8 Steps to Building Innovating Organizations

8 Steps to BuildingInnovating Organizations

8 Steps to BuildingInnovating Organizations

Manu Parashar

Response BooksA Division of Sage Publications

New Delhi/Thousand Oaks/London

Copyright © Manu Parashar, 2007

All rights reserved. No part of this book may be reproduced or utilized inany form or by any means, electronic or mechanical, including photo-copying, recording or by any information storage or retrieval system, with-out permission in writing from the publisher.

First published in 2007 by

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Published by Vivek Mehra for Response Books, Laser typeset in 11/13points Sabon by Excellent Laser Typesetters, Delhi, and printed at ChamanEnterprises, New Delhi.

Library of Congress Cataloging-in-Publication Data

Parashar, Manu, 1971–8 steps to building innovating organizations/Manu Parashar.

p. cm.Includes bibliographical references and index.

1. Knowledge management. 2. Business enterprises—Technologicalinnovations. 3. Creative ability in business. 4. Technological innovations—Management. I. Title. II. Title: Eight steps to building innovatingorganizations.

HD30.2.P369 658.4’063—dc22 2007 2006034193

ISBN:10: 0–7619–3559–2 (PB) 10: 81–7829–718–3 (India-PB)13: 978–0–7619–3559–9 (PB) 13: 978–81–7829–718–7 (India-PB)

Production Team: Swati Sahi, Mathew and Santosh Rawat

Contents�

List of Tables 9List of Figures 10

Foreword by Abhoy K. Ojha 11Acknowledgements 14

Introduction 15

1 What is Innovation? 19

What is Innovation? 22Quantum Jumps vs Baby Steps 23

Is Innovation Episodic in Nature? 31Conclusion 34

Key Takeouts 35

2 Innovation as Capability 38

Innovation Tunnel 42Innovation Capability 48

6

8 Steps to Building Innovating Organizations

Conclusion 52Key Takeouts 53

3 Knowing 56

Knowledge Capability 60Diverse Workforce 63

Consumer/Customer Knowledge 64Networks 66

R&D Investment 67Multifaceted Development Programs 70


4 Attitude 75

Attitudinal Capability 78Openness 80Awareness 83Curiosity 83

Playfulness 85Conclusion 87

Key Takeouts 89

5 Getting Creative 91

Creative Capability 94Techniques 95

7

Contents

Communication 99Innovation Space 101


6 Building Blocks 105

Individual 106Team 109

Organization 111Conclusion 112

Key Takeouts 113

7 Staying the Course 115

Vision 117Goals 119

Shared Values 120Systems and Processes 121

Outcome/Output Measurement 122Learning and Feedback 123


8 Renew 126

Knowledge Capability 129Attitudinal Capability 131

8


Creative Capability 133Conclusion 134

Key Takeouts 135

Bibliography 136Index 138

About the Author 142

List of Tables�

Episodic vs ContinuousInnovation

Building Blocks of InnovationCapability

Impact of Time Variable onKnowledge Capability

Impact of Time Variable onAttitudinal Capability

Impact of Time Variable onCreative Capability

1.1

6.1

8.1

8.2

8.3

33

109

130

132

133

List of Figures�

1.1 Types of Innovation 25

2.1 Innovation Tunnel 46

2.2 Building Innovation Capability 51

3.1 Building Knowledge Capability 65

4.1 Building Attitudinal Capability 84

5.1 Building Creative Capability 97

7.1 Building Lasting Capabilities 118

Foreword�

Innovation is key to the survival and growth of anyorganization. Since the opening of the economy in theearly 1990s, most Indian organizations, old and new,have recognized the importance of innovation fortheir long-term performance. More recently, severallarge Indian companies have developed global ambi-tions that are predicated on innovation. However,many of these same organizations have not achievedmuch success in translating their desire for innovationinto concrete tangible outcomes. This may be largelyattributed to the inability of their leaders to fullyappreciate the innovation process and to create orga-nizational capabilities that support the process as ittranslates a creative idea/invention into a commerciallyviable innovation.

The process of innovation in an organization isquite complex. First, contrary to popular perception,an innovation is not a product of an inspired thoughtof a genius. Thomas Edison, who is often portrayedas one of those geniuses, had noted that inventivegenius is “99% perspiration and 1% inspiration”.Second, successful innovation requires the involvement

12


and support of a large number of very talentedpeople—it is a team effort. A typical innovation isthe output of a multidisciplinary team working to-gether over a long period of time, and interacting withmany experts outside the team and in the market.Third, not all inventions or innovations are a result ofprocesses that deliver outcomes as planned. Chanceplays a big role in throwing up new ideas and oppor-tunities for their application. And finally, it is a well-accepted truth that inventions that lead to successfulinnovations often result from random accidents orexperiments that went awry. The capabilities thatare required to support such an understanding ofthe innovation process are very different from thosethat are required for the normal activities in an orga-nization.

This book does an excellent job of explaining in avery lucid manner the nuances of the innovationprocess. More importantly, it presents a set of guide-lines that will allow business leaders interested ininnovation to build the necessary capabilities in theirorganizations to support the innovation process everystep of the journey. Manu Parashar has includedconcepts from the most current literature on innovationin a very reader-friendly language. He has sprinkledvery fascinating examples and case studies from well-known firms in India and abroad to illustrate theapplication of these concepts in practice. He has alsorevealed his personal insights from his involvementwith the innovation process in a few organizations.

I believe that this book will be beneficial to anyonewho is passionate about innovation, and is interestedin transforming his or her organization into one thatis innovation capable.

Abhoy K. Ojha July 2006ProfessorOrganizational Behaviour andHuman Resource ManagementIndian Institute of Management BangaloreBangalore

Foreword

13

Acknowledgements�

Kabir

Keep your critic close. Build him a home in your courtyard.Without soap, without water, he would keep your attitude pure.

I have been fortunate enough to be surrounded bypeople who provide me with constructive criticism. Totheir credit my often violent reactions have not deterredanyone. I owe this book, and possibly my pure atti-tude to my critics. May they grow from strength tostrength and take me with them.

Manu Parashar July 2006Bangalore

fuand usM+k jkf[k, vk¡xu dqVh ca/kkbAfcuk lkac.k ika.kh fcuk] fujey djs lqHkkbAA

Introduction�

Business has always been about ideas that can gen-erate a profit. These ideas are what get a businessstarted, help it survive, grow, and contribute to soci-ety. All businesses start with a seed idea that gives theman opportunity to provide value to their customers andthey earn a part of this value generated as profit. Theircontinued growth and successes depends on comingup with new ideas to serve their customers better. Theseideas represent innovation. Innovation is the soul andspirit of a successful organization. Innovation can takeplace in every sphere; in products, in distribution, inadministrative processes, in logistics. The list is end-less. And so are the possibilities.

The 21st century has also resulted in a world thatnot only seems speeded up but also significantly smallerand crowded. The rate of change today is blinding.Technologies are launched and become obsolete in aflash. Product life-cycles are being reduced to minisculeproportions. Even the process life-cycles are smaller,and a process implementation provides only a fleetingadvantage. The only way to stay competitive is to staywell ahead of the change curve.

16


The other aspect of 21st century change is that glo-balization, information technology, internet, and im-proved transportation infrastructure have actuallymade the world a smaller place. Change or innova-tion travels across the world at lightning speed. Thereaction time to change is almost infinitesimal. Thisalso ensures that best practices or innovations arecopied much quicker and therefore the advantage theygive is temporary. Thomas Friedman and NandanNilekani call this “the flattening of the world”.

In this flattening process, organizations can no longerrely on an unequal distribution of knowledge to givethem a long term competitive advantage. They need tostay either at or close to the leading edge of change totake advantage of this ever changing environment. Thiscan happen only by creating new knowledge or inno-vating continuously. Creating an ever flowing streamof innovations is no longer a luxury but a necessity.

In recent times, businesses the world over have beenchallenged by the marketplace. Some have beendefeated by financial and ethical issues, such as Kmart,or others closer to home, Hindustan Motors or FiatIndia have simply been unable to cope. Across thebusiness landscape there are lesser stories, stories ofcompanies who are simply drifting their way to thefuture; whose innovations are serendipitous rather thanplanned. These are the companies that do well butnever well enough.

One thing is common to these companies—theirview on innovation. The traditional view of innovation

17

Introduction

was restricted to the research & development depart-ment, or perhaps the marketing department. Theactivity was episodic, as part of a larger picture ofnew product planning or of product refreshment. Intoday’s world, that is no longer possible. Somewhere,somehow, some competitor is going to come up toyou and say, “Smile, you’re on Candid Camera!”—and your new product becomes a joke.

Organizations need a continuous stream of novelprofitable ideas that gives them a sustainable competi-tive edge. The ability of an organization to gear itsprocesses towards innovation and deliver novel prof-itable ideas is its innovation capability.

In this book, the focus is on showing organizationshow the capability to innovate can be systematicallybuilt into the fabric of the organization. The compo-nents of knowledge, attitude and creativity are dis-cussed. Throughout the book, the model is illustratedwith examples from great innovative organizationslike IBM, Google, Dupont, Proctor & Gamble, ITC andTata Motors. What makes these organizations specialis their commitment to continuous and sustained in-novation and the systematic way in which they achieveit. Their experiences in building innovative organiza-tions serve as guide posts as well as inspiration, for thereader. Some of these organizations are over 100 yearsold, and still others have innovation practices datingto the early 1900s. They provide a mix of insights thatare not just interesting but relevant, timeless, and ap-plicable to a wide variety of organizations.

18


Just as the concept of travel is timeless but genera-tions never tire of it, and people keep discovering newerand different ways of seeing the world, the concept ofinnovation is timeless but organizations need to con-tinuously work at it to build long lasting capabilitiesand keep themselves alive. Innovation can be a sourceof great competitive advantage that is not just ephem-eral but can also give them strength to survive andflourish. The hope is that this book may just be the firstsmall step for many organizations on that journey.

One aspect of innovation capability as you will dis-cover in the coming pages is the merit of using know-ledge from diverse sources. You may recognize someof them and some of them may be new to you. At theend of the matter, if the reader can get new knowledgeout of this book, then the task is done.

1 What is Innovation?

What is Innovation? � QuantumJumps vs Baby Steps � IsInnovation Episodic in Nature?� Conclusion � Key Takeouts

One of the single biggest innovations to shape ourworld has been the printing press. It took civilizationfrom the realm of handwritten books that took priests20 years to write to printed paperbacks that are soldfor Rs 50 on the footpaths. And one man was largelyresponsible for that shift. Johannes Gutenberg put to-gether a printing press in 1440 that with refinementsremained the process of choice for printing until aslate as the 20th century.

Gutenberg’s printing process was not entirely in-vented from scratch either. What Gutenberg actuallydid was use and combine different types of knowledgethat he had seen or heard of over the years. He had

20


probably seen examples of block printed Chinese play-ing cards or paper money in Europe and got the ideaof movable block printing from them. Pi Sheng, in1041, was the inventor of the Chinese process of claytypeset in frames, pressed on to paper. The Chinesescript is so complex that 5,000 characters were neededto create a full-length book. However, the Roman scriptas we all know is far simpler. Gutenberg’s experimen-tation with metal blocks in 1430 required him to de-velop only 26 characters.

Gutenberg was a goldsmith, a metal worker, but healso had the soul of an artist. He was not content withcreating the movable metal type out of a complex pro-cess where he used steel rods to cast the type that werethen impressed upon copper plates to create matricesto be used as moulds. He also wanted to imitate al-most exactly the beautiful calligraphy of the books ofthe time. Gutenberg not only created the type with theperfectly regular spacing of calligraphic writing buthe also made a typeset that captured cursive writing.His artistry was so unparalleled at the time that onlyfour such cursive types are known to have existed inthat era and all four were attributed to Gutenberg.

Not only did Gutenberg’s process of the movablemetal type enable the reproduction of books, it sparkedoff no less than a revolution in its related fields. Tillthat time, in Europe, books were made on vellum(which was lamb/calf skin) and the early printed booksalso used the same material. But as demand for booksincreased, paper technology had to make substantial

21

What is Innovation?

advances to enable the printing of books on paper.Paper was also a Chinese invention, but the Gutenbergprocess created a demand for paper in Europe like thathad never been seen before. Nor was ink technologyfar behind in advancement. The previous wood-cutmethod used water based inks or an egg based tempura.However, such inks would not remain on metal typesand therefore, viscous oil based inks that had beendeveloped around the 10th century were adapted byGutenberg for the metal type process.

Finally, Gutenberg needed a press to put all of thesetogether into a book. Previously, presses of a fashionwere being used in wine and cheese making. Gutenbergadapted a similar thought into a printing press thatenabled an operator to press the type on to paper andthen lift it off leaving behind the impression.

This revolution took a continuous commitment onGutenberg’s part for more than 20 years and was anenormously expensive process. Beginning with his firstprototypes in 1430, Gutenberg started building hispress in 1436. His first examples of printing were papalindulgence slips in 1440, which were used to pardonsins of people who were rich enough to purchase themfrom the Church. The first mass produced GutenbergBibles began to appear in 1452 and by 1499, therewere as many as 2,500 printing houses across Europe,and it was rumored that 15 million books had beenpublished.

Gutenberg had created this revolution by combin-ing a lot of disparate ideas together. And the unique

22


combination of ideas that he came up with changedthe world forever.

What is Innovation?�

The printing press is a truly breakthrough innovation,isn’t it? What can be learnt from the Gutenberg story?The story is a veritable treasure trove as far as inno-vation is concerned. One of the first lessons is thatinnovation is all about combining various kinds ofknowledge in a unique manner.1 Gutenberg combinedknowledge from fields that were very different fromeach other. All knowledge existed in one form or theother but only Gutenberg managed to combine callig-raphy, ink technology, paper technology, metal work-ing and mechanical engineering together. The result ofthis combination changed the world. In a sense, thisexample both illuminates innovation as a process andalso illustrates what goes into innovation. The con-tent of innovation is knowledge while the process isthe combination of knowledge.

Different types of existing knowledge form the inputand the combining of these types of knowledge leadsto an output, which is new knowledge. The output ofthe innovation process itself hence is new knowledge.Creating this new knowledge is the process of innova-tion. Gutenberg created the field of printing technology,a field of knowledge that did not exist before.

23

What is Innovation?

New ideas, concepts, products, services, technol-ogy, etc. all represent new knowledge and are a resultof a process of knowledge creation. This also meansthat any new combination of two or more kinds ofknowledge can be construed as innovation. But is allinnovation the same? No, of course not. We all in-stinctively know that some innovations transform ourlives but others just merely improve or worsen it.The mobile phone is one such device that transformedlives. However, the polyphonic ring tone on mobilephones is only a peripheral source of entertainment orirritation, depending on whether you are its owner orits audience. Then what differentiates breakthroughinnovations from incremental innovations?

Quantum Jumps vs Baby Steps�

Very simply, a breakthrough innovation is one thathas the potential to further human knowledge andradically change the world. It is created when manydifferent kinds of knowledge are combined. Not onlyare the knowledge bases different but they also havevery little overlap. This combination of knowledgepushes the boundaries of knowledge far beyondexisting ones. Take space travel, for instance. Try tofigure out the number of different kinds of knowledgethat are combined to create space travel. The list thatyou will end up with will be very long indeed. From

24


fluid mechanics to human physiology; from organicchemistry to electronics, and so on. Breakthroughinnovations need a combination of a large number ofknowledge areas.

Essentially there are two dimensions that determinethe extent to which an innovation can be classifiedas breakthrough or incremental (see Figure 1.1). Thefirst dimension is the types of knowledge combined,varying from the small to large. If a large variety ofknowledge is being combined then a breakthrough in-novation may result. But of course, this is not the onlyfactor. Also important is the extent of overlap in theknowledge being combined. A low degree of overlapin the types of knowledge being combined can resultin a more radical innovation.

The two dimensions of the types of knowledge andthe overlap in knowledge leads to the classification ofinnovation into four broad categories—Kaizen, incre-mental/efficiency, radical and breakthrough.

The Kaizen school of thought is meant to improveexisting processes rather than achieve a specific goal.Kaizen has five founding elements—teamwork, per-sonal discipline, improved morale, quality circles andsuggestions for improvement. On this base, are con-structed the three Kaizen pillars, efficiency, 5S and stan-dardization. Kaizen creates small amounts of newknowledge by focusing on improving status quo andon employee commitment and discipline. Kaizen, there-fore, is a very people-oriented concept. It usually doesnot take the organization very far in terms of radical

25

What is Innovation?

Innovation:Greater variety, bigger bang

Figure 1.1: Types of Innovation

Low

Ove

rlap

in

the

type

s of

kno

wle

dge

com

bine

d

Types of knowledge combined

Few Many

KaizenImprove a small partof an existing process

in very small stepsrather than achieve

a specific goal.

Incremental/Efficiency

Making a processefficient or an

improvement inproduct/service

features.

RadicalA novel way of doing

things that makes a stepchange from existing

process, productsor services.

BreakthroughParadigm Shift.

Opens up a wholenew marketplace and/ora set of applications that

were not envisagedbefore.

Hig

h

26


or breakthrough innovation. But it does contribute tothe overall competitiveness of the organization.

Incremental innovation usually results from thecombination of many types of knowledge that have ahigh degree of overlap between them. This improvesoverall product and process but the impact created ontarget market is small. These changes do, however,add up over a period of time.

