THE CONFERENCE BOARD ON INNOVATION

Posted on July 17, 2004 by Dave Pollard

The Conference Board of Canada recently conducted a survey that revealed six common features of “highly innovative” firms (those that get more than 20% of their revenues from new products).. The six features:

Draw on customers as the primary source of new ideas and an integral part of the decision-making process.
Collaborate extensively with universities and colleges on research and to access expertise.
Operate a defined R&D process.
Have formal processes for generating, testing and commercializing new ideas, including incentives for participating employees.
Use both evaluative processes and intuition in deciding on innovation projects and investments.
Have an appointed internal “innovation champion” and at least one “pathfinder” customer to collaborate on innovation projects.

These aren’t rocket science, or particular surprising findings, but from my personal observation some or all of these six features are not only often absent from large organizations, but have often been abandoned by such organizations as part of the past few years of cost-cutting and ‘rationalization’. I have been astonished to hear senior executives of large organizations essentially say they can no longer ‘afford’ innovation — that is has become a luxury that does not engender enough short term return on investment to warrant any expenditure. This is classical large corporate myopia, of course — since you’re rewarded only for what is measured in the latest fiscal quarter, you’re overwhelmingly tempted to outsource, offshore, slash staff, eliminate training and otherwise cut costs that will increase short-term profits at the expense of longer-term viability. Any investment in infrastructure — new technology, knowledge, fundamental research, education, support processes that improve front-line worker productivity — is frowned upon. It’s insanely dysfunctional behaviour, but increasingly commonplace in corporations driven by tyrannical demands of shareholders for constant double-digit profit growth to justify wildly inflated stock prices. And just like the parent who tells his child that he has to go out to work at 18, rather than investing in a university education, this short-sightedness will have profound and lasting long-term negative consequences. When will the overpaid clods in the corner offices learn that you can’t cut your way to greatness?

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2 Responses to THE CONFERENCE BOARD ON INNOVATION

Sorin says:

July 19, 2004 at 07:53

Dave, maybe you lack a little bit of humility ? Don’t worry, there’s nothing wrong with that, I’m pretty infatuated myself. You just need to be aware of it and keep it in mind before clicking on “Submit” -you might uncover new ideasWhy am I saying that ? Let’s read your post:”I have been astonished to hear senior executives of large organizations essentially say they can no longer ‘afford’ innovation — that is has become a luxury that does not engender enough short term return on investment to warrant any expenditure. This is classical large corporate myopia, of course”.Now I do concur with what you noticed : as a result of many senior executives thinking that way, there truly HAS been a decrease in investment for innovation. When I first thought of it, I was surprised as well and formulated a very similar thought : “innovation is what keeps businesses competitive in the long term and it’s shortsighted and foolish to abandon it”. But then I did the “humility check” : what makes me actually think I’m better than all those senior executives put together ? Maybe they see something I don’t ? Maybe they are not as shortsighted as at first appearing ? Maybe there’s something I don’t get ? What could that be ? I don’t have a definitive answer, of course, but basic “thought democracy” tells me that 2 heads are usually better than one, 4 better than 2 and so on (“wisdom of the crowds”, precisely). A crowd of senior executives stand a pretty decent probability of being right against me. My take on it is that what matters is actually the dynamics – doing the right thing is less than half the job, what matters is doing the right thing AT THE RIGHT MOMENT. Not investing long term is clearly not good “per se”, but IT DOESN’T MATTER ! We are asking the wrong question and getting the wrong answer. What matters is whether not investing long term is indeed a bad idea RIGHT NOW. And here the answer is more nuanced : it depends on what the others are thinking. We live in an interconnected world of self-fulfilling prophecies. There is not one prophet, but the combined voice of those senior executives becomes prophetic – if nobody is doing it, then you are better off NOT doing it EITHER !The beauty of the market economy is that it’s strongly intermeshed with democracy – it draws its force from democratic policy and it reinforces democracy, in that it teaches you the force of the majority.The obvious drawback is the “momentum” that leads to vicious circles, from which we need to escape periodically. And the past has shown that we are able to do that (we did it in the past). There are crises, depressions or recessions like this one, and during such a period a business has to, above all, survive. Long-term thoughts are shoveled aside, for later on. Everybody is doing it, which means that if you want to stay alive, it would be foolish to paddle against the flow. But gradually the situation improves and businesses start investing again, and innovating. To me, that’s all there is to say about the “innovation” and “long-term investment” topic.
Dave Pollard says:

July 19, 2004 at 16:57

Yes, I confess I lack humility. But I work closely with a lot of ‘thought leaders’ on innovation and they tend to agree with what I’m saying here. Surowiecki in ‘The Wisdom of Crowds’ warns against GroupThink, and much of what I’ve read lately from CEOs on why they are not investing in innovation definitely smacks of that syndrome. And I can’t agree that “The beauty of the market economy is that it’s strongly intermeshed with democracy – it draws its force from democratic policy and it reinforces democracy, in that it teaches you the force of the majority.” In fact everything I read and see says the opposite — that the market is increasingly controlled by a small group of corporations that are in turn controlled by a handful of people — the antithesis of democracy.