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‘Innovation’ – the act or process of developing a new method, idea, or product

Most companies are neurotic about this term ‘innovation’. For most, it has become a buzzword that is synonymous with driving new value and creating new markets (duh). But in a world where institutions and the people leading them pass the buck on risk to the next available hand unwittingly available to receive it, does innovation have any intrinsic value?

The short answer is yes but the long answer is more complicated when it comes time to decide on how institutions are supposed to manage and process innovation into something tangible that will light a fire under them to take a chance that the idea that’s been vetted is worth implementing. Fundamental to innovation are:

  • Ideation
  • Evaluation
  • Risk
  • Implementation

Most of the technology out there from CRM to ERP to HCM to Innovation Management focus on the processes involved in every one of the four components above. The reality is that most if not all areas of technology get stuck as to what to do with risk because it is the most human and least manageable of all four. What that means is that risk involves one person taking a chance on another with no control over what the outcome of the action, initiative, or idea proposed by the first person will be. In innovation management, solution providers have to be acutely aware that they are getting closer to the cliff’s edge of risk than any other arena of software development.

Value Play in Innovation Management

So what does this mean for the value play in innovation management? From a market perspective, the world has grown tired of ‘innovation’ as a buzzword and they want to know how they can guarantee the maximum profit of their company’s ideation potential for the lowest cost.

In 2015, the world became aware of the damming up of capital both institutionally and on the part of emerging market governments. For example, companies like Apple finished off the year with record cash reserves and the Chinese government spent much of 2015 looking for ways to stem the flow of capital out of the country on the part of its populace as the country’s production velocity slowed in response to the growing inventory crisis.

From 2008 to today, we've seen a massive increase in institutional control over capital and, while cross-border flows of capital have increased in that time period, they have done so in a controlled and predictable way with capital generated in the US and Europe migrating to emerging markets where it gets hoarded and stuck. For the first time in history, the world’s largest production economy is not the world’s largest market or consumer market.

Additionally, many academics disagree with analysts in that the US is poised to remain the global consumer and capital leader even if it is not the global production leader. The problem with this scenario is that production environments are a major incubator of new market generation and upward labor mobility, through the implementation of market needs that lead to Schumpeter’s creative destruction, which ultimately lead to the generation of new Sallow-Swan curves, i.e. the generation of new markets that do not push saturation past production steady-state.

So let’s pull this out of the clouds of macroeconomics and boil it down: Without an increase in the velocity of capital movements, the market remains constipated and that term innovation becomes a buzzkill that all companies know they need but on which they are afraid to capitalize.

Solution Potential

So what are the value scenarios in innovation management and what companies occupy each tier? Hint-Hint: No one is perfect but some are better than others:

comparison_of_innovation_management_providers.png

  • Facilitate – End-users are guided through a process but they manage the outcomes and participate in the management of the system modules
  • Manage – End-users enter data into the system that is then managed through internal analytics for predefined outcomes
  • Discuss – Communities of users deliberate on the management and resources required to scope and take up an initiative to plan and engage
  • Gamify – Users are expected to engage the process in a system of risk return reward that pits them against each other rather than working together for a common goal
  • Track – The system tracks the activities of the user base but does not actively produce an outcome of the tracking
  • Independent – The solution does not provide this functionality but has the potential to integrate with an external
    solution that does

Many innovation management platforms get stuck on either the front-end ideation and evaluation or the back-end implementation phase with no real measure to bridge the risk component that sits between both ends of the innovation management process. While this may seem counter-intuitive since the whole idea of innovation management is to facilitate the development of ideas into executable projects, this focus on the process flow ends happens because among customers, there are two philosophies:

  1. Risk can be managed
  2. Risk can be embraced

Risk managers seek to reduce risk and quantify it out of the equation. These are the people who look for sure things and almost always believe that profitability comes from lean operations and sticking with known markets.

Risk embracers factor risk into the equation of moving a company forward. These people look for smart ways to take risk and create new markets. The trouble for innovation management providers is that the market for risk embracers the world over has been shrinking as capital has not been focused on the markets that typically foster risk taking that leads to the real definition of innovation that involves taking risk.

As another macroeconomic example to highlight this, at the end of 2015, the world was left with record level inventories in every industry. While financial markets tried to write off hard inventory leftovers to victorious online retail sales over brick and mortar the realities emerged in the beginning of 2016 and showed a total cutback in consumption in the world’s leading markets that of course correlated with the production slowdown in emerging markets.

The problem however, is that the shrinkage in demand had not been allowed to catch up with supply capacity due to disconnections in supply chain management so emerging markets were emerging by producing more of the same products for markets that were contracting and oversaturated with the same old stuff.

Again bringing this down to the practical level, it meant that not every developing market behaved like the US market in that socially, innovation was not evolving out of the shop floor because of top down social and political control. The hard reality is that the world had seen this in the emergence of Japan in the 1980’s and 1990’s and it was allowed to happen again.

Without digressing, the shift toward risk management rather than a risk embrace ground actual innovation to a halt, and every solution in the matrix that manages any part of the process gave in to facilitating incremental value returns rather than turning incremental value into new market generation. Only two, Hype and Spigit, stayed true to the risk embracer in that they designed solutions that trusted the people using them and built in measures to accommodate new market development even if it meant dealing with incremental value generation in the short-term.

So this question of the perspective on the word innovation, is it a buzz word or a buzzkill? It comes down to what type of risk manager the prospect is. And never take their word for it because we all lie a bit to convince ourselves we are not insecure. The truth is the world is now more risk averse than ever leaving more and more companies as risk managers than risk embracers. In the innovation management arena, this means that selling encompasses two challenges:

  1. Getting the customer to understand what it means to take risk on the way to driving value through innovating
  2. Selling them on the fact that your solution embraces the value of risk and helps them see the value versus managing out the risk altogether

It’s true: ‘Innovation’ has become a buzzkill because it makes customers nervous. They do not fully understand what it means end-to-end, and they are afraid of being told they are thinking about it wrong because then they become insecure about justifying their own value in the corporate hierarchy. Today’s world is one of sustainability and security – if we don’t provide both, then how can we build a platform for taking risk, right? Wrong! Risk is the antithesis of security although it does incorporate, to a certain extent, sustainability. Getting past that first challenge to properly define innovation to the customer and get them in a risk-taking mindset is a major key to the relevance of innovation management in a market that is a tough sell on taking risk.

Boiling it all down: ‘Innovation’ is a happy peppy buzzkill because in reality, we are all dancing around the fiery ember of risk and how to get customers to embrace it rather than avoid it.

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Zach Chertok

Zach Chertok

Zach joined HYPE Innovation in 2016, working as a Solution Consultant for the US Team in Boston, MA.

Zach has spent six years in the technology and economics arenas, including four years
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