Innovation is more essential for growth – and survival – than ever. As we move from a period of economic exuberance to an era of greater uncertainty, companies are more likely to want to tighten belts and avoid risk than to pursue new ideas and opportunities. Yet CEOs know that cost-cutting alone will not suffice and that future growth rests in the pursuit and execution of innovation.
By treating innovation as a legitimate business process, CEOs are encouraging the development of new ideas from a variety of sources – and focusing on the outputs, not in show off. Hiring smart people who come up with good ideas is helpful but it’s only a small piece of the puzzle. Creativity by itself does not worth much. The key is in being able to translate it into commercial reality very quickly.
Unfortunately, that’s not easy. For every phenomenally successful product or market innovation, there are hundreds of abysmal and costly failures. For every big idea that transformed a company – think Sony Walkman – there are dozens of tales that illustrate the folly of pursuing an unworthy venture for too long and at a great cost.
Finding that elusive balance between allocating resources and managing risk is one of the principal challenges CEOs face in driving innovation. Organizations in nearly all industries need to devote the lion’s share of what they do to cashing in on the services, products and business models that they have, but if they only do that, they end up trapped in the past and in trouble.
Therefore, for CEOs, the question is: what is the right mix of routine work versus innovative work? There is no silver bullet for successful innovation. But nurturing a corporate culture that values innovation and accepts risk is no longer enough. It’s now essential to create an innovation management system that evaluates new ideas, culling and implementing the keepers and discarding the rest.
Creating a climate inside an organization where innovation is allowed to take place and running and managing a business where you are trying to reduce costs and produce and distribute products efficiently are to some degree diametrically opposed. A good CEO understands that and that he has to keep those two processes separate in people’s minds, but at the same time extract the operations perfection out of his people as well as their ideas. Clear vision and defined policies around innovation are fundamental parts of accomplishing that dual objective. Developing good ideas should be part of every employee’s job description and be covered in performance reviews.
Idea-generating processes can be simple or more complex, and no idea is too small for consideration. Continual reinforcement of the company’s commitment to innovation is only effective because it’s not just rhetoric.
People are very cynical about top management and more responsive to what they do than what they say. If they say, ‘We value innovation” and then the only people who get promoted are the ones who cut costs and the only conversation you have with top management is about quarter financials, that’s what [employees] will respond to. They’re not impressed by rhetoric. The role of innovation has to manifest itself in the CEO’s agenda and resonate in the way the company motivates and manages itself.
Paulo Janeiro (CEO)
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