The Sony Walkman, when launched in 1979, createda stir across the world with its concept of personalmusic. Five years later, the Discman was launched.While technologically, the invention of the Discmanwas very different; in concept, the Discman was onlyincremental to that of the Walkman. Both played musicfrom an external device that had limited memory.Every other difference was largely an incrementalimprovement—sound quality, memory space on theCD, handling ease. While many types of knowledgeand technology were used in the creation of theDiscman, the overlap between them and that of theWalkman was high. The philosophy of both devices isessentially the same. The Discman only representsincremental technology over the Walkman in a prog-ressive time period.

Radical and breakthrough innovations radicallychange a product market and the lives of people itimpacts. The launch of the Apple iPod was one suchradical innovation. Apple took a portable music player,added a miniature hard disk and an OS and put it intothe most beautiful design since the iMac—and created

27

What is Innovation?

the iPod. The iPod has changed the face of portablemusic in our lives today. When compared to theDiscman, the iPod was tiny, incredibly sleek, and itcould hold between a 1,000 to 25,000 songs in acompressed MP3 format—compared to most standardmusic CDs that could hold only a few songs (usuallyin single digits). To top that, the users could createtheir own play-lists, manipulate the order in whichthe songs could be played and, in the latest video iPodversion, watch the music video to go with it. As if allthat was not enough, iPod also came with an internetservice, iTunes, which enabled users to buy musiconline. The iPod outplayed the Discman on every front.

The reason it succeeded is because iPod combinedvery different kinds of knowledge. From sociological(looking good) to demographic (with rock star edi-tions) to technical knowledge (massive memory andeasy interface), a wide variety of knowledge has beencombined in a unique manner. Because they draw fromsuch wide sources, they create impact all around. An-other brand that has created such impact is Crest. Crest,in 1955, was the first toothpaste that used fluoride.Until then toothpaste manufacturers had been unableto develop a way of mixing fluoride and the paste abra-sive safely. P&G, with its research in detergents andhard water, knew quite a lot about minerals. Its re-searchers made the translation leap from detergentsto toothpaste and developed the first toothpaste thathad fluoride in it. Not only did P&G researchers makethat leap successfully, but the very fact that they did it

28


across such diverse fields of knowledge makes the in-vention of fluoride toothpaste a breakthrough one.

The question is whether organizations only benefitfrom breakthrough or radical innovations. The answeris no. Each type of innovation has its definite place inthe organization. Radical or breakthrough innovationsproduce step changes in organizations and the marketit services. The printing press, iPod, Crest toothpaste,etc. are all examples of these kinds of innovation. Butsuch radical or breakthrough innovations do not comeabout every day.

They have very long and often expensive incubationperiods; the printing press took more than 20 years andfluoride toothpaste technology took 39 years to reachcommercial production. An organization cannot de-vote 20 years of its time working on a single technol-ogy, however blockbuster it may seem. They are underpressure to improve on a daily basis to stay competi-tive. Most of these improvements come from smallprocess changes that increase efficiency. A smart orga-nization needs to manage a mix of various kinds ofinnovations to remain ahead of the game at every stage.

There have been organizations that have takensmall improvements over a period of time to makegreat strides in quality, cost efficiency, and customersatisfaction. There may have been no one flashy biginnovation but a series of small improvements thatdelivered significant competitive advantage. Nissanwas the first Japanese car company and it was startedin 1933. The second was Toyota in 1937. Toyota

29

What is Innovation?

The Indian Angle—ITC

ITC, originally the Indian Tobacco Company, was onceupon a time a company that owned a blockbuster brand,Wills cigarettes and a chain of 5 star hotels. In more re-cent times, ITC has diversified into categories as wideand varied as wheat flour, sugar candy, biscuits, premiumfashion apparel and information technology. However,no single initiative of ITC has made as much impactamong more people than ITC’s e-choupal movement.

The movement is the subject of case studies by HarvardBusiness School and the University of Michigan and isthe 2004 winner of the World Business Award institutedjointly by the International Chamber of Commerce, theHRH Prince of Wales International Business Forum andthe United Nations Development Program. The e-choupalsets up a marketplace for ITC to bypass middlemen whenpurchasing produce from farmers.

Then what’s so special about the e-choupal? Becausethe method is breakthrough. Most farmers in India, ifliterate at all, know only their regional language. Physi-cal infrastructure is poor with very few roads or eventelephone lines. In that scenario, ITC has set up an internetbased information network for a village where farmerscan check the prices of his crop, order supplies or learnabout global trends. E-choupal represents the globalmarketplace to a rural village.

Implemented in more than 11,000 villages, e-choupalresults in lower procurement costs for ITC (though ITCguarantees a higher purchase price than the middlemen),higher realization for the farmers, better crop yield dueto learning, better seeds and fertilizers, and has a rub-oneffect for the entire village because of the availability oftechnology for school work and information from the

contd.

30


created innovation in the car business. But their inno-vation was not in the car itself. It was in the manu-facturing process.

In 1949, Toyota knew that they were in trouble.American car manufacturers like Ford had outstrippedtheir production capacity by many times, leavingToyota looking like a very poor cousin. The then presi-dent of Toyota, Kiichiro Toyoda, then offered a chal-lenge to his team—to catch up with US productionnumbers—in the space of three years. The challengewas accepted by Taiichi Ohno, who along with ShigeoShingo developed the Just-In-Time production system.They took the American car and started producing itwith cheaper materials and more efficiently.

The Just-In-Time (JIT) production method relies onsupplying every part of the production chain with onlyas much material as they need. At the end of the chainlies the customer who purchases a product which in-tegrates all the way backward to raw materials—eachpart only arriving “Just-in-Time” for the next step.JIT lowered inventories and costs and therefore madeToyota more competitive. But they had to make a goodcar to begin with. The process improvements helped

contd.

outside world. The variety of knowledge combined toproduce e-choupal ranges from internet technology, hard-ware, VSAT, crop fertilizers, seed technology, commod-ity pricing and adult literacy. And the most significantresult of e-choupal is rural empowerment.

31

What is Innovation?

make Toyota one of the largest car manufacturers inthe world today.

Incremental innovations can keep the engine going.But it is the big innovations that deliver the necessaryimpetus to keep an organization ahead of the pack.Perhaps the Toyota Corolla and the Prius represent thebig changes that lead Toyota to where they are today.

The pursuit of breakthrough innovations also rep-resents a higher risk, albeit with higher potential re-turns. The big bang innovations require hugeinvestment of resources over a significant period oftime. The small step innovations on the other handhave both small risk and small potential returns. Anorganization which is looking at building a balancedportfolio builds the optimal mix of both types.

In essence both kinds of innovations are required.The small steps help increase efficiency while the biginnovation, when it comes, delivers the step changean organization needs to break away from competi-tors. The incremental innovations also help balanceout the risk represented by the investment that goesinto big bang innovations.

Is Innovation Episodic in Nature?�

Innovation is often perceived as episodic, coming andgoing in waves. It is something that does not happenoften and is seen as a response to some stimuli. The

32


typical innovation script is a grand solution developedto counter a problem. Necessity of circumstance lead-ing to innovation has been the proverbial crutch ofmany innovations and inventions.

One such product born of necessity is the earmuff.In 1873, Chester Greenwood was a 15 year old boy inMaine whose ears became very cold in winter. Chesterwas allergic to wool and could not wrap his muffleraround his head like most other people of the time.He put his mind at work one day and got his grand-mother to make him a device that he designed. Ithad velvet on the inside, fur on the outside, and wasstrung around his head with wire. The earmuff wasan instant hit. Soon every kid in town was demandinga Greenwood Champion Ear Protector. Necessity issometimes a very young father of invention.

Crises can also create the environment that calls forinnovation. This crisis can be internal, i.e. profitabil-ity linked, or external and part of the environment.Competition or economic scenarios lead organizationsto innovate. Opportunities brought about by a chang-ing environment can also be a trigger.

Table 1.1 lists the factors that distinguish Episodicinnovation from Continuous innovation. A long-terminvestment is absolutely essential to ensure futurecompetitiveness. The episodic form of innovation isinherently inefficient. It is reactive and often meansthat the organization is not the first to market. Thiscan often create major upheaval in an organizationwhile it scrambles to keep up with its competition.

33

What is Innovation?

The resources spent to counter a crisis are not alwaysspent in the most optimal manner and entail significantwastage that could otherwise be avoided with aplanned program. This is brought about by the needto respond quickly. However, this upheaval and theimmediate response is usually short-lived, as typically,once the crisis or change impulse passes the organiza-tion reverts to its old ways.

Then there is the pro-active approach.2 Big banginnovations can be planned and delivered in a con-tinuous manner. Efficiency led innovations can alsobe a part of the pipeline. The trigger here is not a changeimpulse or a crisis. It is, in fact, not a gun trigger atall. It is the planning and pro-active thinking that keepsthe innovation pipeline ticking.

Organizations with a pro-active approach seek to bein the fore-front of the industry rather than play catchup. They regularly churn out a mix of innovationsranging from small improvements to potentially radicalones. They are more successful in the marketplace

Table 1.1: Episodic vs Continuous Innovation

Episodic Continuous

Trigger Crisis/Change Planning/Pro-active

Resource base Contingent Capabilities

Outcome Radical/Upheaval Evolutionary yet significant

Resource utilization Wasteful Optimal

Advantage bestowed Temporary Long term

Risk High Manageable

34


because they offer a greater variety of responses to thechanging environment. Their chances of success therebyare greater. While Dupont as an organization islegendary for its invention of Nylon, Kevlar, Teflon,Lycra and other such materials that revolutionizedfabric and material technology, Dupont hardly restedon its laurels in the intervening years. The organizationput out a series of process improvements, technologyimprovements and material innovations to sharpen andhone its innovation abilities. Using Teflon, Dupontcreated several new products/technologies in areas asdiverse as radar, nuclear weapons, and the householdcooking pan.

Consistent with our knowledge view, these organi-zations build capabilities in the organization that en-able combining or bringing together of disparateknowledge. The resource utilization is more likely tobe efficient here, keeping the risk manageable. Giventhat the focus is on building lasting capabilities that de-liver innovation or new knowledge, the organizationshould gain long-term competitive advantage. Organi-zations that aspire to deliver continuous yet significantinnovations will have to develop an innovation capa-bility which will be driven by constituent capabilities.

Conclusion�

Since the chapter began with Gutenberg, it is only fit-ting that it closes with another aspect of the Gutenberg

35

What is Innovation?

innovation. This is the complexity involved in break-through innovation. The different kinds of knowledgeand its integration makes the effort to put togetherthe printing press a superhuman effort, one thatGutenberg dedicated most of his adult life to. Thisrepresents the frontier of what a single person canachieve. The world has become only more complexover the last 500 years or so. The era of individualinnovator is well and truly over.

Most new knowledge is now being created in orga-nizations, be it universities or large and small compa-nies. The whole process of knowledge exchange andcombination is a collaborative effort of a large num-ber of people. What will make an organization inno-vative in this scenario? What capabilities would leadan organization to deliver continuous and significantinnovations? The answers to these questions will giveorganizations lasting competitive advantage. It hasoften been said that innovation separates the winnersof tomorrow from the losers. Consequently, the criti-cal questions are what represents innovation capabil-ity for an organization and how is it built. Theconstituent capabilities that drive this overall innova-tion capability also need to be identified.

Key Takeouts�

• Creation of new knowledge equals innovation.• New knowledge is created by bringing together

36


disparate types of knowledge in a unique, never donebefore manner.

• All types of innovation whether big or small areimportant for organizations.

• For lasting competitive advantage, the organizationsneed to build innovation capability or the ability todeliver continuous innovation.

Notes

01. Nahapiet, J. and S. Ghoshal. 1998. Social Capital, Intellectual Capital,and the Organizational Advantage. Academy of Management Review,23(2), 242–66; Nonaka, I. and H. Takeuchi. 1995. The KnowledgeCreating Company: How Japanese Companies Create Dynamics ofInnovation. London: Oxford University Press; Drucker, P.F. 1998. TheDiscipline of Innovation. Harvard Business Review, November–December, 149–57.

02. Brown, S.L. and K.M. Eisenhardt. 1997. Art of Continuous Change:Linking Complexity Theory and Time Paced Evolution in Relent-lessly Shifting Organizations. Administrative Science Quarterly, 42(1),1–34.

Web Resources

01. www.ideafinder.com/history/inventors/gutenberg.htm02. http://www.oneplusoneequalsthree.com/2004/05/western_movable.

html03. http://www.kdhprinting.com/inside/html/history.html04. http://communication.ucsd.edu/bjones/Books/printech.html05. http://www.computersmiths.com/chineseinvention/movtype.htm06. http://www.valuebasedmanagement.net/methods_kaizen.html07. http://www.1000ventures.com/business_guide/mgmt_kaizen_main.

html08. http://dandoweb.com/e/auto.html09. http://www.pg.com/science/innovations_tartar.jhtml10. http://www.ideafinder.com/history/inventions/story091.htm

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What is Innovation?

11. http://inventors.about.com/od/wstartinventions/a/Walkman.htm12. http://www.sony.net/Fun/SH/1-21/h1.html13. http://www.osviews.com/modules.php?op=modload&name=News&

file=article&sid=425914. http://www.fri.fujitsu.com/en/modules/popnupblog/index.php?param=

3-2006032011350615. http://media.wiley.com/product_data/excerpt/62/04717548/

0471754862.pdf16. http://www.digitaldividend.org/case/case_echoupal.htm17. http://www.financialexpress.com/fe_full_story.php?content_id=59697

2 Innovation asCapability

Innovation Tunnel � InnovationCapability � Conclusion� Key Takeouts

Many organizations believe that to maintain aninnovative culture, an organization needs to be smalland flexible. They also believe in having expertize in anarrow arena. Large organizations are not seen as ter-ribly creative, usually because of their unwieldy sizethat does not allow people to talk to each other acrossthe organization. All that may be true, but it is alsopossible to be the opposite. Let us talk about 3M,which in popular belief, is one of the most innovativecompanies in the world. Here are some facts for theyear ended 2005. 3M had a sales turnover of $34 bnand a profit margin of 15%, healthy by any standards.They also spent $1.2 bn on research and development

39

Innovation as Capability

and have 69,315 employees in 60 countries across theworld. Yet this organization remained nimble andflexible enough to receive 487 US patents in 2005.In one single year. Now that is being innovative whilebeing a large organization!

How do they manage it? 3M ensures sharing ofknowledge and expertise. Not only is their primaryresearch lab, Central Research staffed with people fromvarious backgrounds like chemists, physicists, biolo-gists; 3M also thrives in making them work together.3M has Tech Forums where people can get together andshare information and listen to experts like NobelLaureates. The Tech Forums encourage teams to presenttheir research problems to the forum and look for solu-tions jointly. They even gives out awards to inventorswho are awarded patents.

The Tech Forum did not remain as a single uniteither. It also created sub-groups of interest, such aspolymers or coating processes. These sub-groups in-cluded people who were interested in the subject orwere maybe struggling with some parts of it in theirresearch. These scientists then pooled their expertizetogether to help solve each others’ problems or sparkideas for themselves.

3M actively brought together different types ofknowledge. When researchers developed a new prod-uct or refinement, they could not simply hand itover to sales and be done with it. Very often, due to3M’s freewheeling research methods, products or tech-niques were developed that had no obvious business

40


application. In such cases, the scientist was made topitch his/her invention to every possible product cat-egory, in the hope of finding one that could use theinvention. Frequently, more than one use was foundfor the same product. Innovation found many homesthrough the sharing of knowledge at 3M.

3M did not stop at sharing knowledge within itself.They put into place several programs such as STEP(Science Training Encouragement Program) and 3MVisiting Wizards to interest and inspire students totake up science as an area of study. They also beganprograms to introduce teachers to science in industry.3M is an organization that believes that innovationis a process that needs to be nurtured at every step ofthe way.

How was this culture of innovation put into place?One of 3M’s early chairman William McKnight is cred-ited for institutionalizing innovation long before otherorganizations began to understand its implications.McKnight believed very strongly that organizationsneed to support its employees and give them freedomto experiment. He offered employees the opportunityto make mistakes and an organization that encour-aged them to think of solutions to solve every situa-tion they came across. He created new teams likeProducts Fabrication Laboratory (Pro-Fab Labs) thathad people who were creative and eccentric and whowere given the freedom to work on projects that noone else had the time for. He created an organizationalattitude that supported innovation.

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McKnight also pioneered another department at3M. One day, while evaluating the timeline of newproducts, McKnight realized that the rate of innova-tion was slowing down. He appreciated that it wasnecessary to have a constant flow of products throughthe innovation tunnel so that the process does not stopat any point. To this effect, he put together a NewProducts Department for the first time. The NPD hadonly one primary task—to evaluate research projectsand markets and identify what would work where.NPD also had the power to fund or kill projects onthe basis of their analysis and had to work in conjunc-tion with production, sales and research. This NPDkept the 3M commitment to continuous innovationalive. McKnight did this in 1940. Sixty-six years later,many organizations are still struggling with their in-novation tunnel.

The 3M story never ceases to amaze. What are someof the things that can be learnt from this truly inspira-tional organization? Very clearly there is knowledgeinvolved. There are ways that they have developed tohave diverse knowledge in their organization. Theyalso exchange and use it better than most organiza-tions. There is an element of culture or organizationalattitude that drives this whole endeavor forward. Thecontent of the whole process is the ability to have alot of knowledge, and then the ability to combine itin a climate that is conducive to bringing knowledgetogether. These together represent an innovation ca-pability of sorts.

