#220 from R&D Innovator Volume 5, Number 6          June 1996

Achieving Innovation, the Core Competence
by James M. Higgins, Ph.D.

Dr. Higgins is president of James M. Higgins & Associates, Inc. in Winter Park, Florida, helping organizations increase creativity and innovation (Phone 407-647-5344).  He is also a professor of management at The Crummer School, Rollins College, and is author of 101 Creative Problem Solving Techniques and Innovate or Evaporate (The New Management Publishing Company, Winter Park, FL, 1994, 1995).

Recently, NEC Corporation was forced to withdraw its low-priced monochrome ink jet printer from the market only four months after its introduction.  Why?  Because the dominant firm in that industry, Hewlett-Packard, had already beaten them to the market with a cost reduction of forty percent on its monochrome ink jet printer and the introduction of an improved color printer.  HP used product innovation to enhance the existing products, and process innovation to reduce costs and create a relative low-cost position in the market.  HP’s entire philosophy of business is based on innovation, from product development to human resource management.  There are other firms where innovation is also a way of life.

Then there are firms where innovation may not be a way of life, but where it has been critical to success.  For example, when Intel was faced with new and nimble competitors, it chose speed of product development as its key strategy, and blew the competition out of the water.

Finally, General Electric’s introduced best practices (GE’s version of benchmarking), process mapping (reengineering) and workouts (energetic, highly participative employee-manager retreats), all in order to get more new ideas from employees.  These ideas were aimed at significantly increasing innovation in order to substantially increase productivity.  These actions were taken in a firm which already, in most years, files more U.S. patents than any other firm headquartered in the U.S.  In each case, these firms—Hewlett-Packard, Intel, and GE—as well as some others, met strategic challenge through innovation.

All of the above companies live and breathe innovation; or, at the very least, find it fundamental to their success.  These types of firms are the ones that others should emulate for they know that to do business,  as Peter Drucker suggested in a recent Harvard Business Review article, “Every organization—not just businesses—needs one core competence:  innovation.”

Innovation and Competitiveness

Innovation gives these firms a competitive advantage.  Now and in the future, more than any time in history, the secret to competitive advantage is innovation.  But innovation can help businesses meet all of their strategic challenges, not just competition; for example, in confronting accelerating rates of change, globalization, rapidly advancing technology, a more diverse work force, and a change from an industrial to a knowledge-based economy.  Meeting all of these challenges helps the firm achieve competitiveness, and meeting these challenges appropriately depends on innovation.

If a firm uses textbook solutions for these or other market-oriented challenges, it becomes dangerously predictable, and at best, ends up in the same relative position as its competition.  The more likely scenario is that the firm ends up at a competitive disadvantage.  We know that a firm must differentiate itself from its competition and/or possess a relative low-cost position compared to its competitors.  Innovation allows a firm to solve its challenges in unique ways that build competitive advantage either through relative differentiation, a relative low-cost position, or some acceptable level of both.  Innovation can’t guarantee success, but success cannot be achieved in the long run without it.

The Innovation Quotient Inventory (IQI)

Many firms fail to produce much that’s new or to improve the processes by which they provide their products or services.  Is there something different about organizations that are consistently innovative?  Absolutely!  Extensive examination of case and research studies has revealed a set of characteristics that are shared by innovative firms, despite certain differences in their organizational cultures.  It is these characteristics that will enable a firm to survive and prosper in the coming years.  These characteristics create the profile of the innovative organization.

In the following survey, I’ve organized 14 of the 49 product innovation characteristics according to the McKinsey Seven S’s:  strategy, structure, systems, style, staff, shared values, and skills.  The survey of these 49 characteristics and similar surveys for process, marketing and management innovation comprise the “Innovation Quotient Inventory” or IQI.  Check this sample of the IQI for product information as it relates to your firm.

Product Innovation Characteristics                                           Rating (from 1 to 10,                                                                                                     with 1 being low,                                                                                                   and 10 being high)

To what extent does your organization:

Strategy

Have a stated and working strategy of product innovation.                                       ____

Require relevant managers to have objectives for product innovation and
evaluate their performance relative to these objectives.                                            ____

Structure

Use alliances to obtain product innovation.                                                             ____

Require cross-functional and customer/supplier new-product teams.                         ____

Systems

Reward product creativity and innovation.                                                               ____

Have management information systems for product innovation to scan the 
environment, monitor and benchmark competitors, determine best 
practices, keep abreast of new technologies, monitor market conditions,
and exchange information internally.                                                                      ____

Style

Use special approaches when managing innovative personnel.                                 ____

Allow employees to make mistakes when innovating products.                                ____

Staff

Use many of the 100 or more creativity techniques such as brainstorming,
verbal checklists, mind mapping, storyboarding, etc. for product development.           ____

Provide physical facilities that are conducive to the exchange of ideas and
creative thinking.                                                                                                  ____

Shared Values

Place a high value on change and make it part of organizational culture.                    ____

Manage organizational culture to make it more innovative.                                        ____

Skills

Proactively create new opportunities, and respond to change relative to new
products.                                                                                                              ____

Continuously create new products or services and/or enhance old ones.                     ____

Scoring Your Responses

Simply add up your total score from all fourteen questions.  Experience suggests that scores higher than 115 indicate a very innovative organization.  Scores between 100 and 115 are good.  Scores between 85 and 100 are acceptable.  A score below 85 leaves plenty of room for improvement.  Scores below 57 reveal firms likely to possess little innovation.  Scores below 28 indicate firms in serious trouble.

Generally, the higher the score, the more likely the firm is to be innovative.  But the requirements of some industries and/or certain situations may cause a firm to have a high score but not be as innovative as another because one or two vital characteristics are missing.  For example, speed strategies (of product development and placement in the market) are more critical in rapidly changing environments than in others with a slower pace of change.

How did you score your company?  How did your colleagues, at various levels in the organization, score your company?  Perhaps this can initiate further discussion on what needs to occur to improve your innovative capabilities.