The Future of Innovation

Abstract
This document is aimed at projecting the future episodes of innovation, provoking more debate about future trends and culminating in encouraging innovators to keep abreast of the challenges confronting them. Tapping into the constructive episodic memory is unavoidable for most innovators. A crucial role of a constructive episodic memory is to enable innovators to perform simulation or imagine future episodes, events and scenarios. In simulating future episodes, it is important that past experiences are invoked and combined with current experiences to map the future.

Predicting the future of innovation is never going to be an easy subject given the level of environmental changes taking place today. The challenge here is one of looking into a crystal ball and predicting the future of innovation. In order to project the future of innovation in today’s terms, it is imperative that this document starts by briefly mapping innovation trajectory in the past, locating its current standing and emerging trends and then using that information to extrapolate how the future of innovation might play out. Emerging innovation patterns will be noted together with how the corporate world is responding to the phenomenon. The discursive, conclusive remarks underline the writer’s opinion and conviction on the future of innovation.

INTRODUCTION
The rate of economic and technological change worldwide is unprecedented. It is profoundly impacting on organisations’ strategic processes and choices, with no sign of abating. This change is cutting across all organisational life, casting more uncertainties and challenges in the operating environment. Successful organisations today have responded not only by innovating their business models, but by changing their ways of managing. Today more and more management decisions are required to be made at local level, closer to the customers. The business environment today places great emphasises on innovation and customer satisfaction, which requires organisations to have an outside-in perspective rather than the more traditional inside-out perspective. Adopting the outside-in perspective entails looking at delivering customer value starting from the market place, where an organisation tries to engage and understand the nature of the problems and issues facing customers.

Most managers today express their frustrations in dealing with environmental uncertainty caused by fast paced changes. In order to confront the uncertainty, organisations need to look at both internal (R&D) and external (open innovation) factors and adapt their interventions to help reduce the uncertainty and deliver value to customers. Of course innovation entails change. Such change could be incremental or radical. This does not happen by chance, but through some strategic planning effort, leading to strategic choice and implementation. The managerial task in deploying innovation interventions is to find ways of creating and delivering more value to the marketplace.

The next section presents a brief trajectory mapping of innovation as it has developed, followed by the status of innovation today, taking note of emerging trends. Finally, conclusive remarks are offered, followed by the writer’s conviction on the future of innovation. The spirit in which this document is written is that of encouraging organisations to look ahead and confront uncertainty.

The Innovation History Timeline
The last 100 years has seen the world changing so rapidly from industrial revolution to modern age, nuclear age, space age and then the information and information digitalisation age. The Great Depression created momentous opportunities in mechanising employment (Hicks, 1932: 121-125; Robinson, 1938). In the 1960s, Robinson popularised ‘induced innovation’, marking the beginning of the extensive literature on induced innovation and extensive use of the term innovation in economics. Table 1 below summaries the innovation history timeline.

Firstly, Solow (1957)’s inspirational analysis managed to equate production function with technology, leading economists to correlating R&D with productivity measures. Thereafter, a whole literature developed, analysing the contribution of research to industrial development, performance, productivity and economic growth.

Secondly, it is through J.A. Schumpeter that innovation really got into the economics mainstream. Schumpeter views capitalism as creative destruction: disturbance of existing structures, and unceasing novelty and change (Schumpeter, 1928; 1942; 1947). He identified five types of innovation (Schumpeter 1912:66): 1) introduction of a new good; 2) introduction of a new method of production; 3) opening of a new market; 4) new source of supply of raw materials; and 5) implementation of a new form of organisation.

Following Schumpeter’s entrepreneurial change topic, innovation studies started to move away from concentrating on individuals to a wider unity of analysis such as organisational innovations. Firstly, the real accentuation of innovation came through Management and Business Schools as they started developing the study of organisational innovation (Cole, 1959; Aitken, 1965). Secondly, (Burns and Stalker, 1961; Hage and Aiken, 1970; Zaltman et al., 1973; Wilson, 1966) inspired the study of innovative behaviours of organisations such as organisational structure and management style. Thirdly, a stream of management research activities concentrated on firms’ performance (Solow 1957). The 1980s and 1990s were dominated by R&D departments, though this was soon to fade in the 2000’s. Marked developments in innovation are starting to show, and this is discussed briefly in the next section.

