Innovation may be considered to be the application of a novel or new solution that satisfies an existing market need or an unarticulated need. Although to some this may mean the development of an innovative product or service, innovation also includes the development of more effective products, processes, services, technologies, or ideas that are readily available to markets, governments and societies. Michael Porter (1985), a highly-quoted source on strategy and competitiveness emphasised the importance of differentiation, which consists of the perception that makes consumers identify your product or service, as being unique and different from what the competition offers. Porter developed a framework consisting of three generic strategies that organisations (both public and private) may use to achieve competitive advantage, the first being Innovation.
According to the OECD (2012), recovering from the reduced potential output growth, increased unemployment and soaring public debt, requires the urgent identification of new sources of growth. The OECD also recognises that much growth has occurred due to the adoption of R&D budgets that have enabled innovative products, services and processes to develop. The European Union has also identified that an innovation strategy is fundamental and is one of five ambitious objectives in its Europe 2020 growth strategy for this decade. It has also established an Innovation Union that aims to turn ideas into jobs, green growth and social progress. The financial instrument that is implementing this Innovation Union is called Horizon 2020. Developing an innovation strategy requires a drive for public and private enterprises to develop a number of policy actions to reflect the nature of innovation. This may be achieved by incorporating a strategic policy focus on innovation, training and education policies to stimulate creativity, innovating beyond science and considering investments in processes and methods, new approaches towards cooperation, risk and cost sharing, exploiting the benefits of information technology and of the benefits that knowledge in its wider sense can bring to the table.
An adage we often hear says that, ‘if it is not broken, don’t fix it!’. Herbert Simon had recognised the existence of cognitive limitations when it comes to making decisions. More often than not, these limitations lead us to adopting the above adage as our business philosophy, and to choosing the first satisfactory alternative that comes to our attention, which is not always the optimal solution. Herbert Simon called this ‘satisficing’. Innovation is the complete opposite. Satisficing stultifies innovation. Therefore, innovation requires that we outdo satisficing and always consider the decisions we take, and the processes in place from different perspectives. This is what constitutes creative or lateral thinking, which is a way of solving problems through an indirect and creative approach, using reasoning that is not immediately obvious and involving ideas that may not be obtainable by using only traditional step-by-step logic. By way of illustration, when faced with a decision one should keep the following points in mind:
- Focus on the data available and considering the information available, looking for gaps and verifying the validity of data, as well as analysing it closely and seeking ways to learn from the results of the analysis;
- Consider intuition, gut feeling and how people may react to your decision in view of the fact that they are not yet aware why such a decision has been taken;
- Consider all the bad points of your decision or process and the weak points in the system, while allowing for contingencies and/or strengthening the weaker areas;
- Analyse the positive and take an optimistic view of the decision or process without downplaying the risks;
- Assess your decision and process closely and try to be as creative and receptive as possible to finding new avenues and solutions to problems;
- Always ensure that the right amount of time and resources are spent on the above-mentioned considerations and that an adequate balance has been struck.
Most would agree that the individual lies at the centre of innovation. This is what ultimately makes up organisations. They are the prime driver for innovation and organisations must seek ways to involve, engage and develop individuals to get the innovation process going. That said, an individual rarely accomplishes innovation by him/herself. People in organisations work in teams as innovation requires different skill sets from different functions of the organisation. An engineer who comes up with an innovative product requires a marketing team that is able to plan and implement a strategy, an operations team to produce and package the product, financial analysts to determine the price and the financial viability of the product and other supporting functions such as HR, legal and IT. Thus, teams are also drivers of innovation and organisations must focus on improving the effectiveness of teams to maintain innovation, encouraging the readiness of individuals to embrace changes in processes and offerings. Another driver of innovation revolves around the psychological climate of individuals and organisations. Psychological climate represents shared individual perceptions that are relatively homogenous, persistent and stable over time (Koys & De Cotiis, 1991).It guides behaviours with the aim of meeting organisational objectives and is a set of perceptions that describe experiences of organisational life by an individual, such as the acceptable standard to keep at work and what is considered to be going well or not at work. People are constantly experiencing and interpreting the world around them. This is highly-relevant to innovation as one’s view of the world, will shape the newness that they create and enable. The right amount of control and autonomy at work facilitates exploration of new avenues which in turn impacts the psychological climate of individuals. Thus, it is a key driver for innovation, and devoting attention to it is a requisite towards facilitating innovation within an organisation.
More often than not, when one considers recent innovations in the private sector, a welter of devices and technologies spring to mind, among which would be, the Internet, mobile phones, computers and tablets. These devices and technologies have changed the way we communicate and our work environments. A single device enables us to communicate, browse the internet, navigate, obtain information, listen to music, blog, chat, and interact on social media platforms. A number of start-up companies such as e-Bay, Google and Facebook have become multi-billion dollar enterprises within a short span of time, demonstrating that innovation can definitely lead to organisational success. The development of new technologies have also been maintained by established organisations such as Apple, Samsung and Microsoft that have kept producing devices, and systems which seemed more science fiction than reality, on their course to being developed. Looking at Google’s current projects, among which Google loon and Google glass might be the most popular, one might be excused for thinking that such projects are the basis of the script of a sci-fi thriller rather than actual technologies at prototypical stage.
