodsbutexperiencestocustomers.Successfulfirmswillbethosethatcan
deliverbettercustomerexperiencesbyusingempathyskillstobuildnewbrandsordevelopnew
consumerexperiencesusingestablishedbrands(Nussbaum,2005).
Thereslittledoubtthatasnewbusinessmodelsariseandnewtechnologiesemerge,organi
zationswillfindotherwaysofgainingnewcustomersandinvolvingcurrentcustomersinthein
novativeprocess.
1
TeamworkandCollaboration
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themwithcleargoalsandnecessaryresources.On
theotherhand,poorleadershipcanbeverydam
aging to teams.One recent studyexaminedhow
well crossfunctional new product development
(NPD) teams are supported. These cross
functional groups typically include representa
tivesfromR&D,design,engineering,manufactur
ing,andmarketingaswellaskeycustomersandvendors. A survey of 269 product development
managers at U.S. and Canadian manufacturers
foundthatNPDteammanagersoftenbelievethat
the teams will usurp their power, and theres
sometimesalackofcommitmentandcommunica
tionwhen itcomestosuchteams(Boyle,Kumar,
&Kumar,2005).
TheNeedforDiversityThemost creative teamsaredrawn fromdi
versebackgrounds, saysMichaelWest,professor
of organizational psychology at Aston Business
School.Westsayssuch teamsbringdiverseskills
andknowledgetoprojects,offeringmanycreative
solutionstoproblemsbecausetheyapproachsuch
problems with different perspectives (Glover &
Smethurst, 2003). Team diversity can also help
companies improve their focus on customers.
Whendiverseemployeesrelatetodiversecustomers, companies can tap into new product ideas
andmarkets(Lockwood,2005).
Tania Aldous, a manager in the global con
sumer design department of Whirlpool Corp.,
says that if employees are to work on cross
functional teams,Weneeddiversityof thought,
variousperspectivesandculturalheritages. It is
importantnottobringinallclones,saidRobert
Sutton,aprofessoratStanfordUniversityandau
thorofWeirdIdeas
That
Work:
11
Practices
for
Pro
moting, Managing and Sustaining Innovation
(Pomeroy,2004,p.50).
Michael West cautions, however, that teams
madeupofpeoplefromdiversebackgroundscan
generateconflict,andtheymustbewellmanaged
to make sure such conflict remains constructive
(Glover&Smethurst,2003).So,thebottom lineis
that teamsand teamworkare important to inno
vation,buttheyrequireskilledleadershiptomake
themaseffectiveastheyshouldbe.
InternalandExternalCollaborationsMore
innovation
occurs
through
collabora
tion and community than through the inventive
thinking of a single mind, according to Andrew
Hargadon, author of HowBreakthroughsHappen:
The Surprising TruthAbout How Companies Inno
vate.Hargadoncontendsthatmostnew ideasare
adapted from existing ones, a concept he calls
recombinant innovation. Whats more, ideas
can spring from even casual encounters that ex
pose one to a new perspective as easily as they
can from concentrated teamwork. His book ex
plores other theories that support the value of
community, too,suchas theconceptsofserious
play and communities of practice, in which
companies purposely create internalnetworks to
foster knowledgesharing and creative thinking
(Kleiner,2004).
Collaboration occurs both within organiza
tionsandamong them.Thesedays,only slightly
more than half (55%) of innovation is generated
internally.Organizations
are
tapping
academia,
the government and other firms for fresh ideas,
according to the 2004 Making Innovation Work
study by The Conference Board. That survey
foundthatorganizationsseekinnovationthrough
collaborationwithuniversities,privateR&Dlabs,
andgovernmentagencies,andthroughparticipa
tion with consortia. Such open innovation is
expectedtostrengthenasfirmscontinuetodiver
sifytheirinnovationportfolio(Troy,2004).
Companieswith
R&D
located
in
the
U.S.
seem particularly interested in collaborations
based on alliances. There have been relatively
large increases in participation in alliances and
jointR&Dventures inrecentyears. In fact,61%
of surveyed companies expect to increase their
participation in those endeavors in 2006, accord
ing to the IRIs 22nd annual R&DTrendsForecast
(Ayers,2006).
2
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Sometimes companies collaborate through
investment. Companies that do not want to risk
trying to achieve their ownbreakthroughs find
waystoinvestinothercreativebutriskyfirmsby
providingsomeoftheirstartupcapitalorbybuy
ingthesecompaniesoncetheyprovethevalueof
theirideas.Realoptionsreasoningprovidesvalu
ableinsightintohowflexiblecommitmentscanbe
made to fundbreakthrough research projectsby
taking the investments of large companies and
spreading them across many pathbreaking
smaller firms in thehope thatsomeof themwill
succeed(McGrath,1997).