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Then there is an efficient process that they have putin place. That is the process of innovation tunnel. Letus tackle what this tunnel does for innovation firstand then turn our attention to innovation capabilityof which the innovation tunnel is an important com-ponent.

Innovation Tunnel�

As in the 3M story, most organizations today have setup an innovation tunnel to efficiently monitor theirprogress in coming up with new business ideas. Thistunnel is made for efficient sieving, sifting, and short-listing of potential ideas that can be taken forward.Often this is christened as the NPD or the new pro-duct development tunnel. The process works in mul-tiple stages.1

Each stage of the tunnel has an evaluation systembuilt into it. So ideas proceed to the next stage only ifthey fulfill these evaluation criteria. These set of criteriaare built on suitability of the ideas to the organization,their business potential, and any competitive advantagethat they may confer on the organization. This processis broadly called a stage-gate process. The ideas enterfrom one end, they are developed in various stages,where they have to pass through evaluation gates ateach stage, and at the end of the process some of theseideas become products, services or processes that theorganization can profit from.

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One unlikely suspect that has a beautifully designedinnovation tunnel is Royal Dutch/Shell. The offshootof a shop that started out by importing seashells andexporting kerosene to Singapore and Bangkok in 1833,the Royal Dutch/Shell Group is today a $130 bnorganization with over 102,000 employees. It wasalso a traditionally bureaucratic organization with areputation for having mazes of brick walls betweenemployees and departments. GameChanger began asan individual project by Tim Warren, the then directorof research and technical services at the Exploration& Production group. It also began in 1996 with aproblem that many managers are faced with today.Warren realized that the E&P division was not goingto meet its earnings targets without some radicalchanges being made.

Even though the problem is a familiar one, whatWarren did is what finally changed the game at Shell.Warren put a team of key people together across hisdepartment and gave them the sole power to solicitideas and fund projects to the tune of $20 mn. That’sright. Not a $100,000. Not $1 mn. But $20 mn! TheGameChanger process began in November 1996, butas typical of bureaucratic organizations, most employ-ees were so used to thinking a certain way that theyhad difficulty in coming up with rule breaking ideasfor the GameChanger panel.

The GameChanger team then hired a bunch of con-sultants and put together a series of innovation labs.Once again, anyone across the organization could

44


attend the innovation lab and the carrot was an on-the-spot dole of $500,000 to ideas that made the grade.Seventy-two people turned up and they brainstormedand used several ideation techniques to come up witha laundry list of 240 ideas that could be worked on.These included ideas for new businesses and newapproaches to existing departments.

The teams, however, did not stop with ideation.They then devised a set of stage-gate criteria to decidewhich ideas would qualify for funding. The teams alsoselected 12 ideas from the laundry list to be taken for-ward and given the seed money funding for develop-ment. These 12 ideas once again gathered volunteersaround it who would work on them at every step ofthe rest of the way.

The ideas and teams were then put through a 5-daylab that scoped out the ideas, financial implications,competitive information, and the operating boundaries.They were also given 100 days to develop a low-risk,low-cost method of testing their business plan. Atthe end of that time, they presented their plans to theGameChanger panel for further sponsorship and sup-port. The ideas typically ended up with the appropri-ate departments within Shell as a fully fledged businessinitiative.

Did the GameChanger process translate into busi-ness success? Absolutely. In 1999, just two short yearsafter the first GameChanger panel was set up, fourout of Shell’s five major new business initiatives wereproducts of GameChanger. GameChanger projects

45


were receiving as much as 30% of the Exploration &Production group’s R&D budget.

Today the process has become institutionalized.On a fairly well hidden section of Shell’s website, theGameChanger panel solicits ideas from outsidersas well as employees. They invite proposals to gothrough a very similar stage-gate process as the firstGameChanger process. If the organization or persongiving the idea is an outsider, then they can be invitedto become suppliers, licensors, development partners,or even have Shell invest in their company. This pro-cess can be translated across almost any organizationor department.

Shell knows that they need to keep the flow comingat the entrance of the innovation tunnel. Broadly speak-ing, the stages in an innovation tunnel can be groupedinto four. The first stage is idea generation. Here theorganization casts a wide net to get as many ideas aspossible. The techniques may range from formal brain-storming sessions to inviting ideas from employees ingeneral. In some organizations, formal presentationsmay also be conducted.

The second stage comes after the ideas with mostpotential have been shortlisted. This list can either bedeveloped by doing a quick idea sort with customers/consumers or on an internal checklist. In the secondstage, the idea is actually developed further. A busi-ness plan may start to develop, all potential applica-tions may be explored, and potential markets, etc. maystart to fructify. Incubated ideas are again sieved and

46


Innovation Tunnel:The content of the process

Figure 2.1: Innovation Tunnel

NewKnowledge

More knowledge as process input

Any new idea that enters the innovation tunnel represents a combi-nation of two or more existing bases of knowledge. At each stage inthe tunnel new knowledge is added to make the idea viable commer-cially.

At the heart of this process that many companies use is knowledge.Organizations possessing a large knowledge base, and the ability aswell as a conducive environment to combine this knowledge in uniqueways would exploit this process most efficiently.

Existingknowledgeas processinput

IdeaGeneration Incubation Prototyping Launch

Knowledge Combination& Creation

47


then led into prototyping. Prototyping is the third stage,and here the ideas will actually be put in physical formand tested in real market or application situations. Thisis an important stage as it determines which ideas canset the marketplace on fire in the last stage.

For a successful program it is important that at eachstage of evaluation, learning is taken on board and theidea is constantly worked upon. This rigorous devel-opment of an idea ensures its final success or failure.

The stage-gate process is a good one to monitor,control, and reduce uncertainty in the innovation pro-cess. However, that is just one aspect of the wholeinnovation setup. What flows through this tunnel andhow it gets transformed into ideas is also equally im-portant. The raw material of this tunnel is knowledge(see Figure 2.1). Ideas represent nothing but interest-ing combinations of existing knowledge. The outputis knowledge itself, new knowledge that competitorsdo not have and confers competitive advantage on theorganization.

There are a few things to note here. The organizationneeds to possess knowledge assets that competitorsdo not have in order come up with truly interestingand unique ideas. These ideas are raw materials andhave to be of high quality. The organizational climateneeds to then help bring together the different ideas.At each evaluation stage new increments of know-ledge are added. Again the knowledge assets, organ-izational attitude, and ability to combine knowledgebecome important.

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Focus on process alone can have detrimental effects.If the organization does not put in good raw material,the new knowledge created may not be very useful. Infact, the organization also needs enabling infrastruc-ture to be able to combine knowledge effectively.

Innovation Capability�

How does one define innovation capability? It can beviewed as the ability to come up, consistently, with newknowledge that delivers short and long-term profits toan organization.2 This new knowledge is in the form ofnovel business ideas that could result in new products/services, efficient business processes, or exploiting ofnew markets.

There are two parts of this capability. One part isthe process and the other part is the asset.3 Process isusually represented by the innovation tunnel. It repre-sents the physical process of processing raw materialsfor innovation. The asset part is all about the raw ma-terials and infrastructure that go into the process.

Very clearly, in order to produce new knowledge alarge reservoir of existing knowledge is required. P&Gis one organization that has devised a good way for un-locking the knowledge that resides within its 98,000employees. P&G has an organization-wide platformcalled MyINet that performs two tasks. The first is thatit hosts a searchable database of over 2 million research

49


documents from P&G labs across the world. The docu-ments are made searchable in such a way that research-ers can cull out information that is relevant to theirfield of study from every part of the organization’sresearch documents. This helps in translating know-ledge from one application area to another as well.

P&G also has an interactive service called Ask Meon MyINet. Ask Me is actually the initial thoughtbehind MyINet and its success led to the creation ofMyINet. Ask Me is a service where researchers canpost queries or problems that they are facing in theirwork. Researchers across the P&G world, regardlessof department, have access to the queries posted andcan answer, guide or refer them to experts. Apart fromthe researchers, P&G also has a team of technical en-trepreneurs within the organization whose task is toattend conferences, technical programs, and work withuniversities and the Internet to identify and internal-ize knowledge that can further P&G’s innovation goals.One of which is that 50% of the innovation withinP&G must have an external root to it.

Similarly, any good organization should have theability to scan the environment for new knowledgeand be able to absorb it. Knowledge represents boththe raw material and infrastructure. It can be seen asinfrastructure because it helps absorb new knowledge.4

(How that happens is tackled in subsequent chapters.)The organizational environment aids combination ofthis knowledge. The organizational attitude in someways is the enabling infrastructure for innovation

50


capability. The key question that this capability asksis whether the organization has the right attitude thatenables playful combination of knowledge.

P&G’s MyINet would never be of any use unless itsresearchers actually put it to the test. Most organiza-tions put into place intranet knowledge bases withoutany premium being placed on its use. Researchers atP&G actively search for knowledge that will help themin areas other than their own areas of research. Howelse would detergent and hard water research lead tofluoride toothpaste and calcium supplements or soapand candle making lead to vegetable shortening?

The organization must possess the inherent abilityto be able to bring together these bases of knowledgeand combine them. Systems and processes that helpsharing of knowledge and help force different bases ofknowledge together is the tunnel’s key infrastructure.Tools and techniques that effectively bring togetherdifferent types of knowledge are also a part of this in-frastructure.

The fact that an organization needs to possess a va-riety of abilities/capabilities (e.g. knowledge bases,environment as enabling infrastructure and ability tocombine knowledge) to effectively and continuouslyinnovate means that innovation capability has con-stituent capabilities. These capabilities together deter-mine the innovation capability of the organization. (SeeFigure 2.2). They can be grouped under three broadcapabilities that together determine the innovationcapability of an organization.

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Innovate

Figure 2.2: Building Innovation Capability

KnowledgeCapability

The sum total ofknowledge assetsof the firm that

determine its capacityto absorb and create

new knowledge.

InnovationCapability

The ability to comeup, consistently, withnew knowledge thatdelivers short and

long-term profits toan organization.

CreativeCapability

The ability to bringtogether various types

of knowledge in a novelmanner is what this

capability represents. Itcomprises tools,

techniques and enablers.

AttitudinalCapability

A relational asset (or anasset composed of

emotional or attitudinalstate of an organiza-tion), that acts as an

enabler for creating newknowledge in a firm.

A Capability-basedInnovation Model

52


• Knowledge Capability:5 The sum total of know-ledge assets of the firm that determine its capacityto absorb and create new knowledge.

• Attitudinal Capability:6 This is a relational asset (oran asset composed of emotional or attitudinal stateof an organization), that acts as an enabler for cre-ating new knowledge in a firm.

• Creative Capability:7 The ability to bring togethervarious types of knowledge in a novel manner iswhat this capability represents. It comprises tools,techniques and enablers.

What is amply clear by now is the fact that innovationis about creating knowledge and innovation capabilityis about effectively creating knowledge over a periodof time to provide the organization with sustainablecompetitive advantage. The constituent capabilities ofinnovation capability represent the infrastructure andraw materials required to create new knowledge. Thewhole black box on innovation or the creation of newideas is opened up using this approach.

Conclusion�

Often organizations focus on the process of any activ-ity. What is borrowed from other organizations as bestpractice is often the process of getting things done. Thecontent of these processes is missed and does not get

53


transferred. As a result, the record of best practice trans-fer is pretty patchy. A lot of companies have the inno-vation tunnel implemented in their organizations butfew will have it working as well as 3M to have 487patents in a year. The process is extremely importantbut not the only determinant of success. There are rawmaterials and infrastructure that need to be in place forthe process to work. The challenge an organization facesis to put these in place along with the process.

The process ensures efficiency and the content en-sures effectiveness. The best way to make this capabil-ity work is to make sure that both process and contentare in fine shape. The focus of the knowledge-basedview in this book is on the content of this capability.

Even from a content view, innovation capability isa multifaceted capability that has at least three con-stituent capabilities. The organization needs to workon all three of these to deliver continuous and signifi-cant innovation. The following chapters go into thedetails of these three and provides directions to buildthese capabilities in the organization.

Key Takeouts�

• Innovation capability of an organization comprisesboth process and content.

• Focus on process alone may not deliver optimalresults.

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• The content part of innovation capability consistsof three constituent capabilities.

• All three of these constituent capabilities of an or-ganization need to be developed to deliver a con-tinuous stream of new knowledge or innovation.

Notes

01. Tranfield, D., M. Young, D. Partington, J. Bessant and J. Sapsed.2003. Knowledge Management Routines for Innovation Projects:Developing a Hierarchical Process Model. International Journalof Innovation Management, 7(1), 27–49; O’Connor, G.C. andA.D. Ayers. 2005. Building Radical Innovation Capability. ResearchTechnology Management, 48(1), 23–32; Davila, T., M.J. Epstein andR. Shelton. 2006. Making Innovation Work. New Jersey: WhartonSchool Publishing.

02. Parashar M. and Sunil Kr. Singh. 2005. Innovation Capability. Man-agement Review, 17(4), 115–23.

03. Teece, D.J. and G. Pisano. 1994. The Dynamic Capability of Firms: AnIntroduction. Industrial and Corporate Change, 3(3), 537–56; Teece,D.J., G. Pisano and A. Shuen. 1997. Dynamic Capabilities and Stra-tegic Management. Strategic Management Journal, 18(7), 509–33.

04. Cohen, W.M. and D.A. Levinthal. 1990. Absorptive Capacity: A NewPerspective on Learning and Innovation. Administrative Science Quar-terly, 35(1), 128–52.

05. Parashar M. and Sunil Kr. Singh. 2005.06. Parashar M. and Sunil Kr. Singh. 2005.07. Parashar M. and Sunil Kr. Singh. 2005.

Web Resources

01. http://www.3m.com02. http://www.referenceforbusiness.com/management/Gr-Int/

Innovation.html03. http://solutions.3m.com/wps/portal/!ut/p/kcxml/04_Sj9SPykssy0x

PLMnMz0vM0Q9KzYsPDdaP0I8yizeIDwrQL8hwVAQABzAF5w!!

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04. http://www.businessweek.com/2000/00_38/b3699129.htm05. http://www.businessweek.com/1999/99_50/b3659021.htm06. http://hbswk.hbs.edu/item.jhtml?id=1444&t=innovation07. http://www.strategos.com/articles/internalmkts/markets4.htm08. http://www.shell.com/home/Framework?siteId=gamechanger-

en&FC2=/gamechanger-en/html/iwgen/leftnavs/zzz_lhn2_0_0.html&FC3=/gamechanger-en/html/iwgen/about_shell/introduction.html

3 Knowing

Knowledge Capability � DiverseWorkforce � Consumer/CustomerKnowledge � Networks � R&DInvestment � Multifaceted DevelopmentPrograms � Conclusion� Key Takeouts

There is another organization that is legendary for itscommitment to innovation and the systematic pursuitof it. DuPont is responsible for creating several inno-vative products in its portfolio like Neoprene, Nylon,Lycra, Dacron and Teflon. The DuPont commitmentto research dates back to the early 1900s where the firstR&D department was set up. Typical of the times, whenmany of the research projects failed to come to frui-tion, one of the two cousins who ran the company,

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Knowing

Alfred I. Dupont, started questioning the need for R&D.However, Cousin Pierre Dupont ensured that DupontR&D survived, and to this day, it has flourished.

In 1926, Charles Stine, the director of DuPont’sCentral Research department put up a proposal toundertake pure research or fundamental research.He asked for funds to hire researchers who wouldthen work on chemical problems that interested themwithout any pressure on practical applications. Stinebelieved that practical applications would follow au-tomatically. Dupont’s commitment to R&D investmentled to them approving far more money to follow hisproject than Stine had even dreamt of.

Stine’s first two recruits were Alan Coburn andWallace Carothers. Both proved to be blockbuster findsas Coburn developed the field of chemical engineeringand eventually set up a department at the Universityof Delaware. Carothers came on board and flourishedtoo in the open environment, and quickly created thebreakthrough that would result in neoprene. Carotherswas also working on a new artificial fiber but hadseveral technical problems with it. He eventually set itaside and tried to work on something else. At the time,a new director was brought to Central Research, ElmerBolton, who believed that practical applications wereessential for fundamental research. Bolton believed thatCarothers was on to something with his new fiberresearch and kept pushing him to deliver results. Thepressure worked and Carothers eventually developedthe fiber that would be called nylon in 1937.

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Dupont’s focus on research that worked continuedthrough the post-World War II era. By then nylon wasa hugely popular fabric. Yet constant consumer researchshowed that in a time where washing machines weremaking life easier for women by taking over laundry,there was one task that was still painful for women—Ironing. Dupont, never one to leave a market opportu-nity alone, developed a wash-and-wear, wrinkle-resistant fabric—dacron.

Dupont also took the step of involving key custom-ers in their R&D process. Large numbers of custom-ers were invited along with R&D and marketing teamsto incorporate both marketing and consumer insightsinto the research process. This ensured that a greaterproportion of work was done in areas that had itsroots in information from the market and consumers,and therefore, a greater chance to succeed. Dupontis extremely aware of the fact that in the chemicalindustry, innovation must be based on consumer andcustomer insight as well as their research-based know-ledge. If they depend solely on research output, thenthey face the risk of commoditization and incremen-tal innovation that may leave Dupont by the waysidein the marketplace.

