The Innovation Opportunity: Getting started with business innovation and moving beyond survival!

By Grant Ferry and Scott D Anthony

Getting started with business innovation and moving beyond survival!

Do you want more from business and life than mere survival?

Are you constantly dealing with change, increased costs

and mounting competition?

In The Innovation Opportunity, Grant Ferry assists business owners in navigating the dynamic business e

• Language: English
• Publisher: Fortitude Publishing Pty Ltd
• Release date: Feb 15, 2021
• ISBN: 9780645027716

Grant Ferry

Grant Ferry is an experienced management consultant and author specialising in business strategy and innovation. He believes that innovation offers an unrivalled pathway to maximising business performance and long-term success. With twenty-five years' experience establishing, leading, growing and advising businesses, Grant delivers the practical solutions business owners need to survive and thrive in a rapidly changing business environment. As the owner and principal consultant at Fortitude Business Consulting, Grant offers a variety of consulting services and online programs for businesses at all levels. These are designed to be simple, practical and powerful. They allow all businesses to build the foundation requirements for effective innovation and to begin their innovation journey - enabling business owners and leaders to accomplish what they want from business and life. Grant's formal educational qualifications include: • Master of Science in Innovation and Entrepreneurship (HEC Paris) • Stanford Innovation and Entrepreneurship Certificate (Stanford University) • Executive Master of Business Administration (RMIT University) • Master of Taxation (University of New South Wales) • CPA Program (CPA Australia) • Bachelor of Business Accounting (La Trobe University). Grant's professional certificates and registrations include: • Certified chief innovation officer with the International Association of Innovation Professionals • Certified management consultant with the Institute of Management Consultants • Certified practicing accountant with CPA Australia • Registered tax agent with the Tax Practitioners Board.

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INTRODUCTION

The Accelerating Pace of Change

The world of business has experienced significant change in recent decades. The current technology arms race is resulting in increasing innovation and an explosion of choice.

Rapid technological advancements are shortening product life cycles, accelerating product development, creating new offerings and giving rise to entirely new business models. At the same time, this is creating greater market segmentation, an abundance of customer choice and:

• Extreme uncertainty about how the future will unfold

• A lack of clarity around the best path to take, and when you should commence that journey

• Material shifts in the underlying basis of competition, and what you need to do to achieve and sustain a competitive advantage.

Innovation and advances in technology are the most significant drivers of economic growth – and for many industries, competitive success – creating considerable opportunity for those who choose to embrace it. This trend is accelerating and will continue to bring a great deal of complexity, uncertainty and competitive pressure to bear. Traditional strategies of defending a market position are likely to fall short of what’s required to maintain long-term success.

While technology is accelerating the pace of change, this is also punctuated by events that rapidly and materially alter the rules of the game. In recent decades, events such as the global financial crisis and the coronavirus pandemic have caused significant upheaval that has driven deep and dramatic change. In almost an instant, the world as we know it and how we operate within it can change.

While these types of events are enormously disruptive, difficult to manage and a major threat for those who are blindsided by them, they also provide significant opportunity for innovation.

Accelerating Innovation

Simply reacting to change is insufficient. In the current environment, business survival and success are directly related to the ability to engage in effective and constant innovation. You need to simultaneously control your operational activities to ensure they are highly organised (focused, efficient and effective), while maintaining the flexibility essential for the innovation activity that sustains your competitive advantage.

The need for innovation to achieve commercial success and sustain competitive advantage has always existed – it’s far from a new phenomenon. However, the traditional concept of sustainable competitive advantage is being eroded by the pace of innovation.

Ongoing commercial success depends not only on your ability to innovate, but increasingly on the speed of innovation. This places business owners and leaders under much greater pressure to develop innovation as a fundamental business routine and hone it into a core competency. Innovation, and the creative abilities and processes that fuel it, have become an essential driver of competitive advantage.

While innovation is complex and can be a high-risk and high-cost endeavour, it’s nonetheless essential to both survival and ongoing success. Fortunately, innovation is a field of business management that’s evolving rapidly; with some help, it can be effectively managed and developed into a core business function – and a source of enduring competitive advantage and long-term success.

When innovation becomes a core business competency, it enables you to keep pace with your competitors. Additionally, when you are sufficiently focused, you’re able to outpace rivals by building barriers to imitation and sustaining long-term competitive advantage.

