How to sow the seeds of innovation

BOOK REVIEW: The Innovation Zone: How Great Companies Re-innovate for Amazing SuccessBy Thomas M Koulopoulos Davies Black Publishing; £19.99 (€22)

AS NEW car models go, the Ford Edsel from the 1950s was a flop of epic proportions.

The experience taught Ford that manufacturing needed to be a cross-divisional activity rather than the division-specific system that led to employees of its Mercury division grudgingly building the Edsel, with resulting inferior-quality cars.

It also showed Ford that it needed to be more outward- looking in understanding market trends, as the Edsel’s size worked against it with the US economy in recession. The lessons helped Ford in the successful launch of the Mustang a few years later.

As Thomas Koulopoulos argues coherently in this well-crafted book, it is unhealthy to remove all the risks associated with innovation. Moreover, innovation needs to be a system: a process of being innovative rather than a specific product. Products have dominated our notions of innovation but enduring value is created through a business model that recombines existing ideas and inventions to create new value.

Organisations are full of innovation killers, such as the belief that innovation will just happen, the fear of failure, innovating only when forced to do so, and laying the success of innovation solely at the feet of technologists.

Koulopoulos identifies four objectives that leaders must focus on to create innovation.

Firstly, they need to separate the core competencies of their organisation from its core business model, which allows the organisation to innovate within its core business and at the same time build new business models.

Secondly, leaders must foster a culture of innovation, a process that needs constant reinforcement.

Thirdly, leaders need to challenge the complacency associated with past success.

Finally, leaders must create an organisational structure that encourages innovation while still achieving operational efficiencies. Counterbalancing competing forces in this regard is tricky.

Sustaining innovation is harder in large organisations but the issue is not as simple as one of pure scale or decentralisation.

As Koulopoulos acknowledges, while the autonomy of a distributed organisation can allow individuals to bring new ideas to market without layers of corporate filters, it can also be a hindrance to good communication.

The shift to matrix organisations that emphasise decentralisation and more localised control has advantages, but the controls associated with these structures can be stifling.

Two decades of experimenting with the matrix organisation created failures across many industries, especially in high tech where firms such as IBM, HP and ATT suffered from the toll of endless meetings intended to co-ordinate the complexity and chaos of the matrix. This compromised their ability to innovate. It has been argued that Sony’s failure in the MP3 war with Apple was caused not by technological or marketing failure but by its inability to co-ordinate resources quickly and effectively enough to respond to its rival.

Successful matrix organisations are driven by compact teams that tackle projects expeditiously. The key, Koulopoulos says, is to develop a team approach with the right combination of technology and culture, and to ensure that these teams are truly part of the corporate fabric.

Ironically, though, even the best matrix organisations inspire and reward circumnavigating the bureaucracy, and those who advance fastest simply plunder the resources needed to get the job done. While this results in innovation, it falls short of building an innovative organisation.

Koulopoulos recounts his experience of working in a large multinational that had a well-defined executive hierarchy combined with the intricacies of matrix management. “The two cultures interacted like colliding weather fronts,” he writes.

“The net result was that those employees who were able to take a good idea and grow it into a new business successfully had to exercise a fair amount of political savvy and on occasions be outright devious in their efforts. If they succeeded, they were lauded and promoted very visibly. If they failed, they were soon cast out.”

Innovation can take many forms, ranging from tactical to radical and from component to systemic. It can also be considered in terms of recombitant innovation that recombines existing components in a new package; generational innovation that changes the nature of a product or service by taking advantage of a new technology; and behavioural innovation that creates new behaviours with no base of experience or precedence.

The challenge of innovation, Koulopoulos concludes, is whether organisations can rise above managing the present and glorying in the successes of the past to embrace the uncertainties of the future. To do this, they need to create ecosystems where unknown seeds will grow and eventually thrive.

Frank Dillon is a freelance journalist