Dupont also believed in the sharing of knowledge.It took the extremely unusual step (for a money-makingcorporation, at least) of publishing its research in acade-mic journals. These led to other academic minds beingable to study and further research the various scientificprojects that interested them. Charlie Pedersen, a

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Knowing

chemist at Dupont was even awarded a Nobel Prize inChemistry.

Dupont does not stop at publishing its knowledge inthe academic domain. It also runs a program in its CropProtection unit called University Compounds. Univer-sity Compounds asks researchers to send Dupontsamples of molecular compounds that they are work-ing on. In case Dupont finds them interesting, Dupontwill offer to buy the compounds off the researcher andundertake their own testing. If the tests look positivethen the researcher may be invited to participate in aresearch cooperation program. Dupont claims that newproducts now contribute to 33% of Dupont revenuesand the goal is to make that figure 35%. The way Duponthas been managing their innovation process, it seemsvery likely that they will get there sooner than later.

Some very important learning emerges out of thisDupont example. This particular organization seemsto be building some very important reservoirs of know-ledge. As has been argued before, the richer and morediverse these reservoirs of knowledge are, the greaterthe chance of being able to combine them and comeup with new knowledge. Investments in R&D helpbuild large reservoirs of technical knowledge thatcan absorb new knowledge. Consumer knowledge isbuilt through a robust program of consumer research.Often it is said that when consumer knowledge is com-bined with technical knowledge, the results will bemore successful and more profitable than innovationsbased only on one or the other.

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Knowledge Capability�

If an organization wishes to form new combinationsof knowledge, then it needs to have a diverse set ofknowledge bases. These knowledge bases also helpabsorb new knowledge.1 The notion is simple. Oneneeds to know multiplication first to be able to domathematical operations like square roots or calculus.These two roles of knowledge, of sustaining itself andattracting new knowledge, make it very importantfor continuous innovation in the organization. Know-ledge reservoirs then represent a constituent capabil-ity of innovation capability. This capability can thusbe defined as the sum total of knowledge assets of thefirm that determine its capacity to absorb and createnew knowledge.

Knowledge resides in various forms. The most com-mon classification is explicit knowledge (codified) andtacit knowledge (resides in people).2 The explicit formof knowledge is the kind of knowledge that can becodified into documents, manuals and databases. Thiskind of knowledge is thus easy to transfer. Also, thisknowledge forms the foundation of the knowledgecapability of an organization. The greater the docu-mented store of knowledge that is easy to access anduse, the greater the chance that continuous innova-tion will happen.

There is also knowledge that is difficult to codify,and hence only resides in people who possess it. This

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Knowing

kind of knowledge can be in the form of special skillsor in the form of heuristics used for decision-making.These are essentially thumb rules that people developwith personal experience or through anecdotal evidenceof other people. Everybody possesses heuristics abouttheir jobs or skills. Anyone who has to work with thegovernment will see the best evidence of heuristics—the formal rules for getting something done is often verydifferent from the practical way to approach it.

However, when a new person enters a job, then whilethe explicit knowledge is often passed on, it is the heu-ristics involved that rarely get translated explicitly. Thechallenge with heuristics and special skills is two-fold,one, to bring it out as explicit knowledge and second,to make it possible to combine it with other kinds ofknowledge.3

There is another kind of knowledge that existsamong groups of people. This is the notion of socialcapital, which is defined as resources embedded in re-lationships.4 These resources are usually knowledgeresources. Having a variety of relationships increasesthe access that an organization has to external know-ledge reservoirs.

The question is that how does an organizationensure that it has enough knowledge reservoirs to keepthe innovation tunnel buzzing? The most direct wayis to consciously look at the three kinds of knowledgeand deliberately build reservoirs based on these kindsof knowledge. In the following section some impor-tant ways to build bases of knowledge are discussed.

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contd.

The Indian Angle—Infosys

Infosys is the brand that stands for Indian IT in manyeyes. One of the earliest software companies to pioneerits ‘Global Delivery Model’ Infosys has a turnover of US$2,152 mn and it is only celebrating its 25th anniversaryin 2006. With 52,175 employees in offices all the wayfrom Atlanta to Zurich, with Bangalore & Utrecht thrownin, Infosys is truly a global company. So how does thisglobal company ensure that all its employees are on thesame page with each other and their customers? By build-ing its knowledge capability.

Infosys is an organization that has made great stridesin managing and using its knowledge capabilities. As aconsulting company, Infosys places a premium on build-ing knowledge pools across divisions and levels. To thisend, they have put into place several practices such asregular workshops, white papers, seminars, webinars, etc.that ensure that knowledge is recorded and shared.

Infosys has also been recognized for its knowledgecapability. In 2005, it was inducted into the Most AdmiredKnowledge Enterprises (MAKE) Hall of Fame. MAKE isa research program that researches and acknowledges thebest practice knowledge organizations globally. Infosyshappens to be the only Indian company inducted intothe Hall of Fame.

Infosys’ knowledge networks are not restricted onlyto its own organization. A 2002 agreement with IBMensures that employees create knowledge across the twoorganizations through IBM’s software developer plat-forms and Infosys’ knowledge management intranet.

Infosys knows very well, that in the knowledgeeconomy, it is the company that can mine and use itsknowledge capability that will end up as the winner of

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Diverse Workforce

As already discussed people possess knowledge thatis not easily codifiable. Hiring people with the kindsof skills and experience that an organization requiresis the sure-fire way to build non-codifiable knowledgewithin the organization.5 Recruitment proceduresgeared towards building work groups with diverseskill-sets will ensure that a better cross-section of non-codifiable knowledge will be represented.

Apart from non-codifiable knowledge there is a greatdeal of knowledge that exists in people that may becodified with effort, but there is a huge cost involvedin doing so. This knowledge comes from their back-ground, their experiences; the various degrees or typesof education they possess; social, religious and ethnicbackgrounds also provide special knowledge to people.Even the out-of-office interests that people possessendow them with distinct knowledge. If organizationscan hire people keeping an eye on a heterogeneous

contd.

the game. Infosys does all the necessary things—recruit-ing a diverse workforce across nationalities and skillsets, building internal and external networks to accessknowledge, doing R&D to sustain new knowledge, learnabout consumers and customers alike, and create newprograms to ensure the dissemination of knowledge. Inthese respects, Infosys is truly a knowledge company.

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mix of people, then the cause of innovation will beserved.6 Homogenous set of employees may result in acomfortable but non-creative environment. This non-creative environment may be great for efficiency ortraining ease. But if the overlap of knowledge is high,it is unlikely that there will be enough knowledgediversity for new knowledge to be created.

Consumer/Customer Knowledge

A deep understanding of the consumer provides astrong base for innovation.7 This understanding doesnot come from normal market research that is done tovalidate pending decisions. Product tests, advertisingtests or simulated test markets while important to helpmake informed decisions, provide very little informa-tion that can result in promoting a deep understand-ing of the consumer. While validation is necessary atvarious points of the marketing cycle, the organiza-tion needs to take an exploratory approach to marketresearch to sustain the spirit of innovation.

There are some techniques that explore the consumerpsyche in depth, and there are also techniques that bringout the social aspect of consumer behavior. Techniquesborrowed from other social sciences like ethnographyand phenomenology are useful in understanding be-havior in social contexts. Techniques from psychologylike projective techniques explore the consumerpsyche. Pure observation tactics represented by un-obtrusive methods provide a different view into the life

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Knowing

NetworksBuilding strong

internal andexternal networks

enabling accessto reservoirs of

knowledge.

Knowledge CapabilityThe sum total of knowledge assets of the firm that determine its capacity to

absorb and create new knowledge.

Knowing

DiverseWorkforce

Heterogeneity inskills, competencies,

demographic andeducational

backgrounds.

R&DInvestment

Strong investment inboth basic and

applied research todevelop a large

reservoir of technicalknowledge.

Consumer/Customer

KnowledgeFocus on exploratoryresearch to develop adeep understanding

of consumer/customer.

MultifacetedDevelopment

ProgramsDevelop workforce

into a strongknowledge base by

enhancing theirskills, knowledge and

competencies.

Figure 3.1: Building Knowledge Capability

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of consumers and customers. The idea is to use meth-ods that explore rather than validate. Exploration addsto the knowledge base of consumers. This, when com-bined with internal technical knowledge, can providenovel ideas.

Networks

There is an important role that networks play in build-ing reservoirs of knowledge.8 These networks can beboth formal and informal. The whole notion is thatknowledge that exists in relationships both inside andoutside the organizational boundaries becomes a partof the total knowledge base of the organization. At aformal level attempts should be made to have a strongnetwork with universities (involved in research), con-sumer bodies, industry bodies, and other specializedinstitutions. The knowledge that would exist in theseinstitutions would then become a part of the know-ledge architecture of the organization.

Equally important are the informal socializing tiesthat organizational members have with the outsideworld. These can be with batch mates, social circles,hobby clubs, professional societies, etc. These relation-ships again hold immense amounts of knowledge thatcan be used for organizational innovation purposes.The way an organization can make this work is bymaking employees aware of the value of these rela-tionships and how they can further their careers alongwith giving the organization a competitive edge.

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Knowing

Then the networks within the organization also playa role. But that role is in terms of sharing and combin-ing knowledge. They are important for the final com-ing with innovative ideas phase.

R&D Investment

Most innovative organizations spend a significant per-centage of their turnover on research. P&G spendsabout 3.5% of worldwide sales on R&D. For Dupontthat figure is about 4.9%. 3M has an even higher per-centage of sales spend of about 5.8%. This is largelybecause investment in R&D helps build technicalknowledge base. Now this investment can be in basicresearch or in applied research. This would dependon the kind of strategy that the organization follows.If the organization is looking at making fundamentalchanges in the business environment through break-through products and services, investment in basicresearch has to be fairly high. 3M is an organizationthat has historically encouraged basic research. Thepurpose of 3M’s Pro-Fab Lab was to work on basicresearch that could turn up interesting ideas. Theseinteresting ideas need not have been related to anyexisting 3M project, product or initiative. However, ifthe researcher at the time felt that there was an appli-cation possible from his research, then he could pitchit to any of the 3M divisions for further funding anddevelopment. 3M calls this kind of research as fuzzyfront end research. At the time that the research is

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undertaken, no one knows whether there will beany useful application developed from it. Yet 3Mresearchers can keep going at it for months, evenyears until they figure out something of interest. In1944, 3M acquired the rights to a process for creatingfluorochemical compounds. At the time and for 12years after that, no one had figured out what to dowith the compounds. But 3M persevered with the tech-nology and in 1952 Patsy Sherman began the researchthat would lead to the launch of Scotchgard in 1956.

Even if the intention is to use basic research fromsomewhere else and apply it to solutions, the organi-zation necessarily has to invest in applied research.Today the rate of technical change is pretty fast andtechnology itself is complex. Any organization thatneeds to utilize a new technical advancement needs tohave a basic understanding of technology. That un-derstanding cannot be formed without investment inapplied R&D.

Even an imitating strategy needs a basic understand-ing of what is being imitated. If an organization Ainvests $50 million dollars on a new technology andlaunches a consumer product for it, many companiescan try and imitate it. So if organization B wants tomake a cheap knock-off, it still needs to be able totake apart the product and recreate it. Imitators there-fore have to invest in basic technical knowledge. Pres-ence of in-house technical knowledge not only helpscreate new knowledge or innovations but also helpsabsorb new technical knowledge from outside.9

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Knowing

The Indian Angle—Tata Motors

Tata Motors, formerly known as Tata Engineering &Locomotive Co. Ltd. or Telco is one of the grand-daddiesof the Indian automotive industry. Yet, the organizationhad never forayed into passenger cars until its launch ofthe ‘India Car’ Indica in 1998.

The thought behind the Indica shows the root of thequest that Tata Motors embarked on with innovation.The company’s management were challenged by RatanTata to build a car that had all the characteristics of thebest cars in the market at the time and deliver it to theconsumer at the lowest price possible. Tata Motors hadto look around for inexpensive R&D in an industry domi-nated by MNCs that had decades of passenger car expe-rience and the budgets to match.

In this effort, Tata Motors launched the Indica. How-ever, the Indica too was not the overnight success that itwas supposed to be. Tata Motors then went back to thedrawing board and worked on the car all over again.

The second time around, they got the formula rightand the Indica was relaunched with great success. Today,Tata Motors has its lessons down right. Its investment inR&D has increased from 1% of sales in 2004 to as muchas 2.2% of sales in 2005.

Famously a straight-laced organization, Tata Motorshas also adopted the procedure of assembling cross-func-tional groups from different departments that work to-gether. These teams come together to work on deputationfrom their departments on new ideas. The types of projectsare wide and varied, and significantly, for an Indian com-pany, not all of them have immediate applicability. TataMotors realizes the importance of building knowledgecapability in the organization to ensure that it remainsequipped for the future.

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Multifaceted Development ProgramsOrganizations can actively increase their total know-ledge base by developing the knowledge capabilityof the workforce.10 The ways in which this can beachieved are many. The fundamental way is to exposethem to new knowledge through training programs.These could be in-house, or to maximize benefits, couldbe in leading educational institutions. Exposing orga-nizational members to new and varied experiences canalso help development of this capability.

As an organization there could be an emphasis oncreating special interest groups that work not only onorganizational problems, but enhance the overall un-derstanding of subject matter. P&G’s technical entre-preneurs focus solely on gathering outside knowledgeon research topics and disseminating that knowledgeto P&G researchers. They attend seminars, forums andtraining to actively collect this outside information andmaterial. MyINet in P&G remains as an active sourceof information and research, both from within P&Gand from the outside world. There could even be com-munities of practice headed by masters from within oroutside the organization that instill new tacit know-ledge in people.

Conclusion�

Knowledge capability is the fundamental capabil-ity that an organization needs to build to be able to

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Knowing

innovate on a continuous basis. Knowledge itself isthe raw material of innovation. If there are many di-verse kinds of raw materials available, they can be puttogether in countless new ways to deliver a continu-ous stream of finished product, i.e. new knowledge orinnovation. Organizations have to deliberately buildreservoirs of knowledge to be able to become trulyinnovative organizations.

A robust knowledge capability will also ensurethat the organization is able to absorb new know-ledge from the external world effectively. This wouldlead to a virtuous cycle of ever expanding know-ledge capability. Long-term competitive advantagefor the firm then is truly assured. What is required isan appreciation that knowledge is at the base of allinnovation.

Key Takeouts�

• Knowledge capability is fundamental to the overallinnovation capability of a firm.

• Three kinds of knowledge—explicit, tacit and theone existing in relationships are all required to buildknowledge capability.

• Investment in consumer knowledge and R&D buildreservoirs of explicit knowledge.

• Networks exploit the knowledge present in relation-ships.

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• A diverse workforce and multifaceted developmentprograms are keys to building a big base of know-ledge in the organization at a tacit level.

Notes


02. Nonaka, I. and H. Takeuchi. 1995. The Knowledge CreatingCompany: How Japanese Companies Create Dynamics of Innovation.London: Oxford University Press; Polanyi, M. 1967. The TacitDimension. New York: Doubleday.

03. Nonaka, I. and H. Takeuchi, 1995.04. Coleman, J.S. 1988. Social Capital in the Creation of Human

Capital. American Journal of Sociology, 94(5), 95–120; Nahapiet,J. and S. Ghoshal. 1998. Social Capital, Intellectual Capital andthe Organizational Advantage. Academy of Management Review,23(2), 242–66; A. Portes. 1998. Social Capital: Its Origins andApplications in Modern Sociology. Annual Review of Sociology,24, 1–24.

05. Ghoshal, S. and C.A. Bartlett. 1997. The Individualized Corpora-tion: A Fundamentally New Approach to Management. New York:HarperBusiness.

06. Thompson, L. 2003. Improving the Creativity of Organizational WorkGroups. Academy of Management Executive, 17(1), 96–111.

07. Marinova, D. 2004. Actualizing Innovation: The Impact of MarketKnowledge Diffusion in a Dynamic System of Competition. Journalof Marketing, 68(3), 1–20; Desouza, K.C. and Y. Awazu. 2004. Gain-ing a Competitive Edge from Your Customers: Exploring the ThreeDimensions of Customer Knowledge. KM Review, 7(3), 12–15; Brown,S. and K.M. Eisenhardt. 1995. Product Development: Past Research,Present Findings and Future Directions. Academy of ManagementReview, 20(2), 343–78.

08. Powell, W.W., K.W. Koput, and L. Smith-Doerr. 1996. Inter-organi-zational Collaboration and the Locus of Innovation: Networks ofLearning in Biotechnology. Administrative Science Quarterly, 41(1),116–45; Tsai W. and S. Ghoshal 1998. Social Capital and Value

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Creation: Role of Intra-firm Networks. Academy of Management Jour-nal, 41(4), 464–71.


10. Roffe, I. 1999. Innovation and Creativity in Organizations: A Reviewof the Implications for Training and Development. Journal of EuropeanIndustrial Training, 23(4), 224–37.

Web Resources

01. http://www.heritage.dupont.com, DuPont: The Enlightened Organi-zation by Dr. John Kenly Smith, Associate Professor of History atLehigh University and Co-Author of Science and Corporate Strategy,DuPont R&D, 1902 to 1980.

