Creating a Healthy Innovation System

By Kevin O'Donnell, November 15, 2007 — Is the luster wearing thin on the innovation imperative? Maybe, according to Business Week’s annual survey. It shows that only 46% of senior executives are satisfied with return on innovation spending, down from 52% in 2006, and only 23% (versus 32%) of respondents call innovation a top concern.

The fact is that, done right, innovation drives growth and both differentiates and adds value to a brand. Apple, Netflix and Boeing can attest to that. But the growing dissatisfaction with returns may be symptomatic of a bigger problem – American business’ all-too common quick-fix orientation.

Successful innovators are committed to an overall innovation system that encompasses not just processes and structures but includes the philosophies, capabilities and behaviors that permeate the organization.

A healthy innovation system has various features, but two must-haves. The first is balance between the art and science that drive it. In instituting the Six Sigma quality improvement system, 3M found the resulting emphasis on process excellence overbalanced what it takes to innovate – variation, failure and luck. With less than 25% of its sales derived from new products (down from one-third), the firm has since de-emphasized many of its Six Sigma initiatives.

A second attribute of a healthy innovation system is acceptance of failure. Adopting a more venture capitalist mindset – versus the prevalent corporate investment orientation – helps to create a culture that embraces failure. The venture capital mindset is just the opposite of the corporate model, which presumes a high degree of certainty and success. To innovate successfully requires a certain amount of humility and acceptance that there is more you don’t know than you do.

Businesses that expect to stay, achieve growth and maintain fresh and relevant brands understand that innovation is more than the trend du jour, and have inculcated behaviors, philosophies and systems into their cultures to support it over the long haul.