Innovation Inside Out
| posted by Roger SmithThere has been some very interesting research on the impacts of intellectual capital on innovation. Specifically, Subramaniam & Youndt studied the impacts of three forms of IC on two forms of innovation. Their findings were published in the June 2005 Academy of Management Journal article "The Influence of intellectual capital on the types of innovative capabilities."
IC can exist as human capital (brilliant individuals), social capital (groups that exchange ideas), and organizational capital (patents and databases of knowledge). Innovation is typically characterized as incremental (improving existing products or services) or radical (creating entirely new products).
Subramaniam & Youndt found that incremental innovation was primarily driven by organizational capital -- the historical knowledge-base of the firm building itself up one brick at a time. However, radical innovation was NOT primarily driven by human capital -- the brilliant individual was insufficient for creating radical innovations. Instead, the primary driver for radical innovations was social capital -- groups of people sharing their ideas, insight, and experiments was more effective that the application of brilliant individuals alone.
They took a very scientific approach to this problem and worked hard to gate out external influences.
Conclusion -- If you want to develop radical innovations you had better invest in social interactions and collaboration first. You can spend the money you have left over hiring Giant Brains.
Comment
Recent Comments | 2 Total
August 8, 2005 at 11:04am
Richard WatsonInteresting. In my experience big companies often fail at innovation because they focus on the wrong type of innovation. They shoot for radical innovation (thanks Mr Hamel!) when they should be aiming for incremental change (which they are usually much better at). This problem is compounded by the fact that most companies don't realise there's a difference between the two types of innovation. And even if they do 'get' the difference, they persist in chasing the sexy 'blue sky' stuff when their culture in incapable of implementing anything so radical. I'm not saying that big companies shouldn't pursue big ideas but simply that they should recognise what they're good at. Equally, many really big ideas come out of small companies but they are often next to useless at scaling up and commercially exploiting ideas. I guess collaboration really is the answer. Maybe the big guys and the little guys should talk?
August 8, 2005 at 2:11pm
Roger SmithRichard,
Excellent observation -- many companies do not even know there is a difference between incremental and radical innovation. Therefore, how can they possibly appreciate that there are differences in the way one should approach each of these. Unfortunately, the trade press gives the impression that brilliant individuals are the key to every problem (CEO, CTO, Research Scientist, etc.). In fact, it is usually a well mixed team that can work together toward a common goal.
Coming up with the next big idea is just one of the first steps toward a radical innovation. This has to be followed by hundreds of complementary steps if the innovation is going to turn into successful product. Big companies may have the financial and organizational resources to do that, but they often lack the vision or faith to move ahead. Small companies often have unwavering faith in their ideas, but no money or breadth of expertise to put behind them.
Though this may imply that the two should get together, that would require that the big company invest its money in someone else's idea. If they cannot invest in their own radical ideas, there is no way to get them to invest in someone else's.
... Enter the VC.
Roger