02. http://pubs.acs.org/cen/coverstory/83/8316specialtychem.html03. http://www.williammcdermott.com/proctor_and_gamble.pdf04. http://www.businessweek.com/magazine/content/04_41/b3903463.

htm05. http://www.ugs.com/about_us/success/pg.shtml06. http://www.intel.com/cd/ids/developer/asmona/eng/strategy/retail/

52546.htm07. http://www.intel.com/business/casestudies/pg_research.pdf http://

www.askmecorp.com/press/jul16.asp08. http://www.baselinemag.com/article2/0,1540,1620221,00.asp09. http://www.fastcompany.com/magazine/95/design-qa.html10. http://www.msnbc.msn.com/id/7856259/site/newsweek/11. http://hbswk.hbs.edu/item.jhtml?id=5258&t=innovation&iss=y12. http://www.expressitpeople.com/20020812/careers4.shtml13. http://www.destinationkm.com/articles/default.asp?ArticleID=98214. http://www.infosys.com/media/press_releases/global-make-award-

hall-of-fame.asp15. http://www.infosys.com/about/quick_facts.asp16. http://rediff.co.in/money/2005/nov/19spec.htm17. http://www.tata.com/tata_motors/articles/20040925_tata_motors.htm18. http://knowledge.wharton.upenn.edu/index.cfm?fa=viewArticle&id=

127519. http://www.tata.com/tata_motors/articles/20030802_crash_testing.

htm

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20. http://www.tata.com/tata_motors/articles/20030825_challenge.htm21. http://www.tatamotors.com/our_world/press_releases.php? ID=227&

action=Pull22. http://www.tatamotors.com/our_world/press_releases.php?ID=

192&action=Pull23. http://www.tatamotors.com/our_world/research.php24. http://domain-b.com/companies/companies_t/tcs/20041208_deal.html25. http://www.tata.com/tata_motors/articles/20030424_rebuilding_

success_stories.htm26. http://www.cfoasia.com/archives/200512-01.htm

4 Attitude

Attitudinal Capability � Openness� Awareness � Curiosity� Playfulness � Conclusion� Key Takeouts

Incorporated in 1998, Google’s beginnings weretypical to the start-ups of the time. Graduate studentsLarry Page and Sergey Brin met when Page visited Brin’scampus at Stanford. On the tour, they started arguingabout current search technology and the sparks flew.By January 1996, they had begun collaboration on asearch engine called Back Rub. By 1998, they hadperfected their technology and were looking forpartners to license from them. They could not findany takers, and finally were encouraged to start thecompany themselves. They began by pitching to AndyBechtolsheim, the founder of Sun Microsystems. Andthey got a check for $100,000 in funding before they

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even had a company or a name for it. The check wasmade out in the name of Google Inc and so that’s whatthey named the company. Yet this start-up was gettingover 100,000 hits before it was six months old, andhas been profitable since 2001.

Google now has almost 5,000 employees in officesacross the world. The company is known for its inno-vation culture and its ability to deliver breakthroughinnovation. Google desktop and Gmail have had in-dustry biggies running for cover. It has become iconicas an employer and they claim to receive almost 1,000applications a day. What makes Google so special?

Google, though a very young organization, has de-fined its market at a very broad level. The foundersdefine their market as being “about search.” It’s pos-sible when you have a search engine and you are “aboutsearch,” that the focus of your organization will be onmaking your search engine better, faster, and moreloaded. But Google has turned that logic on its head.Their approach is to find newer products that theycan load their search technology onto. Approachedfrom that point of view, Google immediately found awide range of products and technology that could helpthem expand their business. Google has been quick toadapt, adopt, or even buy into other technology.

Google keeps the innovation flow going by lettingits employees work on things that interest them. Thereis a list of Top 100 priorities and engineers chooseprojects that they want to work on. They get togetherin interest groups and work together for days, weeks

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Attitude

or months until the project is completed. Particularlyoutlandish projects are specially marked out to ensurethat they are not judged or evaluated at that particu-lar stage. They are developed bias-free until they be-come feasible.

One such experiment is Krishna Bharat’s dynamicnews service. Bharat believed that Google couldprovide a news service that would be dynamicallyupdated every hour from different sources. Bharatsimply sent out an internal email about his project tohis co-workers. One of them, Marissa Mayer thoughtthat his idea was interesting enough to merit a trialand in six weeks Google News was up. Within threeweeks of launch Google News had 70,000 users.

Today, it is a fact that there are very few domainson the Internet that have not been penetrated byGoogle’s efficiency at search. Websites, books, images,desktops, maps, satellite images, shopping catalogues,emails and chat conversations all can be searched byGoogle’s power. Google even sells advertising basedon the location of the user so that it is better targeted.

What are the factors that make companies likeGoogle special? It is to an extent that they react as anorganization to new ideas, new knowledge and prob-lem solving. This is a kind of reflex that the organiza-tion displays. It is deeply ingrained almost in thesubconscious of an organization. This is a sort of anattitude at an organizational level. The attitude makesthe organization conducive to acquisition, transfer,and creation of knowledge. It is essentially an enabler.

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This attitude also represents a capability, an enablingcapability. If it is an enabling capability, then it can bebuilt by an organization through manipulation of itscomponent factors. This capability would influencethe manifest culture and innovation output of the or-ganization. It will contribute to the overall innovationcapability of the organization.

The Google story gives some clues on what it takesto build the right attitude. There seems to be a certainkind of openness in the organization. There is a keenawareness of what is happening in the world aroundthem. As also there seems to be an almost playfulexperimentation that appears to exist at the core oftheir innovation design.

Attitudinal Capability�

In an earlier chapter of the book attitudinal capabilityhas been defined as a relational asset (or an assetcomposed of emotional or attitudinal state of an organ-ization), that acts as an enabler for creating newknowledge in a firm. There is a need to demystify thiscapability and how it helps create new knowledge asalso figure out what organizations could do to buildthis capability. The creation of knowledge requiresthree distinct steps. The first is acquiring knowledgeboth from within and outside the organization. Thesecond step is that of transferring it to locations where

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it is required. The final step is combining the availableknowledge in a novel manner to create new knowledgethat the organization can use to build efficiency, launchnew products or services, expand markets or save cost.

Acquisition of knowledge in a continuous mannerrequires a certain attitude. The ability to look out intothe environment, welcome new ideas and thoughts,and a questioning mind. Google’s concept of identifyingwhere their search technology could make a differencehas helped them come up with varied applications likeGMail, Google Desktop, Google Answers and ofcourse, Google News. Combining various kinds ofknowledge also takes a special attitude to knowledgeitself. Seeing connections where none have existed tillnow and the ability to play one set of ideas with anotherset of ideas. Google has also used capabilities fromdifferent parts of itself to come up with new ideas. InOctober 2004, Google acquired Keyhole, a digitalsatellite image mapping company. Out of the Keyholeacquisition, came two very different applications. Oneis Google Earth, where users can zoom in on satelliteimages of any place in the world. The second, at theopposite end of the spectrum, is Google Local andGoogle Maps, that help users (in North Americainitially) to find navigation information and maps toany place that they wanted to get to.

This special attitude that Google has developed isclearly multidimensional. There are four distinct atti-tudinal attributes or factors that contribute to attitu-dinal capability.

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Openness

Openness has been shown by management theoriststo have a direct link with organizational learning.1 Thewillingness to absorb new ideas, step out of comfortzones, trying out new ways of doing things, and com-fort with often ambiguous and conflicting knowledgeis broadly what openness is all about. This opennessoperates at many levels. The first level is an atmo-sphere of free exchange of ideas within an organiza-tion. People at all levels respecting ideas that otherpeople come up with, results in a surfeit of importantknowledge traveling across the organization. The keyhere is listening and absorbing.

The second level is about not getting caught in func-tional silos. Active and open collaboration withoutany hidden agendas on projects often results in break-through innovations. In a truly open organizationthis collaboration would happen both at a formal andinformal levels. The third level of openness is aboutthe willingness to experiment with new ideas that liebeyond the comfort zone of the organization. There isan element of risk-taking here. Backing radical projectstakes a higher order of openness. This is becausethe organization is open to difficult projects as well asfailure.

The final level is about being open to informationor knowledge from outside organizational boundaries.Free flow of knowledge from outside the organizationoften creates discomfort. The reason behind that is

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The Indian Angle—Tata Motors

When working on the Indica, Tata Motors had a massivechallenge on their hands. The car was to be a completelyindigenously developed car and more importantly, wasto be value for money. This in an industry dominated byMNCs that had decades of passenger car experience andthe budgets to match.

Tata didn’t quite get it right the first time around.In 2001, with a poor quality car on its hands and aRs 500 cr (5 bn) loss, the organization was probablyat its lowest point ever. Ravi Kant, the managing directorknew that drastic steps had to be taken and he tookthem.

Tata Motors realized, as an organization, they neededto be more open and listen to what the market wastelling them. Tata Motors embarked on a knowledgeexercise that took its suppliers right into their car. Theorganization began asking its suppliers not only togive them the best quality parts at the best value butalso to join them in understanding what the parts didin the entire car—and how that entire car could beimproved.

The insights that Tata Motors got out of thisknowledge are extraordinary. This resulted in an entirelynew and improved version of the Indica being launched.By 2005, not only did Tata Motors have 18% of thepassenger car market, but they had also turned 2001’sRs 500 cr loss into a profit of Rs 1,237 cr. Tata Motors isclearly on a roll. A roll that began with a shift in theirattitude. An attitude that called for more openness,awareness, and curiosity about the marketplace and itscustomers.

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that this new knowledge may question the basic as-sumptions the organization operates on. Also, theinformation coming in may be contradictory. It takesa really open organization to be able to process andabsorb this knowledge. Often this knowledge is whathelps organizations create breakthrough innovation.2

Keeping in sync with environment also results in aseries of process and incremental innovations.

The organizations can play a significant role in build-ing this attitude. For internal openness there needs tobe a trusting environment in the organization. Forexternal orientation there needs to be a value that theorganization needs to place on external knowledge.Both Dupont and Shell place a significant value onexternal knowledge. In Dupont’s University programthey actively solicit research compounds by paying andpartnering university researchers. At Shell’s GameChanger too, they invite ideas from the general publicand depending on who the idea comes from, eitherpurchase information or materials, and/or invest inthe organization.

IBM’s Alphaworks puts its alpha software or initiallevel software on the Internet for outside softwaredevelopers to play with. They let developers use the code,improve it, change it, and give feedback on it for a periodof 90 days. IBM also lets developers use the code asbase code for developing their own applications as well.This process has helped IBM fast-track their emergingtechnology development time to the market, from asmuch as 2–3 years to as little as six months.

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Awareness

Any organization that wants to be innovating continu-ously has to be clued into the changes happening in theworld around them. These changes could be social,technological, demographic or political. Discontinuitiesbrought about by change represent new bases of know-ledge. When knowledge of these discontinuities is com-bined with existing internal expertise, new knowledgeor innovation happens. An aware organization is onethat is always aware of its surroundings. These includecustomers, suppliers, immediate and wider society, andstate of knowledge in various fields.

Within this overall construct of awareness is a higherorder of awareness. This is the ability to abstract higherorder concepts from the happenings in the world. Thisis the ability to see beyond events and be aware thatevents maybe connected in many ways. And if these con-nections are deciphered, new knowledge may emerge.

Awareness is a state that an innovative organizationshould strive to achieve. Placing value on this attitudeshould be at the core of the organization. Peopleworking in the organization themselves need to be madeaware of the need to be aware of the world around them.

Curiosity

A constantly questioning attitude is certain to bring inknowledge. And questioning basic assumptions maybring in knowledge that has a major impact on theinnovation process. Children in their learning years

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Attitude

Figure 4.1: Building Attitudinal Capability

AwarenessClued into changes in

the environment be theysocial, technological,

political or demo-graphic. Ability to

abstract higher orderconcepts from events.

PlayfulnessSense of humour, spirit

of adventure, vividimagination to seeconnections, ability

to play with seemingdisparate bases of

knowledge.

OpennessWillingness to absorbnew ideas, step out ofcomfort zones, trying

out new ways of doingthings, comfort withambiguity and using

conflicting knowledge.

CuriosityConstant questioningof basic assumptions.

Not acceptingsomething justbecause it is.

Being unafraid ofquestions.

Attitudinal CapabilityA relational asset (or an asset composedof emotional or attitudinal state of anorganization), that acts as an enablerfor creating new knowledge in a firm.

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have this marvelous sense of curiosity. Their view ofthe world is full of wonder and the words they usemost are “Why” and “How.” This drives their phe-nomenal learning in the formative years. The greaterthe curiosity, the faster and better people learn.3

The same holds true for organizations. Asking ques-tions is sure to bring in new knowledge that the orga-nization needs to feed the innovation tunnel. Thisquestioning attitude takes time and effort to develop.The organization should encourage challenging as-sumptions and the quest for knowledge.

There is another deeper side to curiosity. The know-ledge or information that is available in the environ-ment often is about phenomena that have happenedin the past or are currently happening. There is hardlyany insight into why they are happening the way theyare. This is where curiosity steps in. Constantly ask-ing “why” and “how” phenomena are taking placemakes people aware of not only occurrences, but theprobable reasons behind these occurrences. Knowingwhy phenomena happen the way they happen, iswhat insight is all about. These insights very oftenare unavailable to competitors. These can becomesignificant sources of competitive advantage. Beingcurious can pay off in more ways than one.

Playfulness

This is the most important part of creating new know-ledge or innovating. When faced with various kinds of

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knowledge, it takes a certain sense of humor, a spirit ofadventure and vivid imagination to see connectionsamong those various kinds of knowledge. When one isable to play these bases of knowledge against one an-other and establish some sort of connections, combin-ing knowledge to create new knowledge becomes veryeasy. Combining knowledge in unexpected ways is thehallmark of good humor. Anyone who has ever tried totell a good joke will know that the more unexpectedthe punch line, the better the joke will be received.

The same is true of creative ideas. The more unex-pected the thought, the more interesting the idea islikely to be. Therefore, keeping an open mind will turnthe mind more receptive to making new unexpectedconnections. One organization that keeps the humorquotient up is Southwest Airlines. Southwest hasemployees that make fake in-flight announcements,play dress-up and dance, and do just about anythingto entertain passengers. Southwest is also one of theworld’s most profitable airlines, one that has beenprofitable from its second year of operation. Secondyear!

There really is something to Southwest’s policy thatpeople who have a good sense of humor tend to bemore creative, more relaxed about life and, thereforemore productive. Playfulness in general and humormore specifically is seen to have a strong relationshipwith reducing stress, improving inter-personal skills,fostering creativity, and driving rapid learning.4 Thehumor–creativity link is important and can drive

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innovation. Southwest’s playful attitude does not mani-fest itself only as fun and games. Employees at South-west are empowered to make decisions to resolve anyissue on hand. The airline also tracks the suggestionsgiven by its employees. Southwest estimates thatemployee suggestions have saved them millions ofdollars each year.

Sometimes serious contemplation is a hindrance incombining knowledge. A playful attitude makes theprocess more fun and results in novel combinations.Another thing that playfulness brings in is that theprocess of judgement is suspended for a while. In thissuspension of judgement some really radical ideas thatlooked improbable at first maybe considered. It is agreat way to come up with new ideas. Once the playfulattitude has thrown up a large basket of ideas, theycan be submitted to the rigorous process of the inno-vation tunnel.

Conclusion�

The manner in which an organization respondsto stimuli is of great importance to the business ofinnovation. This automatic response depends on theattitude the organization possesses. It is extremelyimportant to develop an attitude that is conducive toacquisition, transfer, processing, and creation of newknowledge. This attitude has to be at an organizationallevel. The development of this attitude takes time and

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effort and needs to be presented by the organizationas a valued capability to have. Often corporate orga-nizations tend to be hierarchical, humorless and for-mal. While some of them make token efforts atplayfulness through activities run by the human re-sources department, very few organizations translatethat playfulness into their daily working life. This lackof playfulness tends to destroy the attitude requiredfor innovation to take place. While formal structuresare required to run an organization efficiently, anopen and often playful attitude is required for inno-vation.

Organizations that manage to bridge the efficientformal structure gap with attitudinal capability man-age to be efficient and innovative at the same time. Avariety of devices are used by the organizations toachieve this. Google’s list of Top 100 priority projectsat any given point in time actually has about 250 itemson it, but the point is different. This active project listkeeps the focus on things that are of interest to Googleas an organization. Within this list, researchers choosewhat they are interested in and form teams that canget together for as little as a few weeks to many monthsto work on the ideas. While the formal structure ofresearch teams is available, the openness of choosingyour team because the project idea is of interest toyou and disbanding once the project task is fulfilledkeeps the organization playful and flexible enough tohave maximum effectiveness.

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Key Takeouts�

• Attitudinal capability is an important enablingcapability that contributes to the overall innovationcapability of an organization.

• The component factors of attitudinal capability areopenness, awareness, curiosity and playfulness.

• These component factors help process knowledge,from acquisition to the creation of new knowledge.

Notes01. Argyris, C. 1978. Organizational Learning: A Theory of Action Per-

spective. Reading, MA: Addison-Wesley Publishing Company; Senge,P.M. 1990. The Fifth Discipline: The Art and Practice of the Learn-ing Organization. New York: Doubleday.

02. Leonard-Barton, D. 1992. Core Capabilities and Core Rigidities: AParadox in Managing New Product Development. Strategic Manage-ment Journal, 13, Special Issue, 111–25.

03. Hensley, R.B. 2004. Curiosity and Creativity as Attributes of Infor-mation Literacy. Reference and User Quarterly, 44(1), 31–38.

