Secrets of serial innovators

Most businesses come up with good ideas – but to be able to continually adapt and change, they need the capabilities to sustain innovation

Innovation is the holy grail for today’s businesses – the hidden force that helps them adapt to changing demand, drive sustained growth and dominate their markets.

So why are some companies able to continually reinvent themselves and stay at the forefront of their industry when others struggle to keep up? Research suggests that answer lies not in their skill in generating ideas but in their ability to nurture and sustain innovation.

Martie-Louise Verreynne, Professor of Innovation at The University of Queensland Business School, says:

“Many people think of innovation as a light bulb moment, but in reality, it is a combination of creative ideas and capable execution. Most firms are skilled at developing good ideas, but the ones that stand out have innovation capabilities embedded in the culture through routines, processes and practices.”

Professor Verreynne believes organisations should stop considering innovation as a one-off event and look to develop an innovation culture. Here are some lessons that firms can learn from businesses which innovate successfully time and time again:

Put innovation at the heart of your business

Companies like Google and Amazon build innovation into their everyday operation. “These organisations have innovation at the core of their vision and strategy,” says Professor Verreynne.

“They build cultures and values that support learning, alertness to opportunities, experimental mindsets and acceptance of risk. Their leaders inspire employees to innovate. They give them the opportunity to collaborate, debate ideas, experiment with new products or processes and fail until they succeed.”

Create a stable environment

One paradox about innovative companies is that while they encourage experimentation, they have stable management and strong values. They hold onto talent and don’t change high-level strategies quickly. It is this stability that enables them to innovate and allows employees to feel confident about taking risks. Management continuity also encourages the development of informal internal networks which are known to be a factor in innovation.

Implement small experiments

Big ideas often come from an accumulation of little bets according to Professor Verreynne.

“By creating small experiments at an early stage, companies of any size can test new ideas in an affordable manner.”

Professor Rita McGrath, a globally recognised expert on innovation, and growth studied almost 4,800 companies with a market capitalisation of $1 billion or more that grew by 5% a year for five years. While they differed widely in terms of size, region and industry, what they did have in common was that they all made small bets early on to diversify their portfolios.

One example was the film studios Pixar. It made a big bet on its Pixar animation hardware, a small bet on the animation that illustrated the software. The hardware division was bought by Viacom for $2 million in 1990, while the animation arm became Pixar Animation Studios which was bought by Disney for $7.4 billion in 2006.

Develop problem-solving skills

Professor Verreynne and her colleagues studied 400 businesses in the Queensland oil and gas fields as they went through a ‘boom and bust’ period and analysed what the top performing 25% had in common. They found that problem-solving skills were a key factor.

Linda Hill, Management Professor at Harvard Business School, argues that innovation is, in fact, a type of collective problem-solving. Innovative organisations know how to have heated but constructive arguments. They use the debate to build a portfolio of ideas which they may then combine or reconfigure to create new and useful solutions.

“When you look at innovative organisations, they never go along to get along,” says Professor Hill. “They don't compromise. They don't let one group or one individual dominate, even if it's the boss, even if it's the expert. Instead, they have developed a rather patient and more inclusive decision-making process, that allows for both solutions to arise and not simply either/or solutions.”

Be pro-active

Organisations with innovation capabilities continuously scan the environment for opportunities and use them to outperform competitors. Professor Verreynne found that the top-performing companies in her study were able to anticipate shocks through active monitoring and adjust. Therefore, they were less likely to be caught off guard.

“Innovative organisations are able to anticipate and learn proactively, they don’t wait for the big event to occur.” says Professor Verreynne.

Develop dynamic capabilities

Businesses have two types of capabilities. Ordinary capabilities are the operational skills they require in their day-to-day business – for example, a good accountancy firm can deliver high-quality service to its clients. However, ordinary capabilities by themselves will not be enough to respond to disruption. Businesses need dynamic capabilities to be able to reconfigure their resources and take advantage of opportunities, this means they should develop the capabilities and will to continuously change.

In the fast-changing business environment, the lifespan of firms has become shorter. Innovators of the past such as Nokia and Kodak have fallen victim to newer technologies, while others such as Apple have responded to change successfully.

Professor Verreynne says all businesses should ask themselves the question “are you locked into your current business model, or have you developed a culture that supports continual renewal and innovation?”

Learn more about embedding sustainable innovation in the Business School’s free 10-week online course:

Creating and Sustaining an Innovation Culture.