Innovation can be a powerful accelerant for the future prospects of a business, and an entire economy. It is a much sought-after ingredient by companies in all sectors and policy makers in every economy. It has the power to catapult a company to become a leader amongst its competitors and ignite a country to become an economic powerhouse.
Neglecting innovation within a company can be fatal and even formerly strong market leaders can be vulnerable. Just ask Kodak. There are numerous stories relating to companies that were once at the forefront of innovation in their industry but which now litter the corporate graveyard, replaced by companies with faster, simpler, and better technology.
Within Australia there are companies setting the pace when it comes to innovation, illustrating to other sectors of the economy just how innovation can be achieved, and Professor of Management in the Faculty of Business and Economics, Danny Samson, recently conducted a project with the Department of Innovation, Industry, Science and Research, to identify the key principles of innovation shared among innovation leaders.
Professor Samson says the aim of the project was to show that no matter what size a company is, certain principles can be adopted to drive innovation. “We wanted to examine in detail both large and small innovative companies that operate in Australia which consciously adopted a competitive strategy that is at least partly – if not significantly – based on their innovation capability.”
The result of this project was the creation of an in-depth report, Innovation for Business Success – achieving a systematic innovation capability, which examined the building blocks of innovation and identified successful principles adopted by ten Australian-based companies across varied industry sectors. Within the report Professor Samson underscores the importance of five key building blocks that can create the foundation for systematic innovation within a company.
The first block is strategy. A company must take the decision to explicitly and consistently state its strategic aim to be innovative, and actively and relentlessly engage in activities that drive innovation across the company.
The second key building block to ensure innovation within a company, according to Professor Samson, is that the operating practices and resources of a firm must be geared towards qualified risk taking, as opposed to conservatism or a ‘don’t change’ attitude. The report describes how some companies worked to ensure this occurs, with for example the Indian company Tata having an annual competition known as Innovista to inspire innovation amongst its staff. Locally, Lonely Planet has ‘Innovation days’.
A third crucial building block to create innovation is measures of performance within a company. “What gets measured gets done still applies and if a company wishes to create innovation, key performance indicators related to it are a necessary ingredient,” he says.
Ensuring staff are recognised and rewarded for innovation contributions is the fourth building block towards creating innovation.“What gets measured gets done, but what gets measured and rewarded gets done very well. Our most innovative firms have systematic ways to measure innovation effectiveness, and they recognise and reward the people who contribute.”
The final building block to cement the process of innovation within a company is to instil a culture and behaviour towards innovation. “Firms must work to ensure innovation is second nature and embedded as part of daily work and not an addendum on Friday afternoons,” he says.
One company cited in Professor Samson’s report which worked hard to ensure this occurs was the Minneapolis-based food manufacturer, General Mills, which sent several employees to observe and learn from the fast changeovers applied in the pits at NASCAR races, which could then be taken away and applied to their production lines. Within months they had reduced changeover time on their production lines from three hours to 13 minutes. Innovation can be as much about process improvements and cost reductions as it is about new offerings to the market.
In addition to analysing these five crucial building blocks of innovation, Professor Samson’s report identified ten innovative Australian based companies including both foreign and locally owned, that varied in types and sizes, and that spanned radically different industries such as tourism, car manufacturing, electronics, textiles, computers and mining.
“We carefully selected a group of companies which were substantial and successful innovators to take part in the study,” Professor Samson says. Interviews were conducted with senior executives in each company and analysis was undertaken to determine the underlying principles common to these effective innovators.
Through this work twenty principles of innovation were ascertained. “From the companies we studied, we found that although they differed very much in size and structure, industry, and product or service offerings, deep down there were some common success factors. These were deep principles, not only of innovations, but also of the capability to successfully implement a series of innovations. I call it Systematic Innovation Capability.”
One of the salient principles in the twenty identified in the report is that of leadership. Strong, determined, energetic and dynamic leadership was a common feature of all the ten companies’ studied, and was one of the most important principles identified. Without the right leadership, the researchers found that resources would not be allocated nor focused on innovation, measures would not be right, and so firm-wide innovation behaviour would not be in place.
Another principle identified among these ten companies was that innovation was achieved by involving partners from outside the organisation. There was a large degree of openness amongst these companies and they recognised that a firm does not have to work on its own in its innovation efforts. Toyota was one example of this. It placed its staff on secondment for extended periods so their suppliers became familiar with the ‘Toyota Way’.
An additional feature of these companies and a principal identified by Professor Samson in the report was that sustainable development actions such as waste reduction, staff wellbeing, and environmental output improvements, went hand in hand with innovation.
“Sustainable development ideas are by definition innovations. In order to engage in energy use reduction, or staff wellbeing processes, innovation is required and changes are implemented. The concepts of innovation and sustainable development are entirely complementary. One can spur on the other,” he says.
The Department of Innovation, Industry, Science and Research has now condensed into a booklet the twenty principles of innovative companies identified in Professor Samson’s report, to allow companies to reflect on their own approach to innovation. Professor Samson is of the opinion that innovation offers Australian companies the possibility of competitive advantage.
“Australia is an expensive country when it comes to labour costs, so we cannot compete on that front anymore. Likewise the old adage that Australian products while costing more are made better, is also ringing hollow, as low cost countries improve their quality. Today, superior systematic innovation capability is where this country can compete and offer competitive advantage. Innovation is the ultimate competitive weapon, both in processes and in products and services.”