The Hindu Business Line : Innovation and the CEO’s agenda

Indian CEOs unequivocally rank innovation as a critical organisational priority – as per the Paradigm Innovation Survey, 2006 an overwhelming majority of CEOs sees innovation as one of the three most important factors of competitive advantage. When asked about the sources of growth, the response once again indicates that they expect their topline growth to be driven by innovation in existing or new businesses.

Yet, have Indian CEOs equipped their organisations to deliver on this vision? Our survey threw up the usual suspects: lack of clarity on growth options, vague and indeterminate expectations from innovation, poor advocacy, culture and metrics that work against embracing risk and towards a perpetuation of the status quo, and so on. To summarise, our research indicates that while innovation is desired, and indeed, expected by the organisation, how exactly this is to be engineered or planned is not given serious thought. No wonder, then, that the Paradigm Innovation Survey points to a pervasive discontent across organisations and sectors with the putative benefits of innovation.

Some insight into why this could be happening comes from examining the relationships between the different elements of an innovation system (see the Innovation System Map in the earlier article in this series; The Challenge of Innovation, BrandLine, July 19, 2007).

There are two aspects that stand out. First, there are a large number of equally important elements - corporate strategy, risk-taking culture, processes - each residing in different parts of the organisation. Second, many of the elements are inter-related. Managing these interactions needs working across organisational silos, which, as any experienced manager knows, is not easy to do. This is why steering innovation and creating new growth engines should be the responsibility of the CEO: only from his perspective can the organisation derive the culture and strategic direction to drive its innovation efforts. Equally important, his backing ensures that things will happen. Which is why it is critical that innovation comes onto the CEO’s personal agenda.

The CEO’s innovation agenda

Going back to our view of innovation as a system of three interlocking gears — strategy, culture and processes & competencies, it is up to the CEO to ensure that not only does each individual gear run efficiently, but that all the gears mesh smoothly, providing the right impetus to the system.

You will observe that the gears are not of equal size, and that’s not an optical illusion. There is a reason why strategy and culture occupy such pivotal roles: they have the power to rapidly create transformative change. Without cranking strategy and culture sufficiently, the growth engine will not start. Several organisations tend to focus on processes and competencies, but these are actually enablers, not the main drivers.

Of course, the CEO must delegate a large part of the activities to appropriate levels; however, the innovation agenda itself needs the CEO’s personal and visible commitment, leadership and advocacy.

The Three Gears

It begins with strategy: What sort of innovation does your organisation need? Answering that question needs an understanding of where exactly innovation fits into the overall corporate strategy. A clearly articulated strategy is a necessary prerequisite for linking innovation to strategy. The articulation — and managerial buy-in — is critical because, while the CEO should steer the innovation and growth agenda, execution will typically be the responsibility of middle or junior managers. If the strategic direction is not clearly laid out, each individual will bring his or her own, perhaps flawed, understanding to the situation.

Many organisations lack a strategic blueprint for their future, and the result is organisational confusion on what the innovation initiatives should be, and how they should be managed. A well-thought-out innovation strategy needs deep strategic introspection on issues such as the core of the growth strategy, the translation of growth expectations into goals, articulation of goals for each time horizon, clarity about the suitability of different growth options, and so on. Only when these questions are answered can innovation goals be set.

Setting innovation goals: Adopting the innovation goals of a successful organisation and expecting this to work in another situation is a common error. Such goals can be used as a guide, but ultimately, every CEO and his top management team must re-define the organisation’s innovation goals to match its strategy, capabilities, corporate DNA, and competitive environment. Together, the top management team must articulate, communicate and get a buy-in for the goals from the rest of the organisation.

Embedding a culture of innovation: Innovative organisations tend to embrace risk-taking, and to encourage diversity of opinion: that in turn comes from ensuring a diverse managerial gene pool, encouraging gender diversity and a culture of debate and dissent. Innovating organisations are also failure-tolerant, meritocratic and low on hierarchy. They give importance to knowledge management, incorporating a feedback process to benefit from the lessons learnt from successful, and more critically, failed projects. Employees are encouraged to pursue interests apart from work, to expand their experience and give free rein to their creativity. One of the most critical tasks facing the CEO is the fostering of an innovation mindset that encourages the organisation to seek risk, not to avoid it, and which embeds a shared propensity for creativity and change. Changing the culture of an organisation is not easy: of the three gears, this is the one with the greatest inertia. Yet this, in our view, is the gear with the greatest power to accelerate momentum.

Processes and competencies: Sadly, the smallest wheel acts as the greatest limiter of management vision. Go through the literature on innovation and you could be led into believing that it is all about processes – in fact, innovation is almost synonymous with new product (or service) development. Many a new idea has been tossed out after a veto on the grounds of “we have no competencies in that area”. No doubt both processes and competencies play an important role in driving an idea; however, innovation is bigger than either of these. In our view, processes and competencies are both enablers – they can be plugged in at will (resources permitting), to take innovation forward along the strategic direction.

In organisations where innovation has failed to fulfill its role in creating sustainable competitive advantage, there is evidence of systemic breakdown: inadequate ideation, weak strategic foresight and poor execution all combine in a negative vortex that sucks resources and energy out of the system, leaving behind failed products and low morale. On the other hand, in organisations that have a history of successful innovation, the CEO’s vision, leadership and supervision generate a virtuous spiral in which the different elements reinforce, rather than weaken, each other to create value and growth.

By taking charge of the innovative agenda, through a combination of advocacy and execution, by infusing positive energy in the right elements, a CEO can transform his organisation into a living entity where value-creation through innovation is an integral part of the genetic code.

Parmit Chadha is Director, Strategic Decisions Group, a California-based strategy consulting firm. Radhika Chadha is Principal of Paradigm, a boutique consulting firm specialising in growth and innovation.

(This article is adapted from Innovative India: Insights for the Thinking Manager Parmit Chadha and Radhika Chadha published by Penguin India in July 2007).

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