Magazine Winter 2011 Research Feature

The 5 Myths of Innovation

Nowadays, goes the theory, innovation is supposed to be done constantly, by everyone in the company, improving everything the company is about — and new Web-based tools are here to help it happen. Is the theory right? Or do the experiences of companies reveal something different?

Julian Birkinshaw, Cyril Bouquet and J.-L. Barsoux Reading Time: 25 min 

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Image courtesy of Flickr user rishibando.

Historically, most managers equated innovation primarily with the development of new products and new technologies. But increasingly, innovation is seen as applying to the development of new service offerings, business models, pricing plans and routes to market, as well as new management practices. There is now a greater recognition that novel ideas can transform any part of the value chain — and that products and services represent just the tip of the innovation iceberg.1

This shift of focus has implications for who “owns” innovation. It used to be the preserve of a select band of employees — be they designers, engineers or scientists — whose responsibility it was to generate and pursue new ideas, often in a separate location. But increasingly, innovation has come to be seen as the responsibility of the entire organization. For many large companies, in fact, the new imperative is to view innovation as an “all the time, everywhere” capability that harnesses the skills and imagination of employees at all levels.2

Making innovation everyone’s job is intuitively appealing but very hard to achieve. Many companies have put in place suggestions, schemes, ideation programs, venturing units and online forums. (See “A Glossary of Established Drivers of Innovation.”) However, the success rate of such approaches is mixed. Employees face capacity, time and motivation issues around their participation. There is often a lack of follow-through in well-intentioned schemes. And there is typically some level of disconnect between the priorities of those at the top and the efforts of those lower down in the organization.

The Leading Question

What conventional wisdom about innovation no longer applies?

Findings
  • Online forums are not a panacea for innovation.
  • Innovation shouldn’t always be “open.” Internal and external experts should be used for very different problems.
  • Innovation must be bottom-up and top-down — in an approach that’s balanced.

Moreover, Web-based tools for capturing and developing ideas have not yet delivered on their promise: A recent McKinsey survey revealed that the number of respondents who are satisfied overall with the Web 2.0 tools (21%) is slightly outweighed by the number who voice clear dissatisfaction (22%).

Topics

About the Authors

Julian Birkinshaw is a professor of strategic and international management at London Business School. Cyril Bouquet is a professor of strategy at IMD in Lausanne, Switzerland. Jean-Louis Barsoux is a senior research fellow at IMD.

References

1. For a taxonomy of different types of innovation, see S. Conway and F. Steward, “Managing and Shaping Innovation” (Oxford: Oxford University Press, 2009), 13-14.

2. See P. Skarzynski and R. Gibson, “Innovation to the Core: A Blueprint for Transforming the Way Your Company Innovates” (Boston: Harvard Business Press, 2008).

3. See “Building the Web 2.0 Enterprise: McKinsey Global Survey Results,” July 2008, https://www.mckinseyquarterly.com/Business_Technology/BT_Strategy/Building_ the_Web_20_Enterprise_McKinsey_Global_Survey_2174.

4. See M. Hansen and J. Birkinshaw, “The Innovation Value Chain,” Harvard Business Review 85, no. 6 (June 2007): 121-130; and A. Hargadon, “How Breakthroughs Happen: The Surprising Truth About How Companies Innovate” (Boston: Harvard Business Press, 2003).

5. See, for example, J.H. Dyer, H.B. Gregersen and C.M. Christensen, “The Innovator’s DNA,” Harvard Business Review 87, no. 12 (December 2009): 60-67; and Skarzinski, “Innovation to the Core.”

6. A. Giridharadas, “Democracy 2.0 Awaits an Upgrade,” International Herald Tribune, Saturday-Sunday, Sept. 12-13, 2009, Currents, sec. A, p. 1.

7. M. Witzel, “Managers Who Use a Little Imagination for Big Rewards,” Financial Times, May 6, 2008, 18.

8. E. Byron, “A New Odd Couple: Google, P&G Swap Workers to Spur Innovation,” Wall Street Journal, Nov. 19, 2008, sec. A, p. 1.

9. See, for example, E.L. Deci, R. Koestner and R.M. Ryan. “A Meta-Analytic Review of Experiments Examining the Effects of Extrinsic Rewards on Intrinsic Motivation,” Psychological Bulletin 125, no. 6 (1999): 627–668.

10. H.S. James “Why Did You Do That? An Economic Examination of the Effect of Extrinsic Compensation on Intrinsic Motivation and Performance,” Journal of Economic Psychology 26, no. 4 (August 2005): 549-566.

11. K.J. Boudreau and K.R. Lakhani, “How to Manage Outside Innovation,” MIT Sloan Management Review 50, no. 4 (summer 2009): 69-76.

12. E. Kahn, citing Eric Mankin, “Innovate or Perish: Managing the Enduring Technology Company in the Global Market” (Hoboken, New Jersey: John Wiley & Sons, 2007), 19.

13. J.W. Rivkin, D. Leonard and G. Hamel, “Change at Whirlpool Corporation (B),” Harvard Business School case no. 9-705-463 (Boston: Harvard Business Publishing, 2006).

i. For more details see Skarzynski, “Innovation to the Core”; and T. Davila, M.J. Epstein and R. Shelton, “Making Innovation Work: How to Manage It, Measure It, and Profit From It” (Upper Saddle River, New Jersey: Wharton School Publishing, 2006).

ii. L. Dunnavant, cited by A. Muoio, “They Have a Better Idea ... Do You?” Fast Company, (August 31, 1997), 2. i.