But whether collaboration is among compa
niesorindividuals,thedifferingbackgroundsthat
partiesbring to the table can often produce fric
tion or conflict that erodes trust. Cultural differ
ences must be taken into account. If properly
channeled, such conflict canbenefit the innova
tionprocess.Thecollaboratingentitiesmustfocus
on their commonalities, such as goals and chal
lenges,rather thantheirdifferences,butproperly
managed friction can serve as a catalyst forpro
ductivechange(Hagel&Brown,2005).
3
TheRightResources
The 2005 AMA/HRI survey showed not
only
that
appropriate
resources
(time
andmoney)wasamongthetopfactorsfordevel
oping a culture of innovation but also that
insufficientresourceswasthemostwidelycited
barriertoinnovation.
TopRankedBarrierstoInnovation*
*Seenby10%ormoreofrespondentsasthe
numberonebarrierintheirorganizations
Its not true, however, that more is always
better.
Having
too
few
resources
hinders
innova
tion,buthavingtoomanymightalsobeakindof
obstacle (McLean, 2005). Employees with long
spans of time in which to come up with results
may losemotivation.Therightbalanceofmoney
is important, too.Too little,andemployeeshave
to put time and energy into seeking other re
sources.But toomuch (beyond thethresholdof
sufficiency)hasnotbeenshown tohaveaposi
tiveeffectoncreativity(Troy,2004).
Thisrule
applies
to
research
and
develop
mentaswell.ArecentBoozAllenHamiltonstudy
foundthatthereisnorelationshipbetweenR&D
spendingand theprimarymeasuresofeconomic
or corporate success, such as growth, enterprise
profitability and shareholder return (Jaruzelski,
Dehoff, & Bordia, 2005). On the other hand, the
samestudyshowsthatspendingtoolittleonR&D
canhurtcorporateperformance.
Barriers Rank
Insufficient resources 1
No formal strategy for innovation 2
Lack of clear goals/priorities 3
Lack of leadership/management support 4
Short-term mindset 5
Structure not geared toward innovation 6
Communication
Atrulycreativeculturetendstobedistin
guished by open communication and
the free exchange of ideas (McLean, 2005). This
means communication among different parts of
the organization, communication among team
members, and communication up and down the
corporate hierarchy. Communicating not only
means sharing ideasbutalso sharing the lessons
learned from failuresand successes.Ways toen
hance communication include more inclusive
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meetings,better online tools for sharing knowl
edge, crossfunctional assignments and more
brainstormingsessions(McGregor,2005).
The most suitable type of communication
e.g.,viatechnologyorfacetofacemeetingswill
oftendependonthetypeofcollaborationneeded
to
solve
problems
that
call
for
creativity
(Sonnenburg, 2004). In situations where an or
ganizationistryingtodevelopmoreradicalinno
vations (or find more radical solutions to prob
lems), collaborators are often friends or partners
who need to communicate on a more personal
level. In other situations, technologymediated
communicationisprobablysufficient.
Communication also includes storytelling.
Thismeanstellingbothinspirationalandcaution
ary tales. After all, stories about why ideas fail
mightbeasvaluableasourceoflearningforbusi
nessesas
stories
about
success.
Without
an
exami
nation of why ideas fail, valuable lessons that
mightbelearnedarelost,accordingtoJerkerDen
rell,assistantprofessoroforganizationalbehavior
at the Stanford Graduate School of Business
(Wagner,2005).
4
AnAbilitytoSelecttheRightIdeas
Fully96%ofallnewinnovationinitiatives
failtoatleastmeetreturnoninvestment
targets (A Creative, 2005). While having an
ideasharingculture inplace ispartoftheprofile
of innovative firms, thebigger challengemay lie
in having the right processes in place to quickly
cullthroughthoseideasandselectthosetoshep
herdthroughtofruition.
But there isnoobviousstrategy forselecting
orevenevaluatingideas.Nearlyhalf(48%)ofthe
AMA/HRI respondents reported that they dont
haveastandardpolicyforevaluatingideas,byfar
the largestresponse toaquestionon thissubject.
The next most common responses? About 17%
saidtheyuseanindependentreviewandevalua
tionprocess,while15%saidideaswereevaluated
by the unit manager where the idea was pro
posed.
PercentUsingTheseApproachestoEvaluate
IdeasinTheirOrganizations
Some experts contend that thebest way to
sort through multiple options in the pursuit of
innovationistocreateadefinedportfolioofinno
vationapproaches.Thisallowsacompanytobal
ancedifferenttypesofinnovationssuchasincre
mentalandbreakthroughinordertomaintaina
healthyrangeofselections.
