The financial crisis pushed efficiency onto the agenda of nearly every corporation. But there has been a general consensus, particularly among blue-chip companies, that you can’t cut out innovation, research and development. In Denmark, where I’m from, the biggest companies, Vestas, Danfoss, Novo Group and Lego, kept innovation expenditures at a considerable level throughout the crisis.
You have to sustain growth even as you cut back on costs, and, to do this, companies need to become more precise. For example, broad-spectrum research projects should be eliminated. Organizations will also need to decide in which part of the value chain they wish to innovate. Do they wish to create new business areas, also known as the “blue ocean” strategy, or do they want to foster incremental growth — the “red ocean” strategy?
An effective type of innovation that has emerged in this difficult economic environment is denovation. Denovation happens when companies push the envelope so far in one direction that it automatically creates an opportunity for push-back in the marketplace. Overexposure to technical innovation makes customers more likely to begin purchasing simpler, cheaper products. For instance, in the shoe industry, when exotic materials and advanced suspension systems become commodities, customers will eventually discover that a cheap, simple pair of sneakers will do.
Even as denovation has emerged, “open innovation” has received a great deal of attention recently. Open innovation happens when companies invite a community to contribute ideas, harvesting the good will of the stakeholders. Open innovation isn’t the silver bullet that followers of University of California at Berkeley professor Henry Chesbrough believe it to be, but done well and under the right circumstances open innovation can save companies money.
2. Is innovation as a discipline still relevant? If it is, why? And, what does it entail?
Innovation has been around forever. It has been an integral part of coping with change and turning change to one’s advantage. Think of the viking long ship’s shallow draft that permitted beach landings, Shaka Zulu’s short spear, the Earl of Sandwich’s meat tucked between two pieces of bread, Mitsubishi’s electric rice cooker. Innovation happens in all historic periods and in all cultures.
The Industrial Revolution accelerated the pace of innovation, making its value and techniques more tangible. Also, the nature of innovation changes as our societies do. The networked society we live in today has given rise to an unforeseen digital innovation boom. But what’s next? I anticipate the next frontier to be innovation that breaks away from resource-dependence, where growth is uncoupled from consumption and product life cycles are prolonged.
Innovation is — and will remain — relevant. Today, however, it has become abstract and institutionalized. Large corporations and institutions have set up new organizational structures to harness the value of innovation, while innovation managers and consultants populate corporate hallways. New organizational structures have worked well to exorcise autonomous individuals and random processes in the past, but they have not been as good at retaining a strong sense of vision and creativity. I see the advent of this new management structure as a threat to innovation’s future potency. Taming innovators might make innovation tame.