New thinking on how to innovate

Richard Straub believes that innovation comes from companies being prepared to change the ways they do business and change their views of their employees, writes Karlin Lillington

Practising what he preaches, Dr Richard Straub finds himself multi-tasking across a range of roles. In a previous era, someone in his senior corporate position would have been expected to take a quiet and prosperous retirement.

Instead, this veteran of 35 years with IBM has put the knowledge gained from his career into a dizzying number of jobs: adviser to the chairman of IBM Europe, Middle East and Africa; director of development and the Corporate Learning Improvement Process with the European Foundation for Management Development; secretary general of the European eLearning Industry Group; visiting executive at Helsinki School of Economics, and more.

In Dublin last week to deliver a keynote address at the third annual International Conference on Services and Innovation, he says he firmly believes that innovation comes from companies being prepared to change the ways they do business and change their views of their employees and how they work. Flexibility, openness and multiple skillsets are central to this vision.

"In this sense, I'm already one of these new workers I am talking about," he muses, "and when we talk today about innovation, we also have to talk about open innovation."

What does he mean? "In the past, innovation happened in a closed situation - in research labs, for example - and was very much kept within the company, though there might be some collaboration with academics. Now companies are tapping more and more outside resources."

So, innovation happens not within the four walls of a lab, "but with partners directly involved. One of the driving forces in this opening up is the new way in which you involve the other stakeholders and how you use the intellectual property produced."

He notes that intellectual property no longer needs to be tightly held by companies but can be sold or licensed - in turn creating further innovation as it is used in new ways by other companies or forms the basis for a new company.

Straub points towards the open-source software development movement as another type of open innovation, where developers spread across the world collaborate for "a kind of joint ownership". IBM has itself "donated hundreds of patents that are relevant to open source to the open-source community".

Open innovation is "almost inherent in services" and, with services forming an increasingly large proportion of economic activity - far outweighing manufacturing and farming in Europe, for example - open innovation is central to economic growth. "Seventy per cent of the value-add within the economy in Europe is in services," he says, with knowledge-intensive and IT-enabled services offering the biggest opportunity for growth.

He is firm on the point that innovation and growth are not a question of new technologies themselves - new technologies are simply tools for achieving that growth. We are at a point where some technologies, including so-called Web 2.0 social networking technologies, are becoming more stable and secure, enabling their mainstreaming into companies.

"In this cycle, we see the focus shifting from the technology to how we can use it. Success always comes from companies not simply investing in new technologies, but in finding completely new business models" that have been made possible by those technologies.

Straub notes how many of the technologies introduced in the dotcom era have now gone mainstream - far from fading away and having little business relevance after the dotcom crash. He also says it is difficult to tell where we are within a technology cycle - are we in the middle of one, with further mini or major crashes, or are we coming out the other side?

What we do have post-dotcom crash, he says, "is a much more stable basis on which to drive stable innovation".

As for the new business models, the key model now is what IBM calls the "globally integrated enterprise". Rather than having companies duplicate themselves as a vertical stack of operations across different national or international regions, they instead break up into "centres that specialise in different areas".

IBM has moved its human resources operations to Hungary - and not just the company's own internal HR operations, but the global HR work it provides as a service to other companies. Hungary is seen as a centre of excellence in that area, across IBM.

Straub emphasises again that, while technology is central to this function, the function isn't about the technology but the service itself, which the technology enables. He says "IBM couldn't have had this arrangement 10 years ago, because we didn't have the technology" to virtualise an entire division in this way.

This brings him full circle, back to why companies need to take a new view of employees and how to manage them. A new generation of workers isn't necessarily interested in a job for life with a single employer, nor does this older model always suit the situation of the globally integrated, services-focused company looking for what are usually termed "knowledge workers".

"Knowledge workers own the means of production. More and more, the means of production are in their brains, so holding on to these employees is important. For management, the question is, how can you keep them happy and still manage the company in a coherent way?"

Straub adds: "All these new models don't necessarily mean the core model is going to go away. I'm talking about a degree of flexibility and competencies you would otherwise lose."

Most traditional managers have problems understanding and valuing the skills of knowledge workers because their skills, needed in a service economy, are different from those desired in employees in a product economy, he says.

The situation is even more confusing and complex now because companies still ask for employees who come out of an educational system that is itself geared towards a product economy. In that sense, the global educational system needs to change radically to fit a services market, he argues.