Some companies vest their employees with
theresponsibilitytoselltheirownideas.Whirl
pool Corp., for example, encourages innovation
teamstopursuenewideasbycreatingabusiness
case and applying the $25,000 in funding to
quickly prove the ideas worth. The lowbudget,
quickturnaround method is a far cry from the
bigdollar projects of Whirlpools past and was
designedtogenerateradicalandlowriskideas
(Pomeroy,2004).Whirlpoolalsousesanipipe,
or online idea pipeline, where ideas are shep
herded through the process by trained i
consultantsandimentorswhohelpemployeesto
workaspartofaninnovationteam.Surveys,busi
ness plans, focus groups andbrainstorming ses
sionsarealltoolsthatmightbeutilizedtomanagethe project. Separate teams may nurture an idea
through the research, development and imple
mentationphases,aswell(Pomeroy,2004).
AmericanFamilyInsuranceGroup,too,gives
peergroupsthevotefordeterminingthefeasibil
ityofnewITprojects.ITcodewritersareencour
Approach PercentThere is no standard policy for reviewingand evaluating ideas 47.6
There is an independent review andevaluation process for ideas 16.5
Ideas are reviewed and evaluated by theunit manager where idea was proposed 15.4
Ideas are reviewed and evaluated by theunit that would be impacted by the idea 12.6
The employee is responsible for startingand managing the review process 7.6
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agedtodevelopprototypesquicklywithoutheav
ilyinvestingtimeandefforttodemonstratewhat
a new application might accomplish. Depending
on colleague reaction, the project might get ap
provedforcodedevelopment(Ulfelder,2005).
Technology plays an important role in idea
evaluationas
well.
Some
organizations
are
by
passing physical models and using Webbased
simulations or rapid prototyping to test designs
(Shelton&Davila,2005).Onepieceofadvicefrom
UKbusinessschoolHenleyManagementCollege
istousetechnologysolutionssuchascomputeror
mathematical simulations to evaluate ideas. And
when itcomesdowntodecisiontime,itsrecom
mended that companies ask questions from a
commercialperspective.Identifyingtheproblems
thatwillneed tobeaddressed inorder to imple
ment the idea is one of the key decision points
(Henley,2005).
All inall, theabilitytomakequickdecisions
andto
move
from
idea
to
action
appears
to
be
a
keydeterminantofsuccessfulinnovation.Accord
ing toPatrickKulesa,globalresearchdirector for
ISR, Successful innovation companies excel not
onlyatsettingthestageforgeneratingnewideas,
but also have thebusiness discipline and proc
esses necessary to take those new ideas to mar
ket(Kulesa,2005,p.41).
5
CreativePeople
Companies need creative people, of
course,but its a myth that innovation
stems only from a small cadre of
creatives(Breen,2004).Infact,whenitcomesto
creativity, there are few areas of human activity
whereweallstartoutsoequal,accordingtoKris
tinaMurrin,managingpartneroftheWhatIfcon
sultancy (Glover & Smethurst, 2003). Some ex
perts say that creativity is, to a large degree, a
trainableskill.
Still, its true that people who are prone to
inventiondotendtosharecertaintraitsorhabits,
notes Murrin in herbookStickyWisdom. For ex
ample, they have a stimulating life outside of
workthat triggerscreativity, theyuseprototypes
tobring ideas into reality, they often go their
own way, they communicate and are open to
ideas,and theyhave thecourage toexpressnew
ideas(Glover&Smethurst,2003).
Someoftheseobservationsmaybeborneoutbyhistory.CreativepeoplesuchasEdison,Shake
speare, Mozart, Einstein and Darwin had wideranging interestsand ideas thatallowed them to
innovateintheirfields.Theyalsohadthecourage
oftheirconvictions.Theysufferedvariousfailures
but eventuallybrought finished projects to frui
tion(Sutton,2004).
Ofcourse,thecorporateenvironmentplaysa
largepartinhelpingpeople liveuptotheircrea
tivepotential.The freedom to failwithoutheavy
penalty can, forexample,bea powerful support
toeventualsuccess.Socanphysicalenvironment
oftheworkplace.WhatIfresearchclaimsthatthe
physical environment stimulates eight out of 10
newideas,withcreativitytriggeredbysomething
immediately visible to the employee (Glover &
Smethurst,2003).
So,notonlydoemployersneedtorecruitand
retaincreativepeople,theyneedtoprovidetrain
ing in creativity and set up work environments
that
stimulate
creativity
in
all
employees.
