innovation management

Everybody knows that innovation is vital to the present and future performance of organisations. But nobody much agrees about what innovation means, and few managers know how to achieve innovative success. Some basic ideas are generally held - that small companies are better at innovation than large: that this lack of innovatory pay-off gets more marked as the large organisation gets larger: that creativity can't be managed, nor innovation planned: and that success (paradoxically, in view of the feelings about size) is a function of the amount spent.

All these beliefs are wrong. For a start, the believers refer to product innovation above all - not to new processes, either in the provision of goods or services, or in the workings of the organisation. You can, in fact, devise an innovatory process for innovation. Professor Manfred Perlitz of the University of Mannheim has worked long and hard to discover the basic principles. They hinge on a central fact. How long is the product life-cycle?

If it's five years, then by definition your entire product line will need to be replaced in that period: therefore, 20% of your sales must come from new products in every year. In personal computers, where cycles are nearer to five months than five years, or in microprocessors, where two years is a luxury, the consequence is a state of unresting innovation. The attainment of stretching goals in technologically complex products shows other managements what truly can be achieved.

That starts with setting targets, like those derived from Perlitz's analysis. Too much innovation proceeds on a hit-or-miss basis. Not surprisingly, many misses result. Too many targets are excessively long: European car makers who still operate on six-year model replacement cycles are highly vulnerable to competitors who are either Japanese or have come close to the latter's two-year figures. But setting the targets is only a start: implementation is the decisive challenge.

This, rather than creativity itself, is the hurdle over which large companies stumble. Even in firms with a high innovative reputation, like Hewlett-Packard and 3M, innovators have often had to fight tooth and nail to force their ideas past obstacle after obstacle into the marketplace. That happened with 3M's Post-It pads. Sony's Walkman, Raytheon's microwave oven and JVC's video cassette recorder also had to overcome political difficulties beside which the technical problems seemed simple.

The four companies just mentioned are all large, and none is European. The now unassailable American lead in micro-electronics and the associated software is one massive piece of evidence pointing to European innovatory lag. Perlitz's work aims to combat such conditions by setting up processes and procedures that will place innovation on a systematic foundation. That will contribute to a change in culture, but more is needed.

The main barriers to innovation, so one survey found, are mainly cultural: starting with bureaucratic red tape, preoccupation with today at the expense of tomorrow, no innovative thinking, and no top management support for innovation. Ally these with lack of funding and an organisation structure that discourages innovation, and you practically guarantee that the company won't generate enough new products or ideas. The traditional conservative European company is by nature prone to these faults.

What Europe can achieve, though, is demonstrated by innumerable cases. Program, Ciba's oral product for eliminating fleas on domestic pets, is an excellent demonstration - not only because the pharmacology is novel, but because of the marketing process. Program was conceived as a world-wide product, supplied from one manufacturing base, with centrally coordinated marketing programmes that would seek economies of scale and common branding. The team was truly global - and in this respect the company's marketing was as innovative as its product.

Ciba is also one of many companies persuaded by the single market to adopt pan-European logistics, a task complicated by shortage of pan-European hauliers and the need to consolidate IT systems. But a few strategically placed distribution centres offer huge economies over many haphazard locations, and the IT requirement is an entrepreneurial challenge. The US lead in the hardware and software of computery doesn't mean that Europe must lag in applications. On the contrary: the innovative use of IT is an area where European firms can win competitive advantage.

The peculiarities of the Single Market - notably its division between many languages - demand unusual initiatives. An example is the money-saving unification of corporate financial administration on a single site. Customers can telephone from Italy, say, in the belief that they are being connected to an Italian switchboard. Their queries are answered in Italian by somebody who is actually, say, in Grenoble. Call centres are also a fast-growing trend in consumer marketing, as are IT-based direct banking and insurance services.

For such purposes, and many others, technology is no barrier. Not only is all the brilliant hardware and software generated in Silicon Valley, Seattle and elsewhere fully available in Europe, but superb application skills abound, both in multi-national providers and in local suppliers. These talents need to be matched by ambitious customers who know that information technology can supply a competitive edge and who are prepared to adopt the radical, progressive attitudes required to win that prize: in a word, to innovate.

A culture of innovation is the indispensable key to the future. As noted, big ideas often come from big companies - sometimes because only large enterprises can conceive and realise the dream. When a new family of microprocessors requires billions in R&D and production facilities, its production must be a prerogative of size. The same is true of major pharmaceutical products or civil airliners: Boeing's jumbos are not only marvellous innovations themselves, but their components and manufacture have demanded hosts of contributory inventions.

Innovations in the car industry - like the invention of ABS by Mercedes-Benz - necessarily come from companies with deep purses. So an innovatory climate is partly determined by the industry. In information technology, in particular, it's innovate or die for suppliers. But there are companies, like 3M and Hewlett-Packard, which have a reputation for spawning innovations regardless of the capital or market scale involved. Both companies have organised themselves to target and enable an outstandingly high level of innovation.

While it's not true that innovation is a small company preserve, such big innovators mostly try to mimic smallness by breaking down their activities into controllable and focused units. They also inculcate the necessary spirit by making innovation a line manager's responsibility, with both reports and rewards geared in part towards the manager's success in promoting and producing new products and ideas. 3M, for instance, has a '25% rule': managers have to ensure that at least a quarter of the products they manage are less than five years old.

At Emerson Electric, managers reviewing the five years ahead must regularly report what dollar sales they will make in each of those years from new products and services introduced in the previous five years - and from those still to be introduced in the coming five. Sceptics will wonder whether you can turn managers into innovators by such means. If it were true that creativity can't be taught, but is innate and confined to a few true innovators, the scepticism would be justified. But that doesn't happen to be the case.

European thinkers and writers like Mark Brown, of Innovation Centre Europe, Edward de Bono and Simon Majaro have led the world in demonstrating ways in which organisations and the individuals inside them can become more creative. Majaro shows how to make creativity and innovation part of a firm's shared values through an integrated creative and visionary planning process. Brown advocates Total Innovation Management, in which the key acronym is GISA, standing for 'goals, ideas, selection/control and action.' If any of the four parts is missing, the effort to innovate will fail: so creative teams must be balanced to ensure the necessary combination of natural bents.

De Bono, among many powerful insights, argues that natural bents are not immutable: using his Six Thinking Hats method, teams switch their mode from, say, the Black Hat (logical negative) to the Green (creative) or even the Red (intuitive). Yellow is 'logical positive', White concentrates on gathering information, and Blue establishes the correct thinking framework. The Hats neatly remove time-wasting adversarial debate and internal politics from the equation, while making the vital point that thinking can be a controlled process - and must be if you want the best results.

They won't come merely from throwing more and more money at the labs. Under-spending can be fatal: but under-investment in human relationships and skills is just as deadly. Too many European firms have fallen into both traps. The way out, however, is to take the human route first. In the end, people determine the outcome. Research has shown that, perversely, managers are more inclined to take innovative risks in bad times than in good. Innovate at all times, and only the good ones will roll.