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    Have You Defined Innovation? #01 Innovation Newsletter

    Have You Defined Innovation? (If Not, Your Company Performance Could Suffer)

    “Innovation.” What exactly does it mean to you – new products, invented technologies, revolutionary processes, new business models, unique ways of thinking? All of the above? Its dimensions can be fuzzy and subjective, so does a precise understanding even matter? Our recent research¹ suggests that executives and operational managers define innovation in the context of a few general themes, such as « creating new value » and « making major changes. » But managers in various roles at different levels can hold sharply different views of what it means operationally, how it happens, and who can innovate. And that actually does matter.

    Why it matters

    According to Aravind Chandrasekaran, Assistant Professor of Management Sciences at The Ohio State University’s Fisher College of Business, when definitions of innovation across a company are not aligned, performance suffers.² He says, « of course, like many other issues, this starts at the top; but it’s important that others down the line synchronize their definitions of innovation. » Conversely, strong alignment correlates with strong business performance. In his research, Chandrasekaran measured performance based on a variety of factors, including return on investment, return on assets, market share growth, and earnings per share growth.

    Another reason it matters: Achieving growth and improving the effectiveness of innovation are high on CEO agendas for 2012.³ And their definitions of innovation are expanding to encompass just about any aspect of a business—not just new products and services. In the current global climate of rapid non-linear shifts, uncertainty, and limited growth, those mandates present critical challenges for most companies. The more you know, the better you’ll be to align your agenda to make a strategic contribution.

    Innovation or Improvement?

    Companies with active continuous improvement (CI) initiatives should consider the commonalities and differences between innovation and CI in their operations. Chandrasekaran says there is no overall formula for balancing efforts between radical and incremental change (“innovation” vs. “improvement”). For starters, what might be seen as radical change from one vantage point can look like incremental change from another, even within one company. And the innovation agenda, including the size and priority of investments, depends on the company’s objectives as well as the competitive intensity and inherent pace of change in its industry.

    Whatever the definition, management’s primary concerns should focus on cultivating alignment across the organization along with adaptability to change. If this has not been a subject of discussion and strategic action in your organization, it probably should be. It’s very likely constraining your business performance.

    1. Innovation Survey: Next Generation Strategies for Growth (2010-11, Productivity Inc. and The Ohio State University, Fisher College of Business’ Center for Operational Excellence)
    2. Multiple Levels of Ambidexterity in Managing the Innovation-Improvement Dilemma (Aravind Chandrasekaran, dissertation, University of Minnesota, 2009,). Winner of the 2010 Elwood S. Buffa          Doctoral Dissertation Competition, co-sponsored by McGraw-Hill/Irwin and the Decision Sciences Institute.
    3. 14th Annual Global CEO Survey: Growth Reimagined (2011, PwC), Capitalizing on Complexity: Insights from the Global Chief Exectutive Officer Study (2010, IBM),

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