Out there in some garage is an entrepreneur who’s forging a bullet with your company’s name on it. You’ve got one option now – to shoot first. You’ve got to out-innovate the innovators. – Gary Hamel

Prioritising Innovation to Maximise Wealth

While smaller businesses typically focus less on innovation than their larger cousins, this does not need to be the case. Innovation capability is simply a reflection of the choices made by the business owner or leader. If you are looking to grow your business and maximise your wealth, the innovation opportunity is there for everyone who wishes to embrace it!

It’s a choice – an essential choice for those who wish to succeed in the long run.

To move beyond survival and to maximise business growth and success, you must prioritise innovation, embark on your innovation journey and make the most of the innovation opportunity.

Innovation Drives Competitive Advantage

A common theme that sets successful businesses apart from their competitors is the awareness of the need for change and the willingness to innovate. Research constantly confirms that investment in innovation is the most important characteristic in determining business growth, market share and profitability.¹

The more competently a business can develop its innovation capability, the more likely it will sustain long-term success. This is because innovation is the only thing that prevents your competitive advantage (and the profits it generates) from being eroded by changes in the business environment and the activities of competitors.

Ongoing Innovation Fuels Long-Term Success

While many business owners often inject a large dose of innovation into initiating their enterprises, one-off innovation does not sustain a business indefinitely. If you rest on your laurels, you will be left behind. A business’ focus on innovation activity can range from being:

• Non-existent

• Unplanned and ad hoc

• A one-off project

• The result of a series of individual or related projects

• A core competency and a mode of operation.

The key to long-term success lies in a business’ ability to continually innovate: to move from an unplanned, unfocused and ad hoc activity to a well-developed and repeatable business process that supports ongoing value creation. This raises the following questions:

• Can innovation be managed?

• How can you establish innovation as a core business competency?

• Where should you commence your innovation journey and how should you go about it?

Creating and Sustaining Success

Creating and sustaining long-term success requires learning how to manage the innovation process so that it becomes an ingrained business routine and part of your business’ culture. Ideally, you will develop innovation as a core business competency, allowing you to continually create and capture value.

The purpose of this book is to help you get started on your innovation journey so that you can move beyond survival, capture the innovation opportunity and maximise long-term business growth and success. It seeks to:

• Introduce the main concepts associated with the notion of innovation

• Introduce the core elements to the process of innovation and how to manage them

• Give you the practical tools to begin the process of developing innovation into a core business competency.

In particular, this involves:

• Understanding the fundamentals of what innovation is and what it involves ( Chapter 1 )

• Mastering the fundamentals of innovation management by:

o Developing a clear innovation strategy to align your innovation efforts with the accomplishment of your goals ( Chapter 2 )

o Understanding how to recruit, manage and lead the individuals and teams that bring your innovation efforts to life ( Chapter 3 )

o Establishing the essential business practices that create the innovation routines and transform them into a repeatable process ( Chapter 4 )

• Understanding and applying key innovation frameworks, practices and tools ( Chapters 5 , 6 and 7 )

• Knowing how to get started on your innovation journey ( Chapters 8 , 9 and 10 ).

While you needn’t master all this at once, to maximise long-term success you do need to prioritise it and begin the process of developing innovation as a core business competency. The sooner you make this choice and commit the necessary resources, the sooner you will be able to seize the innovation opportunity and move beyond mere survival!

Case Study 1 – A Small Business with Big Ideas

The author and owner of Fortitude Business Consulting previously assisted a small business owner and serial innovator commercialise their most recent invention. Over the years this owner has been responsible for many innovations, including the development of:

• Automated train control and fail-safe systems

• Communication switching hardware used in TV broadcasting and submarines

• Advanced level graphics and network cards for the personal computer industry

• Radio frequency modems

• Autonomous vehicles

• Many other technology-based innovations.

The business owner has several other key innovation projects underway, including one that has the potential to revolutionise the safety, productivity and maintenance of regional and remote rail networks on a global scale. Existing solutions used for high-density, high-traffic and high-yielding rail networks in urban centres are neither financially viable nor technically feasible for adoption on a large scale across regional and rural rail networks. The inherent financial costs associated with installing mains power and communications infrastructure on regional and rural networks is the key obstacle, which results in:

1.Numerous uncontrolled rail crossings (no warning lights, boom gates, etc.) that pose significant public safety issues. Safety issues are in part managed through the use of mandated speed limits. In turn, this substantially increases train travel times, operational and maintenance costs, inefficiencies, and ultimately the use of road transport – which comes at a significant economic and environmental cost

2.A lack of real-time train monitoring that necessitates network management practices that place a one-vehicle limit for each section of rail track at any one time. Again, this significantly reduces efficiencies, and exacerbates travel times and costs – promoting the increased use of road transport

3.Maintenance issues, increased likelihood of traffic accidents and derailments which result in significant delays, repair costs and loss of life.

