Why so much talk about innovation?

“Innovation is central to our strategy.”  “We’re investing in innovation.”  “We’ve got to get better at innovation!”  Sound familiar?  If the ‘i’ word hasn’t permeated the business-speak of your organization, it’s only a matter of time.  

As far as organizational mantras go, ‘innovation’ is about as hot as they come.  Over the last decade or two, innovation as a strategy has moved from implicit to explicit, from obscure to prominent, from accidental to critical.   It’s become central to organizational strategy, something that investors are looking for and executives lose sleep over.  So much sleep that many organizations have appointed Chief Innovation Officers (someone to lose sleep on their behalf).

The interest isn’t only at corporate headquarters, either.  Entire magazines and journals are devoted to the subject, and many existing media outlets have dedicated whole sections to the topic.  Books and websites (and, yes, blogs) on the topic have exploded.  Business school courses on innovation are becoming more and more popular, and there are now entire academic programs devoted to the topic.  Innovation consulting firms have sprouted up with all types of services, among them the ever-popoular innovation workshops and retreats for working professionals. 

Obviously, innovation isn’t new – individuals and organizations have been innovating quite happily for ages. So what’s with all the new press and attention?

On the surface, it may seem somewhat like a fad, or a passing fascination with the topic.  Or maybe a little like “lean manufacturing” or “six-sigma” – something that we hear about for a while and then becomes institutionalized and recedes from view.

A fundamental shift

I believe instead that the business world’s fascination with innovation is indicative of a fundamental shift in how organizations create value – a shift away from value creation through operations, and a shift towards value creation through innovation.

What’s the difference?  When an organization is primarily focused on operations, it’s focused on doing more and more of what it’s already doing – increasing sales, driving down costs, improving production, etc.  In contrast, an organization that’s focused on innovation is focused on doing things it hasn’t done before.

Essentially, its the difference between having impact through existing offerings (products/services/brands/etc), and having impact through the continual creation of new offerings.  (Note that I did not say ‘having impact through new offerings.’  New offerings quickly become existing offerings.  Rather, what matters is having impact through the continual creation of new offerings, not the new offerings themselves.)  Said another way, do we make money by creating something great, or do we make money by being creators of great things?

Still foggy?  Answer the following question: What is your organization’s value engine?  Is it your production lines, your sales force, your distribution channels, your brands, products or services?  If so, then your organization is more operations-focused in its value creation.  If instead it’s your pipeline of new ideas, your creative minds, your new approaches and processes, your innovation teams and programs, your R&D efforts, then your organization is more innovation-focused in its value creation.

You might be thinking: “But you need both!  Both are critical.”  This is absolutely correct.  But keep in mind that organizations also need HR and IT and Accounting.  These activities and groups are also critical to making money and meeting objectives.  However, most of the time they are considered support functions, not centers of value creation.  In other words, they’re not the means by which organizations compete and succeed in the marketplace.

I submit that operations is the same boat.  Or at least it is slowly getting into that boat as individuals and organizations realize that greater value is created through continual innovation than through well-executed operations.  To be clear, I’m not suggesting that operations isn’t important or is on its way out – at the end of the day, companies have to bring home the bacon and operations is how this gets done.   But it’s through innovation that organizations ensure there’s always something that operations can bring home the bacon with.

In future posts, we’ll explore this fundamental shift in more detail, discussing the tricky balance between operations and innovation and how to shift more and more value creation to innovation (without dropping the operations ball).

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