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Social Innovation - the Next Great Management Breakthrough
- Sept. 4, 2011, 7:03 a.m.
The last few years have presented some of the most challenging economic times in the modern business world to run a company, never mind trying to grow it. Today, despite the still-shaky economy, businesses are starting to re-gain their confidence in their ability to grow profitable revenues.
This new era of expansion will not resemble the irrational growth of the late 1990’s, but will take a different path. Two factors have converged that require companies to re-set their businesses to a new reality.
- The first is that shareholders are less tolerant of businesses that cannot demonstrate fiscal prudence. Therefore businesses, while starting to grow revenues again, have chosen not to resume hiring at the same levels. This new reality means that employees are expected to do even more with less than they had before.
- The other factor is that customers, driven by the social web and mobility, expect more services and more engagement from companies they do business with. Thus, a fundamental shift in the way companies operate needs to take place.
Some companies are figuring out ways to embrace these new changes as a way to gain a competitive advantage but companies who cannot transition to this new digital world will face a significant competitive disadvantage.
One way for companies to meet this challenge is by re-thinking innovation.
Here are 3 things you must understand before re-launching your Innovation machine:
1. Pace of Innovation is Increasing Rapidly
Today’s cut-throat competitive environment requires new levels of innovation performance to drive growth whether organic, profitable or partnered. Traditional Research & Development departments simply cannot sustain the pace of new ideas that is needed for growth which is the primary reason that companies are incorporating social mechanics to the innovation process.
Breakthrough innovation is rendering established business models obsolete. Look at what:
- iTunes has done to the music industry
- Amazon has done to Bookstores
- Netflix/Hulu has done to Blockbuster
- Speed of innovation continuously shortens product/service lifecycles. Much of this is because the barriers to innovate groundbreaking products are minimal compared to just 5 years ago
- Commoditization is happening at a much faster pace even in newly established industries. Fifteen years ago companies had 9-12 months lead time on new innovations and today copycat products are launched within weeks if not days of brand new products.
To get through the disconnect between R&D spend versus benefit companies need to embrace the new innovation reality: one where digital (and social in particular) is redefining what innovation is and shifting the importance from ideas to outcomes. The winners of this new reality will be those that know how to convert knowledge and information - no matter where it comes from - into things customers actually want.
This is innovation economics. And innovation economics are all about being the best at the process of creation, rather than the act of creation itself.
2. Innovation as a Process
Putting an idea collection platform in place just gets you more ideas. The opportunity is to move from ideas to outcomes.
The outcome with current innovation efforts is they generate results which appear random. It is often difficult to determine whether a particular innovation investment will result in a hit product or fail completely after serious money is spent.
In a survey of 639 companies, executives cited (1) lack of customer relevance and (2) speed to market as the top two drivers of innovation failure.
Senior leaders aren’t accustomed to random processes: they need predictability in what they do in order to effectively manage their businesses. Subsequently, when you have projects rather than portfolios, each failure is a very big deal. Risk is difficult to mitigate and therefore it’s hard to justify innovation investments when returns are not as predictable as other investments. On the other hand, an innovation process treats failure as one component of an overall expected return. Portfolios aren’t random: at scale they are as predictable as any other aspect of a business operation
3. Innovation at Scale
This of course, leads to the major problem facing innovators: if a portfolio is the only way to get to predictability of innovation returns, how can one deliver enough ideas to grow a portfolio of sufficient scale so you avoid concentrating risk across the enterprise?
The answer is social innovation: the set of tools and cultures organizations can implement that makes it possible to innovate at scale. Social innovation enables companies to innovate at the scale of hundreds or thousands of ideas at once.
Social innovation systems achieve this by shifting part or all of the innovation problem to the crowd. This would include idea creation, evaluation, remediation or even execution. The crowd can be composed of customers, employees, suppliers, expert communities, distributors, etc and acting as a group, they’re able to process ideas at huge scale.
The mechanics of social innovation and its effects
- In most enterprises, it is not ideas that are lacking, but the social mechanisms needed to drive outcomes from those ideas. There are several of these mechanisms necessary if an innovation effort based on social crowds is to be successful
Effects of Social Innovation Systems
- When employees are visibly part of the decision process governing the way change is introduced, they are generally much happier with any change implemented.
- The devolution of the innovation problem to the edge of organizations means the amount of innovation that gets done increases by an order of magnitude. This makes it possible to manage innovation as portfolio without scaling up an innovation team in the corporate center, with the associated significant resource commitments of doing so.
Companies should consider transitioning existing innovation efforts from command-and-control centrally situated approaches to a more diffuse one based on a social system if they wish to ensure they can manage innovation at scale.
By managing innovation at scale with a social system, companies are able to ensure their innovation investments are predictable. With this predictability comes superior market performance: the sort of performance that’s traditionally be limited to “superstar” companies such as Apple and Google.
[Article image from eyeka.net]
Source: Social Media Today
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