While intuitively it makes economic sense to replace long-distance road transport with rail, to a large extent existing regional and rural rail networks are underutilised due to a raft of upfront costs, safety and technical issues. Despite these challenges, this small business owner has developed a breakthrough which addresses the current suite of issues. It has undergone significant testing and proof of concept; its key benefits include:

• Continuous monitoring of train direction, speed and location to provide real-time tracking of all vehicles on the network, allowing for improved safety and network utilisation, lower costs, and improved competitiveness against less sustainable forms of transport

• An ability to cost-effectively install fully autonomous rail crossings in all locations without reliance on costly power and communication infrastructure. This improves level crossing safety while eliminating the need for trains to decelerate at every crossing – improving journey times and network productivity

• An ability to monitor track health (track vibration, deflection and temperature) to provide maintenance and management information – early warning systems data that can be used to detect and prevent track damage and possible derailments.

Although the owner has developed a solution with enormous global potential, unless he goes through the right processes, its inherent value – to himself, potential partners, the marketplace and society in general – will not be realised. His invention will only become an effective innovation for him if he is able to connect with interested parties who are not only willing and able to help commercialise it, but (critically) refrain from misappropriating it.

The key point is that while smaller businesses typically devote fewer resources to ongoing innovation than larger business, this is not to say they are not innovative. Small businesses willing to commit time and effort to innovation often have ideas that offer relatively greater market opportunity, intrinsic value and impact on the business than those generated by larger corporates.

What smaller businesses lack in the knowledge and resources required to commercialise innovative ideas, they often make up for in terms of their creativity, agility and closeness to customers. This allows them to deliver both incremental and highly valuable radical innovations. The innovation opportunity is a matter of choice, commitment and seeking the right help – especially when you are seeking funding!

CHAPTER 1

WHAT IS INNOVATION?

Introduction

Innovation is a process that involves creativity and applying knowledge and ideas in ways that generate value (something that makes someone’s life better) and, in the context of a business, can be provided at a profit.

Innovation is not just coming up with good ideas; it’s the process of moving them into practical and valuable use. It requires an understanding of the creative processes needed to generate new and useful ideas, and the ability to marshal the resources and capabilities needed to transform those ideas into commercial reality. In essence:

Innovation = Creativity + Commercialisation

Ongoing innovation is a process of learning and involves searching, selecting, implementing and capturing value from knowledge and ideas. It involves generating many ideas, followed by an elimination process, typically through experimentation or trial and error. Ultimately, the elimination process serves to narrow the options for further ongoing development and refinement, until the idea emerges as a practical and valuable solution. Accordingly, innovation involves learning from failure (preferably quickly and cheaply) for the purpose of generating ideas, creating knowledge and capturing commercial value.

Dispensing with the Myths of Innovation

Innovation is often misunderstood; there is a lot of hype and mystique surrounding it. This can be tremendously detrimental to those seeking to begin their innovation journey.

Innovation isn’t rocket science. You shouldn’t view innovation as involving only new-to-the-world ideas. While occasionally innovation involves generating ideas that haven’t previously existed, combining old ideas and applying them in new ways or to different situations is responsible for the lion’s share of the value created by today’s innovators.

When you appropriately apply existing ideas or innovations to your business and capture new value, you are engaging in effective innovation.

Innovation is not the same as invention or research and development (R&D). Invention and R&D relate to the development of knowledge or new ideas, but not to the process of commercialising them. They are only a fraction of the overall innovation process and typically don’t result in significant commercial value by themselves. Ideas without commercialisation don’t drive business growth, profits or value.

Contrary to popular belief, innovation rarely occurs in the form of a single idea or light-bulb moment. Rather, innovation usually results from much concerted effort over time – it emerges as thoughts collide and gestate (often over long periods). The highly popularised epiphany is a myth and a destructive mindset. It leads to the view that innovation isn’t a repeatable process and therefore discourages the adoption of the necessary processes, procedures and sustained effort required for ongoing innovation.