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Comments (7)
chris
RG wrote: "Useful learning the balanced conclusions from this research.

One immediate thought that struck me is that Innovation is probably going through the stage of maturity that Quality went through in the late 1980s. Yes, ultimately it’s about empowering people, there are multiple tried-and-tested approaches and techniques to equip people with, measuring results is paramount but just throwing money on a borrowed scheme is not going to succeed… and so on."  

I agree that at the core is it really about empowering people.  It is also about changing the perspective of those people as well.. for example Made in China to Invented in China.  Large shift in perspective that will no doubt empower in directions never before dreamed of...
bert shlensky
Corporate Size Is the Antithesis of Innovation 

Your article ignores the more important consequence of size which inhibits innovation, change, growth and entrepreneurship. Your study sample is mostly of larger companies that don’t really know how to innovate. 

The issue is best evidenced by comparing the performance of different types of companies. Between the years 2002 and 2010 ,the results of buying  50  shares each of the following large prestige leading Companies : Coca-Cola , Citi , Dell , Exxon-Mobil , G.M. , G.E. , I.BM. , Disney, 3M, Johnson & Johnson, Microsoft, Wal-Mart, Pfizer and Proctor & Gamble are as follows: You would have invested about $32,000 and lost about $ 3000 or almost 15%. . 
 
In contrast if you bought 100 shares of Cognizant, Ralph Lauren, Google, Hanes, Coach, VMware, Costco, Apple, and Amazon in 2002 or whenever they went public the results are as follows: You would have invested about $ 26,000 and it would be worth almost $ 132,000 or about a 20% annual return.


What is ignored is that many large companies lack the structure and commitment to create effective environments because of inherent constraints:

•	In your article on myths in( comparison to other great articles on analytics in the issue) you ignore several aspects that may be responsible for the results reported :
o	Large organizations frequently have tunnel vision, organizational constraints and ignore emerging challenges, technologies and opportunities. Thus, it is not the factors you describe but their execution that is wrong.  It is interesting that 2 spin-offs of Sara Lee(Coach and Hanes) have done spectacular   
o	They lack the flexibility to respond to urgent needs or changes in their environment and use outdated solutions and technologies.
o	You seem to take an all or nothing approach to evaluating these tools rather than understanding the integration and environment affecting innovation. For example bottom up or open systems still require goals, measurement and focus which do tend to get ignored in the enthusiasm of new programs. 
o	Similarly, criticizing the Eureka moment should not be interpreted to encourage the squashing of deviant, new and challenging ideas.   

.	
Most companies need to examine and adjust their capabilities to compete in a changing and complex market place. In particular, professional cultures and decision making need to replace hierarchies which are the cornerstone of size. Organizations are frequently focused on control, minimizing risk and treating everyone equally.  Instead I argue that we need to learn to accept and accommodate deviant behavior. This is best exemplified by companies like Apple and Facebook who have thrived as a result of special leadership. 


In summary “Size does not matter anymore “, the performance of innovative companies in the last 10 years is the best evidence. In order to be flexible in our changing environment, companies simply need to have more focus at the operating level than the corporate level. Most important we need to identify, support, encourage and reward traits like deviance, innovation, passion, and commitment,
RG
Useful learning the balanced conclusions from this research.

One immediate thought that struck me is that Innovation is probably going through the stage of maturity that Quality went through in the late 1980s. Yes, ultimately it's about empowering people, there are multiple tried-and-tested approaches and techniques to equip people with, measuring results is paramount but just throwing money on a borrowed scheme is not going to succeed... and so on.
Kevin McFarthing (@innovationfixer)
An excellent article.  The key takeout for me is that innovation is a balance, there isn't a "one shot" solution.  It's the balance between creativity and implementation; between customer needs and technology options; making sure the best options are implemented, whether internal or external; between top down directives and bottom up energy.  Also, that innovation is more about people not process; hence the observation that financial reward doesn't make a difference to idea suggestion.  

Thank you.

Kevin McFarthing (Innovation Fixer Ltd)
phil corse
I think innovation is misunderstood, mismanaged and overrated at many companies and the amount of time for realization is underestimated.

This article helps to drill down on what innovation could/might be and helps us to understand it and the required lengthy time horizons for realization/execution much better.

Well done.

Phil Corse
Kellogg School of Management
Laurent Blondeau (evidencesx)
Quest for innovation is a never ending story, but must not be a "end", itself. Just a way, to get "out of the box", create "blue ocean" and take advance in competition fields. And companies must be prepared and organized for it, by creating the mindset and the taste for it. Innovation places are such fuels of motivation for people, that they have to live inside the daily life of companies. Quite in DNA, if you look at innovation trendsetters say...
We can find good examples outside the companies, collaborative places that can help the level of awareness and interest of corporation. See for example innocentive.com, for me a very good sample of what already works...
Michael A. Dalton
Well made points - Sun Tzu said it centuries ago - "Preparedness everywhere means lack everywhere" 

To expect innovation everywhere and always is to waste your resources - instead the key to improvement is knowing where you are constrained and focusing your efforts at that leverage point.

Michael A. Dalton 
Author of Simplifying Innovation