Innovation goes nowhere if not connected to research, design, development, testing, scale-up, implementation and support. As Peter Drucker put it, “Ideas are cheap and abundant; what is of value is the effective placement of those ideas into situations that develop into action.” Few would argue with Professor Drucker.
More controversial is the definition: does innovation cover any improvement – product launch, cost-reduction and upgrade – no matter how trivial or widely used in peer companies? This seems too wide, and in danger of making the term meaningless. On the other hand, must innovation have an element of surprise or non-intuitive thinking that changes the direction of a business? Consider the processes or activities that operate in a business.
Primary activities within an organisation (so-called Level 1 in the Viable Systems Model, VSM) can be making cars, mending fridges, filling potholes, or trading junk-bonds. They evolve over time, perhaps within a system like Kaizen, but the changes are not perceptible from day to day.
Sticking with VSM categories, Level 2 is the information channels and systems that allow the primary activities to communicate with each other, and through which they are monitored and coordinated. Level 3 is structures and controls that rule and monitor primary activities. It interfaces with Level 4, those responsible for looking outwards, and with Level 5, those accountable for direction. Activities for designing new products, dealing with regulatory matters, hiring staff and building a new factory are no different. All are business-as-usual: mostly predictable, required for continuity and not, by most definitions, surprising. They are managed as processes with output targets and productivity goals. Importantly, all are quasi-autonomous in their management and direction. They get budgets and direction from Level 5 but their touch-points with other activities are only for transferring requirements, information or outputs. Targets for managers of these activities are in two buckets, outputs and productivity. Managers have little incentive to retain spare capacity for an unexpected opportunity, especially one from outside their activity area; and less still to risk their own performance by diverting resources towards it. They are incentivized to become lean and stay lean.
How is innovation to happen in these lean processes? Where are the chances for “placement of those ideas into situations that develop into action”? Unless its definition is stretched to include routine and necessary improvement, what chance has innovation?
This BlogPost has no positive conclusion, still less a solution. It is for others to argue and follow up on. Blame is, at least partially, shared with Thierry Fausten, Armin Scharlach and Ciaran Crossin as co-contributors to the SWISSUES PodCast, ‘Innovation and Compliance, Enemies of Innovation?’