FreedomandRiskTolerance
The autonomy to work toward goals is
an important feature of an innovative
culture.Thisdoesnotnecessarilytranslate,how
ever, to theautonomy todecide thosegoals.Re
search conducted by Professor Teresa M.
Amabile of Harvard University shows, in fact,
that employees creativity is enhanced when
their goals are clearly specified but theyre
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granted freedom to pursue those goalsby what
ever means they decide. Too much control can
impedecreativityandinnovation.
Laird D. McLean combed through the re
search of innovation experts and concluded that
several types of control can inhibit creative per
formance.Itcouldbecontrolindecisionmaking,
control of information flow, or even perceived
controlintheformofrewardsystemsthatputtoo
much emphasis on increasing extrinsic motiva
tion,McLean(2005)writes.
Organizationsmustalsobewillingtoallowa
certainamountofrisktaking.Riskimpliesadan
ger of failure, but innovative companies know
that failure is as essential a part of the growth
processassuccess.Organizationsthatunderstand
risktaking isnecessarymake thatmessagecome
alive through their employee communications,
their ideasharingandevaluationprocesses, their
recognitionprogramsandtheirrewardsystems.
Managing employees in a way that encour
ages innovation requires leaders to acknowledge
and reward risktakingbehaviors notjust suc
cessfuloutcomes.JohnSweeney,authorofInnova
tionattheSpeedofLaughter,suggestsmanagersuse
techniques such as initially welcoming all ideas
without first judging them, creating an atmos
phere where opinions canbe freely shared, and
reinforcing thevalueofemployeescontributions
byactingonthem(EmployeeInnovation,2005).
6
Ways
of
Measuring
Results
Innovationanditsimpactcanbemeasured
inanumberofways,thoughnoneofthem
isperfect.Thetoprankedmeasurementtype,cus
tomersatisfaction,isntamajorsurprise,giventhe
high ranking of customerrelated factors in all
partsoftheAMA/HRIsurvey.Butitsinteresting
to see how much more important respondents
consideritcomparedwithmeasuressuchasinno
vationasapercentageofprofitsorasmeasuredin
terms
of
intellectual
property.
On
a
1
to
5
Likert
scale, where5 isextremely importantand1 is
not important,customersatisfactionreceiveda
whopping 4.36, compared with just 3.40 for
innovationasapercentageofrevenuesandprof
itsand3.07forintellectualproperty.
RelativeImportanceofWaysofMeasuring
CreativityandInnovation
Itsinterestingtoseehowthisdatacompares
withthatofotherrecentresearch,whichlooksless
at the importance of innovation measures and
moreattheirdegreeofusage.Onlyabouthalfof
thefastgrowingU.S.businesses(48%)havetried
tolinkinnovationtomeasuresofsuccess,accord
ingtoresultsfromPwCsTrendsetterBarometer.Of
those that made the effort, the most common
measuresincludedoverallrevenuegrowth(78%),
customer
satisfaction
(76%),
revenue
growth
from
new products/services (74%), productivity in
creases (71%), earnings (68%), recruitment/
retention (34%) and market capitalization (17%)
(PricewaterhouseCoopers,2005).
A2004ConferenceBoardstudyfoundthatto
track the success of employee innovations, re
spondentsusedmeasuressuchastotalnumberof
employee ideas submittedannually (76%), finan
cial impact of implementing employee ideas
(76%),
and
percentage
of
ideas
implemented
(56%).
TheConferenceBoardsurveyalsofoundthat
respondentssaidmeasuresrelatedtoinnovations
(e.g., patents, R&D spending as percent of sales)
werethemostuseful,followedbyfinancialmeas
ures (e.g., sales,market share),processmeasures
Measurement Types RankCustomer satisfaction 1
Market share 2New products/services/processes produced 3
Financial impact of ideas submitted byemployees 4
Innovations as percent of revenues and profits 5
Spending on research and development 6
Spinoffs/new operations based on newproducts 7
Intellectual property (e.g., number of patents) 8
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(e.g., time tomarket, fulfillment speed)andpeo
ple measures (e.g., performancebased awards)
(Troy,2004).
Someexperts(Muller,Vlikangas,&Merlyn,
2005)sayinnovationshouldbemeasuredthrough
threedifferentlenses:1)theresourceview,which
analyzesinputs
such
as
capital,
talent
and
time
withfactorssuchaspercentofworkforcetimein
vested in innovation,number ofemployeeswith
entrepreneurial experience or percent of capital
dedicated to innovationrelated activities; 2) the
capability view, which measures inputs through
number of innovation tools, the percent of em
ployeeswithinnovationasakeyperformancein
dicator, and the percent of employees receiving
training inactivitiesrelatedto innovation;and3)
the leadership view, which measures inputs
throughpercentofexecutive time invested in in
novationversusoperationsorpercentofmanage
mentteamtrainedintheuseofinnovationtools.
