by Linda Sanford
Working in a leading technology company, I have come to understand the importance of innovation: it can transform business, create new markets and drive economic growth. In today's uncertain economic climate, however, innovation has become less of a priority among many business leaders, with corporations generally reducing their focus on research and development.
In the right form, however, innovation can still be a tremendous driver of shareholder value. First, though, we must be careful to understand the distinction between invention and innovation. Invention is the creation of something new — "the next big thing," if you will. Innovation is the application of invention to business or societal needs.
From that point of view, the reinvigoration of innovation is a critical issue not just to business leaders, but to everyone. Coming from IBM, you might expect me to tout technology as the answer, but I contend that the primary way to drive new innovation is by investing in people first.
The companies that can create a culture of innovation are the companies that will succeed in the next era of business, create sustained brand equity and drive greater shareholder value. That culture is defined by its ability to anticipate customer needs and market dynamics, then quickly respond with flexible business processes and technology to meet those challenges.
Investing in people and creating a culture of innovation might seem counter-intuitive as we are slowly emerging from five years of utilizing cost containment as a primary financial management strategy. Every executive I talk with is interested in how to sustain productivity gains going forward — and they realize cost cutting can now only go so far. They're not interested in buying hot technology just because it's the newest thing. They're looking for top-line growth.
This was supported in the findings of The Global CEO Study 2004, in which IBM surveyed 456 CEOs worldwide to identify their business agendas for the next two to three years. In the study, four out of five CEOs pointed to revenue growth — not cost containment — as their top priority for boosting financial performance.
The CEOs said the best way to drive new growth is through increasingly differentiated products and services — but they also said that this type of innovation will be impossible without a renewed focus on people, including retention and re-education to keep vital knowledge within the organization and to develop new skills to compete in a more demanding and fast-changing global economy.
On this front, companies would do well to emphasize a single behavior that's key: collaboration. At large multinational enterprises — and I'd include IBM in this category — collaboration has the most potential to drive enormous competitive advantage but is universally underutilized. The winning recipe for improving collaboration includes a few essential ingredients.
IT tools are certainly one. There's a tremendous amount of innovative software applications for collaboration flooding the market. E-meetings, team rooms, instant messaging and other new technologies make it much easier to collaborate within a large organization or outside the enterprise with trading partners and customers.
Having the right tools is important, but not enough to induce collaboration. You have to get people to think differently. To that end, corporate leaders must promote and reward collaborative behavior on an ongoing basis.
Senior management needs to model the type of collaborative behavior they're trying to encourage. Performance reviews, bonus and incentive plans must be aligned with the goals of creating a collaborative, high-performance culture of innovation. Most importantly, remember that habits of behavior don't change overnight — you have to keep at it.
Enhanced collaboration reaps many benefits. It improves productivity, eliminates inefficiencies and helps solve problems — but it also becomes the engine for innovation. Whether you're talking about product development, customer service, marketing or any other business discipline, you invariably will get a better, more innovative solution through collaboration than through solitary effort.
Increasingly, that collaboration must cross business units, geographic boundaries, different stakeholder groups both inside and outside the corporation and even industry lines — in other words the culture of innovation must be more of an ecosystem where many different partners and stakeholders contribute and thrive.
Think of the potential for innovation in our emerging knowledge-based global economy. Today, the basis of innovation is less focused on things, and more on ideas — ideas that in our networked world can move around the globe with the click of a mouse.
The potential exists to accelerate the engine of innovation across many sectors of the economy, but it can only happen if we create corporate cultures where people are empowered to collaborate in new ways, and where that collaboration is seen not just as a cost of doing business, but as a driver of shareholder — and stakeholder — value.
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