04. Miller, J. 1996. Humor—An Empowerment Tool for the 1990s. Em-powerment in Organizations, 4(2), 16–21.

Web Resources01. http://www.google.com/corporate/business.html02. http://www.google.com/corporate/tenthings.html03. http://www.google.com/corporate/history.html04. http://www.internet-story.com/google.htm05. http://www.cbsnews.com/stories/2004/12/30/60minutes/main664063.

shtml06. http://www.businessweek.com/magazine/content/04_18/b3881001_

mz001.htm07. http://www.laughterremedy.com/humor.dir/humor11_00.html

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08. http://btobsearch.barnesandnoble.com/booksearch/isbninquiry.asp?z=y&btob=Y&ean=9780767901840&displayonly=EXC

09. http://www.laughterremedy.com/articles/boost_creativity.html10. http://rediff.co.in/money/2005/nov/19spec.htm11. http://www.tata.com/tata_motors/articles/20040925_tata_motors.htm12. http://knowledge.wharton.upenn.edu/index.cfm?fa=viewArticle&id=

127513. http://www.tata.com/tata_motors/articles/20030802_crash_testing.

htm14. http://www.tata.com/tata_motors/articles/20030825_challenge.htm15. http://www.tatamotors.com/our_world/press_releases.php?ID=

227&action=Pull16. http://www.tatamotors.com/our_world/press_releases.php?ID=

192&action=Pull17. http://www.tatamotors.com/our_world/research.php18. http://domain-b.com/companies/companies_t/tcs/20041208_deal.html19. http://www.tata.com/tata_motors/articles/20030424_rebuilding_

success_stories.htm20. http://www.cfoasia.com/archives/200512-01.htm

5 Getting Creative

Creative Capability � Techniques� Communication � Innovation Space� Conclusion � Key Takeouts

IBM has re-invented itself time and again over thelast 95 years. Look at IBM’s advertising today—the“helpdesk” campaign—does it look or feel like a 95year old company? Certainly not. Few companies havewillingly shed their heritage and glorious past like IBM.Yet for IBM, this is a time of renaissance. In the 1920s,it was a manufacturer of tabulating machines. In 1953,it entered the computer business and in the 1950s and60s, became the largest manufacturer of mainframeand standalone computers in the world. The 1980ssaw IBM transform itself into a PC manufacturer andmove into the consumer space from a previously purecorporate space. Come the 21st century and IBM(though the initials stand for International Business

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Machines), is largely a software and services company,having sold off its PC business to Lenovo. Throughthe decades, the IBM brand has been growing stronger.In 2004, it clocked record sales of US $96.5 billionand a record profit of US $8.4 billion.

How has IBM consistently re-invented itself to re-main at the forefront of technological innovation? ThatIBM has been doing this for many decades is evidencedby its 4,500 research employees, more than 15,000patents and five Nobel Prize winner researchers. Inthe 21st century, IBM is encouraging its employees toshare their information and ideas and work on themfor growth.

IBM recognizes its employees as innovators. TheIBM website abounds with stories of individualinventors who have done IBM proud with their innova-tions. One thing that IBM is very clear about is that inthe 20th century, it may have been easier to makebreak-through innovation in technology because somuch of technology was yet unexplored. In the 21stcentury, it is far more difficult, because customers nolonger embrace technology for technology’s sake. Theyquestion and evaluate the technology for the valuethat it provides them. In this scenario, IBM ensuresthat its employees get together and think about theimplications of technology, to think about wheretechnology can make a difference. Online communitieslike ThinkPlace encourage employees to post ideas andsuggestions about IBM’s products and services. Manyof them make it through to evaluation for commercial

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testing. It’s not enough to merely set up the forum, itis necessary to encourage active participation as well.

In an era where most organizations are trying toblock employee access to “goof-off” on the Internetwhere they perceive “random surfing” taking place,IBM has set up blogging communities where upwardsof 3,000 employees actively blog about whatever thatstrikes them as interesting. While an exhaustive codeof conduct exists about blogging behavior, the flip-side is that this code of conduct has been devised bythe employees themselves through a “wiki” site—where changes can be made and viewed online. IBMbloggers include very senior IBM employees.

IBM encourages employees to think laterally aboutbusiness problems or ideas while looking at the out-side world. IBM even highlights inventors on theirwebsite and proudly talks about the results of theirlateral thinking efforts. Llamas and auto insurance,computing grids and breast cancer, telematics andcar problems, they all come together under IBM’sinitiative towards innovation and lateral thinking toget there.

But IBM is not creating communication spacesand thinking tools only for its employees. IBM alsoset up supply chain management curriculum at vari-ous US universities when it realized that businessprocess problems would be the biggest area whereIBM could see exponential growths. Not only is itfocussing on an existing area of study like supply chainmanagement, IBM is also developing a new area

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that it calls services science. IBM’s services sciencecombines anthropology, game theory and behavioraleconomics to integrate technology that makes servicesbusinesses more efficient and satisfying. IBM is work-ing harder than ever to define the new face of tech-nology in our world. That better than anything elseanswers the question in their new US ad campaign,“What makes you special?” IBM’s answer, quitesimply, is innovation.

Well, IBM seems to be doing interesting things inits quest for innovation. There are some techniquesthat they are using, lateral thinking for one. Other thanthat, they seem to be creating spaces where minds andstreams of knowledge can meet and actively create newknowledge. Blogs and ThinkPlace are examples of this.Also, they seem to be creating forums for even newdisciplines to deliberately let varying disparate streamsmingle together to create competitive advantagethrough new knowledge. These set of things actuallyrepresent the third constituent capability that anorganization can build. In the next section it is dealtwith in detail.

Creative Capability�

Once an organization has built disparate reservoirs ofknowledge and got its attitude absolutely right, onething remains to be done, the onerous, very serious,

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playful and exciting task of combining these disparatebases of knowledge. Often this happens either bychance or by force of circumstance, or by a brilliantindividual. All of these are not ideal for an organiza-tion that wants to deliver innovation continuously.Thus there is a need for a set of processes or assets inan organization that can make this combination ofknowledge an ongoing process. In short, the organi-zation needs creative capability.

Creative capability can be defined as the ability tobring together various types of knowledge in a novelmanner. At times these stream would have to bebrought together with some amount of force. If youbanged the different streams together, the violentmix would create something new altogether. At othertimes the streams have to just mingle and create newforms of knowledge. There are a few time-tested waysof making this happen.

Techniques

Idea generation or generating options for the innovationtunnel is often seen as a black-box. Organizationsemploy a lot of tactics to get ideas without openingthis black-box. The most popular among these tacticsare brainstorming, putting up of idea bins and runningcontests. These tactics do not systematically bringtogether knowledge to create new knowledge or newideas, or innovation in short.

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In the IBM example in the beginning of the chapterthere was the use of lateral thinking techniques inventedby Edward de Bono.1 The techniques used in lateralthinking essentially work by making novel combinationsof existing knowledge or by inducing a type ofknowledge that has not been considered before. Someof the techniques like “random insertion” in lateralthinking use a random object as a start point to startrecombining knowledge that exists. The same holdstrue for “reversal” where the conventional wisdom isreversed. The most famous example of the use of thistechnique is the Indian cooking oil brand Saffola. Useof excess oil in cooking is supposed to be bad for theheart. But once the proposition was reversed to cookingoil that is good for the heart, existing knowledge abouthuman health and certain vegetable oils could berecombined to deliver a breakthrough product.

Another interesting way to combine knowledge isthe use of metaphors or metaphorical thinking. Thistechnique has been used by a wide variety of peoplefrom religious leaders, to writers, and even organiza-tions. The basic idea here is to force a metaphor andall that it represents onto an existing base of know-ledge and then recombine knowledge in novel ways.

There are many other techniques that exist for cre-ativity.2 Any organization should make sure that theseare spread through the organizations and become stan-dard tools. This may be done through training pro-grams, insistence on the fact that each idea be backedby use of techniques, etc.

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Create

Figure 5.1: Building Creative Capability

TechniquesMaking available a

set of techniques likelateral thinking to

aid forcing togetherdisparate bases of

knowledge.

Creative CapabilityThe ability to bring

together various typesof knowledge in a novel

manner is what thiscapability represents.

It comprises tools,techniques and enablers.

Innovation SpaceCreation of physical

or virtual spaceswhere knowledge andideas can intermingle

in a relaxed andinformal manner

leading to creation ofnew knowledge.

CommunicationEnabling both formaland informal channelsof communication to

bring together differentkinds of knowledge by

intelligent use of ITand creation of other

communicationchannels.

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The Indian Angle—Biocon

Biocon, as one of India’s largest biotechnology companies,has several active R&D projects at any given point in time.Started in 1978 by a lady who would eventually, if ratherbriefly, become India’s richest woman, Kiran MazumdarShaw, Biocon focussed on generic pharmaceuticals.Generics was a field where more Indian pharma and biotechcompanies operated, with non-infringing manufacturingprocesses of patented drugs, or off-patent drugs.

However, the pharmaceutical industry is extremelycompetitive and any organization with an eye on the long-term like Biocon needed to look further up the value chain.Biocon recently ventured into collaborative R&D work-ing with other organizations jointly on projects and shar-ing knowledge and results. Some of these projects requirecollaboration with teams in other countries; some requirecompliance to procedural norms like ISO 9001. Bioconneeded to invest in R&D, which it did, increasing R&Dinvestment by 76% in 2005 over 2004. However, Bioconalso realized that to generate the maximum returns ontheir investment they had to make sure their teams workedto their maximum effectiveness. For this they needed thehelp of technology.

Biocon worked with IBM to create platforms to helpits teams work and communicate better. These platformsensured that the teams had ready access to norms and toeach other. Using these platforms, Biocon’s IT team thendeveloped monitoring tools to help their scientists. TheLaboratory Information Management Systems (LIMS)ensures that the outcome of clinical trials is directly up-dated on the system. This system can then be accessednot only by Biocon scientists but also their partner col-laborators in other locations.

contd.

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Getting Creative

Communication

The techniques that were just discussed forced know-ledge together in new ways almost like a particlecollider. However, there are ways in which know-ledge can be allowed to mingle in more benign ways.This approach is more continuous than episodic.Effective communication across levels and functionsallow for mingling of ideas and knowledge in a seam-less manner. Any organization that is serious aboutinnovations needs to closely look at the robustness ofcommunication.3

People within organizations communicate at twolevels, formal and informal. The formal processesare often very well defined. But often they followfunctional and hierarchical path flows. Not an idealcondition for an open sharing of ideas. Informalcommunication is often viewed with suspicion anddiscouraged. However, informal communication isprobably the fastest way to exchange ideas. Commu-nication with or just surfing of the outside worldis also discouraged except for specific projects. Thisdiscourages flow of knowledge into the organization.

Biocon, therefore, has used technology to create a spacefor its scientific teams to communicate with each otherand working towards the same goals on projects. Bioconhas used technology to build its creative capability in anintensely scientific environment.

contd.

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IBM may today be an organization that has got itsgame together in terms of innovation and its directionfor the future. However, things were not always sogreat at the Big Blue. In the 1970s IBM believed thatcomputers were just what its name meant—‘BusinessMachines.’ IBM had focused its entire product devel-opment process on making bigger and bigger machinesthat could handle massive computational tasks.

Meanwhile, however, two unlikely heroes by thenames of Steve Jobs and Steve Wozniak were busycreat-ing the product that would create history—thePersonal Computer (PC). The PC brought computingto every home and to every person’s fingertips. By 1981,IBM had created its own PC—with an operating systemcalled DOS from a tiny start-up called Microsoft. TheIBM PC and Microsoft would soon become ubiquitouswith the PC. And yet, once again, just like the previousyears when IBM created an advantage for itself,opportunities passed IBM by. A lack of communica-tion with each other and their customers meant thatIBM once again lost its way in the competitive market-place.

It was not until 1993 with the advent of LouGerstner Jr, that IBM once again began to pick up thepieces. They began again to talk to their customersand understand where the market was leading. Andthis time they correctly identified the movement asbeing towards the Internet and e-commerce. IBM nowbecame the organization that helped other companiescommunicate.

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Information technology is transforming the wholemode of communication within and outside organ-izations. Instant messengers, emails, bulletin boards,etc. can be great means of communication. P&G’sMyINet posts ideas, information and experts forresearchers to gather information, or have theirresearch problems discussed/evaluated. The wholeexchange of ideas can be accelerated by putting inplace novel means of communication. Once ideas andknowledge are allowed to mingle, new knowledge issure to blossom.

Innovation Space

Water coolers and coffee-vending machines are sup-posed to be the most productive places in an organ-ization as far as coming up with innovative ideas isconcerned. They bring people from various functionstogether in a rather relaxed and informal environ-ment. Nobody is judging what is being said, andbingo! there is a flow of ideas. Can this be recreatedin a deliberate manner to get a flow on innovativeideas?

IBM has created a virtual innovation space inthe form of ThinkPlace. This is again a way of usinginformation technology in an innovative manner.Organizations can create these virtual spaces throughthe use of intranet, like P&G’s MyINet. Blogging sitesalso represent spaces where disparate bases of know-ledge can be brought together.

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Physical spaces can also be created in forms ofcreative lounges, meeting places and other spaces whereknowledge can be brought together in pursuit ofinnovation.4 3M’s Tech Forums are exactly these kindof open meetings where researchers get together todiscuss their projects, ideas, and learn from each other’swork. Special interests groups or committees, or hobbygroups that relate to business innovation can alsobe created and can be a part of the whole innovationspace that an organization possesses.

Conclusion�

The creative capability is the final step in formation ofinnovation capability of the organization. This is thecapability that ensures output of ideas. The one thingthat is important to note is that each of the threecapabilities play a distinct role in making an organ-ization deliver continuous innovation. Creativecapability is a capability that works best if the othertwo capabilities—knowledge and attitudinal are welldeveloped.

The effort in the creative capability is to create someamount of mingling as well as forcing together of dif-ferent bases of knowledge. The accent is on doing itdeliberately. This would create some amount of fluxin the organization, which gets taken care of by theinherent attitudinal capability that the organization

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Getting Creative

develops. The knowledge capability forms the bedrockof all this. In the next few chapters, development, main-tenance and renewal of these capabilities would bedealt with in some amount of detail.

Key Takeouts�

• Knowledge residing in different parts of the organ-ization and different individuals needs to be broughttogether to create new knowledge.

• Creative capability plays the role of bringing know-ledge together.

• Constituents of creative capability are techniques,communication and innovation space.

Notes

01. De Bono, E. 1977. Lateral Thinking. Harmondsworth: Penguin Books.02. Alder, H. 1994. The Technology of Creativity. Management Decision,

32(4), 23–29; Tanner, D. 1992. Applying Creative Thinking Techniquesto Everyday Problems. The Journal of Consumer Marketing, 9(4), 23–28; McFadzen, E. 2000. Techniques to Enhance Creative Thinking.Team Performance Management, 6(3/4), 62–72.

03. Burns, T. and G.M. Stalker. 1961. The Management of Innovation.Oxford: Oxford University Press; Brown, S. and K.M. Eisenhardt.1995. Product Development: Past Research, Present Findings andFuture Directions. Academy of Management Review, 20(2), 343–78;Brown, S.L. and K.M. Eisenhardt. 1997. Art of Continuous Change:Linking Complexity Theory and Time Paced Evolution in Relent-lessly Shifting Organizations. Administrative Science Quarterly, 42(1),1–34.

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04. Syrett, M. and J. Lammiman. 2002. Successful Innovation. London:Profile Books Ltd.

Web Resources

01. http://news.com.com/IBM+The+next+big+thing+no+longer+exists/2100-1008_3-6050056.html

02. http://www.pc.ibm.com/store/news/500_011304.html03. http://domino.watson.ibm.com/comm/research.nsf/pages/d.math.

cliff_pickover.html04. http://www-03.ibm.com/developerworks/blogs/page/jasnell?entry=

blogging_ibm05. https://www-927.ibm.com/ibm/cas/cascon/workshopsignup/display

Workshop?PublicView=true&Slot=WEDPM&Num=406. http://www-03.ibm.com/ibm/history/history/history_intro.html07. http://news.com.com/IBM+Research+turns+60/2100-11395_3-

5892661.html?tag=nl08. http://news.com.com/IBMs+service+science/2010-1008_3-5201792.

html?tag=st.rc.targ_mb09. http://www-8.ibm.com/in/casestudies-sw/case_biocon.html

6 Building Blocks

Individual � Team � Organization� Conclusion� Key Takeouts

In the last few chapters, the entire model of whatinnovation capability entails comes together. The chal-lenge that remains is to build this capability at mul-tiple levels1 in the organization. If the elements of thiscapability are put in place across various levels in theorganization then there is a good chance that it willbecome a part of the organizational fabric. Till now,the discussion has been at the overall organizationallevel. This chapter would take a more fine-grained viewof innovation capability.

Any organization is composed of a set of people.These people are the driving force behind organiza-tional activities. They take decisions, drive execution,contribute to strategy, and are made to face ambiguoussituations almost everyday. Any firm or organization

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that aspires to be truly innovative should have peoplewith ability to innovate in a continuous manner. Mostof these innovations may at best be incremental, butthey would contribute to the organization performingeffectively. Also, if there is a wide base of capablepeople, the chances of scoring a breakthrough wouldbe high.