Another common misconception is the belief that creativity is the function of the ‘lone genius’: the belief that creative ideas should be left to a few individuals without input from others. The reality is that we are all social creatures, hardwired for cooperation and competition; we need interaction and input from others to be at our best. Promoting a spirit of diversity, collaboration and sharing is essential for creativity and innovation.

You shouldn’t view innovation as something that cannot be managed. Innovation is a process that needs to be more than a spontaneous one-off event. While it rarely comes from a single epiphany and involves much more than just invention or R&D, it can be managed and honed into a core business competency. You must dispense with the myths surrounding innovation, so they don’t prevent you from developing the skills needed to sustain your long-term success.

Creativity and Innovation

Creativity is the highest cognitive function of our species and the fuel that powers the innovation process.

For the purpose of this book, we’re referring to creativity in the technical sense as opposed to the artistic. In this context, creativity is the cognitive activity that results in useful and novel or unconventional ideas. That is, creativity involves coming up with ideas that are both new and useful.

Creativity largely involves breaking away from the bounds of existing cognitive maps and exploring new alternatives, using both logical and intuitive thinking processes. It’s a human endeavour that involves the use of imagination and ideas to create new value.

While innovation is dependent upon creativity and the ideas that flow from it, it’s not simply a matter of developing new and creative ideas. The ideas must be both valuable and commercially viable, and then be put into practice in order to result in innovation. Accordingly, innovation is about understanding and managing the process of creativity, and marshalling the resources and capability needed to transform selected ideas into commercial reality.

Nevertheless, creativity and innovation are inextricably linked; together they form a core component of the entrepreneurial spirit and the means of creating long-term success. While the process of promoting creativity and honing innovation into a core competency requires hard work, it’s within reach if you devote the necessary focus and resources to it.

The Key Elements of Creativity

Given the significance of creativity in the process of innovation, it’s important to establish an understanding of the factors that influence individual and business/organisational creativity. From an individual perspective, creativity is largely influenced by:

Cognitive factors, including:

o Mental flexibility – the ability to overcome habitual patterns of thinking and adjust your thought processes from one situation to another ²

o The ability to link remote associations – ‘connecting the dots’ ³

o The ability to suspend judgement – avoiding prematurely killing off ideas before they are appropriately understood ⁴

o Originality of thinking – the ability to develop multiple imaginative ideas and build upon what is currently known ⁵ ⁶

Personality traits, including:⁷

o Risk-taking – the willingness to try something new

o Self-confidence – trust in your qualities, judgement, abilities, etc.

o Tolerance of ambiguity – the ability to manage and work with uncertainty

o Proactivity – anticipatory, change-orientated and self-initiated behaviour

o Need for achievement – desire for significant accomplishment, mastery, control or high standards

o Autonomy and non-conformity – a degree of freedom from the control or influence of others

Knowledge, including:

o Formal knowledge – what is known and can be made explicit

o Tacit knowledge – what is known unconsciously and is difficult to make explicit

o Knowledge development – the drive for continuous learning and advancement

Motivation – the impetus to apply cognitive skill, personality traits and knowledge to the development of creative ideas, including:

o Extrinsic motivation – the external system of reward, such as the remuneration model

o Intrinsic motivation – the internal desire to engage in a task out of interest, enjoyment or personal challenge. ⁸

Accordingly, if you are recruiting for innovation work, it’s useful to target people who exhibit the:

• Cognitive factors and personality traits favouring creativity (as these take time to shape and mould)

• Drive for continuous learning (the drive for learning can typically overcome current knowledge gaps)

• Intrinsic motivation to push through challenging tasks.

Nevertheless, as illustrated in Figure 1, both creativity and motivation are directly affected by the overarching context of the individual’s personal environment and the organisation’s work environment.⁹

Figure 1 – Factors of Creativity

While a business exercises little control over its employees’ personal environment, as an owner or leader you nevertheless possess significant influence over their work environment and motivation – and therefore, your organisation’s creativity. Accordingly, a critical task for owners and leaders is to not only recruit the right people, but to also lead, manage and structure the business in a manner that enhances creativity and innovation. As can be seen from Figure 2, this involves various factors and many tasks including the business’:

• Leadership

• Resources and skills

• Structure and systems

• Culture

Figure 2 – Key Factors of Organisational/Business Creativity

The crucial points are to understand the key individual characteristics and business factors that promote creativity, recruit staff with the right characteristics, and establish a work environment that stimulates the creativity needed to fuel your innovation efforts. We will cover many of these key elements throughout this book and provide further detail in Book 2 of this series: The Innovation Opportunity – Growing your business and laying the foundations for effective innovation!