Itsclear
that
companies
have
many
options
when it comes to trying to measure innovation.
Theirchoiceswilldependontheir industry,their
experienceatusingsuchmeasures,andtheirabil
itytomakeeachmeasureasaccurateaspossible.
Theliteraturesuggests,however,thatmanycom
paniescoulddomoreintheareaofmeasurement
thantheyarecurrentlydoing.
7
AnAbilitytoBalanceIncrementalandBreakthroughInnovations
While
radical
or
breakthrough
innova
tion can reap handsome financial
profits, the largest percentage of revenue is still
morelikelytocomefromincrementalinnovation.
Balancing efforts to capture the advantages of
bothcanbeawisebutchallenginggoalfororgani
zationstopursue.
Someresearchsuggeststhatexecutivesexpect
a growing percentage of future innovations to
come through breakthrough rather than incre
mental innovations (Troy, 2004). Thats understandable,giventhatcompaniesthatcanleverage
more radical innovations can realize huge finan
cialgains.ClaytonChristensen,authorofTheIn
novatorsDilemma,conducteda reviewof innova
tionsand found that, in2000,37%of thecompa
nies that were leaders in terms of providing a
disruptiveinnovation
such
as
computing
via
cellphonesexceeded$100million in revenues.
Incontrast,just3%oforganizationsattainedsuch
revenuelevelsiftheywereinalreadyestablished
markets(McLagan,2002).
And for firms in the hightech sector, while
nextgenerationinnovationsrepresentonly14%of
product launches and 38% of revenue, they still
bring in 61% of profits, according to a studyby
the Harvard Business Review. The study also
showed that while incremental innovations accountfor62%ofrevenue,theybringinonly39%
ofprofits.GregoryC.Tassey,senioreconomistat
theNationalInstituteofStandards&Technology,
said,We should invest more in nextgeneration
technology(Rovner,2003).
LeadershipandAccountability
N
otonly is leadershipcrucial to innova
tion, the reverse is trueaswell. Inanother AMA/HRI survey, the LeadershipDevelop
mentSurvey2005, itwas found that theability to
fostercreativityand innovation isamong the top
competencies required of leaders today and that
thisabilitywillbecomeconsiderablymoreimpor
tantover thecomingdecade (AmericanManage
ment Association & Human Resource Institute,
2005).
So,whatarethemostimportantrolesleaders
play inspurring innovation?TheAMA/HRIInno
vation Survey 2005 found that the single most
widely selected action that leaders take is
developing an organizational strategy for inno
vation, followedbyredesigningorganizational
structureorworkflowandincreasingemployee
involvement.Leadersare,inanutshell,expected
toshapetheorganizationandtheoverallmanage
ment philosophy to make sure innovation can
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thrive. They must set up systems that regularly
encourageinnovation.
Toooften,however,leadershavetheopposite
effect in organizations, inhibiting or disrupting
innovations by setting up bureaucratic barriers,
quashingcreativeideasbeforetheyregivenafair
chance,or
trying
to
take
charge
of
development
teams insteadofgiving thenecessaryautonomy.
TheAMA/HRIsurveyfoundthatlackofleader
ship/managementsupportisasignificantbarrier
to innovation,as isno formal strategy for inno
vation, lack of clear goals/priorities, and, as
mentioned before, insufficient resources. In
eachcase,topleadershavethepowertobuildup
thesebarriersorremovethem.
So, who is responsible and accountable for
innovation in an organization? Some companies
have specifically designated leaders for this. In
fact,about40%of firmshave someone to fill the
roleofchief innovationofficer, though this re
sponsibilitymayresidewithofficerswitharange
of titles, from head of R&D to vice president of
globalinnovation(Troy,2004).
Butmore
and
more
organizations
are
seeing
that creativity and innovation are not the exclu
sive province of a small group of employees.
Manyareworking tochange theircorporatecul
tures to make innovation everyones job (Troy,
2004).This,ofcourse,means findingways toen
courage innovation and hold people accountable
without making them riskaverse. Figuring out
waysofdoing thiswell is likely to remaina sig
nificantorganizationalchallengeincomingyears.
