What is Innovation?

by Melanie Featherstone 

January 2010

Innovation: the Fortune 500 buzzword of the new millennium. Even before the rise of President Barack Obama, change was the recurring theme at the turn of the century among many corporations. One-hundred-year-old companies were trying to figure out how to once again build a sustainable competitive advantage in today’s hypercompetitive business environment. As evidenced by a quick search of numerous company Web sites, newly created innovation departments and job titles have crept up all over Corporate America in the last ten years.  

But what does innovation really mean? Some would argue that innovation is synonymous with brainstorming or that it is about delivering new products or services. However, I would suggest that innovation is also as much about the process that you use to get the job done. 

Many companies added staff and reorganized to create corporate innovation departments without taking into consideration how they would deliver the new products or services. Their attempts to deliver new products and services without careful thought as to how to deliver them has lead to the demise of many of America’s once most prominent institutions. Consider, for example, the recent crisis in the banking industry where banks used creative financing instruments and provided sub-prime mortgages for homeowners. Although there was creative financing, there was, however, no creative process in place to provide liquidity to the banks in case the mortgagees defaulted on the payments as they had.  

The innovation process requires competency building in an organization. In addition to employing creative human capital and brainstorming techniques to fill the company’s pipeline with new product or service ideas, organizations must also be willing to employ new businesses processes, technologies and organizational infrastructure to support the ideas. Furthermore, companies should have senior leaders in place who are willing to take the calculated risks necessary to fund ideas along with the appropriate success metrics for innovation projects. For example, as an organization are you more concerned about top line or bottom growth and what will be the life expectancy of your new innovation project? Lastly, an organization must also decide ahead of time whether it will be open to innovation only within or outside of its core businesses or a combination of both.