A Process for Fostering Innovation - An Approach Paper

In a brief moment of inspiration, I had penned this article down. And now as I am in a position to practice it, I actually find that the process works! So I have shared this for people to give it a read and if they like it, give it a shot

The Need for Innovation
One of the prime motivations for the IT industry to set shop in India was wage arbitrage. The difference between the hourly wages of an employee in one part of the world as compared to another drew work in an osmotic way from more expensive parts to India The digital world made it possible for the benefits of such rendered services to be experienced by customers globally. In fact, the cost factor continues to remain as one of the major drivers of IT outsourcing today.
Companies that are moving up the value chain, improve their competitiveness by working on process efficiencies. However, as in the case of design service industry, the process used for execution are pretty much standardized and now efficiencies are increased by the smart use of IT tools.
Even in industries where there is no electronic transfer of knowledge possible as in chemical or biotech industry, the labor arbitrage model has been operational. While material cost is the same globally, the people cost is the significantly lower especially at the cadre level. At best, process improvements are made to existing process to improve the benefits.

Thus, the benefits from offshoring are obtained through:¹

1. Labor arbitrage
2. Process Improvements

But there is more to gain by working in a lower cost country, than pure labor arbitrage. For this, new paradigms have to be explored.
These would be,

3. New and fundamentally different processes for achieving the same results of the older processes
4. Developing completely new solutions that would not be possible in a “high cost” country

It is in these areas that small companies should seek to leverage. These companies are typically not tied by the bureaucracy of a larger company and hence can move with speed. They should be looking at newer ways to differentiate themselves. These companies should be willing to take the bigger risk to move away from the well-trodden path and in turn get a bigger return for the investment dollar.

For any company to do things in a different manner, they have to innovate. Only if companies innovate can they move to look at different processes or completely new concepts.

In this approach paper, a model for innovation will be discussed.

2.0 Creating a Framework for Innovation

While many organizations may want to innovate, the process of innovation cannot happen overnight. For companies to use innovation not only as a buzz word but as reality, it has to be embedded in the culture of the company. In the table shown below, some of the indicators that emerge which differentiate innovating organizations from regular organizations are captured.

Table 1: Comparison of Operating Organization vs Innovating Organization³

Operating Organization	Innovating Organization
Creating today’s revenue	Creating tomorrow’s revenue
Steps are predefined	Steps are undefined
Steps are mostly linear	Steps are mostly non-linear
Single route for a result	Multiple routes for a result
Driven by functional teams	Driven by cross-functional teams
Reworking is a waste	Reworking is part of learning
Clear, shared goals	Unclear, conflicting goals
Easy to measure	Forecasting is almost impossible
Rich historical data	Poor historical data
Short cycle time	Long cycle time
Many common causes	Many special causes
Traditional players and roles	New players and roles
Doing things right	Doing right things

Thus, in order to be an innovation driven organization, it is important to look at it in terms of a maturity model. Figure 2.1 outlines a 3 level maturity model for achieving this state. The basis of the maturity model is that it is important to have an established framework of people processes that affect the culture of the company, before change is introduced. Any change can be established only if there is an awareness of the baseline.

Figure 2.1: A three level maturity model to build a innovating organization

The various levels and what they entail are listed below.

Level	Description2,3,4,5
Level1: Manage	Objective: Set-up and management of the following core people processes Recruitment Compensation Training & Development Performance Management Communication Work Environment
Level2: Facilitate	Objective: Tuning processes to foster innovation Recruitment for Innovation Compensation for Innovation Training & Development for Innovation Performance Management for Innovation Communication for Innovation Participatory Culture Leadership driving innovation
Level3: Innovate	Objective: Sustaining Innovation Organization Structure & Work Design for Innovation Empowered Workgroup Development Measures of Innovation

The advantage of using a Maturity based approach is that progression from one level of maturity to another level can be tracked. Just as a building cannot be built without a foundation, it is successful practice of each level of maturity can ensure that the cultural change introduced can be sustainable. This approach has been used by software organizations and can be adapted to develop a framework for innovation

In Level 1, people processes that are essential for all organizations are implemented. This ensures that there is a framework of people processes. It assures the stakeholders that the organization can embark on a cultural change process.

In Level 2, all these processes are tuned for Innovation. For example, if the goal of the organization is “Endless Innovation”, then is the recruitment process tuned so that people are recruited who can fit that requirement of the company⁶. Are the compensation policies so designed such that innovation is rewarded? There are two additional process areas that have been added. These are Participatory culture and Leadership driving Innovation.

Participatory Culture encourages team participation and also provides for an open discussion of ideas. In addition to this, the leadership dimension for driving innovation is also looked at. How are employees trained to be leaders of innovation i.e. how can they facilitate the process of innovation? How can employees constantly challenge their teams to question the status quo? How can they ensure participation from all members of the team?

Thus, Level 2 the support mechanisms for driving innovation are in place.

In Level 3, the existing processes are integrated so that innovation can be practiced. Towards that organization structure, team structure, and how work is being carried out should be looked at. Also, measurements to measure innovations for the organization has to be introduced so that the journey is sustained

3.0 Conclusion
Building and achieving innovating teams is a process and a journey. It can function only if there is an environment that is not risk averse and allows mistakes. Building and driving this environment to foster a culture of “learning from mistakes” is the primary responsibility of leadership. Embedding this leadership in all employees of the organization is going to be the biggest challenge that these small companies are going to face in the future.

4.0 References

1. Personal notes from discussions with Dr. Sridhar Mitta, CTO and MD of e4e labs on maturity levels of outsourcing 2. People Capability Maturity Model from SEI
3. “Embedding Innovation in Workplace” December 2005 Review, Corporate Leadership Council
4. “Encouraging and Assessing Innovation”. October 2004, Corporate Leadership Council
5. “Developing an Innovative Team”, September 2004, Corporate Leadership Council
6. Course Material of “Strategic Human Resources” by Prof Wayne Brockbank, University of Michigan