Having said that, innovation in private companies has not only been driven through the development of gadgets and gismos. Some private organisations have been successful at innovating their processes, services or service delivery platforms. Essence, founded in 2005, for example, is a digital marketing agency providing strategy, design and advertising services to online giants such as Google, Expedia and Betfair. Essence saw sales soar from a modest £3m in 2009, to £170m in 2012. In 2008, the automotive industry looked at Toyota as the number one car company. Toyota attributed its success to the innovations it engaged in its production systems, by adopting a lean manufacturing system and focusing on reducing waste to improve customer value. Thus, innovation in the private sector has not solely been the development of completely new products or technologies but also on challenging and striving to improve the way things are done even if they work.
As previously mentioned, the EU has put innovation as a key component in Europe’s 2020growth strategy. In order to maintain a leadership role in innovation and to respond to Europe’s needs in terms of jobs and competitiveness, the EU has created the7th Framework Programme for Research and Technological Development2007 – 2013 (FP7) with a total budget of over €50 billion.
The Framework Programmes for Research and Horizon 2020 have two main strategic objectives:
- to strengthen the scientific and technological base of European industry
- to encourage the EU’s international competitiveness, while promoting research that supports EU policies.
The preponderance of the budget has been dedicated to co-finance research, technological development and demonstration projects. Grants are determined on the basis of calls for proposals and a peer review process, which are highly competitive and at times subject to lobbying influence. Research projects need to be carried out by consortia having participants from different European countries. That said, there is also a new action for “individual teams” with no obligation for trans-national cooperation.
In order to attain the above-mentioned strategic objectives, the FP7 has been grouped as follows: Cooperation, Ideas, People and Capacities. For each group, there is a specific programme corresponding to the main areas of EU research policy. The two main programmes that are most appealing to industry are the Cooperation and People programmes. In the Cooperation programme, the research objectives have been set with the help of European Technology Platforms (ETPs). These are industry-led and bring together public and private sector stakeholders to define research and development priorities, timeframes and action plans on a number of issues that are strategically important to achieving Europe’s future growth, competitiveness and sustainability. As well as specific actions to help SMEs, the Capacities programme aims to develop Europeanresearch infrastructures, optimise their use and improve access for researchers, including from industry. It will also support regional research-driven clusters, involving enterprises as well as universities and local authorities.
The People programme aims to increase mobility between public and private sectors, as well as between countries. To this end, they support industry training, joint research partnerships and staff secondments between the two sectors.
For more information on research and innovation funding please click here.
Mentioned earlier, the Horizon 2020 is the financial instrument implementing the Innovation Union in the 2014-2020 Programming Period. It is designed on the principle that help is needed to bring more good ideas to the market. The three key objectives are:
- Competitive Industries
- Better Society
- Excellent Science
Horizon 2020 aims to attain:
- competitive industries by building industrial leadership, boosting job creation, supporting innovation and stimulating private investment in research and innovation;
- better societies by developing environmental friendly and sustainable projects and having clean, reliable efficient energy;
- Excellence in science through support to scientists, providing training and career opportunities, research infrastructures and developing emerging technologies.
The programmes also aim to tackle major issues such as green transportation, safe and healthy food, safer Internet, and resistance to antibiotics and their replacement with new health treatments.
For more information on research and innovation funding please click here.
The need to be innovative within the public sector is premised not on profitability considerations but on the need to provide an efficient and cost-effective service at a reasonable cost to the taxpayer. Areas of innovation in public administration have included processes, whereby governments have grouped a number of services in a one-stop-shop setting to help start-up companies, foreign investors and the private sector get business started and having necessary day-to-day information required to run a business. In the EU, this approach has gained momentum following the enactment of the Services Directive and its transposition into the national laws of its Member States. Innovation in the civil service has also occurred through the use of technology, such as the possibility to access government-related information and apply for services through on-line platforms and citizen-relationship management tools. Governments have also invested in large-scale international research projects that have made breakthroughs in the development of life sciences. An example would be the Human Genome Project, which identified the chemical components and the sequence of human DNA.
Equinox Advisory has the expertise and experience to help both private and public institutions in developing and designing an innovation strategy, in finding solutions for organisational and institutional problems, in identifying ways in which to be able to capitalise on existing opportunities, and also in implementing the innovation strategy on the ground. We also consider this to be an ongoing and evolutionary process, whereby we monitor and calculate the benefits of the adopted strategy and constantly adjust and update the strategic direction in view of the ubiquitous market changes that beset contemporary organisations and institutions.