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Innovation pays, but only when it’s everyone’s job

Research shows channeling the best ideas into new products takes a systematic process. atomicShed/Flickr

Innovation pays, and the benefits are even greater when organisations develop “systematic innovation” capability, according to a recent study by The University of Melbourne and the Australian Institute of Management.

This large-scale survey of professional managers across Australia found organisations perform better when management embrace a structured, planned, and organisation-wide approach to innovation.

What is “systematic innovation”?

Systematic innovation equates to sustained innovation, rather than haphazard or unplanned activities, that create value and secure competitive advantage for organisations.

Organisations that successfully undertake systematic innovation generate a series of innovations that deliver business value.

The development of systematic innovation capability requires a holistic and integrated approach to innovation across the entire organisation.

This means managers get involved in innovation projects, and innovation is prioritised in the business strategy, which is strongly aligned with technology.

It also requires organisations to take calculated risks, and for them to involve customers in the innovation process. Finally, it’s essential that employees are rewarded financially for innovation contributions, and competitors are benchmarked.

Innovation can occur as the occasional “lucky break”, but no business should rely on such an approach.

Systematic innovation capability is the ultimate competitive weapon for organisations, as it has no ceiling on it, and can be applied in a broad range of ways, from achieving cost reduction through innovation in process management, to creating new streams of revenue.

Australia faces challenges in achieving and maintaining global competitiveness in terms of cost, service and quality.

As Australia looks to build its future beyond the resources boom, the research findings make it clear innovation is a means of achieving competitive advantage, and a key profit driver for successful organisations.

“We found that firms with proven innovation performance were three times more likely to have higher revenue growth, profitability and productivity. Such firms were also three times more likely to report higher levels of cash flow, cost advantages and long-term competitive advantage,” said Tony Gleeson, CEO of the Victorian and Tasmanian arms of the Australian Institute of Management.

“The findings also confirmed organisations that failed to embrace innovation as a systematic performance tool were likely to be chronic under-achievers. Such under achievement translates into lower levels of growth than innovative competitors, fewer development pathways for employees and greater difficulty in attracting, developing and retaining skilled people.”

The survey showed that revenue growth; profitability, productivity, cash flow, and other elements of business performance were higher for innovation “leaders”. And innovation performance is strongly linked to business performance.

Sustainable and systematic innovation requires a holistic approach across a range of innovation activities in order to maximise innovation performance, from leadership through innovation, strategy and process management.

The survey revealed specific innovation practices that are significant predictors of innovation performance including aspects of strategy and leadership, a strong customer focus, the embracing of risk and change, human resource management and a culture that supports innovation, strong innovation process management and a focus on sustainability.

So who should take responsibility for innovation?

Although 46% of managers surveyed reported that specific responsibility for innovation rested with an assigned individual or group, the development of systematic innovation capability is best served if everyone in the organisation takes responsibility for innovation.

Systems and structures, as well as the organisational culture, should reflect a joint commitment to developing and sustaining innovation throughout the organisation.

It is important for organisations to create a workplace culture where everyone feels they have an opportunity, if not an obligation to contribute to the innovation process.

Therefore, to galvanise the collective brain power of an organisation, the report findings advocate that innovation should be viewed as a shared opportunity for all employees.

This finding has two important implications.

Firstly, all employees can and should be given the skills and incentives to exercise their creativity on opportunities from process innovation to product and service enhancements. And second, organisations should have robust processes in place to evaluate and channel the best creative ideas and inventions to where they can create value: in scaling them up to the marketplace.

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