April 7, 2016, by Academic contributor

How do crisis and opportunity work in unison?

Crisis and opportunity“Only a crisis – actual or perceived – produces real change,” wrote Milton Friedman, economist and Nobel Prize winner, in his highly influential Capitalism and Freedom, first published more than 50 years ago. Was he right? Not really.

Granted, crisis does produce change, if only because crises tend to be situations in which staying the same isn’t a viable option. Moreover, it’s all too easy to believe we live in a state of near-permanent crisis, so remarkable has the sheer pace of change become.

But sometimes the driving force of change is opportunity. Witness, for instance, the advent of the smartphone and its transformation of the developed and developing worlds. There was no communications crisis before the smartphone came along.

So what do crisis and opportunity have in common? Both underline the virtual inevitability of change; and both, by extension, provide the occasion for innovation.

What do we really mean by “innovation”?

There was a time when innovation wasn’t an especially popular concept. For much of human history the very idea of doing things differently engendered suspicion, with most people content to do more or less exactly as their parents had done.

By the 20th century, innovation came to be seen as the engine of economic development. Now it’s omnipresent. There’s even a government department dedicated to it.

Yet in 2013 an Accenture survey of organisations with revenues exceeding $100m highlighted a worrying dichotomy. Some 93 per cent of executives said they considered the ability to innovate vital to their company’s long-term success, but only 18 per cent said they believed their innovation strategy delivered a competitive advantage.

This suggests innovation isn’t very well understood and that efforts to embrace and channel it might be misdirected or even counterproductive. First and foremost, then, how might we best define “innovation”?

Perhaps the neatest answer is to view it as the successful exploitation of new ideas. In other words, it’s the process that carries ideas into actions – irrespective of whether those ideas take the form of services, technologies, businesses, means of organising or even ways of thinking. The bringing of value and the doing differently represent the essence of innovation.

A popular response to the challenge to innovate is to look at what others are doing. It’s natural to cast an envious glance towards a perceived leader and wonder: “Why can’t we be more like that?” But this isn’t necessarily wise.

After all, what if we were to choose as an exemplar the firm that Fortune magazine named as America’s Most Innovative Company for six years running? It operated a ruthless system of “rank and yank”: the top performers were rewarded handsomely, while the rest were encouraged to take their talents elsewhere. The company was Enron, whose shareholders lost $74bn and whose president was jailed for 24 years.

Google and Apple are frequently pronounced the most innovative organisations around, yet legend has it that their approaches are wholly dissimilar. Whereas Google employees are supposed to sit about in dungarees and drink smoothies, Apple’s workforce is said to do precisely what those on high command.

So for every company that’s innovative in one way there’s another that achieves comparable success totally differently. For every open-desk policy there’s a skunkworks. For every gold-plated service there’s another that’s being stripped to its essentials.

Given this, we should reframe that rule of thumb. Rather than contemplating what we ought to imitate, maybe we might give more thought to what we should avoid.

Why innovation remains misunderstood

By way of illustration, let’s examine the barriers to innovation. Research carried out as part of the executive education programme at Nottingham University Business School has revealed an uncanny consensus in this regard, with non-engagement, short-termism, inflexibility, risk-aversion, micromanagement, lack of time, lack of freedom, lack of budget and initiative overload among the factors routinely cited.

To many employees the last of these might well be the most depressingly familiar of all. It’s without doubt among the most alarming and self-defeating. There are numerous stories of initiatives being superseded before implementation has been completed.

This sort of thrashing around may seem inescapable in a world of ceaseless change, but it betrays a basic misunderstanding of the nature of innovation. Novelty for its own sake is no better than paying lip-service to revolution while actually perpetuating muddled inertia.

Organisations that fail to realise this tend towards caution. They reward certainty and punish failure. Some might have lost sight of their raison d’etre, especially if they have multiple divisions whose metrics are far removed from the real bottom line. Some might even be nearing the threshold beyond which renewal is no longer feasible.

One strategy is to recognise and prepare for the crisis points at which innovation becomes inevitable. Another is to be identify, seize on and maximise the myriad opportunities that too often go unremarked and unexploited. We ignore at our peril the possibilities offered by external disruption, new technologies and emerging trends or markets.

Above all, we should keep asking two fundamental questions that frame innovation’s potential as succinctly as anyone could wish:

•    What can we do better?

•    What can we do differently?

Organisations that are reluctant to confront these crucial concerns find themselves in genuine crisis soon enough and they can count themselves very, very lucky if they escape from it.

Paul Kirkham is a researcher in the field of entrepreneurial creativity with Nottingham University Business School and co-deviser of the Ingenuity problem-solving process taught to students at its Haydn Green Institute for Innovation and Entrepreneurship (HGI).

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