Management Innovation-Role of a Consultant Ramesh S.Tyagi Management Consultant ‘Innovation is the specific instrument of entrepreneurship. It is the act that endows resources with a new capacity to create wealth. Innovation, indeed, creates a resource. There is no such thing as a ‘resource’ until man finds a use for something in nature and then endows it with economic value. Until then, every plant is a weed and every mineral just another rock.’ (Peter F.Drucker, Innovation and Entrepreneurship,1985) Companies achieve competitive advantage through acts of innovation. They approach innovation in the broadest sense including both new technologies and new ways of doing things. (Porter, 1990) ‘Everyone knows that innovation is a core business necessity. Companies that do not innovate, die. This is not news.’ ( Henry Chesbrough, open business models, Harvard business school press 2006)
Introduction: Importance of Innovation has been discussed for decades and continues to be the most talked about management issue these days. Today, knowledge in all its forms plays a crucial role in economic processes. Organizations with more knowledge systematically outperform those with less. Within the knowledge-based economy, innovation is seen to play a central role. It was believed that an enterprise can maintain competitive advantage through quality and price. However, the research at the Ernst Young Centre for Business Innovation (CBI) has revealed that innovation is one of the most valuable differentiator for sustainable competitive advantage. Firms innovate to defend their competitive position as well as to seek competitive advantage. Innovation is at the heart of economic change. In Schumpeter’s words, “radical” innovations shape big changes in the world, whereas “incremental” innovations fill in the process of change continuously. Innovation is the motor of the modern economy, turning ideas and knowledge into products and Apple, Google, 3M, Toyota, Microsoft, GE, and P&G were the most services.1 innovative companies in the year 2006 as per the annual list of the world’s 25 innovative firms. Innovation has been mostly discussed related to technology, product and processes. It has been argued that product and process innovation are not the main bottleneck to progress. The bottleneck is management innovation. But what is management innovation? Why is it so important? And how can companies learn to become management innovators? The present management systems, structures, practices, processes, and strategies have been developed over the last 150 years. Management innovation transforms these systems, business models and practices to meet the challenges of change in the dynamic economic environment. The skill to spot opportunities and create new, better strategies, management practices and activities is at the heart of management innovation. The purpose of this article is to discuss process of management innovation and role of consultant in this regard. 1
UK Office OF Science and Technology, 2000
Conceptual Framework What is Innovation? Innovation is about selecting and implementing the right ideas into useful new products, processes, services or management systems for improving profitability and growth of an enterprise. An idea or project is not an innovation unless it is applied in practice and put onto the market. Innovation is different from creativity and invention. Creativity is the ability to produce new and original ideas and products. Innovation makes the ideas practicable and useable. Innovative activities in an enterprise depend on the creative contribution of its employees. Invention is discovering things that have never been discovered before. Innovation is discovering new ways of creating value and successfully introducing and commercializing new products, processes and new ways of adding customer value through innovative business models and management systems. An important distinction is normally made between invention and innovation. Invention is the first occurrence of an idea for a new product or process, while innovation is the first attempt to carry it out into practice" (Fagerberg, 2004: 4).Innovation can be incremental or radical. Radical innovations are major changes in the products and processes and management systems. Incremental modifications involve minor changes to products and processes. Under management innovation, established management practices undergo changes including human resource development, marketing, managerial processes, skill and attitudes of managers. Innovation broadly involves following types: 1. Technological Innovation: Traditionally, Innovation is associated with the use of technological knowledge, research and development activities. Any innovation due to an industrial application of scientific knowledge is a technological innovation. 2. Product innovation: Products are tangible goods. Service sector includes health, insurance, financial service, professional service etc. Product innovation is introduction of new goods and services which are significantly improved in terms of design excellence, core characteristics, technical specifications etc. Product innovation is derived from customer insight, industry insight and strategic alignment of the organization. 3. Process innovation: Process innovation comprises the introduction of a new or significantly improved production process involving new ways of producing goods and services that maximizes speed, service, quality, simplicity and waste reduction. Waste consumes resources without creating any value. Waste of untapped human potential, waste of time, energy, material etc. should be reduced or eliminated through process innovation. Initiatives including six -sigma, lean manufacturing, TQM have great impact on process innovation and improve bottom lines of the companies by enhancing productivity and profitability. 4. Management Innovation: Management innovation essentially means implementation of new management practices, innovative ways of doing things and dramatically transforming and improving the effectiveness of management functions and significant departure from the current norms.
