Turnover down and profits squeezed? Innovate!

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Innovation innovation innovation-150x150We frequently hear the statistic that few of the leading firms from the post-war era are still around today.  We even hear that few firms make it beyond ten years.  Why is that?  Is it that the market changed and the firms didn’t?  Or that competitors just became better at serving customers?  Or is it that the market was still there and the firms unfortunately got worse at meeting the client’s needs?  Somehow the latter is seriously counter-intuitive.  The former two are more likely.  We have become accustomed to market change but somehow less able to do something about it.  So is demise inevitable?  Is it really only a matter of time before some disruptive technology or some shift in needs topples all firms?

This paper offers a simple solution – innovation.  It addresses how managers should organise their firm to stimulate innovation.  And it addresses the most critical of issues: how people can be encouraged, indeed committed, to innovation to ensure the lifeblood of the firm.

The paper is in three parts.  The introduction sets out the argument for assuring innovation within the firm.  The body discusses the various research towards a method of measuring propensity to innovate in the firm.  Once measurable, management can deliberately set up the correct climate to assure that innovation results.   Finally the paper closes with a set of practical suggestions to assure that innovation occurs.

The Innovation Imperative

The Innovation ImperativeIt’s a sad fact that most firms are too busy concentrating on eking a profit to worry about the big picture of what to do about a general demise in business position.  Business demise is generally a slow process and hence so too is the innovation needed to reverse it.  Innovation seldom happens in a flash.  It’s rarely a single brilliant idea that saves the day.  The future strategy of a firm normally dictates continuous incremental improvement: continuous incremental reaction to market change.  Innovation is also seldom about one brilliant individual riding in to rescue the company.  It’s about the harnessing of the energies of everyone in the firm towards innovation and change.  It’s about putting in place people management policies and practices that make staff want to contribute to prosperity.  And it’s about measuring how much of the right stuff to put in place to get the innovation response needed.

Let’s centre first on some definitions.  What IS innovation?  Many have postulated a definition but the one that is perhaps simplest is Amabile’s definition[1] that innovation is the “successful implementation of creative ideas within an organisation”.  There are a couple of important words used here – successful implementation tells us that the ideas themselves are for nothing if they can’t be successfully implemented.  And success implies having a positive effect on the business position.

Innovation Growth and StrategyWest and Anderson[2] put it a bit more explicitly.  They postulate that innovation is “the expectation, approval and practical support of attempts to introduce new and improved ways of doing things in the work environment”.  This shows us that innovation is not all about product and services that might be saleable but that innovation is also about process – the way of doing things.  Product innovation and process innovation sit together, complementing but existing in differing measures at different times.  Innovation is the process by which staff in a firm attempt to change some aspect of their work or the products they produce and sell in order to realise some benefit that they value. Every firm should innovate.  Every firm MUST innovate.

To make innovation happen, the climate in the firm must be right.  And climate is about the people eco-system that management set up.  Much of this eco-system is described by the firm’s human resource management policies and practices augmented by a bit of vision and direction.  Innovation is therefore not all about funded R&D where only lab-based egg-heads have it in their job description.  Innovation is for everyone, if only they knew it.

Innovation is a Group Affair

It’s useful to distinguish between innovation and creativity.  Many staff will be creative, perhaps in writing bids or in doing individual jobs but creativity is a personal trait.  It’s useful but it does not maximise benefit to the whole firm, just to those creative individuals.  Consider however if a creative idea were evaluated, changed and adopted by the whole firm.  The benefits would be multiplied, simplistically by the number of people using the idea but more realistically by a factor much greater.  Creativity is to be encouraged but innovation is to be harnessed.

In summary then, to assure their future, firms must innovate both product (as goods that they sell) and process (in the way they do what they do).  And innovation is done by teams of people who in some way feel motivated as a result of the climate they find themselves in.  Reversing that conclusion gives us the thrust for the rest of this paper – that if a manager creates the right climate, with a modicum of leadership, innovation will follow and with that, the security of the firm.

What’s a Climate?

What happens when a group of bright individuals bound into work, spark off one-another and set about changing the way they do things only to sense the negative mood of management towards their enthusiasm?  Simple answer – they shut up and get on with things the way they did yesterday.  The chance for change has gone forever.

What happens if that enthusiasm is met with a positive response and processes are in place to harness and mould the ideas into lasting change?  Simple answer – the group rejoice and get on with finding and developing the next good idea.  Management need only set up the right environment and provide a means of evaluating change to assure that innovation which grows the business position is encouraged.  Ideally that which would waste resources needs also to be discouraged without negatively affecting the climate.

There is of course, also a flip side.  What happens if management dearly want innovation to happen but despite their best endeavours they just can get folk out of their ruts and into innovation?  Is it all about climate?  Well, yes… and no.  Innovation is itself a continuous incremental change process.  If the staff recruited are not the sort to respond to the climate, it may well be that a change of staff becomes essential for innovation to take hold.  It may well be that to innovate some staff have to go and others be brought in.  We’ve dealt with re-structuring and redundancy elsewhere in TimelessTime blogs and papers.  This paper makes the assumption that the existing staff will respond to the climate stimulus.  Staff response always comes second to achieving the right climate.  Only after the climate is right can staff issues emerge.