8
MotivationandRewardSystems
What are the most effective means of
rewarding employees for innova
tion?Theanswerisamatterofdebate.Someex
pertsargue that ifcompanies focus toostrongly
on providing employees with extrinsic rewards
suchasbonuses,theyriskdestroyingemployees
intrinsicmotivation.Thisviewpoint isbasedon
empirical research showing that following re
ward,individualsoftenspentlesstimeperform
ing an activity and stated they like the activity
less, as compared to a control group that per
formedthetaskwithoutreward(Eisenberger&
Shanock,2003,p.123).Experimentshaveshown
thatthissometimesappliestocreativetasks.
On the other hand, other social researchers
havearrivedatcontraryconclusions.Inonecase,
forexample,
students
who
had
been
promised
a
reward for inventing creative story titles were
found tobemorecreative than thosewhowere
giventhesameinstructionswithoutthepromise
ofareward.EisenbergerandShanock lookedat
theresearchandconcludedthatencouragement
of creativity, in the form of tangible and so
cioemotionalrewards,strengthenscreativemoti
vationalorientation (p.128).This implies that
employerscaneffectivelyusetraditionalreward
systemstomotivateemployeestoactmorecrea
tively in the workplace and that rewards dont
necessarilyreduceintrinsicmotivation.
Thats good news in light of the fact that
manyemployersengageinsometypeofrewardand recognition systematwork.TheAMA/HRI
survey found that the most commonly cited
formsofrewardsarenonfinancial,asthefollow
ingtabledemonstrates:
RewardandRecognitionPractices
Type of Practice PercentInnovation is not rewarded in this organization 26.0
Innovation is recognized with nonfinancial rewards 20.9
Innovation often leads to more challenging workand/or autonomy 19.3
Innovation is rewarded by individual bonuses and/orsalary increases 17.6
Innovation is considered in promotion decisions 9.2
Innovation is rewarded through team bonuses 4.4
Innovation is rewarded with larger staff and/or budgets 2.0
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If companies do decide to use financial re
wards such as bonuses for innovation, they
shouldrecognizethattheremaybeafinelinebe
tweentoomuchandtoo little.Stanfordprofessor
Antonio Davila says the issue canbe controver
sial.Someexpertssaythatthebonuscanbecome
a larger focus than the innovation itself forsome
employees,whileothersfeeltheabsenceoffinan
cial incentives will dampen motivation. In one
survey, Davila found that bonuses averaging
about30%ofpayseem tobeoptimal,depending
onthecomplexityoftheproject.All inall,recog
nitionseemstobeasimportantamotivatorasfi
nancial incentives when it comes to innovation
(Pomeroy,2004).
9
Conclusion
Manyoftodaysbusinessesfaceaconundrum:Theyreacutelyawarethatinno
vation is a growing imperativebut they see themselves as only moderately
successfulinnovators.AmongorganizationsrespondingtotheAMA/HRIsur
vey,theresnoconsensusonhowtoevaluateideas,andnearlyhalfofrespondentsdonthave
aclearunderstandingabouthowtheircompaniescanbecomemoreinnovative.Itslittlewon
der,then,thattheliteratureshowsmostinnovationinitiativesfailtoattaintheirgoals.
Organizationsmustgearupforanewerainwhichtheybecomemuchmoreeffectiveat
spurringandmanaginginnovation.Beforetheycanachievethis,theyneedtogetbetteratthe
basics,suchasunderstanding,communicatingandevaluatinginnovation.Untiltheydo,they
simplywontknowhowtoallocatetheproperresourcesorsetthebeststrategies.
Whatotheractionsshouldcompaniestake?TheAMA/HRIsurveyfindsthatrespondents
allover theworldbelieve that focusingon the customer is crucial to innovation.Thatsno
doubt true,especially inourageofmasscustomization. Insights fromcustomersaswellas
potentialcustomerscanleadtogreatnewproductlines.Butitsnotthewholepicture.Long
termsustainability
depends
on
successful
breakthrough
innovation,
and
this
is
less
likely
than
incrementalinnovationtocomedirectlyfromcurrentcustomers.
Thereisnosinglebuttontopush.Inthispaper,wevelaidoutavarietyofapproachesto
spurring innovation,butwe recognize thatnooneway isbest foreverycompany.Still,we
think thatbecoming an innovative company usually requires looking at the whole system,
from culture to process to strategy. Companies must forge an innovation strategy thats
alignedwithitsoverallstrategy,choosetheprojectswiththebestvaluepropositions,manage
the system efficiently so itdoesnt waste time or resources, and commercialize innovations
well,witheveryoneworkingtogetherasateam(Jaruzelski,Dehoff,&Bordia,2005).