‘But innovation is done by people, and people work within a structure’ 2 . Management innovation also includes ‘collaborative Innovation, and ‘strategic innovation’. Collaborative innovation requires finding new synergies for harnessing the creativity and capabilities of other organizations. Strategic Innovation initiative generates a portfolio of breakthrough business growth opportunities using a disciplined yet creative process. Successful innovation in an organization occurs when technological, product, or process innovations in the value chain are implemented through effective management innovation. Innovation as a driver for growth, profitability and success of an organization will include people, leadership, creativity, process and organizational culture. Innovation in an organization should not be approached in a piecemeal manner but in a systematic enterprise wide capability and should be initiated even at the lowest levels. Types of innovation are depicted as under:
Peter F.Drucker, Innovation and Entrepreneurship,1985 3
Challenge of Change Most organizations operate the way they had been operating in the past and are resistant to any change. To remain competitive, they strive to work harder, improve efficiency, cost reduction and implement best practices. But, this is not enough. They need to adopt innovative ways to change the strategies rather than getting stuck in their standard mode of operation. The best way to create value is to innovate your way ahead of the competition. You can do this by harnessing the creative power of your greatest asset: your people. The goal is to turn them into opportunistic entrepreneurs who are constantly looking for new ways of doing business. In the words of Gary Hamel, a renowned management expert, ‘most companies are built for continuous improvement, rather than for continuous innovation. They know how to get better, but they do not know how to get different.’ Management innovation involves total transformation of institutional culture and is used to enhance organizational performance in an integrated manner involving technological innovation, product innovation, process innovation and of course, management innovation. ‘Management innovation changes the way managers do what they do, and does so in a way that enhances organizational performance.’3 In a period of dynamic growth, we need people with vision and desire to achieve results and take initiative to think about how to achieve goals and targets. To build a truly innovative and entrepreneurial organization you need to follow few steps outlined as under: 1. Leadership with lateral thinking 2. Vision and Mission statement. 3. Formulate strategic innovation 4. Set goals and objectives. 5. Create culture of creativity and innovation and participation. 6. Empower Employees at all levels. Leadership with lateral Thinking
Vision and Mission
Culture of creativity and Innovation
Objectives and Goals
The future of Management by Gary Hamel with Bill Breen –Harvard Business School Press, 2007, page 19
Leadership with Lateral Thinking Conventional leaders normally pay attention to efficiency and hard work. Leaders should inspire the team to find innovative ways of doing things. Lateral thinking is a term originated by Edward de Bono (1970). Lateral thinking is a set of techniques and approaches to look for radically new ways to approach the problems. Leaders with lateral thinking are more focused on creativity and innovation of the team â€˜Successful leaders combine the qualities of the conventional leader and the lateral leader. They know when to focus on efficiency and results and when to focus on vision, coaching and inspiring.â€™(Lateral Thinking Skills by Paul Sloane, Kogan Page Limited, 2006). The leader should communicate and make the employees share the vision, purpose, value and mission of the organization even at the lowest level, Generally these remain only decorative and considered to be prerogative of top management.
Vision Statement To achieve great things, you need ambitious visions. You start by painting a vision that is desirable, challenging and believable Vision is vivid mental image of business what it will be like in future. A vision statement is a vivid idealized description of a desired outcome that inspires, energizes and helps the organization to create a mental picture of the future goals of the organization. Vision provides purpose, direction and motivation for the enterprise. The corporate success depends on the vision articulated by the top management. The most effective visions are those that inspire, usually asking employees for the best, the most or the greatest. Vision statement should broadly consider three major components: Purpose: The basic reason for existence of the business. Value: What are the beliefs of the business and what it stands for. Mission: How to achieve vision? At GE, the vision is "we bring good things to lifeâ€™. Vision
M is s io n S ta te m e n t
Mission Statement Mission statement turns the vision into practice and attempts to give them direction and sense of priorities. Mission statement clarifies the organization’s purpose, i.e., what it is doing and why it is doing what it does .A mission statement should be a short and concise statement of goals and priorities. In short, a mission is a purpose while a vision is a dream. The mission statement communicates the firm's core ideology and visionary goals. Mission statement of Google is ‘To organize the world’s information and make it universally accessible and useful’.
