Innovation: More than Cool Gadgets

A recent study finds that executives are more interested in product innovation than creating an innovative organization. That could help organizations achieve short-term goals, but not long-term success. 

By Jared Shelly

When the word “innovation” is used in the business world, it conjures up images of cool products or gadgets that send shockwaves through the marketplace. The iPad, the Kindle, even the Snuggie come to mind.

But innovation within the organization isn’t nearly as tip of the tongue — as executives are more focused on developing innovative products than in creating cultures of innovation where new ideas flow freely, according to a study by Olympus Corp. of the Americas, based in Center Valley, Pa.

In fact, 60% of the 304 Fortune 1000 executives surveyed say their companies focus more on product innovation than on enterprise innovation (defined by Olympus as the development of transformative business practices).

And nearly half (47%) say their companies do not have a team, process or system in place for finding and vetting new ideas.

This modest focus on enterprise innovation comes despite most executives calling it “extremely” or “very” important for driving business growth (95%) and profitability (94%), and attracting and retaining talent (86%.)

Caryn Dashukewich, vice president of human resources for Olympus, has some theories on that disparity.

“Sometimes, [companies] don’t have the right incentives to reward innovation … [and sometimes] executives don’t focus enough on enterprise innovation because of the pressure to achieve short-term goals or other [business objectives] that take priority,” she says.

But amidst all of that, she says, there’s a “business opportunity” for companies that “[establish] a forum for their employees to be more innovative by providing them the tools, the resources and the [necessary] leadership.”

“You can’t get to product innovation without having the business process or the enterprise innovation in line,” she says.

The executives surveyed by Olympus seem to agree: 85% say enterprise innovation is a prerequisite for product innovation.

The struggling economy could be a reason the development of new ideas and new business practices have been put on the back burner, says Chris Trimble, a professor at the Tuck School of Business at Dartmouth College in Hanover, N.H.

“Down economies are hard on innovation. After all, it is profits from day-to-day operations that pay for innovation,” says Trimble, who authored The Other Side of Innovation: Solving the Execution Challenge. “When resources are tight, companies naturally focus on innovations that are closer to home and more likely to succeed, such as simple extensions to existing products and services.”

Some companies, are still in survival mode, says Tara Young, principal at Innosight, a consultancy and executive training firm focused on innovation based in Watertown, MA. That pushes long-term goals [such as organizational innovation] aside and focuses attention on “short-term wins,” she says.

“It’s definitely a challenge for any leader to stay focused on the long-term when you have some short-term wins that appear easy,” says Young. “Incremental product innovation, that’s easy. You know what kinds of resources you want to devote to it.

“When you’re looking for new ideas, new business models, new processes, new ways of doing things … that’s more difficult. There are more unknowns.” Companies “risk losing in the long term, but it’s a very difficult balance,” she says.

Companies seeking to foster innovation within their organization may be much more successful if they have a CEO that’s bought into the concept. The executives responding to the Olympus survey say CEOs can foster innovation throughout the organization by providing leadership, tools and resources.

Nearly all of the polled executives (92%) say their CEOs should try to create a culture that encourages innovation, while 78% say they should allocate financial resources toward innovation.

When it comes to rewards, nearly three-quarters (72%) say their CEOs should reward employees with non-financial recognition, while 70% propose financial rewards.

Brad A. Chambers, assistant vice president with Aon Hewitt’s Talent and Rewards practice, says it’s all about creating a culture where goals and reward structures don’t deter people from engaging in innovation.

“It’s not enough for CEOs and senior leaders to simply sponsor an innovation contest, for example,” says Chambers, who is based in the Detroit area. “They must be committed to acting on good ideas and providing people [with] the flexibility to participate in the initiative.

“Through their support for innovation, CEOs and senior leaders play a substantial role in creating and nurturing a culture of innovation,” he says.

This article originally appeared in the November 2010 issue of Human Resources Executive magazine. Reprinted with permission from LRP. [link]