Locating the current position of innovation
Innovation is now more pronounced and central in our society. In what could be classified as its formative years, innovation was depicted in ways and processes by which companies configured their R&D (linear innovation model) to obtain knowledge for the creation of products and services for their customers. In this linear model of innovation customers were viewed as external to the organisation and their input was not necessarily sought before the production of goods and services. The R&D model is rapidly giving way to an intricate web of relationships and associations (open innovation) for a common project, sometimes comprising companies, customers, academia and other key stakeholders. Traditionally innovation has been associated with technological advancement, but today many branches of innovation are springing up. There is management innovation, business model innovation (systemic), product innovation and service innovation etc.

Indeed, innovation is transitioning into a new identity; emerging global systems are creating autonomous multi-billion dollar economies. It is further moving away from the internally localised R&D centres to global collaborative teams, away from command innovation to collaborative innovation. Open innovation engenders multidisciplinary work and multi-generational problem solving techniques. Problems confronting companies nowadays are multi-dimensional and therefore require an ability to come up with multi-generational solutions.

Some firms are starting to demonstrate strong entrepreneurial orientation in their product and service offerings. Exhibiting a strong entrepreneurial orientation (EO) requires an organisation to remain grounded in the five dimensions of autonomy, innovativeness, pro-activeness, competitive aggressiveness and risk taking, which it exploits in identifying and creating venture opportunities (Lumpkin and Dess, 1996).

Cloud computing
A cloud computing platform is a pay-for-use business model, where the client does not have to pay for the software, hardware and maintenance costs. It operates on a flexible arrangement, it allows for scalability up or down depending on business demands. Cloud computing frees employees to work from anywhere as long as their computer is connected to the Internet. As an innovation, cloud computing is shifting the competitive arena, organisations can rent computer power at a lower cost. There are large provider organisations such as Amazon, Microsoft, Google and AT&T and smaller ones like Rackspace and Terremark. Large corporations are still sceptical about the security and confidentiality of their information under cloud computing.

Emerging patterns
Traditional innovation processes have been subjected to severe criticism for their failure to keep abreast of current multi-dimensional challenges. These processes are now slipping and working in the 37% efficiency range (BCG 2010 report). Customers demanding more for less cost, dwindling resources, long turn-around times and a fast changing operational environment have conspired to outpace the current linear approach (R&D). Innovation as a function of R&D used to be heavily focused on operational efficiencies, but today it is strongly emphasising top-line growth in its various combinations. More and more emphasis is shifting to open innovation as it allows a cross fertilisation of ideas (inflows and outflows of knowledge) through company lines to take advantage of the opportunities in the market place. Leading the pack on this are companies such as Procter & Gamble, Microsoft and Google.

Open innovation
Regardless of how the future of innovation plays out, open innovation is going to be part of the equation. It is premised on the same key principles that hold societies and communities together in that it is consultative and self-organising for a shared good. As a concept, open innovation is predicated on the principle that there is a world out there where knowledge is widely distributed. Therefore, to deliver customer value organisations need to deliver cost effective innovative solutions from both inside and outside the organisation. In an era where change is fast paced, an organisation cannot solely depend on its own research initiative to innovate, but must also look outside for inventions from other organisations. Table 2 below compares closed and open innovation systems.

A pattern is unfolding nowadays; deployment of open innovation processes is becoming more pervasive in some firms, they are now prepared to buy creativity from outside sources to circumvent the rigorous and expensive route from creative ideas to successful innovations (e.g. Procter & Gamble PLC). There are underlying problems with open innovation:

1. Open innovation thrives in a network of potential solution providers who are external to the organisations they serve, hence, they lack deep understanding of the problems they work on and also do not share the same mission as the client company. As a result, they only innovate to meet specifications, not to meet the mission of the organisation.

2. It is a huge challenge for companies to overcome the “not invented here” syndrome. For open innovation to be pervasive in any organisation, it has to gain cross-functional support, which requires a culture change. Without a cultural change, open innovation remains relegated to targeted pocket areas of the organisation instead of the whole organisation. The other challenge is that organisations are still not prepared to surrender their privacy and openly involve outsiders in every aspect of their process of production from idea generation, to sales and distribution.

3. Using outside channels of innovation entails appraising external innovators, which is timely, costly and requires elaborate definitions. The dilemma is that most of the toughest problems are conceptual and articulating them in summary form distorts the intended picture. They require someone who is internal to the organisation with enough grounding into the problem.

Organisations employing open innovation need to proceed cautiously. There is no need for organisations to make a full plunge into it at this early stage. A cue should be taken from pioneering organisations such as Procter & Gamble who are still only getting 50% of their innovations from open innovation regardless of the praise they heap on it.