Leadership, of course, is critical. Not only can excellent leaders influence culture over
time,theycansetthestrategiesandgoals,modelthedesiredbehaviors,demandgoodmetrics,
permit smart risktaking, reward creativity, cultivate collaboration and teamwork,andpro
videenoughbutnottoomanyresources.Innovationrequiresambidextrous leaderswho
cansimultaneouslycontrolandpromotefreedom.
Intheend, innovationmeansmorethanjustcreatingnewproductsandservices.Italso
means considering new management principles and challenging old orthodoxies in smart,
valueaddedways.Ofcourse,suchthingsarealwayseasiersaidthandone.Butnooneever
saidsurvivingintothefuturewasgoingtobeeasy.
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AbouttheAuthors
PROJECTLEADER
JayJ.JamrogistheexecutivedirectoroftheHumanResourceInstituteanddistinguishedlectureratTheUniver
sityofTampa.Asafuturist,hehasdevotedthepast20yearstoidentifyingandanalyzingthemajorissuesand
trendsaffectingthemanagementofpeopleinorganizations.Jayistheassociatearticleseditorforthebuildinga
strategicHRfunctionkeyknowledgeareaofHumanResourcePlanning,hashadarticlespublishedinmajorbusi
nessmagazines,andisfrequentlyquoted inbusinesspublicationsandnewspapers.Heoftencollaborateswith,
andspeaksbefore,otherorganizationsandassociationsonmajorresearchtopicsrelatedtothefutureofpeople
management.PriortojoiningHRIin1982,Jayheldnumerousmanagementpositions,includingvicepresidentof
purchasingforalargeimport/exportwholesaler.Contactinformation:(727)3452226orjamrog@hrinstitute.org.
AUTHORS
DonnaJ.BearistheCreativityandInnovationKnowledgeCentermanagerfortheHumanResourceInstitute.She
hasaB.S.degreeinbusinessadministrationandanM.S.degreeinmanagementandiscertifiedasaSeniorPro
fessionalinHumanResources.HerpreviousexperienceasanHRgeneralist/consultantspansthePEO,corporate
andnotforprofitsectors.Contactinformation:(727)3452226orbear@hrinstitute.org.
MarkR.
Vickers
isafuturistandseniorresearchanalystattheHumanResourceInstitute.Hehasauthoredmany
HRIreportsandwhitepapers,isHRIsformermanagingeditor,andiscurrentlytheeditorofHRIsTrendWatcher
andTheFortnightReport.Contactinformation:(727)3452226orvickers@hrinstitute.org.
OTHERCONTRIBUTORS
WandaV.Chaves,Ph.D.,isanassistantprofessorofmanagementattheJohnH.SykesCollegeofBusinessatthe
UniversityofTampa.Shereceivedherdoctoraldegree in industrial/organizationalpsychologywithaminor in
crosscultural studies from the University of South Florida in Tampa. Her work experience includes training,
teaching,and consultingwithin theTrainingandDevelopmentand theOrganizationandExecutiveDevelop
mentdepartmentsattheWaltDisneyWorldCompanyaswellasworkasanexternalconsultant.Sheisaprofes
sorofleadership,humanresourcemanagement,internationalmanagement,andorganizationalbehavior.Contact
information:(813)
253
6221
ext.
3968
or
wchaves@ut.edu
or
Dwvchaves@aol.com.
SusanConte,Ph.D.,hasover25yearsofexperienceasaconsultant,corporatetrainer,anduniversityprofessorin
strategicmanagement,organizationalchange,businessleadershipandpersonaldevelopment.Throughheredu
cationandexperience,shehasacquiredathoroughknowledgeoftheforprofitandnonprofitworldsandanabil
ity toanalyzeandevaluate individuals,groups,organizationsandorganizational systems.Susanreceivedher
Ph.D.inmanagementandstrategyandanMBAfromTheWhartonSchoolattheUniversityofPennsylvaniaand
abachelorsdegreeandmastersdegree inorganizationalbehavior fromYaleUniversity.Contact information:
(813)2536221ext.3625orsconte@ut.edu.
DonnaJ.Dennis,Ph.D.,isaleadershipdevelopmentprofessionalwithover30yearsofexperiencehelpinglead
ers and teams increase leadership and team effectiveness through coaching, strategic planning and team
building. She is known for innovative,businessfocused solutions to organization and leadership issues. She
holdsamastersdegreeineducation,aPh.D.inhumandevelopment,andcertificationinpersonalityassessment
andexecutivecoaching.Contactinformation:(609)4971997ordonna@leadershipsolutions.info.