People do not form the organization straightaway.They are usually organized in teams. These teams getthe actual work done by bringing together individualcapabilities. These teams themselves need to be ableto build together the constituent capabilities of inno-vation capability to deliver continuous innovations.These capabilities have to be consciously built. It isnot enough to just form teams. It is essential to enableand empower them with capabilities necessary to de-liver innovative solutions.

Thus at the very minimum, there are three distinctlevels at which innovation capability is required to bebuilt. Starting with individuals, then teams, and finallyat the overall organizational level.

Individual�

An individual who wants to be innovative or creativeor has the ability to come up with ideas continuouslyalso needs to follow the path suggested for buildinginnovation capability in organizations as a whole.

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Building Blocks

The individual needs to be aware of a large body ofknowledge or better still, bodies of knowledge. Thisperson should have the right tools/techniques and theright attitude.

An individual’s knowledge capability is to someextent determined by the background, the education,and the interests the person has. If the person has hadan education that has given him exposure to a widevariety of subjects, has a range of interests and is welltraveled, then the person would be well equippedto produce new knowledge. Some of the most wellknown inventors and innovators fit this profile.Historically, however, prolific inventors like Edison,Einstein and Leonardo Da Vinci were self-taught;learning about subjects that interested them with avoracious appetite to learn more. Da Vinci taughthimself anatomy, architecture, created the firstprototype for a robot, and the first design for a flyingmachine. And he is most famous for a painting!Inventors like Da Vinci then worked to apply thatlearning into practical experiments and applications,with a love of discovery.

The organization can make a huge impact as wellon the knowledge capability of an individual. The keyto this is to provide exposure to the individual bothwithin and outside the organization. Within the orga-nization, initiatives like role rotation, multifacetedtraining and multi-skilling would help. Placementout of the organization for sometime, either for highereducation or specific training would also help.

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Attitudinal capability requires some amount oftraining. The values of dimensions of openness,awareness, curiosity and playfulness are not easy tocultivate in an organization. At a children’s playgroundcertainly, but in an office, somehow, people seem toleave all these qualities behind. However, a biggerimpact can be made if these values are part of the socialfabric of the organization. That would ensure thatindividuals value these and apply them in their worklife. Providing people with some amount of autonomyas far as work is concerned would also make peoplemore open and aware. This is because with autonomycomes responsibility, and the need to be open to andaware of the environment.

Employees need to possess a full toolkit as far astechniques for combining knowledge are concerned.They should be exposed to everything from lateralthinking to metaphorical thinking. This calls forextensive training of individuals and well as oppor-tunities to practice and hone these skills. Ofcourse, as with any training, the employee needsto see value in the program and see that the organ-ization places importance on the practice of thattraining.

The key idea here is to take a systematic approachto creation of new ideas or innovation at an individuallevel. Often being innovative is taken as a personalitytrait. This is not correct to a large extent. Innovationcapability at an individual level can be built prettysystematically.

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Building Blocks

Table 6.1: Building Blocks of Innovation Capability

Individual Team Organization

Knowledge Role rotation, Team diversity, Workforce diversity,capability Multi-skilling, Social capital, Systems,

Multifaceted Communities of R&D, Social capitaltraining practice

Creative Techniques Creative tension, Process, Systems,capability Facilitation Structure

Attitudinal Autonomy, Facilitation, Structure, Sharedcapability Training Team identity values

Team�

A team is essentially a group of individuals involvedin a set of tasks that have a common goal. At thislevel, the ways and means of developing innovationcapability are quite different from an individual level.The individual capabilities would have to be harnessedhere to build a capability that is bigger than the sumof individual capabilities. P&G has a formal processto put together research teams. P&G creates a teamthat has a combination of an older, experienced personand a younger person for energy and enthusiasm. Theteam will also have a combination of domain know-ledge and “translation expertize.” Translation expertiseis the kind of experience that comes with being ableto translate technical output into user-friendly appli-cations. P&G also makes this team work literally

110


together. Even if initially the team is from differentlocations or countries, in putting together a specializedteam, P&G will ensure that the team works in closespaces, next to each other, to keep up the spirit ofenthusiasm.

Knowledge capability of a team can be maximizedat the selection stage itself. Members of a team shouldhave diversity in the expertise they bring to the table.If the team is homogeneous then there will be a greatdegree of comfort, but the knowledge base will be nar-row. Diversity in a team is a must if creation of newknowledge is the objective. The two other things thatcan increase the knowledge base are the connectionsthat the team members have with the outside world,as well as the strength of relationships within the team.This is the notion of group social capital,2 where know-ledge is the resource embedded in relationships.

The attitude that a team possesses needs to be devel-oped as a part of team identity. The teams need tolearn that a certain attitude is required to be able toinnovate continuously. The team needs to identify withthe attitudinal dimensions and inculcate it into itswork processes and interactions. Attitude is somethingthat only develops over a period of time and requiressustained effort. Facilitation from trained teambehavior experts in the initial phases may well play animportant role.

At a team level, while techniques are important forcreative capability, a greater role is played by teamprocesses and systems. Effective communication

111

Building Blocks

has to be ensured to make sure that knowledge isexchanged and creation of new knowledge becomespossible. Apart from this, teams may requirefacilitation to ensure informal exchange of knowledge.Information technology can also be exploited at a teamlevel for effective communication and for creatinginnovation space.

Building innovation capability at a team level is alittle more complex than building it at an individuallevel. Teams are entities where most of the organization’swork gets done. Usually teams engage in collaborativeproblem-solving, which is essentially creation ofnew knowledge. Thus it becomes important to buildcapabilities at the team level.

Organization�

The organization level building of innovation capabilityhas been extensively dealt with in the earlier chapters.There are a few things that can happen only at theorganization level. These are specifically investmentsin R&D and market research that build knowledgecapability. These have to be driven from organizationalimperatives. At an organizational level it is necessaryto put systems and processes in place that drive someof the imperatives of building innovation capability.Thus systems and processes are needed to buildworkforce diversity, provide multifaceted training, and

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build communication channels. This is true acrosscapabilities. The organization structure also needs tobe tinkered to build some of these capabilities.

At an overall level, a strong sense of shared valuesis required to build the right attitude. This is some-thing again that can be tackled only at an organiza-tion level and has impact on the team as well asindividual levels.

Conclusion�

The right approach to innovation capability is a multi-level approach. What this approach does is that itmakes the capability really robust. It no longer remainsonly an organizational aspiration. Rather it toucheseach individual and every work team, and eventuallythe organization. There is no escape from this multi-level approach. Innovation can become embedded inthe fabric of an organization only if it is incorporatedat all levels. Individuals who are high on innovationcapability can contribute both to teams and organiza-tion as a whole effectively.

However, having capable individuals is just notenough. When teams are formed then a new set ofchallenges crop up. On especially challenging projects,for example, a certain diversity in team compositionwould be required, so that all knowledge areas thatare required for problem solving are covered. As also,

113

Building Blocks

enabling mechanism to aid knowledge combinationwould be required. So having capable individuals alonewould not lead to effective teams. Putting in placemechanisms that build team innovation capabilitycontribute to the overall innovativeness of an organi-zation.

Certain things can only be done at an organizationallevel. Overall policy direction is always determined atthe organizational level; values and beliefs contribut-ing to attitudinal capability can be effectively set onlyat an organization level. Thus organizational level ini-tiatives also become extremely important.

This also means that a fragmented approach tobuilding this capability may not be very successful.The organization that will be most successful in imple-menting this will take an integrated approach. Thiscapability would also be long lasting if an integratedapproach is taken so that the constituent capabilitiesare deeply embedded in the organization.

Key Takeouts�

• A multi-level approach to building innovationcapability is required.

• Constituent capabilities need to be built at thelevels of individual, team and organization.

• Only an integrated approach will maximize benefitsto the organization.

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Notes

01. Drazin, R., M.A. Glynn and R.K. Kazanjian. 1999. Multilevel Theo-rizing about Creativity in Organizations: A Sensemaking Perspective.Academy of Management Review, 24(2), 286–307.

02. Oh, H., M. Chung and L. Giuseppe. 2004. Group Social Capital andGroup Effectiveness: The Role of Informal Socializing Ties. Academyof Management Journal, 47(6), 860–75.

Web Resource

01. http://www.fastcompany.com/articles/2001/08/pg2.html

7 Staying the Course

Vision � Goals � Shared Values� Systems and Processes �

Outcome/Output Measurement� Learning and Feedback �

Conclusion � Key Takeouts

In the last chapter it was argued that to be successfulwith building innovation capability, a multi-levelapproach has to be followed. Building capabilities atmultiple levels also ensures their longevity to someextent. Extending this argument in this chapter, a closelook is taken at how to make sure that these capabilitiesare long lasting. A lot of organizational initiativesturn out to be temporary fads. They are touted as thesolution to all problems and then rolled out. However,they fizzle out pretty soon. This creates disillusion-ment and disappointment within the organization. The

116


reason for this is that often there are no visible resultsfrom these short-lived initiatives. Such results couldlead to the organization members treating all initiativeswith distrust. For any initiative to be successful, theorganization needs to develop trust in its ability todeliver results.

Any change that an organization wants to introducehas to be persisted with for a significant period oftime. Building lasting innovation capability wouldrequire a systematic effort over a period of time. Thesedays often, results are sought instantly. There is nothingwrong with this attitude per se, but what has to beunderstood is that capabilities are like infrastructurethat take time to build and give benefits over longperiods of time.

This can happen only if there is an effort to makeany initiative an integral part of the organizationalarchitecture. The vision, goals, systems, processesand values of the organization that essentially form itsarchitecture should reflect the priorities broughtabout by the need to build innovation capability. Unlessthese set of architectural elements reflect innovationpriorities, the organization as a whole would not takeseriously the need to build innovation capability.

Measuring something ensures focus on what is beingmeasured. A lot of organizational priorities are a resultof what is measured. If market share is measured ittends to become one of the important performanceparameters. Hence for an innovation capabilityinitiative to succeed, important innovation capability

117

Staying the Course

led outcomes and ouputs should be measured. Thequantified results then need to be analysed for thelearning to be fed back into the organization (see Figure7.1). Only such a systematic process would result inbuilding lasting capabilities.

Vision�

The vision of an organization represents its long-termaspirations.1 This is usually put together as an inspira-tional statement that binds the organization together.A lot of innovative organizations have innovation builtinto their vision statements. IBM’s values at work state-ments include that IBMers’ actions will be driven by“Innovation that matters, for the company and forthe world.” 3M’s industrial tapes and adhesives seg-ment has a vision that states “To be recognized as aninnovative solutions provider by every customer thatwe serve”.

Vision is something that guides an organization overa significant period of time. It is like a guidepost thatalways keeps the organizational efforts focused in onedirection. This makes vision extremely important. Anyorganizational aspiration that is seen as importantshould form a part of the vision. This will ensure thatthe particular aspiration stays visible. This essentiallymeans that organizations that are serious about hav-ing long lasting innovation capability have to build it

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Building lasting capabilities

Figure 7.1: Building Lasting Capabilities

Output/Outcome

MeasurementMeasurecapability

outcomes andinnovation

output.

LearningLearn from

mistakes andsuccesses to fine-tune vision, goals,

shared values,systems and

processes, andmeasurement. Vision

Make innovationand innovationcapability an

integral part ofvision.

Goals

Quantifyinnovation output

and capabilitybuilding goals.

Shared ValuesBuild shared

values to havean open, aware,

curious andplayful

organization.

Systemsand

ProcessesPut enablingsystems andprocesses forcapabilities.

Grey connectorsrepresent feedbackafter the learning

stage.

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Staying the Course

into their vision. How they do it depends on thecontext in which they operate. But it has to be built invery strongly.

Also given that vision is later broken down intogoals, systems/processes and shared values, it becomesthe driver of what happens in an organization every-day.

Goals�

Vision translates into goals that drive the organizationin the medium term. The goals have to represent thepriorities set out by the vision. These goals have to bemeasurable so as to monitor them over time. Orga-nizations usually put goals in terms of revenue,profit, and market share. However, if innovation is apriority then the goals need to also have the innovationcomponent built into them. The typical goal builtaround innovation is that a certain percentage of salesneed to be from new products/innovation developedwithin the last five year span. For P&G, that percentageis more than 35%, for Dupont that percentage iscurrently at 33%.

Specifically in case of innovation capability, not onlygoals for innovation output (usually defined in termsof new products, services, percentage of business fromNPD, etc.) but also outcome goals for constituent ca-pabilities become important. Outcome measurements

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for each of the three capabilities, knowledge, attitudi-nal and creative, have to be done. These should be-come the part of the goal sheet of each and every partof the organization. Only then the development of in-novation capability will happen in a focused mannerin the organization.

Shared Values�

Attitudinal dimensions of openness, awareness, curi-osity and playfulness are extremely important to in-novation capability. These have to become a part ofthe shared value system to then become organizationalattitude. A strong program of shared values has to beput in place by the organization to develop attitudeconducive to innovation capability. A shared valueprogram has to do with more than just attitudinal de-velopment. The emphasis has to be on a culture ofinnovation, placing value on knowledge and develop-ing the right attitude.

Shared values, in short, have to become a part oforganizational architecture. These values then shapethe culture of the organization. Values and beliefs areat the base of this culture. Very simply, if the organi-zation wants to have a strong “innovation culture”,shared values of openness, awareness, curiosity andplayfulness become fundamental.

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Staying the Course

Systems and Processes�

Strong systems and processes are required in two ofthe capabilities that contribute to overall innovationcapability. Knowledge capability requires strongsystems and processes to be able to recruit a diverseworkforce, conduct robust market research, havesuccessful R&D, and give multifaceted training.What should be appreciated here is that buildingthese systems is often a multifunctional exercise.Multiple departments are involved simultaneously. Forexample, a diverse workforce and training involve thehuman resource functions as well as other functionswhere these initiatives take place. Only if strongsystems and processes exist would these dimensionsof knowledge capability be delivered in a consistentmanner.

Similarly, the communication dimension of creativecapability needs strong systems and processes tofacilitate both formal and informal communicationthat lead to creation of new knowledge. A lot oforganizations are using strong IT systems to buildthese systems and processes. IT in fact, can enable bothformal and informal communication. The organiza-tion needs to build these systems and processes in arobust manner, so that they become an integral partof the organizational architecture. They will, in turn,provide long lasting innovation capability.

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Outcome/Output Measurement�

It is very important to measure both outcomes andoutput. Usually the very act of measurement by theorganization is taken as a signal by organizationalmembers. Whatever is being measured becomesimportant to deliver, especially if rewards are attachedto such a measurement. Thus it is very important tomeasure whatever is being driven through theorganization. In the case of innovation capability, theoutcomes that come out of each of the constituentcapabilities need to be measured as well as theinnovation output. When A.G. Lafley became theCEO of P&G in 2000, the organization had a less than35% success rate of new innovations that went tomarket. Lafley knew that if this rate had to improve,then P&G needed broader and richer sources ofinnovation. Thus, was born the P&G diktat that theinspiration or roots of 50% of P&G’s innovation hadto come from external sources. It has worked—insix years R&D productivity has increased by 60%,while R&D costs have dropped from 4.8% of salesto 3.5%.

The other benefit that comes out of measurement iscourse correction. Measurement provides a sense ofwhat is working and what is not working. This allowsto course correct some of the initiatives. This coulddetermine the long term success of any initiative.

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Staying the Course

Learning and Feedback�

The data results of measuring output and outcomeprovide important learning in terms of what is work-ing and what is not working. This learning then has tobe fed back into the starting point of this entire pro-cess. The vision may require clarification. One is notsuggesting a frequent revamp of vision. But it may needmore clarity to help define the rest of the process.

Similarly, goals may have to be fine-tuned. Systemsand processes may have to be strengthened or altered.And shared values might have to be approached in acompletely new manner. Using feedback properlywould result in the strengthening of innovationcapability in the organization. This process has to berobust and followed rigorously.

Conclusion�

Staying the course is important in any initiative,especially when it involves building long lastingcapabilities that would contribute to the innovationcapability of an organization. Putting an overall organ-izational architecture in place is the most importantthing that an organization can do to make the saidcapabilities relatively permanent. A strong vision thatincorporates innovation priorities is the first step in

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putting this architecture in place. This vision shouldthen lead to focused, measurable goals, robust systemsand processes, and a strong set of shared values. Thesehave to be persevered with to an extent over a periodof time so that they can have a measurable impact.

Equally important is course correction based onfeedback. Each organization operates in a uniquecontext. The context would make some componentswork better than others. Key output/outcome para-meters should be measured to figure out what is work-ing and what is not working. Then adjustments haveto be made in every cycle to keep the capabilitiesrelevant.

Organizations can build long lasting capabilitiesonly if they show a judicious mix of resilience andflexibility.

Key Takeouts�

• Building lasting innovation capability takes asystematic approach.

• Vision of the organization should incorporateinnovation priorities.

• A strong organizational architecture comprisingshared values, systems and processes, and goals isneeded.

• Measurement and feedback are important to keepthe system robust.

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Staying the Course

Note

01. Hatch, M.J. and M.S. Schultz. 2001. Are the Strategic Stars Alignedfor Your Corporate Brand? Harvard Business Review, February, 128–34.

Web Resource

01. http://media.corporate-ir.net/media_files/irol/73/73320/Databook_2005.pdf

8 Renew

Knowledge Capability� Attitudinal Capability �

Creative Capability � Conclusion� Key Takeouts

The passage of time does a lot of stuff that may notbe visible in the short term, especially with regard tocapabilities that are represented by organizational pro-cesses and assets. There is a need to stay current as faras these capabilities are concerned or they will repre-sent no competitive advantage at all. In the first in-stance, it might pay to look at what are the factorsthat impact these capabilities.