Conclusive remark
Anybody who has taken a keen interest in innovation would notice that years and years of research have shown that nothing is static in life. There is a continuous process of adapting, reconfiguring, realigning and mix and matching from the already available solutions. It is always difficult to predict the future with certainty. By looking at the past, present and what is emerging helps any futurist to thread a scenario. This is the approach that has informed this article in projecting the future of innovation. All innovation is cultural, situational and people unique (people driven). Organisations are different as they mirror their people and leadership, and so is innovation. Best practices are there but do not become sweeping. They are just broad templates that need to be adapted. Predicting the future with certainty has always intrigued human beings and it is even more difficult now given the rapidly changing environment. Within my conclusive remarks the following is noted as the likely future direction of innovation:

Locating Future Innovation:

What future is envisaged?
We are moving into a new paradigm – a more pervasive internet infrastructure and mobilisation of devices, fueled by the digitalisation of goods and services, where customers will care more about the goods and experiences but care less about the goods and its ownership. The Internet has created a super information highway enabling companies to reach out to a wider audience and at the same time increasing the competition. It is now possible to compete for goods and services from anywhere in the world. Rapid environmental changes require persistent changes in people, systems and processes to engender organisational flexibility and agility as critically sought after capabilities. The following four points are pertinent in visualising how the future innovation might unfold:

1. The Internet ecosystem will exude a lot of energy, defined by the interaction of different stakeholders in symbiotic relations, that will spark collaboration among players, creating huge potential market value. Defining boundaries and roles of these organisations will be difficult, and the recognition systems will have to be a combination of success, openness and transparency to sustain engagement levels. Emerging out this environment will be what the current author calls Super-magnet organisations. These are highly innovative organisations that are characterised by the ability to create rich, compelling and exciting experiences for the customers. Super-magnet organisations not only innovate with customers but also focus highly on their employees. These new generation companies would have mustered the art of getting customer insight and retaining a high skilled work force. They are characterised by undertaking constant change in systems, people and processes. They will establish workforce backups in the form of federated worker associates residing outside the company. In these organisations non-technological innovations will be increasingly important, for example, the need to re-align or come up with new business models aimed at changing the way the firms operate to deliver customer value. At the heart of a super-magnet organisation are customers and employees.

2. Super-magnet organisations will be ready to exploit the positives from the open innovation system model, and adapt them to their own mission so as to avoid the problem of “not invented here”. Thus the emergence of organisations that coalesce into the super-magnet concept will be driven by the need to employ systemic innovation and the need to innovate to mission to keep everything under control. The idea of open innovation denotes dispersed control and I envisage a situation where this will not sit well with super-magnet organisations. This will lead to them going out to buy innovation and quickly coil back into their element.

3. In future, product and process innovations will be overtaken by ‘management innovation’ – implementing management practice, process or structure that is new and innovative. Management innovation is systemic and hard to copy and gives an organisation a sustainable competitive advantage than product or process innovation. Well-known historical management innovations include capital budgeting techniques by Du Pont and problem-solving skills of line employees by Toyota. The latest cases in point are Procter & Gamble’s Connect and Develop open innovation model and Motorola’s Six Sigma quality methodology.

4. The future of innovation is all about meeting customer passion. I see a future marked by an explosion of complexity and an explosion of devices raging from computers, mobile phones and house gadgets to motoring devices, given the earlier explosion of application software. Network solutions will become central in our lives, in that connectivity will no longer be an option, but a must have, as we need to stay connected with global communities. Our social lives and professional lives are converging and devices we use in our social and professional life are becoming uniform. So the challenge for innovation is to strike the right balance of the network solutions that represent a seamless switch from home to professional use and vice versa. With telecommuting (working from home) gaining traction, it becomes pertinent for future innovation to find the right mix of technologies that are required to make us more productive from our social communities.
Now it is crucial that we are not left behind in understanding how the ground where we stand is shifting. Here is how I think it is going to play out: When you combine the explosion of applications, smart devices networks and sensored data, this results in the provision of intelligent solutions, for example, digitalisation of content is getting more pronounced as books are going digital now.

Therefore, more innovation is likely to come from social communities such as gaming communities. I see these virtual communities becoming sanctuaries for innovation. The strength of virtual communities is that they have a strong appeal in human perception. More importantly, the virtual world is going to influence innovation, and I believe that we will eventually see something hugely innovative emerging from the virtual world.

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