People, the Key to success in Innovation

People, the Key to Success in Innovation.  David Reyero –  Boletín CEDE –  December 2014

The causes of failure in the implantation of innovation

According to the “Study of Business Innovation in Spain in 2014” by the CEOE (Spanish Confederation of Business Organizations), 72% of Spanish companies state that innovation contributes positively to their competitiveness in the domestic market and 86% agree that innovation has helped them to deal more effectively with the economic crisis. In addition, successful RDI development has also been targeted as instrumental in achieving internationalization.

However, according to data from the Ministry of industry, Energy and Tourism, only 10% of Spanish companies are capable of introducing innovation into the marketplace, which places us among the least innovative countries in the European Union.

Why is it then that of the 70% of Spanish companies who attempt to achieve innovation in their business challenges and generate a truly innovative culture, only 10% clearly succeed in doing so? Although failure and our learning from it is a key component for future success, we should pinpoint which specific factors lead to such a low success-rate in the field of innovative capacity.

There is, however, no single cause to explain this situation, but rather a combination of multiple factors that simultaneously affect the innovation process and consequently influence its implementation, such as team training, the technology used, the adequate interpretation of needs, subsidies and incentives provided by public administrations, access to financing, company size and the ecosystem of companies and technology parks, etc.

However, especially in large companies, the root causes of failure to innovate do not tend to be related to such factors, but rather to the absence of a corporate culture capable of fostering entrepreneurship, with erratic people management policies, low involvement of senior management and the inability of companies to anticipate the evolution of the market and the needs of their different stakeholders. Put another way, it is basically people who determine the success or failure of innovation.

10 lessons to be learned in innovation management

Below are the 10 non-obvious lessons to be learned regarding how company members should be managed to ensure that innovation becomes an integral part of the corporate DNA and to achieve a relevant impact on the company’s results, based on my multi-sectoral experience in human resources and my direct involvement in various innovation projects for business and cultural change.

1. Links with business and results: As in any transformation process, it is essential to identify and    internally communicate the “business reasons why our company must innovate”. I have ascertained that this link to specific business challenges is initially more appropriate than launching completely open idea-generation processes, which usually entail two negative impacts: firstly, a low initial participation or a large volume of unrelated ideas which are subsequently difficult to manage and, secondly, a lack of organizational maturity regarding innovation.

2. Raising awareness: Once the business challenges are defined, the process begins by internally educating our staff as to the importance of innovation and clarifying on the basis of a day-to-day example that it is not solely the responsibility of the managers, the core-team at central headquarters or just a few “talented employees”. Today, innovation is not the result of the work of a specialized team, but rather the consequence of the involvement of all company members. If we really do not achieve this goal, the credibility of the project will suffer and the degree of employee participation will be insufficient. This will impair the quality of the solutions to be implemented as, in terms of innovation, the volume of generated ideas and the diversity of the team generating them are two early predictors of success.

3. Educating: Sharing the experiences of our company and those of other companies, organizing collective forums, providing tools for creativity and promoting work-groups to deal with internal challenges etc. are all relevant activities that allow less proactive members of the team to lose their fear to innovate and put forward their ideas. This is especially important in sales and industrial teams in which there is occasionally a lower initial implication with such projects as a result of the physical distance from their central headquarters.

4. Collective passion: The results of previous efforts should trigger an internal emotional state of excitement, passion and effervescence of ideas in the company framework. If we are not achieving this, we should take time-out to consider whether we are going about it the right way. The message that “Innovation is a responsibility and a challenge for all of us” must be transmitted by senior management, as their involvement and commitment is a powerful stimulus that will increase the entire company’s level of commitment. In order to achieve this goal, it is essential for middle managers to promote innovation in the day-to-day functioning of the company. If this is done successfully, the level of energy and enthusiasm shown by our teams in such processes is tremendous, constituting a wealth of creativity, quite unimaginable in the framework of non-innovating companies, and an invaluable source of competitive advantages for the present and the future.

5. Diversity and open-mindedness: I am familiar with few truly innovative organizations that do not have a wide range of personal and professional profiles and do not encourage diversity and a continuous search for ideas beyond the companies’ frontiers in their day-to-day business and basic people management policies (external selection and internal promotion, creation of project teams, reconnaissance…) and indeed in the very definition of their strategies, for which they draw on relevant external opinions from their key stakeholders.

6. Attitude: Successful innovation is not so much the result of talent or high intelligence as an individual and collective attitude of constant searching and questioning, open-mindedness and venturing out of comfort zones in order to dream (whether in terms of new products or new processes, etc.) and improve customer experience and generate added value. The most mould-breaking Innovative companies even contemplate strategic changes in moments of plenty in order to anticipate the evolution of the market. In the words of Franc Ponti, one of Spain’s leading experts in the field of innovation, “If it works, change it!”

7. Risk management and error tolerance: Innovation involves trying things out, taking risks, getting it right and getting it wrong. It is critical to evolve progressively and inexorably towards a culture that accepts errors and reasonable risk-taking as positive elements to achieve new solutions that will improve our value proposition.

8. Coherence: If innovation becomes a strategic consideration, we must manage, both boldly and with sound judgment, tools which will contribute to significantly shaping our organizational culture through variable remuneration, promotions, internal and external acknowledgement or other measures to reward or indeed penalize day-to-day conduct and decisions related to such an important issue.

9. Agility in making decisions and execution: A new idea, whether incremental or disruptive, always creates a degree of uncertainty and initially poses doubtful results. It is essential to avoid analysis paralysis and to move quickly into action, even with incomplete information. This allows us to make a swift evaluation of prototypes and keep the credibility and the spark of innovation alight within our teams so they may continue to contribute ideas both in a present and future context. Another differentiating aspect in the most advanced companies is that the validation of ideas should not be the responsibility of the management committee, but rather the task of an Innovation Committee or Forum made up of employees and middle management personnel. This speeds up decision-making and reduces the management of innovation with “political” criteria that are not directly linked to the quality of an embryonic idea.

10. Celebrate success, failure and learning processes: It is difficult to achieve successful innovation at our first attempt. It is therefore essential to be tenacious and if we do not succeed, we must try and try again. To sustain our team’s motivation, it is necessary to congratulate not only the team members who have achieved results, but also those who have tried and not succeeded, as this is part and parcel of a learning process that is relevant for the company as a whole. By way of example, I would stress that the most innovative companies specifically ask candidates participating in their selection processes about their failures and the lessons they have learned in the course of their professional careers.

In short, innovation is a complex process whose success is linked to multiple variables. Companies that are capable of innovating successfully have a hard-to-match competitive advantage over their competitors on the basis of a coherent organizational culture that can rise to the challenge: from the daily example of senior management to the daily commitment of each and every one of our employees, we must leave behind those psychological and hierarchical barriers that block productivity and manage people in such a way that they may unleash their creative potential and be close to their customers in order to anticipate their needs.

We may therefore conclude that, to a great extent, the difference between one company and another company in terms of the ability to innovate lies in the team’s attitude and the predominant values of its corporate culture: the humility to learn continuously, the passion to advance despite errors and the intelligence and courage to reinvent ourselves once we have savoured our first experience of success!

Think big, start small, be quick to try and fail and willing to learn, improve, try again and one day success will be yours!