20
INNOVATION
ISSUE 03 2014
profitable product lines and it’s only human nature for them to want to see their particular project continue. In practice, these people often act as bottlenecks to the flow of new ideas and the open sharing of knowledge.
These ways of thinking are also often encouraged by the various incentive structures that exist across the sector. Customers expect their suppliers to continually improve the product they are offering, fixing bugs and adding enhancements to increase usability and functionality. While customers often enjoy thinking up some new ‘bleeding edge’ next generation capability to challenge their suppliers and show that they’re capable of independent thought, they won’t in reality dump those suppliers for not delivering these. They will however be furious if bugs aren’t fixed or enhancements are not delivered on time and to cost, accompanying the anger with threats of reduced orders and penalty payments.
Most humans – and therefore most companies – tend to take the route of least pain and least effort, so successful companies invest the bulk of their financial and intellectual capital to keep their existing customers happy by doing what they want, rather than innovating in a disruptive manner.
Google allocates 20 per cent of each of its engineer’s time to be spent on innovation
In the long run, this dynamic tends to explain why market leaders find it so hard to stay on top. It’s not due to a lack of innovative people or investment in innovation. It’s all due to a disproportionate investment in only one type of innovation.
Interestingly, recent research reveals that those mainly middle management employees who are sought out for advice by senior executives about ways to innovate, ironically often have the most negative attitudes towards disruptive innovation. These people rise to a position of trust within the corporation through being the highly respected ‘gurus’ of the current
How investors view CSPs and innovation Attitudes within the investment community also have a similarly unintended negative effect. While they may well have a portion of their portfolio dedicated to high-risk companies, the bulk of their investment in CSPs and major vendors is based on the hope that those companies will regularly hit stable quarterly financial targets. Investment that goes towards meeting or even exceeding those short-term targets is therefore always more likely to get agreement from major shareholders. By contrast, risky and disruptive investments are always going to be treated with much more suspicion, even though empirical evidence also shows how truly bad humans – and especially those working in the financial sector – are at identifying and evaluating risk.
There is a lot of material published on what drives innovation but, from my research and experiences over a long career in this industry, it can really be distilled down to a few key characteristics such as committed leadership and confronting risk in intelligent and flexible ways.
Committed leadership Commitment to innovation doesn’t mean simply putting it in the front few pages of an annual report or allocating budget for a fancy innovation-centric customer demo or roadshow facility.
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