This article provides an understanding of how innovation needs to be matched to context. The conclusions are drawn from research on the views of 25 CEOs of Australian companies across a variety of sectors. The CEOs were asked at interview to provide accounts of successful and unsuccessful innovations with which they had been involved. Through the analysis of these accounts we identified 12 patterns of behaviour and action associated with innovation. These patterns are discussed in detail elsewhere but the way in which the CEOs exhibited these patterns varied across 3 main forms of innovation: revolutionary, evolutionary, and incremental. The three forms of innovation were indicative of different levels of uncertainty faced by the CEOs and their organisations. As a result each form of innovation required a different driving focus to deal with the uncertainty. For incremental innovation, this was culture; for evolutionary it was the personality of the leader and for revolutionary innovation it was the effective management and engagement with partners.
The basis for Successful Innovation
From this work we concluded that every innovation has its own contextual factors that impact on the motivations, constraints and speed with which things happen. An approach to innovation that will work in times of relative stability will not work in times of disruption. However, many of the CEOs in our sample exhibited a preferred approach to innovation that they employed regardless of the circumstance they were in potentially giving rise to a problem of fit.
The CEOs came from a wide variety of industries and backgrounds and so using industry specific definitions of innovation to classify the different stories wasn't appropriate. To address this issue, we looked for the common contextual factors that played a role in their stories and influenced their motivations. We identified two key dimensions:
- The Level of Certainty the CEO held about both their organisational situation and the environment it was operating in; and
- The Level of Pro-activity inherent to the CEO's story. Was the CEO responding to a critical issue, or was the innovation initiated without a burning platform to get it started?
Each of the 54 innovation stories we collected were analysed against these dimensions so that they could be grouped, and compared. Using this approach we divided the stories into three broad forms of innovation based primarily upon the level of certainty the CEOs had about their context. The 3 forms of innovation we identified were:
- Revolutionary Innovations: Here the innovation involves high levels of uncertainty for the CEO in terms of both the internal and external aspects of the organisation. Revolutions represent a significant departure from the previous business model of the organisation and may have a disruptive impact on the industry involved. For the customer they can represent a fundamentally different opportunity or experience;
- Evolutionary Innovations: Here the CEO may be dealing with moderately high levels of uncertainty in either the external environment or within the organisation but usually not both at the same time. The innovation itself will typically represent an expansion of, or significant change to the current business model, or the back end processes of the organisation;
- Incremental Innovations: Are characterised by high levels of certainty about both the internal and external business environment of the organisation. Improvements to the current business model, that don't involve changing it significantly. Often this involves fixing problems with current operations as opposed to creating new operations.
There is nothing new in these categories, they have been suggested by a number of innovation researchers in the past, but the distinctive contribution of this study was what it revealed about the patterns of behaviour appropriate to each and, more importantly, how different patterns were associated with the successful innovations when compared to the unsuccessful. We can't go into detail in this short article but our key conclusions are:
An organisation experiencing disruption and possibly in need of a Revolutionary change needs a CEO who is willing to partner with others and manage the uncertainty of their circumstances in a systematic way. The archetypal charismatic CEO is not likely to be the person for the job as the personality-driven approach seems more likely to fail in this context.
A CEO with a charismatic personality-driven style is better suited to the delivery of Evolutionary change in an organisation. Indeed they are necessary when expansion into new markets or significant changes to operations is required. A CEO not focused on driving the change from the top is significantly more likely to fail.
Successful innovation should not be a gamble. The ego based bet on an idea was often seen as an effective way to fail. Where CEOs begin to display this type of approach, it is crucial that effective processes be put in place around them to manage the risk. Process won't produce successful innovation, but it might reduce the chance and magnitude of failure.
Belief and emotion are an important factor in the CEO's ability to engage with an innovation. This is more significant for those who work for the CEO. CEO buy-in is not rational, and as a consequence the process of gaining their belief or uncovering what it is, is crucial to the success of both Evolutionary and Incremental innovation.
So if the approach to innovation needs to be responsive to context, but different CEOs have preferred approaches which may be appropriate to only some of those contexts the consequence is that Boards should be matching the innovation style of their CEOs to the circumstances of the organisation. Similarly investors should be asking questions about the degree to which the innovation challenge is matched to executive style, preference and capability. This is particularly acute for organisations whose business models are being disrupted as there is more to loose from getting it wrong or for organisations which find themselves in rapidly changing contexts where innovation is fundamental to their long term viability.
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Dr Chris Goldspink is an Executive Director of the Sydney Australia based research and consulting firm Incept Labs http://www.inceptlabs.com.au The company helps SMEs, large corporates and Government deal with uncertainty in current and future environments by providing targeted research and supporting innovation, risk management, change and quality governance.
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