Strategic Innovation Guided by the business mission, strategic innovation is formulated and strategic and financial goals and objectives are defined. Strategic innovation is a holistic systematic approach focused on creating growth strategies, new products, services and business models that make significant difference in the value delivered to consumers, customers, partners and the corporation. A Strategic Innovation initiative generates a portfolio of breakthrough business growth opportunities using a disciplined yet creative process. An organization moves beyond an ad hoc approach to innovation when it begins to develop and institutionalize a cultural mindset and a set of processes that support repeatable, sustainable Innovation. Given the information from the environmental scan, the firm should match its strengths to the opportunities that it has identified, while minimizing its weaknesses and threats. The selected strategy is implemented by means of programs, budgets, and procedures. Formulating Strategic Innovation will require market analysis and SWOT analysis. A scan of the internal and external environment is an important part of the strategic planning process. SWOT analysis is depicted as under: Internal Environment Scan Strength
Match Strength with Opportunity
Minimize weaknesses confront threats
External Environment Scan Industry Analysis
Goals and Objectives Goals are specific objectives that relate to specified time periods and are stated in measurable terms. Long-range goals are set through strategic planning and are translated into activities that will ensure reaching the goals through operational plans. Financial objectives involve measures such as sales targets and earnings growth. Strategic goals are related to the firm's business position, and may include measures such as market share and reputation.
Role of a Consultant Management consultants provide much wider expertise than is available within the organization. Their role is more prominent in dealing with change and designing and implementing a new system. Management consultants provide objective appraisals and broader picture and the long-term perspectives. The consultants are expected to possess thorough domain knowledge Integrity, Intelligence, the ability to communicate, an enquiring mind and clarity of purpose. Consultants help organizations to improve their performance, primarily through the analysis of the existing business problems and development of plans for improvement. Organizations hire the services of management consultants to gain external and more objective advice and recommendations, to gain access to the consultants' specialized expertise, or simply as temporary help during a one-time project, where the hiring of
permanent employees is not required. Because of their exposure to and relationships with numerous organizations, consultancies are also said to be aware of industryâ€™s 'best practices,â€™ Consultancies may also provide organizational change management assistance, development of coaching skills, technology implementation, strategy development, or operational improvement services. Management consultants generally bring their own, proprietary methodologies or frameworks to guide the identification of problems, and to serve as the basis for recommendations for more effective or efficient ways of performing business tasks.
Training Highly skilled consultant can develop training programme and train the employees in the principles, tools, skills and methodologies of innovation which should enable them to spot unexploited opportunities and generate innovative ideas. These ideas can be turned into core competencies by making innovation systematic capability across the company. The consultant can play a crucial role in this regard.
Culture of Creativity and Innovation The process of transformation of organizational culture to be creative, innovative and entrepreneurial requires an independent, objective and professional outside advice.. Consultant provides unique knowledge, skills, insights and methods for this purpose. There are barriers to create an innovative and creative culture in the organization such as : 1. Budget Imperatives. 2. Superiority Syndrome. 3. Compliance rather than performance. 4. Follow all the rules even though not logical.. 5. Making mistakes is not accepted. 6. Be as practical as possible.
Bureaucratic culture based on budget imperatives, compliance rather than performance and superiority value syndromes is the main hurdle to releasing peopleâ€™s creativity. How often we hear â€˜there is no budgetary provision and therefore this idea can not be implemented or the boss wants it to be done this way and therefore there is no point of thinking to do it in any other way. Most managers come from order-and-obey or command-and-control cultures.
Empowerment of Employees Empowerment is the process of enabling an individual to think, behave, and take action, and control work and decision making in an independent manner. The objective is to make all employees entrepreneurs who have the opportunity to solve problems by adopting innovative ways. The organization has the responsibility to create a work environment which helps foster the ability and desire of employees to act in empowered ways and to remove barriers that limit the ability of staff to act in empowered ways. 'Empowerment' is not just a matter of delegating job authority to the job-holders. It means that 'everyone can take action to enhance his or her work in organizational terms'. Instead of the traditional bureaucracy, with its emphasis on control, standardization and obedience, employee empowerment can only thrive in the liberated surround of innovation, flexibility, commitment, and continuous improvement. Consultants play important role in creating such an organizational environment.
The major challenge before a consultant is to help the organizations to effect positive changes and improvements. The consulting projects should demonstrate improved client performance and to ensure that client organizations fully benefit from consulting inputs.
Summary In the present competitive environment, innovation is seen to play a central role. Broadly, there are four types of Innovation: technological innovation, product innovation, process innovation and management innovation. The present article has discussed crucial elements of management innovation. Management innovation transforms the structure, systems, business models and practices to make the organization more innovative .The skill to spot opportunities and create new, better strategies, management practices and activities is at the heart of management innovation. The vision and mission statements, goals and objectives, strategic innovation are communicated to all the employees to keep them energised and focussed on the goals and objectives and encourage them to find innovative solutions. Some management innovations, including Toyotaâ€™s lean production system and Procter and Gambleâ€™s brand management model, provided the companies distinctive competitive advantage. Consultants play crucial role in transforming an organization to make it innovative and creative. The structure, systems and business models are designed to make the organization an open culture in terms of flexibility, integrity and accountability. Comprehensive training programmes are designed and implemented for this purpose.