In my study of the Indian innovation scenario a few years ago, one of the serious gaps that emerged was the lack of innovation capacity in Indian firms. What I mean by this is not the ability to improvise as and when necessary à la jugaad, but the structures, processes and systems to run sustained innovation programmes.
In strategy, one of the dominant conceptual streams today is the “resource-based view of the firm”, which argues that strategy is all about the possession of difficult-to-imitate resources that create value for customers. Given this perspective, it is intriguing that, with a few well-known exceptions, Indian firms have not taken building innovation capabilities more seriously.
Why are Indian companies afraid of systematic innovation? One of my friends, a successful innovation and branding consultant, explains: “The preferred model for growth for Indian businessmen is the diversified conglomerate. This keeps their focus away from growing via innovation in their core business.” But the question remains: as markets get more efficient, will this approach be sustainable?
Among Indian entrepreneurs, even in large business houses, the fear of systematic innovation is that it will prevent them from being agile and quick. They point to multinationals who lost out to nimble local competitors, such as a Nokia being eclipsed by a Samsung or a Unilever by a Nirma.But I wonder whether it’s fair to attribute these travails of large multinationals to their systematic innovation processes. It’s well known that as companies become large, they become more focused on predictability and efficiency than on innovation. And, they get bogged down by the “dominant logic” of what made them successful in the past rather than what will help them succeed in the future.
Recent examples corroborate these observations: Nokia had developed touchscreen phones well before the Apple iPhone made them the “next big thing”. Kodak, which recently filed for bankruptcy, was a pioneer of digital photography but allowed other companies to take over that space.
What Systematic Innovation has to Offer
Once you go even slightly higher up the technology ladder, systematic innovation becomes inevitable for success. 3M, arguably the most innovative company of all times, has built and nurtured a decentralised innovation process. Other successful systematic innovators include Intuit, whose “Follow me Home” philosophy reflects a sustained emphasis on empathetic understanding of user needs, and IBM, a powerhouse of innovation, with more than 6,500 US patents in CY12.
Indian companies following structured and systematic innovation programmes include Tata Motors and Cognizant Technology Solutions. But systematic innovation is not the province of large companies alone. Mid-size companies like Praj Industries are building the capabilities to graduate from the ability to convert the dirtiest agriculture wastes into pure alcohols to an end-to-end understanding of biofuels. Bengaluru’s Hind High Vacuum, which established its reputation in import-substitution projects for strategic programmes, today earns more than half its revenues from international markets through its expertise in thin film deposition technology and optical coating systems.
None of these companies could have achieved these results without following systematic approaches to innovation. But what is systematic innovation? Systematic innovation is about adopting simple approaches to harness innate creative and problem-solving skills in the organisational context. Systematic innovation involves embracing three broad themes: building a pipeline of ideas that can sustain and drive the firm’s innovation engine; improving idea velocity, i.e., making sure ideas don’t get stuck or lost along the way; and improving the firm’s batting average, i.e., the proportion of ideas that result in significant business impact.
Building an effective pipeline is centred on three important steps. The first step is laying a strong foundation for innovation. CEO identification of innovation as a gamechanger, like AG Lafley did at P&G, is usually a good starting point. Defining the scope of employee involvement in ideation and putting in place a robust process to consider and support ideas is usually the next step. Creating a buzz around innovation as Indian Railways did with its successful “Heavier, Faster and Longer” campaign helps build employee interest and motivation. Training and development on creative problem-solving or design thinking enables the translation of the innate abilities of employees to the business context.
The second step is creating a challenge book, or identifying and prioritising the problems that the innovation programme should address. The challenge book is derived from simple processes like feeling the pain of customers and users, sensing new demographic or technological waves, and identifying where waste is being generated. The third step is to use role models, communities of practice, innovation catalysts and judicious use of rewards and incentives to engender more participation in the innovation process.
Innovation is much more than ideation; it is about execution to provide sustained benefits to users/customers. Sustaining idea velocity is all about a focus on experimentation and testing to check out assumptions, refine and reinforce ideas, and make innovations more robust and scalable. The motto of IDEO, the world’s leading design firm, sums this up well: “Enlightened trial and error succeeds over the planning of the lone genius.” But experimentation does not have to be expensive. The next steps, therefore, focus on applying a philosophy of low-cost experimentation to the conversion of ideas to prototypes, prototypes to ready-to-launch products or services, and business models for value appropriation, respectively.
Finally, improving the firm’s batting average is key to keeping up the momentum of systematic innovation. One way to do this is to use approaches that enhance innovation effectiveness. The other way is to enhance the margin of safety by de-risking the innovation process through techniques such as pre-mortems and “doing the last experiment first” — test the assumptions that will have a critical bearing on innovation success or failure early so as to avoid going down tracks that lead to nowhere.
Systematic innovation does not necessarily mean huge investments in R&D. In fact, studies have repeatedly shown that the most effective innovators are not those who spend the most on R&D. It does not mean doing basic research or trying to pioneer new technologies. Firms such as Titan Industries have shown that systematic innovation works very effectively even with improvements in manufacturing processes of traditional jewellery. Systematic innovation also does not necessarily mean long-drawn innovation cycles. In fact, effective innovators find low-cost and quick ways of experimenting that help them test ideas and assumptions rapidly.
In short, systematic innovation offers Indian companies the opportunity to capitalise on their innate abilities of intuition and market sensing.
