Tim on Leadership

Musings on Management and Leadership from Tim Parker

Why Innovate?

It's common to walk into a company as the new leader of a development or R&D group and hear the words "innovation" bandied about by fellow executives and team members.  Innovation, according to the dictionary, is the creation of better products or services, but there are many different meanings in corporate development groups.  To some, innovation means coming up with something completely brand new: a new must-have that will drive sales.  To some, innovation means taking what already exists and improving it, either by recoding or redesigning, to it works better and faster and more reliably, with more growth potential.  To some, innovation is not about the product but about the process, and creating a process that helps development groups get new code to market faster.  And to some, innovation means changing everything: out with the old and in with some new, more wonderful, thing.  In truth, every time I hear "innovation" used in a sentence, I wonder if the person using it really understands what innovation means.

I am not saying for a second that innovation is not important.  It is vital to just about every business that wants to succeed and grow.  But everyone involves has to understand what innovation is, why it is necessary, and how it applies to the particular business we are in.  Innovation literally means "to make something new" or "to change something" from the Latin roots, so actually defining what innovation means is pretty simple.  All we have to do is create something new, or change what we have so it's better.  There: that's innovation at work!  And sure, we need to innovate, to make our products better, and to come up with new products.  But managing the innovation process, and how it impacts the business, is tricky and often leads to problems.

Innovation is based on ideas.  Someone in the team has a great idea for improving the existing product, or creating a new product.  That's the first step.  The idea needs fleshing out, usually by doing a requirements assessment: what should this innovative product do, how does it function, and how is it different from the current product (if there is one).  That's all part of the first step, which is "the idea".   The second part of the innovative process is the implementation of that idea.  For the innovation to become reality, what has to happen.  How will it be designed, written, tested, marketed, and sold? What will it cost to produce, and what's the payback?  How can this new idea help the company and its customers.  When "the implementation" is defined, there's a solid understanding of whether "the idea" is worth pursuing or not.  Some ideas are wonderful but won't lead to sales.  Sales are not necessarily an indicator of whether the innovation should be done or not, but most companies have to see some return for the implementation costs of the idea, either directly in monetary form or in goodwill, marketing presence, or some other tangible or intangible benefit.  Only when both the idea and the implementation are defined, reviewed, and approved can an innovation be put into play.

Assessing the implementation is a tricky thing.  There's a bunch of questions that need to be answered for any innovation.  Why is this innovation needed in the first place?  What's the reward for the innovation?  How easy is it to produce this innovation and how will it affect what we do as a company? And, most importantly, how reasonable is it to pursue the innovation?  An innovation that produces a very small cash return in exchange for a large investment is harder to justify than one where the return outweighs the investment, obviously, but sometimes there are non-monetary issues that will change the balance of the decision. 

Innovation for profit is the usual model, but there are lots of other reasons to innovate even when the monetary return is not there.  Perhaps it's about being first to market with something, carving out a niche or a name for yourself.  Perhaps its about a faster, cheaper, more efficient way to do something.  Perhaps it is about adding a level of complexity to a product that will help protect the intellectual property and prevent competition.  Perhaps it is about changing the basic formulae of the business, such as competing on quality and features instead of price alone.  Perhaps it is about novelty, something no one has done before but might catch on.  There's a myriad number of factors going into decision about innovations. 

And that's the problem when I hear the word "innovation". Innovation in and of itself, producing something new or better, is a great idea.  But innovation for the sake of innovation is often a waste of money and resources, leading to nothing substantive for the company.  So, while I am a huge supporter of innovating in all senses, from new products through to new processes, I always want to ground the enthusiasm with a dose of reality.  Sure, innovation is great and that's what leads to new products and services, but it has to be done carefully and managed properly, and that's the subject of a whole set of other posts.