INNOVATION

In my previous post (Growth and competitiveness), I tried to decipher the reasons why major industrialized countries around the world rally behind the innovation banner. In every mind, innovation is the pre-requisite for growth, prosperity and wealth. Innovation is the magic ingredient, the modern economic and politic philosopher’s stone (Max Heindel, Freemasonry and Catholicism, Part VII) that initiates transmutation of devalued industries into gold nuggets components of the new economy

Innovations, the magic word that makes it happen…really? What is innovation and how innovation and invention relate to each other

Referring to the Oxford American Dictionary, inventing is “the process of creating or designing something that has not existed before; be the originator of” while innovating is “the process of making changes in something established, especially by introducing new methods, ideas or products and services”. The subtle distinction between invention and innovation has its importance. Behind each innovation lies an invention but each invention doesn’t necessary end up an innovation! An invention gains its status of innovation through the process that transforms it into a product or a service which transforms behaviors or interactions. Innovating is not a passive process. Innovation results from the capacity of an individual or a group of individuals to examine an invention or idea, to foresee opportunities and realize this opportunity. The individual who can identify opportunities out of an invention is an entrepreneur. An entrepreneur invests resources and efforts to develop an idea in the attempt to create wealth.

In 1970 Edgar F. CODD, while working at IBM, published his paper "A relational model of data for large shared data bank”. At the time IBM disregarded CODD’s findings. Larry Ellison was the first to identify the break through that CODD discovered as an opportunity to change behaviors. He envisioned the potential changes that the relational data modeling could bring to the still very young IT industry. Most importantly, he invested resources to expand the initial idea, make it a product and market it to ultimately generate wealth. Oracle Corporation was born with the success we know. In this respect Larry Ellison’s story and the following Oracle success story is a great illustration of how innovation can catapult a budding company to the highest summits of its industry.

In Oracle’s story Entrepreneurship was the ingredient that transformed CODD’s concept of “A relational model of data for large shared data bank” into a database product that could be sold later on to the CIA. From what we said above we can tentatively define the innovation equation as follow:

Invention + Entrepreneurship (Individuals) = Innovation

In this equation, the entrepreneur is the catalyst, the energy that gives birth to innovation. If individual qualities that an entrepreneur must possess to cross the line of innovation are not to be denied, it is also commonly accepted that entrepreneur must be placed in propitious environment to innovate. In the componential model of creativity and innovation in organizations (1988) Teresa M. Amabile proposed three organizational factors, which include: Organizational motivation to innovate as a basic stance for a company to promote and support innovative initiatives, Resource as the set of means that an organization make available to foster innovative behavior and Management Practices as management attitude to provide freedom and autonomy to conduct activities, clear strategic intends leading to innovations as well as drawing together individuals with different skill and perspectives. Richard W. Woodman, John E. Sawyer and Ricky W. Griffin in their paper Toward a theory of organizational creativity (1993) emphasize the importance of Organizational characteristics (culture, resource, rewards, strategy, structure and focus on technology) in addition of Group characteristics (norms, group cohesiveness, size, diversity, roles, tasks characteristics and problem solving approaches within the group) as enablers to innovation.

We can then refine the innovation equation in order to reflect that Entrepreneurship is function of what entrepreneur interacts with:

Invention + Entrepreneurship (Individuals, Environment) = Innovation

Apple didn’t invent the mouse, apple didn’t invent the windows interface for computers, Xerox Palo Alto Research Center did. Back then, Apple provided the thrilling start-up environment prone to develop entrepreneurship. Steve Jobs as an individual was able to take an idea, develop and incorporate it into a new product: the Macintosh. Not everyone is an entrepreneur. Being an entrepreneur requires some individual specific characteristics, which we will explore in another article. What is so remarkable in Steve Jobs’ attitude is how capable he was to scrutinize an idea, a concept and envision the final product or service. From an innovation point of view, Steve Jobs was the archetype of the Entrepreneur: He had the capacity to monitor sources of innovative opportunities and make something out of it

In his seminal work >Innovation and Entrepreneurship, Peter F. Drucker identifies 7 sources of innovative opportunities: Four lie within the organization while three involve changes outside the organization. The unexpected, the incongruity, the process need, the change in market structure fall in the first category. The demographics, the change in perception, mood and meaning, the new knowledge belong to the second category.

