Innovation: Why is it misunderstood and feared by organisations?

Innovation, derived from Innovate, meaning “make change in something established, especially by introducing new methods, ideas, or products” (Ref: Oxford Dictionary)
AG Lafley describes innovation at Proctor & Gamble (P&G) in the following way “So for us innovation is the brand in addition to the product. It’s the design of the shopping and the usage experience in addition to the functional attributes or benefits. It is the business model. It is the way we go to market and the supply chain. It is the way we create a cost structure so we can deliver delightful new products at affordable costs.” (Ref: HBR Article 26 June 2008

I have observed over recent times, the term “Innovation” is used much too frequently, and quite often is mis-used all together. That is, the word “Innovation” is used instead of “invention” and drawing on AG Lafley’s description, there is a significant difference between the two. 
An invention is the creation of an idea which may be either in the form of a device or process. It is defined as “the action of inventing something, typically a process or device” (Ref: Oxford Dictionary)

From a business perspective, an innovation is the solving of a problem in a way that has a commercial value to the organisation. Therefore, I would like to define innovation as:

Activity ( or change) which adds value.

The dilemma here is that for most people, innovation can be interpreted in two main ways depending on whether it is looked at from consumer (ie external) perspective or an internal business perspective.

Typically from a consumer perspective, the understanding or perception of innovation is that of something which looks good, fresh or interesting and does something in a unique way that makes life better.

However, internally within a business, innovation must be in the  context of adding value to it. If it doesn’t add value, then it isn’t really innovative, it is an invention (or idea). Even internally, there can be two versions of innovation; evolutionary and revolutionary; that is a discussion for another time.
Innovation extends far beyond a product and the way it looks and operates. A business which recognises this can be innovative in many ways:

 Offering (Product or Service)

The offering, that is, the product or service provided by the business  is  typically what is considered as the only area where innovation takes place. If there is this misunderstanding of what innovation is and where it can be applied, then in most cases it will also be assumed that innovation will cost too much to pursue. Given this, so much potential and opportunity will be overlooked because of a “fear of failure” or a simple lack of comprehension.

Exploring new ways to promote and bring the offering to the market can enhance brand value and overall 
business success. 



Packaging quite often is an area which is overlooked, but can provide some of the most significant growth opportunities. Is it by looking at new ways to bulk pack for improved transportation costs? Is it by reducing the environmental footprint?Is it by providing more value to the consumer and hence increased brand value? There are many innovative opportunities to save cost, improve the consumer experience and add value.
Supply Chain & Logistics 

Analysing the way components and products are move around the globe, around the country and within the business can provide opportunities for cost reductions, but may also benefit the supply chain and customers in addition to the business.
Production & Quality Systems 

Many innovation opportunities are available to be discovered by evaluating the production process and the quality systems. Many consider Quality as the policing of Production to ensure only good product leaves the factory. However, like many world class and industry leading organisations, those who employ best in class practise like for example, the Toyota Production System, have at their disposal proven techniques to find innovative opportunities within the production environment, which don’t have to compromise quality.

Personnel Development

As has been identified above, there are opportunities for innovation in all parts of an organisation and it must also include the people in it. Those organisations that have a framework which supports the business to attract and retain the right people, to develop their skills and capabilities, provide clear direction, accountability and rewards, results in developing a strong and progressive organisational culture that embraces innovation and overall growth and sustainability.
So what does all this mean?

Innovation can exist in many forms and is not only limited to the product the business produces. As explored above, opportunities for innovation exist in every part of a business and not every innovation journey requires high investment. Remember, innovation is any activity ( or change) that adds value. If it does not add value, then it must be questioned whether the activity (or change ) should be pursued.

An example of a low cost innovation activity:

I joined a company which design and manufacture consumer goods and along with responsibility for the product development function, I was also responsible for the test lab. The lab serviced the  R&D activities and production QC/QA activities for the company. 

The test lab was quite antiquated and “clumsy” in its design and operation. It served its purpose to test parts and provide information, but it was far from a being at a minimum level of requirement to be considered as a ISO17025 laboratory. There was opportunity for improvement all over the place, but the guys in couldn’t see it because they became comfortable with how things ran and believed there was no other way.
A major function within the Test Lab was to conduct dynamic impact tests on our products and this was performed by a single person. The average output was 4-5 tests per day and only the very basic of information was recorded for each test which concerned me. 

I wanted to find a way so that more value could be provided from the tests for the R&D team to use during the product development phase. I was faced with much resistance as to why a more detailed post test analysis could not be conducted within the time frame and it apparently all came down to needing more people. The staff member who was responsible for the dynamic testing left the business and moved overseas, which opened the opportunity for me to recruit a new test engineer, someone who had worked for me in a previous company; in a test lab environment.

Upon commencement, I challenged him to look and think about ways to improve the efficiency and service value to the business. After 6 weeks in the job, I asked him for his thoughts. He identified 6  projects which focused on eliminating waste in his job role which we workshopped. One of these projects also improved the quality of test, ensuring a consistent, repeatable and reliable setup process reducing test-to-test variation by 15%.  
Overall, the total investment made was under $10,000 and the payback for this was achieved in 6 weeks due to the productivity improvement realised. He was not only able to conduct thorough post test analysis and reporting (to an ISO17025 / NATA standard), but was able to comfortably conduct 9-10 tests per day. In addition, to the quicker test turn-around, he was able to schedule maintenance and improvement activities without impacting test operations. 

It is estimated the sub-$10,000 cost of the innovation initiatives, resulted in over $120,000 value in productivity improvement per annum. 
The important point here is, the innovation achieved here was only on one small part of the business. Imagine what the total potential could be if every part of the business embraced innovation!

What do you think?

Andrew Baldacchino
Director - ANBA Pty Ltd


Andrew Baldacchino, applies his 20 years of industry experience and world class practises in simple, logical and effective ways to help businesses and their people to develop innovative solutions and implement strategies to improve sustainability and brand value in the market place.

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