By Nishant Kolgaonkar
18/12/2009
“A company can’t outgrow its competitors unless it can out-innovate them.” – Gary Hamel
The 2009 annual survey by Boston Consulting Group (BCG), which provides the foundation of BusinessWeek's 25 Most Innovative Companies list, features only one Indian company and it is none other than the Tata Group. The leader of the pack remains ‘Apple’ for delivering innovative products followed by ‘Google’ for innovative customer experience. The third place went to ‘Toyota’ for process innovation and ‘Microsoft’ managed to jump one place from its 2008 rankings. Interestingly even in 2008, the top three companies were the same (http://bwnt.businessweek.com/interactive_reports/innovative_50_2009/)
Perhaps you will disagree with the list, the rankings, and even the methodology of the survey. However, the fact remains that such surveys are important and a good indicators of progressive organisations. Undoubtedly, all these 25 companies deserve kudos. Towards the end, the survey reflects the need for sustainable innovation. Therefore, instead of challenging the rankings, it is necessary to focus and determine the various reasons that could make these companies manage and sustain innovation.
The new competitive advantage
Perhaps the answer lies in the immortal words of Management Guru Peter Drucker, who once said that, “Innovation is the only competitive advantage a company really has, because quality improvements and price reductions can be replicated, as can technology. Therefore, if a company could have just one major capability, it should be innovation.”
Although there are many definitions, models and theories on innovation, for the sake of brevity, let us view innovation as, the generation, acceptance, implementation and more importantly the commercialization of new ideas, processes, products, or services. Simply stating, Innovation involves finding a new and better way of doing something.
All the above mentioned companies create new products or services and invariably have made innovation as one of their major capability and that is what provides Apple, Google, Toyota, Microsoft, and 3M with competitive advantage.
But then, how do these companies create capabilities?
According to David Schmittlein, Dean of the MIT Sloan School of Management, “Innovation does not relate just to a new product that would come into the marketplace. Innovation can occur in processes and approaches to the marketplace.” Moreover, the process of innovation involves idea generation, evaluation of ideas, and commercial conversion of these ideas into products or services or business models and all these are people capabilities. Clearly innovation is about people and is driven by a motivated bunch of people and therefore, in any organisation HR must play a predominant role in order to create innovation capability.
Atul Gawand, Head HR, Greatship (India) Ltd states, “For any business function to work effectively and efficiently, it has to follow a consistent process and the same applies to innovation.” Undoubtedly, innovation is not merely about accidental discovery or invention but it is eventually a process and HR has to play a pivotal role in fostering innovation.
Role of HR
Unfortunately, organisations continue to view innovation along the singular dimension of developing new products or processes. Traditionally, HR is considered as risk averse and often kept away from various innovation programmes. That is usually not intentional, just a lack of understanding about the value HR can provide. Too often, organisations and especially HR focus on operational excellence and standardization that invariably aims at reduction of risk and elimination of failure. While standardization helps to make things run smoothly and efficiently, it also stifles creativity and risk taking behaviour. However, organisations such as Toyota and Cisco have managed to standardize the process of innovation. So how can HR standardize the process of innovation?
Innovation by definition requires change and change requires people to adopt new paradigm. Any change initiative results in fear and resistance from people. Gradually, they accept change and move away from the comfort of the status quo. Since innovation and change are interdependent, it creates changes in people’s perception, attitude, behaviours, organisational norms, processes roles and responsibilities. All these are HR capabilities and calls for HR intervention to focus on human change, organisational change and cultural change.
Vijay Govindrajan, Professor at Tuck, perspicaciously elucidates, “HR is very critical to developing an innovative culture, but the people in HR don’t play the right role. They create processes. They are viewed as nuisance. The new role of HR is going to be as global talent scout and to work with chief learning officer.”
HR Innovations
Amazon founder, CEO and Chairman, Jeff Bezos once said in an interview, "My view is that there is no bad time to innovate. You should be doing it when times are good and when times are tough—and you want to be doing it around things your customers care about. For us, it's such a deep-seated belief, I'm not sure we have a choice.”
During recession, several HR professionals came up with various innovative techniques to manage labour relations, lay-off or retrench employees and even curb cost. And during the boom, we also witnessed innovative practices in the following HR areas- attracting the best talent, effectively managing the talent, retaining high performers and building high employee engagement. Apparently with changes in employee demographics, there is a need for HR to continuously innovate in these areas.
Organisational culture
“Although corporate culture is not necessarily the responsibility of HR, the people who are hired, trained, retained and cultural imperatives are placed on the business and done so through HR. HR, therefore, has a big impact on whether or not the firm is culturally attuned to innovation,” says Vaibhav Rane , Senior, Manager, HR, Bayer.
Typically, innovation happens at three levels – individual level, group or team level and at the enterprise wide level. However, it is the organisational culture that impacts these three levels. HR should readily assess the readiness of organisations in mastering change and promoting innovation culture in following areas:
Individual change
Predominantly people don’t like change; however, there are a few who thrive on experimentation and change. Ironically, those who want to innovate or take on new ideas do not necessarily get the permission! Often people are reluctant to share ideas out of fear of criticism from their peers and managers. Sometimes, people fear that their ideas would be stolen by others. This is where HR has to create a fair and transparent climate. It has to help employees overcome this conundrum and provide an environment that encourages both casual and formal exchange of ideas. Google encourages all its employees to spend 20% of their time on innovative projects. More importantly, HR has to help employees respond to change with a mindset to master the process of changing the routine.
Organizational change
While strategy determines structures, yet many organisations fail to re-design their organisational structure despite the regular changes in strategy. Traditional organizational structures are rigid and not pre-disposed to change. Functional silos and hierarchical structures leave little room for cross functional thinking and conversation. In order to encourage risk taking, HR should contribute in creating innovative teams or groups and even re-design their organisational structures and avail technology that enable collaboration across functional lines.
Cultural change
Human beings learn from their mistakes and yet organisations do not tolerate mistakes. The performance management system, metrics and compensation philosophy often discourage innovation. Too often organizations ask people to participate in innovative activities yet evaluate and reward their efforts and work on existing evaluation metrics which don't reflect innovation. Companies and HR display innate reluctance to attract and recruit people from different domains, who can bring new perspectives and thinking. In some companies even the recruitment, selection and retention practices lack innovation and change. All these results in creating a culture that resists change in order to maintain shared beliefs, values, customs, and behaviors. Most probably, HR has to establish mindset and norms and organize trainings so as to allow individuals and teams to think imaginatively, to take risks, and to seek innovative solutions.
There is no dearth of literature on innovation which claims innovation is important and should be everyone’s responsibility, but in reality, it rarely gets done. That's because organisations, managers and individuals are more focused on fire fighting and achieving the quarterly numbers. It is necessary that HR encourage managers and individuals to spend time in thinking, sharing and capturing ideas on the shop floor, and along with senior managers explore avenues to innovate. The top 25 companies demonstrate that continuous innovation is a matter of habit. While different organisations may adopt different approaches to delivering innovation, one thing is clear that without the involvement of HR, innovation cannot be sustainable.
The author heads Vivechaan Consulting & Training, which is involved in corporate trainings, HRMS implementation projects and HR Process consulting.