First, the environment itself is dynamic. It is inthe nature of the environment to evolve in which anorganization operates. There are various parts of anenvironment—legal, institutional, social, competition,partners, customers, etc. All of these undergo changes

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over a period of time. There is a need for organizationsto build capabilities that are in sync with these changesor can track along with these changes. A simpleexample is the assumption that a mass marketing com-pany may have about its consumers. Social mores andnorms keep changing and it results in a change in thevalues and beliefs of consumers. Being out of sync withthis change can be catastrophic. The consumer basedknowledge should essentially be constantly updated.

Something quite different happens within organiza-tions. It is easy for organizations to fall into predictableroutines irrespective of the environment. It providesfreedom from ambiguity and a sense of comfort. Setroutines also provide efficiency in the near term. Thiscan be dangerous in face of a changing environment.A changing environment can result in some of theseroutines being anachronistic and counterproductive.Hindustan Motors was comfortable churning out itsancient Ambassadors year on after year on. When theIndian market opened up and international manufact-urers entered with their more advanced cars, consumersabandoned the Ambassador without a second thought.Hindustan Motors was left holding the bucket withover 11,000 employees to manufacture a mere 18,000Ambassadors in 2002.

Organizations usually bureaucratize over a periodof time in their quest for efficiency.1 Rigidity in com-munication procedures is usually the result of thisbureaucracy. Rules and procedures tend to dominate.Hierarchy becomes an overriding feature. This provides

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for greater control and coordination but destroys theelements required for continuous innovation.

Finally, there is no capability that is absolute. Tohave a competitive advantage the capabilities thatyou possess should be superior to the ones that yourimmediate competitors possess. Otherwise, thesecapabilities are of little advantage. This relativemeasure in terms of capabilities is very important.

P&G competes in a cut-throat sphere of businesswhere they are squeezed from every side of the supplychain. Their consumers, customers, and trade are alllooking for better and better deals every year. P&Gitself has to keep improving its performance everyyear. And this in an industry that represents fast-moving consumer goods. The FMCG industry is onethat sees a maximum number of product launchesand variants in a year and for P&G to keep pace andcontinue to be the leader is something that reflectsP&G’s competitive capabilities. P&G’s competition isother large corporations like itself, small local/regionalplayers, and even store brands. P&G needs to out-innovate all these people and it does so by ensuring ithas better market/consumer knowledge, and makesbetter use of it.

The three constituent capabilities of innovationcapability are also susceptible to these forces. Thereis a need to constantly renew them, to keep them rel-evant. The ability to keep them fresh and germanewould have a bearing on the long-term competitive-ness of any firm.

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Knowledge Capability�

Knowledge is a dynamic resource. The content as wellas the quantity of knowledge in the world keepschanging. In fact, the quantity of information onlykeeps increasing. A simple search for the word“innovation” on Google yields 827 million results. Theword “sex” on the other hand, just gives us 750 millionresults. This says something about the proliferation ofknowledge in the area of innovation alone.

It also says something about the knowledgecapability of the organization. The problem lies instaying current with the changes in the content ofknowledge as well as having a good idea about areasof knowledge that maybe needed to drive theorganization forward. If these are not updated, thenthere is a chance that the reservoir of knowledge inthe organization would become archaic.

The environment is also fairly dynamic. The insti-tutions, legal framework, customers, etc. undergo sign-ificant changes over periods of time. This knowledgeis critical to make new combinations of knowledge.Again, keeping pace with such changes is important.The knowledge about the context or the environmenthas often resulted in breakthrough innovationswhen this knowledge has been combined with techni-cal knowledge. As women became more and moreactive, with lives outside the house, feminine hygienetechnology had to but keep pace. P&G’s research on

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polyethylene fibers and absorption led to the launchof the Always/Whisper franchise in 1983.

Another important bit about knowledge capabilityis that when compared to competitors, this capabilityshould be at a higher level. Any organization thataims to compete should strive to hold the kind ofknowledge that the competition does not possess. Thisknowledge would then help the organization surprisecompetition with new innovations. However, if in anorganization this capability is not constantly renewedit may fall behind competition.

Table 8.1: Impact of Time Variable on KnowledgeCapability

Change brought about Renewalby the time variable strategy

Knowledge Knowledge currently held by the Constantly scan forcapability organization becomes outdated. changes in the

Assumptions about the context environment;change drastically. knowledge heldCompetitors discover new fields internally shouldof knowledge that give them an always be in syncedge. with the environment.

The organization that wants to keep its knowledgecapability constantly renewed has to scan the envi-ronment constantly. The scanning has to determineany changes that might take place in the environmentthat would have an impact on the relevance of itsown knowledge capability. A scanning function in theorganization is therefore essential.

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Once the changes are known, the organization cantweak the components of knowledge capability to suitits requirements. It can hire individuals who possessthe specialist knowledge it requires. The R&D func-tion can be reoriented and redirected to gather newknowledge. New networks and alliances can beformed. Google researchers make new teams depend-ing on the research task on hand. P&G also createsR&D teams on the basis of the expertise and know-ledge required. Training can also take up the newobjective of constant updating of knowledge in theorganization.

Attitudinal Capability�

Internal organizational processes can wreak havoc onthis particular capability. In particular, there is a ten-dency for organizations to become bureaucracies. Thisis often done in the pursuance of greater efficiencyand exercise of greater control. Rigid rules and proce-dures become part of the organizational architecture.Deviance from laid down rules often invites censure.Communication is strictly done through hierarchicalchannels.

Even after the organization has expended timeand effort to inculcate openness, awareness, curiosityand playfulness, it needs to constantly watch out forbureaucratizing tendencies. Nature of attitude that

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needs to be inculcated in the organization changes overtime. What represented openness a few decades agois just par for the course in today’s context. The com-ponents need to be redefined in the changing contextcontinuously.

If an organization has been successful in its endeav-ors over some period of time then it shifts into a com-fort zone. There is then a tendency to look inwards.This reduces awareness of the outside world. Even theneed to question diminishes. Success can put an orga-nization into an attitudinal slumber.

Table 8.2: Impact of Time Variable on AttitudinalCapability

Change brought about by Renewalthe time variable strategy

Attitudinal Hierarchy tends to take over. Keep auditingcapability Processes that fostered attitude the attitude and

themselves become rigid and discover freshare taken for granted. ways to drive it.Over time there is a tendencyto look inwards.Tendency to question reduces asorganization hits a comfort zone.

The one thing that any organization has to keepdoing is have some understanding of where it standsin terms of attitudinal capability. This capability isrelational, and deals with elusive elements like attitudeand emotional states, which makes it difficult tomonitor. Regular audits maybe called for to be able to

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track it. The results of the audit will provide directionsfor renewal. Usually fresh approaches and ideas willkeep this capability renewed.

Creative Capability�

Changing tools, techniques and technology impact thiscapability over a period of time. Communication isincreasingly dependent on technology and to make surethat the organization stays at the cutting edge of com-munication, relevant technologies have to be trackedand adopted. Some of the best tools of collaborationlike instant messenger and blogging have had mixedreception as far as the corporate world is concerned.However, smart innovating companies have exploitedthem to their advantage. Staying ahead in terms ofcommunication ensures that the organization is at theforefront of creating new knowledge.

Table 8.3: Impact of Time Variable on CreativeCapability

Change brought about by Renewalthe time variable strategy

Creative New and better ways of communicating. Stay currentcapability New possibilities for creating innovating with techniques

communities. and technologies.Advanced techniques for combiningknowledge.

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Technology also plays a role in creating innovationspace in new and unique ways. Again, it pays to keeplooking at new innovations that would aid the creationof new knowledge. Anything from architecture thatcreates physical spaces to IT that can create virtualspaces, would have to be tracked.

There is a lot of research that takes place in termsof creativity techniques around the world. New waysof forcing disparate kinds of knowledge are devised.These again, if tracked and used early, can confer adistinct competitive advantage.

Conclusion�

It is not enough to just build capabilities once and thenforget about them. They will only represent a strongcompetitive advantage if they are relevant in a changingcontext. Any capability is a prisoner of the context itoperates in. Change the environment and the capabilitymay not work so well. This is true for innovationcapability as well.

Various parts of the environment change over aperiod of time. A change in societal context results inconsumer behavior undergoing a change. Technologychange brings in new ways of doing things. Institutionalenvironment may result in new laws that makeunderstanding of new knowledge bases very important.In the past couple of decades, environmental law hashad a huge impact on how companies do business.

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Organizations themselves change becoming rigidand routine bound. This means that they have to watchout and renew continuously to maintain good attitu-dinal and creative capabilities.

In short, innovation capability has to be renewedconstantly. As an extension, its component capabili-ties also have to be renewed.

Key Takeouts�

• Environment is constantly changing and may makecapabilities outdated.

• Organizations have a tendency for bureaucratiza-tion.

• Competitors develop their own capabilities overtime, and the challenge is to stay ahead of them.

• Constant renewal of capabilities is required to keepthem as a source of competitive advantage.

Note

01. Burns, T. and G.M. Stalker. 1961. The Management of Innovation.Oxford: Oxford University Press.

Web Resource

01. http://www.aworldconnected.org/article.php/301.html

Bibliography�

Argyris, C. 1978. Organizational Learning: A Theory of Action Perspective.Reading, MA: Addison-Wesley Publishing Company.

Burns, T. and G.M. Stalker. 1961. The Management of Innovation. Oxford:Oxford University Press.

Davila, T., M.J. Epstein and R. Shelton. 2006. Making Innovation Work.New Jersey: Wharton School Publishing.

De Bono, E. 1977. Lateral Thinking. Harmondsworth: Penguin Books.Decker, C.L. 1998. Winning with the P&G 99: 99 Principles and Prac-

tices of Procter and Gamble’s Success. London: HarperBusiness.Doug, G. 1999. IBM Redux: Lou Gerstner and the Business Turnaround

of the Decade. New York: HarperBusiness.Freiberg, K. and J. Freiberg. 1997. Nuts!: Southwest Airlines’ Crazy

Recipe for Business and Personal Success. New York: BroadwayBooks.

Friedman, T. 2005. The World is Flat: A Brief History of Globalized Worldin the 21st Century. London: Penguin Books.

Ghoshal, S. and C.A. Bartlett. 1997. The Individualized Corporation:A Fundamentally New Approach to Management. New York:HarperBusiness.

Hirshberg, J. 1998. The Creative Priority: Driving Innovative Business inthe Real World. New York: HarperBusiness.

Leonard, D.A. and W.C. Swap. 1999. When Sparks Fly: Igniting GroupCreativity. Boston, MA: Harvard Business School Press.

Leonard-Barton, D. 1995. Wellsprings of Knowledge: Building and Sus-taining the Sources of Innovation. Boston, MA: Harvard BusinessSchool Press.

Nonaka, I. and H. Takeuchi. 1995. The Knowledge Creating Company:How Japanese Companies Create Dynamics of Innovation. London:Oxford University Press.

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Bibliography

Penrose, E. 1959. The Theory of Growth of Firm. New York: OxfordUniversity Press.

Polanyi, M. 1967. The Tacit Dimension. New York: Doubleday.Quinn, J.B., J.J. Baruch and K.A. Zien. 1997. Innovation Explosion. New

York: The Free Press.Senge, Peter M. 1990. The Fifth Discipline: The Art and Practice of the

Learning Organization. New York: Doubleday.Shukla, A. and R. Srinivasan. 2002. Designing Knowledge Management

Architecture: How to Implement Successful Knowledge ManagementProgrammes. New Delhi: Response Books.

Steinberg, S.H. 1974. Five Hundred Years of Printing. Harmondsworth:Penguin Books.

Syrett, M. and J. Lammiman. 2002. Successful Innovation. London: ProfileBooks Ltd.

Vise, D.A. 2005. The Google Story. London: MacMillan.

Index�

3M, 38; commitment tocontinuous innovation, 41;Pro-Fab Lab, 67; sharingof knowledge at, 40; TechForums, 102

5S, 24

Apple iPod, launch of, 26Ask Me on MyINet, 49attitude, 75–90;

organizational, 49;questioning, 85

awareness, 83–84

Back Rub, 75Biocon, 98Bolton, Elmer, 57books, demand for, 20brainstorming, 95breakthrough product, 96bureaucracy, 126

capability, attitudinal, 52,78–79, 84, 108, 131–32;creative, 52, 91, 94–95,97, 102, 121, 133–34;innovation, 60

Carothers, Wallace, 57communication, 99–101,

133; effective, 33, 99,110–11; informal, 99

compressed MP3 format, 27creative ideas, 86creativity, humor, link, 86Crest, 27curiosity, 83, 85

Discman, 26–27; creationof, 26; invention of, 26

Dupont, 34, 56–59, 82;commitment to R&Dinvestment, 57;commitment to research,56; focus on research, 58;R&D, 57

e-choupal, 29Edison, Thomas, 11efficiency, 24environment, organizational,

49ethnography, 64experiment, willingness to,

with new ideas, 80

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Index

Exploration & Productiongroup, 43

fluoride toothpaste, inventionof, 28; technology, 28

Game Changer, 82; panel,43–45

Gmail, 76goals, 119–20; for innovation

output, 119Google desktop, 76Google Inc, 76Google News, 77Gutenberg, 19–21, 34;

Bibles, 21

handwritten books, 19hierarchy, 126

IBM, 91, 100; Alphaworks,82; bloggers, 93; brand,92; suggestions about,products and services, 92;website, 92

idea, generation, 45, 95;incubated, 45

India Car (Indica), launch of,69

individual, 106–08Information Technology, 101Infosys, 62; knowledge

management intranet, 62;knowledge networks, 62

initiatives, organizational,115; short-lived, 116

ink, technology, 21; waterbased, 21

innovation, 40, 100; big bang,31; breakthrough, 23–24,26, 31, 129; capability,17, 42, 48–52, 105–06,108–09, 115–16, 119,121, 135; as capability,38–52; capability initiative,116; capability of anorganization, 53; capabilityat a team level, 111;classification of, 24;commercially viable, 11;complexity involved inbreakthrough, 35; contentof, 22; continuous, 32,106; development of,capability, 120; episodic,32; imperatives of building,capability, 111; importanceof, 11; incremental, 23,26, 31; kinds of, 28; lab,43–44; necessity ofcircumstance leading to,32; nuances of the, process,12; overall, capability, 78;within P&G, 49; priorities,116, 123; process of, in anorganization, 11; quest for,94; radical, 26; space,101–02; strengthening of,capability, 123; successful,11–12; traditional view of,16; tunnel, 46, 48

Internet and e-commerce, 100

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iPod, 27; video, 27ITC (originally the Indian

Tobacco Company), 29;e-choupal movement, 29

iTunes, 27

Just-In-Time productionsystem, 30

Kaizen, 24; school of thought,24

knowing, 56–71knowledge, 60, 129;

acquisition of, 79;capability, 52, 60–71, 121,129–31; capability of ateam, 110; constantupdating of, 131;consumer based, 126;consumer/customer, 64;creation of, 78; customer,59; explicit, 60; free flowof, 80; individual’s,capability, 107; non-codifiable, 63; sharing of,58; sharing of, at 3M, 40;tacit, 60; technical, 59;techniques for combining,108; unequal distributionof, 16

Laboratory InformationManagement Systems(LIMS), 98

lateral thinking techniques, 96Lenovo, 92

McKnight, 40–41Microsoft, 100multifaceted training, 107multi-skilling, 107music, CDs, 27; video, 27MyINet, 48; P&G’s, 50

Nissan, 28

off-patent drugs, 98openness, 80, 88organization, 111–12

P&G, 27; labs, 49;researchers, 27; researchersacross the, world, 49

paper technology, 20Personal Computer (PC), 100phenomenology, 64Pi Sheng, 20playfulness, 85–87printing, of books on paper,

21; press, 19, 21–22Products Fabrication

Laboratory (Pro-Fab Labs),40

prototyping, 47

R&D, department, 17;investment, 59, 67

research, fundamental, 57

Scotchgard, 68Shell, 82social capital, 61social mores and norms, 127

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Index

Sony Walkman, 26Southwest Airlines, 86;

employees at, 86standardization, 24STEP (Science Training

Encouragement Program),40

Stine, Charles, 57Sun Microsystems, 75

Tata Motors, 69, 81team, 109; diversity in a, 110;

facilitation from trained, 110Tech Forums, 39ThinkPlace, 101

thinking, metaphorical,96

Toyota, 28, 30–31training, specific, 107translation expertize, 109

University Compounds, 59

values, and beliefs, 120;shared, 120

vision, 117–19

wisdom, conventional, 96writing, calligraphic, 20;

cursive, 20

About the Author�

Manu Parashar is CEO of Gone to Fish, an innovationconsultancy at Bangalore. In his present profile heprovides new insights and ideas to the Indian industry.Concurrently, he is also working on his doctoral degreefrom the Indian Institute of Management, Bangalore,in the area of social capital.

A management graduate from Indian Institute ofManagement, Calcutta, Manu has had nine years ofcorporate experience across three major companies,Godrej Sara Lee, Cadbury and Ford India Ltd. As amanagement thinker, he has presented papers inIndia as well as abroad and has been widely publishedin many journals.

8 Steps to Building Innovating Organizations

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