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Sustainable Innovation

Mastering Continuous Innovation Strategy

by Vadim Kotelnikov

If your business is to survive in today's rapidly changing environment, your should either manage change or change management

Two Main Sources of Sustainable Competitive Advantage

  1. Continuous Improvement Culture: continuous effort to improve organizational climate and productivity of the core business in response to continuous changes in the marketplace

  2. Durable Corporate Venture Strategy: internal investment in innovation and new product/service development, new business creation, and external venture investing in new technologies and emerging markets

External Sources of Changes

  • Demographics (population changes)

  • Changes in perception, mood and meaning

  • New knowledge, both scientific and non-scientific

Types of Changes in the Marketplace

  • Continuous organic change

  • Radical, or discontinuous, change driven by radical innovation

Four Questions to be Answered to Define How Much Innovation is Required, in What Areas and in What Time Frame

(by Peter Drucker)

  1. How much longer will this product still grow?

  2. How much longer will it maintain itself in the marketplace?

  3. How soon can it be expected to age and decline - and how fast?

  4. When will it become obsolescent?

Understanding the Present and Preparing for the Future

(by Peter Drucker)

  • What is the current situation of the business?

  • How is the situation changing?

  • How will the changes affect the business?

  • How will the changes affect the competitors?

  • How can the changes be turned to advantage?

Managing Radical Changes: The Tasks of CEO

(by Bill Gates)

  1. To recognize radical changes

  2. To articulate the opportunities they present to each person in the company

  3. To empower employees with as much information and as many productivity tools as possible, so they can achieve results within the framework of that vision

DOs and DON'Ts of a Successful Innovator

(by Peter Drucker)

DOs

  • Analyze the opportunities

  • Go out to look, to ask, to listen

  • Keep it simple, keep it focused

  • Start small - try to do one specific thing

  • Think big - aim at market leadership

DON'Ts

  • Don't try to be too clever

  • Don't diversify, don't splinter, don't try to do too many things at once

  • Don't undershoot, or you will simply create an opportunity for competition

  • Don't try to innovate for the future

Related how-to guides:

Building an Innovation-Friendly Organization - a CEO Guide

Building a Learning Organization

Managing Change

Searching for and Exploiting Opportunities

Venture Strategies

Managing Innovation Separately through Spinouts

Measuring Performance: The Executive Diagnostic Toolkit

Management by Objectives

Continuous Improvement Firm (CIF)

Kaizen and Innovation

Entrepreneurial Leadership

Continuous Change as a Norm

Companies, like any living organism, must become learning organizations that change and adapt to suit their changing business environment. The constant formation of new units within a corporation is one means of gearing up to change.

According to Bill Gates, if you don't practice the change management that looks after the future, the future will not look after you. "...The tendency for successful companies to fail to innovate is just that: a tendency. If you're too focused on your current business, it's hard to look ahead..."

To determine the improvements to make in response to the change, you should continuously:

  • listen to customer feedback, and

  • study new technology opportunities.

Innovation as a Mindset and Corporate Strategy

In today's knowledge-driven world, new technologies appear at shorter and shorter intervals. "Knowledge constantly makes itself obsolete, with the result that today's advanced knowledge is tomorrow's ignorance", stressed Peter Drucker. Innovation thus should be not a one-off event, but a continuous response to changing circumstances. Sustainable innovation system doesn't not just help to solve a problem but creates a new capacity, opening up opportunities for further innovation.

Do not confuse innovation with novelty. Novelty, says Drucker, "only creates amusement", and will not last into the future.

Do not limit innovation to development of new products only. New processes and methods can be more powerful in helping you to win sustainable competitive advantage.

Forming the Business Audit

Business audit will track the performance of your company and of its management against a strategic plan and against specific objectives.

The corporate manager responsible for innovation needs to establish "the business X-ray" which "furnishes the information needed to define how much innovation a given business required, in what areas, and within what time frame". It would help to establish the gap between what already exists and what is required to achieve the corporate objectives: "the gap has to be filled or the company will soon start to die". Actually, the company needs to aim beyond the measured gap because of the high probability of failure and delay. "A company therefore should have under way at least three times the innovative efforts which, if successful, would fill the gap3".

Changes - the Source of Opportunities

Innovation is the specific tool of entrepreneurs. Doing new things, or doing old things in new ways is how entrepreneurs exploit change as an opportunity for a different business or a different service. Entrepreneurs see change as the norm and as healthy; they always search for change, respond to it, and exploit it as an opportunity.

Innovation can be approached methodically, by a purposeful and organized search for changes and by identifying the opportunities that such changes might offer. In your search, focus on opportunities, not problems, these changes can bring along. Results come from exploiting opportunities, not solving problems.

Internal and External Sources of Changes

The changes creating new opportunities for innovation can be both within the enterprise or industry and outside them. A three-level business intelligence system is thus to be established to collect and analyze information from within the enterprise; industry and market structure; and external sources, such as demographics, changes in perception, and new knowledge.

Innovators who want to exploit new knowledge need to apply a careful analysis of the knowledge available and the knowledge needed.

Develop your company into a learning organization that "is continuously expanding its capacity to create its future" by continuously learning new ways of doing things and also continuously forgetting old ways of doing things. It will help you to adapt to and survive in the changing business environment and to fulfill you potential.

Principles of Innovation

"Innovations had better be capable of being started small, requiring at first little money, few people, and only a small limited market."  That gives the innovator more time and space within which to correct inevitable errors.

The purposeful and effective innovation results mainly from analysis, system, and hard work.

Systemic Innovation

Innovation used to be a linear trajectory from new knowledge to new product. Now innovation is neither singular nor linear, but systemic. It arises from complex interactions between many individuals, organizations and environmental factors. Firms which are successful in realizing the full returns from their technologies and innovations are able to match their technological developments with complementary expertise in other areas of their business, such as manufacturing, distribution, human resources, marketing, and customer relationships.... More

Innovating for the Present & Preparing for the Future

No-one can predict the future. You can however to discover the secrets of the present. Innovation is not about taking risk or predicting the future - it's about focusing on the opportunities of the present. Understand the present, study what is known and turn this knowledge into future opportunities.

Synergy Between Innovation and Kaizen Continuous Improvement Strategy

If innovation is considered as a one-shot deal, its effect will be gradually eroded by intense competition and deteriorating standards. The Japanese Kaizen strategy can provide synergy between innovative and continuous improvement efforts. Kaizen means a constant effort not only to maintain but also to upgrade standards. Standards are considered as tentative by nature and a subject to improvement as soon as ongoing standard has been mastered.

Bibliography:

1.    "The Practice of Management", by Peter Drucker, 1954

2.    " Management: Tasks, Responsibilities, Practices", by Peter Drucker, 1974

3.    "The Frontiers of Management", by Peter Drucker, 1986

4.    "Managing in Time of Great Change", by Peter Drucker, 1995

5.    "Kaizen - The Key to Japanese Competitive Success", by Masaaki Imai, 1991

6.     "The Road Ahead", by Bill Gates, 1996

7.    "Roads to Success", by Robert Heller, 2001

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