A Process Model of Innovation

Innovation is a Team AffairInnovation is an inherently ‘group-oriented’ activity.  The group must generate creative ideas from within, and then process these into some lasting beneficial change.  This gives rise to idea that innovation is a group process and that innovation is best when done by groups.  In effect, only a group has the effort collateral to make a lasting change that everyone accepts.  There has been significant research seeking to determine the optimum group size with little conclusion – suffice it to say that it is inherently difficult to get a cohesive group process going with 300 folk.  It’s much easier to engender innovation in the firm with between 10 and 50 staff.  This makes the small to medium sized firm (SME) the perfect beneficiary of innovation.  It’s no surprise that the business news links start-ups and SMEs with innovation, rapid growth and quick return on investment.

Process Model of InnovationInnovation is a group process.  In the simplest of models, the process is termed the group support for innovation.  The output is group innovation.  And the input already discussed above is individual innovativeness.  As already noted, the process must exist first.  Then any failing in individual innovativeness becomes apparent.  There’s no merit in management getting annoyed about lack of innovation if the process is missing.

The group support for innovation can in its simplest form encourage creative ideas, then provide the environment to evaluate these ideas and support the adoption of those contributing most to the business.    This simple model is useful in that it helps illustrate the absolute importance of support to get ideas adopted.  Support is a massive concept and researchers in the field of occupational psychology have gone further to try to understand how it is that the firm can build suitable support.  Indeed what IS suitable support?  Possibly the most famous worker in this field is West[3] who in 1994 postulated a comprehensive model for that support, then broadened and renamed ‘climate’.

The Team Climate Inventory

Management’s task in harnessing innovation is the creation of the right climate.  West’s model defines four key climate factors that need to be present for innovation to thrive.

  • Clearly defined, shared, valued and attainable visions;
  • An environment perceived as non-threatening in which staff perceive it safe to present new ideas and improved ways of doing things;
  • A shared concern with excellence in the quality of task performance characterised by evaluations, modifications, control systems and critical appraisal; and
  • Expected, approved and practical support for attempts to introduce new and improved ways of doing things.

The Team Climate Inventory for innovation tests the climate.  The better the climate for innovation, the more likely innovation is to take root in the firm and benefit its business position.

The first factor of the test is all about vision.  Staff gain shared vision in many ways.  Management can espouse vision.  Close contact within the work group can assure a shared vision of direction and future.  And shared experience such as training and development opportunities can spread the word.  West asserted that this factor broke into four sub-factors: clarity of vision, the nature of the vision, attainability and degree to which it was indeed shared.   The clearer and more attainable the vision, the more likely groups will innovate.

The second factor is about how ‘safe’ it is to suggest and make change.  Staff who feel threatened by management or by fellow workers are unlikely to suggest anything.  Anyone likely to lose their job for being a ‘trouble maker’ will keep quiet and do things as they always have.  If on the other hand everyone is in it together, participating in ideas generation and evaluation, the innovation will flow.

The third factor is about focus on the task.  If everyone in the group is responsible for and committed to the task outcome, they have an emotional investment in ensuring success.  If they are committed to excellence in whatever the team does, they will innovate to sustain that excellence and will make the necessary changes to product and processes.

Communicating Climate for InnovationThe final factor is support both by the group and by management for the general principle of innovation.  Management support is communicated to the group in personnel documents that go to form the people eco-system.  It’s communicated by word of mouth in briefings and it is transmitted by policy statements: in simple terms, management need to say “we expect you to innovate”.   Innovation will happen the more management seeks it.

In recent years a fifth factor was adopted: the degree to which the group actually interacts.  This is a logical extension since intuitively, the less a group interacts, the less the group processes can work.  This is a particular challenge for virtual firms who must put in place specific interaction opportunity to replace the tacit interaction that comes naturally for more centralised firms.

Practical Use of West’s Model

Plan Do Check ActAs a means of evaluating team climate for innovation, West’s Team Climate Inventory fits well with the feedback model of management.  Under this, managers first evaluate team climate for innovation.  They then set objectives for change, to become more innovative, seeking more contribution to the bottom line.  After an implementation period they measure again using West’s TCI and so plot the relationship for their firm between the climate for innovation and the innovation itself and between innovation and profits.

Measurement using the innovation TCI involves an inventory of questions assessing each individual aspect.  In the model’s simplest form 35 questions are used and in the more complex, 61 questions.

Prerequisite Foundation

Whist West and others suggest that the TCI is self contained, their research was generally conducted with groups of professionals employed in firms and organisations where sound human resource management policies and practices were already implemented.  This meant that innovation was inherently more likely in the organisations used as cases to build the innovation model.  The TCI is therefore built on a base of sound HRM.  managerds should ensure that they have achieved at least the Plateau level in TimelessTime’s HRM Maturity Ladder[4] before commencing an innovation drive.  Starting at a lower level means more time spent struggling to set up the basics instead of maximising improvement.

TimelessTime is skilled in assessing and developing culture[5] and climate in organisations of all sizes.  Call us today to learn more.

[1]Amabile et al. (1996) (Amabile, T. M., R. Conti, et al. (1996). “Assessing the work environment for creativity.” Academy of Management Journal 39(5): pages 1154-1184)

[2] Anderson N R & West M A (1998), Measuring climate for work group innovation: development and validation of the team climate inventory, Journal of Organizational Behaviour, Vol 19, 235-258.

[3] See above.

[4] See https://www.timelesstime.co.uk/white-papers/hr-maturity-model/

[5] See https://www.timelesstime.co.uk/white-papers/culture-matters-maximising-people-contribution/

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