Innovation-Driven Leadership: Riding out the Economic Recession of the Past Few Years, Many Organizations Put the Brakes on Aggressive Growth Targets, Vigilantly Watched Costs, and Slashed Spending on Research and Development. in Such a Conservative Environment, Innovation-And the Risks That Went with It-Moved to the Back Burner

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But as the global economy has tentatively returned to health, organizations are realizing that not innovating is a risk they simply can't take. They no longer can rely on the products and processes that have served them well in the past to navigate the complexity of the global economy and ensure their future success. As a result, innovation again is viewed as critical.

The evidence, both in the form of research and anecdotal examples, is seemingly everywhere. Consider these examples:

* An August 2011 article in The New York Times described innovation as "the critical ingredient to all eco-nomic progress, higher growth for nations, more competitive products for companies, and more prosper-ous careers for individuals."

* In a 2010 Boston Consulting Group study, 72 percent of CEOs ranked innovation as one of their top three strategic priorities. The figure was eight points higher than it had been in an earlier study in 2009.

* In the 2011 Development Dimensions International (DDI) Global Leadership Forecast, nearly 12,500 leaders from around the world cited fostering creativity and innovation as one of the top three business priorities for the future.

* Echoing the language of many executives at major companies, when Scott Thompson was named CEO of Yahoo earlier this year, in his first conference call with the media and analysts he was quick to go on record with a commitment to innovation: "We'll be back to innovation, we'll be back to disruptive concepts," he said. "I wouldn't be here if I didn't believe that was possible."

* Similarly, Ron Johnson, the former Apple executive who helped launch that company's successful retail stores, also set a course for innovation upon being named CEO of venerable retailer J.C. Penney last year. He said he looked forward to "re-imagining" the American department store.

Yet, innovation, for all of its acknowledged importance amid continued economic uncertainty, and seismic shifts in technology and the business landscape, continues to confound. Organizations are struggling to have the right innovation approach in place to adapt, do more with less, solve complexity, and come up with new solutions their customers want, as well as those they don't even know they need.

Because every organization is defined by a unique mix of business challenges and strategic priorities, each must decide how it will define innovation--that is to say, the type of value-added solutions it most needs to innovate. Regardless of what that definition looks like, innovation success will turn on an organization's ability to generate and cultivate ideas in quantity, to, in the words of author Peter Sims, place many "little bets" to increase the likelihood that one or more of these ideas will end up having a big impact on the organization.

Innovation is a social phenomenon that not only requires many people to generate and implement ideas, but also requires that those individuals interact, work together, and build on one another's perspective, thinking, and creativity. In the words of Doug Conant, former president and CEO of Campbell Soup and one of the most respected business leaders of recent years, "The action is in the interaction."

Innovation needs be an organizational norm that is reinforced by the organizational culture. And, for many organizations, becoming more innovative requires nothing short of a culture transformation.

This isn't necessarily bad news. To the contrary, this fact should provide a useful reference point for organizations that are baffled by innovation, yet have experience going through major shifts, such as successfully implementing initiatives such as TQM or Six Sigma.

TQM and Six Sigma initially were about techniques for improving quality, especially in the manufacturing realm. But over time, as organizations discovered that quality improvement could be applied effectively to most organizational functions or activities, these initiatives became less about the collection of things an organization does and more about what an organization collectively is--its culture. …