Assessing Innovation Readiness
In the past couple of decades, increased attention has focused on innovation as a driver of growth in a world where knowledge economies are becoming the norm. It is seen as an indispensable driver of growth and competitiveness, especially as volatility and uncertainty wreak havoc with stable and traditional business models.
Innovation has therefore become a high priority in most organizations, be they public or private. In industry, corporations have reluctantly experimented with “intrapreneurship” as a way of coming up with doing things better and cheaper.
But first, let us define what we mean by innovation. In its broad conceptualization, it refers to the application of a new idea to create value (market or social) in a particular context. Some ideas may involve value creation that is incremental (additional features to an existing product) while others may be much more radical or revolutionary (creating products or services that do not currently exist). Its potential foci include products, services, processes, business models, and organizational structures. when it has worked quite well until now – the “don’t fix it if it ain’t broken” mentality.
As many institutions have come to realize, professing such a commitment is easier said than done. There is often a considerable gap between the desire or intention to innovate and the required ability. It is relatively easy to pay lip service to the need for innovation as you laud your commitment to making it happen, but "walking the talk" is where many organizations fail.
But first, let us define what we mean by innovation. In its broad conceptualization, it refers to the application of a new idea to create value (market or social) in a particular context. Some ideas may involve value creation that is incremental (additional features to an existing product) while others may be much more radical or revolutionary (creating products or services that do not currently exist). Its potential foci include products, services, processes, business models and organizational structures.
So, returning to the problem, we started with: It is easy to declare an aim ("become innovative") by building it into your vision and mission but translating that to a real organizational capability and capacity is the real challenge.
This is why assessing an organization's "innovation readiness" is an important undertaking. In short, it is an analysis of an organization's ability to translate scientific and technological ideas to products, services or new business models that can be successfully deployed in the real world. It is about effecting change through redefined processes, structures, and business models.
The notion of innovation readiness overlaps with but is distinct from technological readiness that typically involves R&D. Developed by NASA in the mid-1970s and extended in the mid-1990s, Technology Readiness Assessment (TRA) identifies nine maturity levels that R&D programs can use to assess readiness levels. Innovation readiness encompasses technological readiness but it is broader in scope and intent in that it refers to “system readiness” rather than just readiness of a given technology.
My own experience suggests that most organizations (in the public as well as private spheres) have a low capacity for innovation, despite their aspirations. They simply lack the critical elements required to create successful innovation. But what are those critical elements?
To start with, there is the strategic intent and the articulation of that in terms of plans that can be effectively implemented.
Is there a credible and compelling strategy for innovation and are resources allocated to the critical tasks that are required? Are the organization's avowed values and goals in alignment with the strategy?
Next comes the rather elusive notion of culture. Is there a culture for innovation? Is risk taking and questioning the wisdom of existing practices tolerated? Is there a tolerance for "risk" and encouraging (not shooting down) new ideas? What Joseph Schumpeter referred to in early as the 1940s as "creative destruction" involves the deliberate dismantling of established processes in order to make way for improved methods of production. We all know how difficult it is to challenge the status quo, especially when it has worked quite well until now – the “don’t fix it if it ain’t broken” mentality.
Then comes organizational structure along with systems, policies, and procedures – all of which need to be in alignment and conducive to innovation readiness. Is there senior management support and committed resources, or are these just on paper? Are there well-defined policies governing intellectual property and are incentive structures designed to encourage innovation?
These questions can illuminate the degree of an organization's readiness and need to be approached as interconnected elements in a system that covers resources, skills, processes, and operations.
Lastly, we need to also address external activities such as IP management, networking, and market readiness (which may create "push" and/or "pull" dynamics).
Of course, all of this hinges on the premise that the organization can produce top-notch science and research that can form the foundation for "lab to market" translation. Not much can be sustained without world-class capabilities in science and technology. And to bring about the desired outcomes, it requires a focused and effective technology transfer system involving idea generation, idea filtering/refinement, a credible market assessment, and finding target customers. Above all, it depends on a business model that stands up to intense investor scrutiny.
Having an effective “translation” capability will yield a steady stream of outcomes such as disclosures, patents, licenses, royalties, sponsored and contract research as well as new ventures (through start-ups).
What organizations soon realize is that there is a considerable time lag (or a “temporal disconnect”) that can seriously hinder eventual market adoption. This is referred to as the "valley of death" – a metaphor that conveys the challenge of handling the negative cash flow in the early stages of a start-up before the new product or service can produce revenue from customers. The "translation" of an idea/discovery to a fully developed product, service or new business model may be 3-7 years. Is there sufficient organizational patience and perseverance to traverse this gap? If we judge by the number of ideas that survive the “translation journey” the answer is often negative.
And a final point. A knowledge-based economy does not simply rely on new technologies or new knowledge at the organizational level. It presupposes that most sectors are knowledge-intensive, and form part of a robust ecosystem that also involves venture capital, angel investors and a well-functioning banking system (one not mired by bureaucratic inertia). Within this system, it is possible to create linkages and potential partnerships and draw on ready talent pools.
So, to summarize:
Innovation requires superior organizational capabilities, appropriate and supportive Institutional structures and tailored incentive systems.
Building an effective innovation management system hinges on appropriate organizational structures, skills/capabilities, strategic priorities, all in alignment.
Translation pathways vary across contexts and are impacted by the surrounding ecosystem.
Senior management needs to clearly define the rationales and aims of innovation management in a way that resonates with key stakeholders and is consistent/aligned with values/mission.
Innovation is a journey that takes years, involves iterative learning and needs senior management commitment. Along the way, a re-think may be needed on the route as well as the destination.