Innovation - That Strange Mythical Animal

February 07, 2009
Dr Bhaskar Dasgupta

It was an interesting email that I got from Google Alerts. I have an alert setup for “innovation” as a keyword. The interesting thing is that I get the most interesting and curious hits on that keyword. As it so happens, on the same email, I got referred to a Businessweek article on innovation and another article on how Nortel could not save itself from bankruptcy despite investing heavily in innovation.

Innovation is a tough thing. What exactly is it? Something to do with new things? OK, lets run with it for now. But everybody and his dog wants to be known as innovative. Nothing wrong with it at all. But just like every buzz word, it needs to be treated carefully. People can get into all this innovation business too much and then forget about the basics of business. The two articles given above are interesting examples of this phenomena.

My son has been on World of Warcraft for the past 4 years now and has a good little business running there. So I have a fair idea of what is happening there. He has also managed to rope in my little princess as a magic maid, so that promises to be a good story one day. Anyway, I do appreciate the points made in the article about how WoW has managed to incorporate basic principles of innovation into its game so that it is doing brilliantly. I quote some of the main principles that the authors quote as lessons from the game:

  • Reduce barriers to entry and to early advancement
  • Provide clear and rich metrics to assess performance
  • Keep raising the bar
  • Don't neglect intrinsic motivations
  • Provide opportunities to develop tacit knowledge, but do not neglect broader knowledge exchange
  • Create opportunities for teams to self-organize around challenging performance targets
  • Encourage frequent and rigorous performance feedback
  • Create an environment that rewards new dispositions

But I have a bit of an issue here, and that is that the principles seems to be driven from the story and then generalised. To put it in another way, if I had to pick up these principles and plonk it into any other business, i can, very easily, but does that mean that my old business has suddenly become innovative? Or that innovation starts gushing from each pore? No, obviously not. None of these principles are wrong at all. But at end of the day, people have to keep a a laser eye out on the main business of selling profitably.

Which brings us to the second example, that of Nortel. Nortel did everything that these principles said should be done. It turned its attention to new products, it brought in imaginative thinkers, changed its investment policy, new products were gushing out, strategy was changed, people were let go and new people hired, and so on and so forth. But does this mean that they did wrong? No, just that their basic idea of migrating the firm into a new world of web 2.0 was simply not good enough. It just bombed. As a matter of fact, you could point towards its debt load but then again, they already had $2.6 billion in cash. That again was not enough to save it from going under provided its products were good enough to provide a good cashflow. Which it didn't.

Depending upon which product category you refer to, innovative products have a very high failure rate, ranging from 40% to 90% (as reported in the HBR – June 2006 edition). When you are talking about such a high failure rate, to maintain innovative capability is paramount. You have to dust yourself off and keep on working. In a recent research paper where innovation was studied with respect to Sun, what is normally held to be an innovative company. After one of their products bombed, the researchers coin what is called as Innovation Trauma. This manifests itself by disillusionment, cynicism and contagious demotivation.

So what do you do to improve matters? The researchers suggest that individuals who were championing and pushing innovative products should be given time to disengage from their previous work. Second, they need to conduct post-mortems on the failure to find out why that happened and if they can learn from the results. Third, this postmortem is best if its done collaboratively by the original team or a team of some sort, an innovation anonymous, if you will. Fourth, seed the failure aspects into a new project so that the old failure is uplifted by the excitement of the new project while the new project is calibrated downwards by the caution of the old failed project. Expectations management.

So what do you do? Here’s something that we are trying to do. The British Political system is pushing heavily on the idea that Britain has to become an innovative idea. Pretty good stuff, but how do you deal with innovation? I have recently been invited to join a group on Innovation which will assist in coming up with strategies to improve the UK innovation footprint. It is not easy. Actually, anybody can come up with a good idea. Ideas are dime a dozen, but to get from the idea stage to a company which is stand alone, has some cash in the bank, has a good order book with some good client companies, ah!, now that’s the holy grail.

So what we are hoping to do is to provide that bit of a helping hand from the corporate and government sides. If a small firm does have a good idea, we will get together and try to do two things, (1) try to assist in framing the new idea as something that is innovative in terms of resolving a business problem and (2) try to assist by championing it inside our firms. Obviously no money and all that stuff, but in my experience, innovators fall in love with the idea rather than how it will resolve the problem.

They forget that we are in business to sell (anything, potatoes, widgets, credit cards, etc.) to somebody who can pay for it. Do not want to go into detail, but the idea has to be something that somebody is willing to push his hands into his back pocket and put out money. So despite having great ideas, if you forget the basic elements of selling and making products that will sell, all those innovative ideas will be useless.

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Dr. Bhaskar Dasgupta works in the city of London in various capacities in the financial sector. He has worked and travelled widely around the world. The articles in here relate to his current studies and are strictly his opinion and do not reflect the position of his past or current employer(s). If you do want to blame somebody, then blame my sister and editor, she is responsible for everything, the ideas, the writing, the quotes, the drive, the israeli-palestinian crisis, global warming, the ozone layer depletion and the argentinian debt crisis.
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Temple Stark
February 7, 2009
01:31 PM

The whole concept is flawed in the way people look at innovative. To my mind, innovative / innovation is creating (not just providing) something new and different that people want or that pushes understanding in a given field.

You can't know innovative until AFTER something has been created. It's something you recognize in hindsight.

Other than this, innovation has come to be to generalized as you indicate. Now people use it just to mean - good business practice, which frankly makes no sense whatsoever. People want to use the word so they talk themselves into it.

Rule of thumb, as is so often the case, if someone refers to themselves as innovative, unique, talented beyond belief, the less likely it is true.

February 7, 2009
01:49 PM

Temple, I agree with you. Far too much time is taken up by chasing these buzz words, and yes, you are very right in hitting the hindsight factor.

February 8, 2009
12:12 AM

BD, success in real world is Darwinian. So, most success stories in a fiercely competitive environment are due to chance and accident inspite of best backroom plans.

Other than that I agree with your article, to paraphrase Edison, success is 99% perspiration and one percent innovation. With hundred trys and proper homework, maybe one of them will hit the jackpot.

Nortel might have many tech innovations to its credit, but they were relatively on the fringe(in dollar terms). Its core business floundered, dragging down like Kraken all the innovative aspects of its business.

February 8, 2009
06:03 AM


you are right in that success is darwinian. But the challenge we have is that we now have chief innovation officers, we have innovation departments, we have vision statements sprinkled with innovation as buzz words and and and.

What happens is that expectations arent managed and management attention is diverted from the basics.

I would go further and say that if you try to manage innovation, the chances are you will fail, but if you create an environment for innovation (be ready for changes and embrace changes basically), the chances of the firm getting new products, cheaper processes, etc. are much higher....

Cheap WoW Gold
February 9, 2009
03:34 PM

It's nice to know that WOW is used as example for innovation. At least some doesn't think WoW as a game that can ruin lives. Innovative. =)

February 10, 2009
05:15 PM

well, #5, no it doesnt ruin lives, its a pretty interesting game, I have to admit...

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