With the global economy slowly emerging from the throes of a deep recession, it is becoming evident that this crisis will be remembered as having changed our world forever. Business as usual is no longer an option. This is not just because economic and credit conditions have changed dramatically over the last months, but also because there is a growing realization that we need to innovate to create new solutions for a new world economy.
The global economy has become more inter-connected. It is no longer possible to craft a solution for one country or region in isolation while neglecting global inter-connectedness. Sustainability has also come to the fore. What works as a short-term fix will no longer be a good long-term solution. Global challenges such as climate change, energy shortages, food scarcity and health pandemics overshadow and influence our thinking about long-term solutions. Leaders from the public and private sectors are being challenged to rethink the interlinked relationships between business, government and society at large. All in all, we are operating in a context where fresh thinking and innovation have become paramount.
The need for innovation is clear. However, the nature of the innovation required has changed in line with the current context. Collaborative innovation will be key for success in the future. The scale and scope of the challenges facing us is so large that no one company or single country can solve them all. Even the developed world has realized that it requires the cooperation of emerging nations to create innovative solutions for global challenges. Witness the recent flurry of changes in the governance of global institutions such as the IMF and working groups such as the G8 (now expanded to the G20). Similarly, corporate leaders realize that they need to work collaboratively with their business partners, customers and governments to innovate successfully for the future. Innovation ecosystems that span across the public and private sectors and extend to include citizens and societies have to be formed. Collaborative innovation is the name of the game for future success.
But how well do organizations fare in collaborative innovation? Do organizations have appropriate processes and incentives in place to ensure that innovation is supported and managed effectively across their innovation ecosystem? Or is it the case that they leave innovation to chance – not possessing even basic measures to identify and manage innovation? Or in short, what is the ‘innovation readiness’ of organizations as they face the future?
In one of the most comprehensive studies ever conducted on innovation, INSEAD surveyed two hundred CxO level business leaders from blue-chip organizations from the public as well as private sectors, about their views on innovation, and more specifically on collaborative innovation. The research shows that although they claim to grant high priority to innovation, most organizations are handicapped by low levels of ‘innovation readiness’. Despite increasing their investments in innovation in today’s challenging economic times, organizations are not able to reap the full benefits of these investments due to such low levels of innovation readiness. If leaders do not improve their innovation readiness, their organizations will not rank among the future winners of the global economy. This is particularly true given the increasing competition from new competitors from emerging markets such as China and India.
Key findings from this research include the following:
– Innovation is viewed as essential to success, but a lack of ‘innovation readiness’ is crippling potential.
– Spending big budgets alone on innovation doesn’t cut it – it is time for senior management to step up and make the difference.
– Collaborating with external partners is an important enabler of innovation – it is a game of balancing cooperation and competition while focusing on winning.
– Organizations need an effective innovation ‘multi-culture’ where different aspects of an organization’s behavior are combined in varying proportions, depending on the stage of the innovation process.
– As the path innovation takes is not always clear from the outset, applying old and analytic Return on Investment (ROI) methods is not enough; with innovation, value creation assessment needs greater flexibility.
Success in these challenging times will require responsiveness and the ability to recognize and realign strategies to maximize competitive advantage over time. Success will demand higher levels of investment in building effective collaborative innovation ecosystems.
This article was written in 2010.
pi STRATEGY