Last week I attended IBM’s Business Leadership Forum (BLF) in Rome, with about 350 other IBM guests – most of them senior executives from IBM’s biggest clients. This was the fourth such gathering hosted by CEO Sam Palmisano, aimed at generating discussion among global business leaders about key issues in business and society, and – between the lines – the evolving role of IT in the future of both.
The theme of the event was, not surprisingly, “innovation that matters” – the mantra behind IBM’s new “What Makes You Special?” marketing campaign. It was a high-powered and stimulating gathering. But in the speeches, and in hallway chats, two nagging questions kept repeating:
- Is innovation really as big a deal as IBM (and many other IT vendors) are making of it, or is it just the latest empty buzzword, destined to fade away in 18-24 months?
- And just what is “innovation”? Are we talking only about big, breakthrough business innovations, or is it fair to include small, incremental improvements? And if we include the latter, does it somehow water down the importance of innovation?
Let’s probe both these questions.
Innovation Is the “Ying” to Globalization’s “Yang”
So how important, really, is innovation to business leaders? In a word: Very. Here are just two recent bits of evidence from IDC’s world. First, IDC’s latest Line-of-Business Executive Survey identifies innovation as the #2 (and rapidly rising) priority for respondents’ CEOs in 2006. The second, albeit less scientific finding, is the response to IDC Italy’s recent Innovation Forum in Milan: this inaugural event was tremendously oversubscribed, with about 1,500 delegates from business, IT, government and academia in attendance – over three times the attendance of IDC Italy’s successful perennial CIO Conference. I’m certain we could have had 3,000 delegates if we’d had the room.
But why is the subject of innovation so hot with business leaders? The most obvious and powerful reason is globalization. The direct linkage between the pressures of globalization and the urgent need for innovation was a unifying thread at the IBM event, from author Tom Friedman’s comments about the “flattening world”, right through to former EC Commissioner Mario Monti’s comments about the urgent need for structural reform in the Eurozone’s top three countries. The common message was the same one I delivered last month at IDC Directions 2006:
“It’s clear that companies that operate in the developed economies are not going to win a battle of labor-rate arbitrage with competitors in India or China or other emerging economies. The only way they’re going to be successful is to reinvigorate their ability to out-innovate their global competitors.”
Our research and others’ (including IBM’s recent CEO survey) shows that innovation is seen by an increasing number of CEOs as a critical countermeasure to the growing pressures of globalization. At IDC, we see innovation as the “yin” to the “yang” of globalization: they have a strong positive feedback relationship, with globalization fueling the need to innovate, and innovative companies being able to create value by leveraging globalization. As I said at IDC Directions: “Innovation is moving up the CEO’s agenda, and it will stay there as long as globalization is an issue – which will be for quite a while to come.”
[IDC clients should also check out economist Robert Reich's speech at IDC Directions, titled: "China, India and the Future of Everything", which also made this important connection between innovation and globalization.]
What “Counts” As Innovation? “Anything New Will Do.”
But while innovation is a vital tool for surviving and thriving in a globalizing economy, what about the second thread of discussion at the BLF: What exactly qualifies as an “innovation”?
Innovation is a very fuzzy word – it can mean many things to many people. IBM had quite a few customer innovations on display at the BLF, and I heard more than one delegate ask “Is that really an ‘innovation’?”, implying that if a solution borrows from, or is built on, other innovations, it is not a true innovation. Or if the solution is about an evolutionary shift of a business process, rather than a radically new approach, it should not be considered a true innovation. How narrow a view of innovation should business executives have when striving to develop a culture of innovation in their organizations?
Coincidentally, earlier in the week I spoke at IDC’s CIO Conference in Milan, and heard another speaker – a real expert on innovation – Oxford professor Michael Earl, address this very issue. Professor Earl spoke broadly about the process of fostering and managing innovation, but his opening comments went right at the issue of “just what is ‘innovation’?”. He suggested that virtually all academics who study innovation agree that:
- The definition of innovation is, quite simply, “anything that’s new”
- Innovation has two scopes: it can be incremental (small steps), or it can be radical (large change)
- There’s quite a lot of evidence – in innovation work, and in strategy work – that continuous, small-step innovation pays off much better than radical innovation
- Innovation can be absolute (new to the market or sector) or relative (new to your organization, but quite normal in somebody else’s organization)
He concluded this multidimensional taxonomy of innovation by saying: “There’s no value judgement in these [different approaches]. In fact what all these sorts of classifications say is we should not be too judgmental about what is innovative and what is innovation. Actually, ‘anything new will do’.”
[Hear the full audio of Michael Earl's comments on the different meanings of "innovation"]
Having worked with many different sizes and shapes of businesses in the past 24 years, I can appreciate this inclusive view of innovation. It recognizes the simple fact that, if we restrict the meaning of innovation to only mean absolute, radical changes (a la Google, eBay, et al.), that’s a standard that is – by definition – unachievable by (and therefore, irrelevant to) the vast majority of businesses. As Earl’s comments suggest, innovation – of all stripes – can exert positive change for businesses in many different circumstances and contexts.
Let’s not get too hung up about how pure or absolute a standard we hold for innovation. After all, the ultimate, and most relevant, judges of “innovation that matters” are businesses’ customers, employees, partners and shareholders