JamesW.Forcade retired fromPepsiCowith30yearsofhuman resourcesexperience focused inChina,Asia,
Russia,CentralEurope,theMiddleEast,LatinAmericaandtheU.S.A.Theseassignmentsincludedstartups,re
structuringandrealignment toahighperformanceorganizationalongwith thedevelopmentofaprofessional
HRfunctiontoensuresustainment.JimholdsanM.B.A.fromTheAmericanUniversityinWashington,DC,and
aBSBAfromtheUniversityofNebraskainOmaha.Contactinformation:(727)3848182orjwforcade@aol.com.
12
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JackHipple,Principal,InnovationTRZ,isaninnovationandorganizationaldevelopmentprofessionalwithover
30yearsofindustrialexperienceleadingbreakthroughinnovationandnewbusinessdevelopmentprogramsfor
CabotCorporation,AnsellEdmont,andtheNationalCenterforManufacturingSciences,withresponsibilityfor
theDiscoveryResearcheffortattheDowChemicalCompany.He isamongthemostrecognizedconsultants in
industrialinnovation,focusingonthebreakthroughinnovationandinventiveproblemsolvingprocessknownas
TRIZ.HeistheinstructorinInventiveProblemSolvingfortheAmericanInstituteofMechanicalEngineers,the
AmericanInstituteofChemicalEngineers,andtheAmericanCreativityAssociation.Heisalsoafrequentwork
shoppresenter
at
the
Altshuller
Institute
for
TRIZ
studies
and
the
World
Future
Society.
In
addition,
he
is
certi
fiedinDeBonoandMichaelKirtonKAIorganizationalassessmenttools.Contactinformation:(813)9949999or
jwhinnovator@earthlink.net.
Dr.MaryB.LippittispresidentofEnterpriseManagementLtd.,afirmthatspecializesinleadershipandexecut
ingorganizational change. Herbook,TheLeadershipSpectrum:6BusinessPrioritiesThatGetResults, earned the
Bronze Award as the Best Business Book of 2002. The firms Leadership Spectrum Profile Web site,
www.leadershipspectrum.com,wascitedbyHumanResourceExecutivemagazineasoneoftheTopTenTraining
Productsof2000.HerworkhasappearedintheJournalofBusinessStrategy,HRExecutive,T&DJournal,ODPracti
tioner,andExecutiveExcellence.Contactinformation:(727)9349810ormlippitt@enterprisemgt.com.
RickRiesenberg,Ph.D.,isanexecutiveinresidenceatHRI.Hehasextensiveexperienceinallaspectsofinterna
tionalanddomestichumanresources.HehasworkedasaninternalorexternalconsultantatDigitalEquipmentCorporation,AlliedSignal,AT&TWireless,Nextel,AdvancedMicroDevices,Corillianandothermultinational
companies.Hehas ledHRteamsrangingfromoverseasstartupbusinessesto largemultinationalcorporations.
HereceivedhisB.A.degreefromHarvardUniversityandhisdoctoraldegreeinpsychologyfromtheUniversity
ofMassachusetts.Prior toentering theHRprofession,Rickwasaclinicalsocialworkerandpsychologist.The
NationalCancerInstituteandtheHudsonontheHastingsInstituteacknowledgedhisworkatDartmouthCol
legeMedicalSchoolasoneofthetopfivetreatmentcentersforthephysicalandemotionalcareofterminallyill
childrenandtheirfamilies.Contactinformation:(206)4633199orrickriesenberg@hotmail.com.
Dr.GlenTayloristhedirectorofTheCenterforInnovationandKnowledgeManagementattheSykesCollegeof
Business,UniversityofTampa.Heteachesbusinessstrategy,innovationmanagementandstrategiesforacceler
atednewproductdevelopmentandistheacademiccoordinatoroftheMastersofSciencePrograminTechnologyand InnovationManagement.Heholdsabachelorsdegree inbusinessadministration, amasters inenviron
mental studies, amastersofbusinessadministrationanda Ph.D. fromYorkUniversity inCanada,wherehe
taughtandservedastheassociatedirectoroftheOntarioCenterforInternationalBusiness.Glenwasthedirector
ofAPECsprogramonsupplychainmanagement,whereheledworkshopswithhundredsofseniorexecutivesin
Chile,China,Mexico,thePhilippines,Thailand,andVietnam.HehasalsobeenanactivememberoftheWorld
ResourcesInstitutesworkinChina,whereheservedasatrackleaderforM.B.A.curriculumdevelopmentwith
businessschoolsatthetopfiveuniversitiesinChina.
13
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HHumanuman RResourceesource IInstitutenstitute5959 Central Avenue
Suite 201St. Petersburg, FL 33710
727.345.2226www.HRInstitute.org
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