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Performance Management

Published December 2005

Innovation: From Idea Incubation to Business Execution

Patrick Kulesa

 

In today's increasingly knowledge-based economy, innovation and the generation of new ideas are important business priorities for companies around the globe and across all industry sectors. A recent research report by the Canadian Center for the Study of Living Standards shows that national GDP is positively correlated with the number of patents granted annually, suggesting that the wealth of ideas emerging from a country's businesses is an important driver of national affluence.

Given this pressing business need, how should organizations approach innovation? For human resource departments in particular, what aspects of the workplace need to be in place to facilitate an innovative environment, and how can actions be best directed to address those aspects?

Research by ISR has focused on companies that compete successfully on the basis of innovation and examined what aspects of organizational culture differentiate those companies from the rest. In other words, based on responses from employee opinion surveys, where do employees from high-performing, innovative companies feel their organizations excel? High-performance is defined in financial terms as consistently exceeding industry sector averages for net profit margin or return on invested capital.

The research results point to 10 areas where companies that are successfully pursuing the strategic priority of innovation excel. (See Figures 1 and 2.) These 10 areas may be divided into two classes of topics. Figure 1 contains issues that reflect the development or incubation of new ideas. Successful innovation companies excel at setting a tone within their cultures that is characterized by:

• An entrepreneurial rather than a bureaucratic management style.

• Support for risk-taking and trial and error.

• An easy exchange of ideas and information.

• Supportive work environments that use conflict constructively.

• Highly collaborative work teams.

A second class of topics includes issues that reflect the business execution of new ideas. Successful innovation companies excel not only at setting the stage for generating new ideas, but also have the business discipline and processes necessary to take those new ideas to market. Figure 2 shows that the best innovators excel in several areas of business execution, including:

• Making prompt decisions regarding breakthrough ideas.

• Setting clear priorities so innovation is directed toward ideas that fit the business model.

• Anticipating the needs of customers and consumers.

• Moving quickly from idea to implementation.

• Encouraging ideas from any corner of the business by rewarding those whose breakthrough innovations take hold.

Incubation and business execution topics differ in a way that is especially consequential for the actions of human resource departments. Specifically, incubation topics tend to be driven at the work-unit level and heavily influenced by immediate managers. First-line supervisors can act locally to create practices to address collaboration among employees, easy exchange of ideas, support for risk-taking and productive use of conflict. In contrast, business execution topics tend to be driven at the senior-management level and are heavily influenced by top leadership. Setting priorities, understanding customer and market needs, creating reward systems and taking new ideas quickly to market are generally organization-level issues that should be prioritized by senior leaders. Incubation versus business execution is a useful framework for distinguishing local from corporate responsibilities in the drive for innovation.

 

 

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