The Innovation Landscape (www. doblin.com) is Doblin Group’s systematic approach to analyzing innovation. They create topographical maps that track the rate of innovation for an industry, by category, over 10 years. The maps provide a strategic view of when and where an industry has innovated and highlights areas of opportunity. Exhibit 1 shows Doblin’s innovation landscape for the commercial banking industry. The pattern for other industries varies markedly. Some landscapes illustrate continuous waves of innovation while others depict sleepy backwaters.

Dot-coms Versus Brick-and-Mortar Companies

Dot-coms and brick-and-mortar companies often approach innovation from different perspectives. Typically, dot-coms begin with an innovative idea but lack the depth of talent and experience to implement it or to generate an ongoing stream of enhancements, new products, or creative processes to sustain the effort. As they attempt to grow, they may also be hindered by a lack of internal processes and procedures.

Brick-and-mortar companies, on the other hand, usually have the infrastructure to support process innovation. Exhibit 2 shows the relationship between product and process innovation for both. Dot-coms can often improve their chances of success by venturing into other types of innovation such as process improvements. The bureaucracy that can exist in larger companies is often a hindrance in supporting new product ideas. Many home shopping companies have illustrated this paradox: They have real depth of knowledge in logistics and customer relationship management, built over decades of mail and telephone ordering, and yet they have failed to capitalize on the Internet.

Making an Assessment

Although there is no magic checklist for achieving sustainable levels of innovation, a study of companies that have been successful with continued innovation indicates some characteristics of successful organizations. Distinguished innovators are characteristically different in five areas: vision and culture, passion, relationships and networks, resource commitment, and measurement and reward mechanisms. The Sidebar presents the factors needed to support innovation in each area. Not every innovative firm will exhibit all these characteristics, but there are patterns that contribute to a lasting level of success. Benchmarking against highly successful innovators provides the impetus for future corrective actions.

Vision and Culture

Innovation is impossible if everyone is pursuing different agendas. A credible, shared vision supports innovation because it unifies effort and clarifies priorities. In Built to Last, James Collins and Jerry Porras discuss their six-year project researching the long-term success of visionary companies, conducted through Stanford University’s graduate school. One of the distinguishing features they cite is a cult-like culture found within organizations such as Nordstrom, Proctor & Gamble, and Walt Disney. Actions, not statements, make visions become real. Landmark decisions, training programs, reward structures, celebrations, performance measures, and feedback must all reinforce behavior and, ultimately, a unique and appropriate culture. Organizational cultures are grown from within, not imported.

Passion

If vision instills direction, passion generates momentum. Successful innovation demands hard work, risk taking, energy, and enthusiasm in the face of failure. People need a shared passion and confidence if innovation is to become part of the organizational fabric.

At St. Lukes’s advertising agency in London, Andy Law and his associates threw out all the stereotypes, rules, and even financial structures from their former, more conventional agency, Chiat Day. Collectively owned by all its employees, St Luke’s has an intense focus on the difference it can make for their clients; the only private offices in the building are those created as client theme rooms. Constructive criticism and mutual accountability makes this a tough but invigorating place to work.

Relationships and Networking

Whereas culture and passion are inwardly focused, relationships and networking are about how organizational units and individuals relate to other units and individuals outside the organization. A closed system can strengthen a corporate culture but can also isolate individuals from ideas that come from other disciplines, markets, and organizations. Organizations that encourage cross-functional teams, internal networks, and widespread contact with customers, suppliers, and other organizations accumulate more ideas that can contribute to innovation. This process also limits the dangers of introspection and self-satisfaction.

Resource Commitment

Effective and sustainable rates of innovation need more than funding and a bright idea. Organizations whose leaders understand the interrelationship between their people, processes, and structures and the effect these can have on innovation are more likely to be successful. These leaders understand that the organization’s structures and processes need constant improvement and are willing to make difficult resource allocation choices to sustain innovation.

Measurement and Reward Systems

Employees will perform according to what the organization measures and rewards, not what it says it expects. Speeches and presentations will have little or no impact unless the behaviors and resources that sustain innovation are measured and rewarded. Most processes and methodologies in companies will be designed to eliminate abnormality and minimize risk, possibly inhibiting innovation. It is hard to increase innovation in an organization while working with outdated measurement and reward systems. Change and innovation are both inherently risky, and many companies will understandably want to minimize business risks. In so doing, the really critical risks can be overlooked; competitors’ innovations and emerging client needs are ignored, the organization becomes intolerant of experiments, and the best entrepreneurs leave.

Logistics

The assessment list can be used to stimulate personal reflection or group discussion. Data can be collected from various levels of the organization through focus groups then compared with the management team’s own assessment—the contrast can offer some valuable insights. At meetings to discuss innovation, instant polling systems can be used to stimulate discussion. All of these approaches serve to expose the issue of innovation management and raise expectations of action, so being prepared to change the way things are done is a necessary condition for initiating the process.

Be Practical

Talking is a necessary precursor to acting. There must be a common understanding of innovation, and a common belief that innovation, despite the inherent risks, is commercially important. Encouraging discussion helps set out and win the intellectual argument for an innovation culture, but enthusiasm and commitment are also necessary. Get commitment by focusing attention on shorter term, achievable and credible steps toward greater innovation. Make these choices part of the management team’s discussion and involve still more people in the subsequent work. Both actions will help to generate commitment and ownership of the process.

Developing one or two product or service innovations. There’s nothing as good as customer or client feedback to enthuse providers and get their minds working on (and ready to accept) other and more radical innovations. Completely new services take time to develop and test; start with minor, incremental opportunities that customers can see.

Improving resource management. Internally directed changes to the way resources are managed will send strong and visible signals. Fund a small project group devoted to customer-oriented innovation. Sponsor a series of innovation workshops—not just for senior executives but for the service deliverers, receptionists, and administrators that really know what goes on and can find better ways of doing things. Give people more than one job; offer the chance to work on something completely different and make the most of the objectivity and enthusiasm they can bring to new roles. Rethink your recruitment criteria; individuals tend to recruit younger versions of themselves.

Employees will watch firm leaders’ behavior to see if this new, innovation-minded regime is real or just the latest fad. They will take the lead from the leaders. If the leaders continue to support innovation, even when things go wrong, even when managers grumble, even when they overrun budget, then they will encourage more innovation. With practice, things will get better, and there is a better chance that innovation will not only become more efficient but also part of the culture.

From Tactics to Strategy

As evidence builds, employees will start to believe in the value of innovation. However, there is a real danger in being seduced by incremental change. The innovations that are most disruptive—and often provide the greatest profit potential—are always radical and unconstrained by custom and practice. Already, the fields of consumer banking, insurance, book selling, even air travel have seen radical change, introduced by outsiders, that has left many players with irrelevant systems, processes, people, and organizational structures.

Given the uncertainties of the past, everyone has to decide whether it is better to write the new rules or let someone else do it. Whichever route a company chooses (or has chosen for it), the business will depend upon its ability to marshal resources that will sustain innovation. Innovation-critical resources include not just cash but retained experience, learning capability, willing recruits, staff enthusiasm, and marketplace reputation. Each of these is, of course, inextricably linked with the others.