The Barriers to Creativity

Like innovation, the most common barriers to creativity are those that exist in our minds. Chief among these include:

1.The born creative syndrome – the belief that creativity is the domain of geniuses or the select few who are born creative

2.The fear of failure – the unwillingness to try something new and the associated procrastination, self-sabotage, low self-esteem and confidence that prevents people from experimenting, learning and undertaking the activities necessary to achieve their goals

3.Functional fixedness – the cognitive bias that constrains and limits our thinking to the way something has traditionally been used (a phenomenon that affects everyone and limits our ability to solve problems and capture opportunities)

4.Negative judgements – where our thinking creates hurdles that discourage us from looking for solutions, and when others negatively judge our ideas; this destroys our curiosity and motivation for finding creative solutions.

While sometimes our goals are truly unachievable, more often than not it’s our conscious and unconscious thoughts that obstruct our curiosity, constrain our thinking and prevent us from putting in the effort needed to find the ideas that will bring our goals to life.

The Science of Creativity

The science of creativity has established that the major drivers of creativity include:¹⁰

1.Ordinary cognitive processes (the tension between the ego and superego)

2.Certain personality traits (refer to the discussion on page 18 regarding the key elements of creativity)

3.Positive affect (the extent to which someone subjectively experiences positive moods such as joy, interest and alertness).

Creativity results from ordinary cognitive functions and therefore we are all born with creative potential and capability. While certain personality traits are associated with increased creativity (and therefore, some individuals may be naturally more creative) there are two important caveats. Personality traits are:

1.Not set in stone

2.Only one of the factors that influence your creativity.

Furthermore, personality traits don’t stabilise until your thirties and can be shaped through your environment. This places an emphasis on consciously influencing the development of personality traits through mindset training, the social system and work environment. In this way, you can influence your creative disposition and that of others.

Science has also established a clear and strong connection between positive affect and creativity.¹¹ The significance of this is highlighted by the fact that we are hardwired to focus on negative feelings such as fear, anxiety and sadness.

Positive affect can reliably boost creativity when the creative task must be accomplished (necessity being the mother of invention) or you are intrinsically motivated by a creative task. In both cases, creativity is enhanced because you enjoy greater cognitive flexibility, allowing you to overcome functional fixedness and more easily combine things that are not typically easily assimilated.

To maximise creativity, you need to find reliable techniques for creating positive affect. This can be achieved by writing about what makes you happy, focusing on positive emotions and activities, and ritualising moments of positive affect into your routine so that you can savour them.

If you are predisposed towards positive affect, you have a creative advantage. If not, the key steps to boosting creativity are to know yourself and the things that make you happy, and build them into your daily routine so that you can enjoy them. In this way, you can reliably trigger positive affect, increase creativity, and develop more original and useful ideas faster.

Promoting Creativity and Fuelling Innovation

Creativity is a function of many things and involves overcoming some of the key barriers to creativity by:

• Seeking out creative people, embracing continuous learning to develop and accumulate knowledge, and stimulating and training the mind in the ‘science’ and ‘art’ of creativity

• Driving motivation, particularly from within (intrinsically) but also with a mutually reinforcing system of extrinsic motivators (incentives and rewards)

• Creating an environment and culture that fosters creativity and avoids its inhibitors

• Using the available creative tools (discussed in Chapters 5 and 6 ) and engaging in the creative process – practising creativity builds creative capability.

You cannot command creativity. Instead, you need to carefully cultivate the environment and conditions for creativity to thrive. The ability to successfully manage the above factors is a fundamental precursor to developing innovation as a core competency and will be examined in detail in later chapters.

Case Study 2 – Breaking the Rules to Innovate

A manager running a business centre for a major bank in suburban Melbourne was confronted by a dilemma between bank policy and the desire to help clients.

At the time, the bank’s lending and approval processes were very opaque from a customer perspective. Bank policy deemed lending applications and customer files confidential and managers were prohibited from sharing this information with the customer.

This was contextualised for the manager when his brother said to him in frustration:

When you want to borrow money, you need to educate the banker about your business and provide a mountain of information which then all disappears down a black hole! At some point, if you are lucky, a letter of offer will appear. But what happens in between is a complete mystery! Then, if your banker is transferred you need to go through the whole process again. You have no idea what is on your file or if it’s correct.

At the time, his brother had experienced three new bank managers in the previous eighteen months, and this was not uncommon.

Around