Unexpected source of innovation comes as a result of unexpected success, failure or outside event

In 1968, a scientist at 3M, Doctor Spencer Silver was attempting to develop a super-strong adhesive but accidentally created a “low-tack” reusable pressure-sensitive adhesive instead. For 5 years, Silver promoted his finding within 3M but without getting much success. In 1974, a colleague, Arthur Fry, who was singing in the church choir, was looking for a way to anchor his bookmark in his hymnbook. Fry utilized Silver’s glue to coat pieces of paper that would allow him to turn pages without damaging them while still removable. The Post-it note was born.

Incongruity is a disconnection between what is and what should be (or what people assume it should be). An incongruity exists between reality and assumption, between perceived and actual reality.

In 1977 the CIA desperately needed a way to store and retrieve huge amounts of data for their growing intelligence network. The lack of existing technology made the relational database model extremely relevant. As mentioned before Larry Ellison took advantage of this incongruity to commercialize his database and ensure Oracle success for many years to come.

Process Need is an imperfect task or step in an existing process. Some processes run for ages without necessary anybody being able to recall when it has been implemented or why! In a matter of fact some processes evolve according to organizations’ evolution. Along the way, mutations happen and changes occur reflected in some “in house” processes. If one takes time to analyze such processes, it may well be identified source for improvement or innovation.

Malcolm Mc Lean bought his first truck in 1934. Back those days all cargo was made of wooden crates of different forms and shapes. Loading and unloading was a very slow process as a result of lack of standards. After 20 year of witnessing and enduring such inefficiency, he decided to develop some standardized way to load and unload cargo from ships through trucks to warehouses. After several tries and redesigns Mc Lean patented, in 1956, shipping containers designs, as we know them today. Malcolm Mc Lean design has revolutionized the freight industry and greatly contributed to expanding supply chain industry

Changes in industry and market structure are the prime events that trigger innovation. Changes happen when new technologies are introduced, when a shift occurs from product-based to service-based model to mention only few of the occurrences.

The advent of internet disrupted retail industry in many ways. Amazon, online book retailer, grasped the new opportunity to offer online standardized shop accessible wherever the customer is around the world. Nowadays after many years of economic uncertainties, Amazon has ascertained its business model, is well established and can sell through its e-commerce platform many other products as diverse as cosmetics, perfume and education.

Demographics changes are defined by changes in population, its size, age structure, composition, employment, education status and income.

Club Mediterranean was created in 1950 by former Belgian water polo champion Gerard Blitz. 5 years after the end of World War II, Blitz opened a low-priced summer colony of tents on the Island of Majorca. The first official Club Med was inaugurated the next year in Palinuro in Italy. The very rudimentary sea front straw huts with shared communal washing facilities were replaced by more modern blocks with en-suites while expanding, providing sport tuitions and settling outside of Mediterranean in other continents. Over years, from targeting young couples, Club Med became a destination for families with the first mini-club opening in 1967.

Change in perception, mood and meaning occurs when one focuses on the perception of a group, sector or a population in order to fulfill those expectations.

Nowadays people are obsessed with youth-fetishism and terrified of ageing and not being physically fit. The perspective of ageing and looming long sickness terrifies people who become very receptive to cosmetic clinics. Numerous treatments based on the neurotoxin protein Botulinum toxin commercialized under the brand name Botox® amongst others and filler injections have flourished in the past years. These chemical treatments complement clinics offering physical enhancement or corrective surgeries. The health fervor has created markets for all sorts of specialized health food, supplements, vitamins supply and huge chains of shops concentrating on such products.

New Knowledge has the longest lead time over the others innovation sources. Academic researchers are the great source of new concepts and breakthroughs which lead to new opportunities.

John Bardeen, William Shockley and Walter Brattain received the Nobel Prize in physics in 1956 for their invention of the transistor. The transistor is alleged to be the most prominent invention of the 20th century. In 1968, Robert Noyce, Gordon Moore and Andrew Grove founded Intel. Together they were probably a gathering of the most impressive knowledge on semiconductors at the time. The success of Intel is no coincidence.

Organizations must provide inspiring environments that promote the search for innovative opportunities. Some innovative opportunities are easy to detect while some require more effort. Most innovative opportunities require effort to transform an idea or invention to an innovation. Nothing comes easily. Relentless quest for innovation is the characteristic of the entrepreneur; without the entrepreneur, even innovative opportunities that emerge in a suitable environment will never become innovation. To quote Steve Jobs “Innovation distinguishes between a leader and a follower”, which by a self authorized substitution becomes “Entrepreneurship distinguishes between a leader and a follower.”.

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