As the economy becomes more globalized and commoditized, companies are embracing a new business model that places greater emphasis on innovation, creativity, and design to distinguish their products and services. The brass ring of innovation is a breakthrough product that gives companies a significant competitive edge and a higher margin.
Most companies have already sought opportunities for customization and added value to already existing products to offset the increasingly narrow profit margins in their core manufacturing or service base. Some companies, such as 3M and Apple Computer, have a long history of innovation and design. Others have recently embraced this approach with success, including Samsung, BMW, Procter & Gamble, and General Electric.
Jeff Immelt, CEO of General Electric, is a strong advocate of this new business model and talks about the importance of always looking for opportunities to be more creative and innovative in product and service development. Immelt goes even further and states that new leadership traits emphasizing innovation are critical for long term corporate development. Immelt expects his leaders to change and innovate if they are to have a future at General Electric.
Achieving success with significant innovation is quite difficult. Business Week magazine reports that 96 percent of all innovation attempts fail to achieve their targets for return-on-investment. As a result, it takes a lot of courage for executives to fund innovative ideas because most corporate cultures, for good reason, are risk adverse. More often companies are placing their bets on smaller changes in processes and delivery that add up to create a better product or service for their customers. Even focusing on less than breakthrough changes, however, requires leadership to shepherd the changes through to completion.
Leadership for innovation requires a different set of competencies, not simply the ability to think outside the box. While imagination and creativity are helpful, a more facilitative style of leadership that encourages innovation may be most important. The leader himself does not necessarily have to come up with the creative ideas. Instead, the leader must provide a work environment that encourages creativity and innovation in others. The leader then must have both the insight to recognize an idea with potential and the willingness to take risks to move the idea forward.
Most innovative leaders are focused on understanding how the customer experiences a particular product or service. Innovative leaders seek new and creative ways to make the customer’s experience more satisfying. They work to discover what customers will need in the future, and they seek solutions that anticipate customer needs by having products and services ready when needed. Naturally, this requires a great deal of customer knowledge and intimacy.
While innovative leaders promote creativity as part of innovation, they also recognize the importance of discipline, metrics, and goals with appropriate financial targets. Innovation requires a great deal of hard work, progress measuring, and focus for it to succeed.
Selecting and developing leaders who will promote an innovative work culture is a new challenge for many businesses. Companies that want to promote innovation, design, and creativity need to develop a different leadership competency model, as well as a change in cultural values to embrace change and continuous learning as part of their business model.
Defining what innovation means for your company―both the results expected and the leadership behaviors required to make it happen―is the first step. Next is developing a new set of selection criteria. The criteria must focus on the extent to which leaders are continuous learners and have the ability to recognize the need for change, as well as to facilitate change and innovation in their work units. The new criteria also must include the ability to understand and anticipate changing customer needs. It will be important to look for leaders who do not just think and talk outside of the box, but also have the courage to take educated risks that will increase the chance of success. Lastly, if leaders are to successfully implement innovation, they must have the project management skills and the discipline to manage teams and to meet targets.
Innovation is not simply the latest fad; companies large and small are betting their futures on it.