PERSPECTIVES Tools for Enhancing Innovativeness...

Tools for EnhancingInnovativeness in Enterprises

Pradip N Khandwalla

If the enterprises of the Third World are to survive intense competition and thrive in a globalizedeconomy, they will have to go beyond importing Western and Japanese technologies andmanagement models to innovation. Rapid and widespread induction of structured manage-ment tools imported from the West and Japan may raise the operating standards of theseenterprises but may not translate into superior financial performance because they would notconfer competitive advantage vis-à-vis domestic competitors that also have inducted the sametools. Besides, there may be cultural and other impediments to their effective institutionaliza-tion. Innovation is a superior option because it is homegrown and confers the first moveradvantage. If the enterprise learns to be innovative so that it can generate a continuing string ofsuccessful technical and managerial innovations, it can garner sustainable competitive advan-tage and grow and thrive even in a hyper-competitive environment.

Innovation is applied creativity and, therefore, the principles of creativity need to be kept inmind in seeking to be innovative. Innovation can come in a great variety. Most innovations havethree characteristics: they are executed in the face of much uncertainty; they have economicimplications; and they have a political dimension. These aspects make the management ofinnovation quite challenging.

The major blocks to enterprise innovativeness are internal: conservative and bureaucraticcultures and structures, communications problems, and administrative inflexibility. In enter-prises that have grown up in conservative cultures and protected economies, the requiredmindset change in the stakeholders can be daunting. As a first step to stepped up innovativeness,an organizational design needs to be adopted that is innovation friendly. Such a design is brieflyoutlined.

A number of management tools can enable the enterprise to leapfrog to a much higherplateau of innovativeness. Sixteen tools are briefly discussed with real life applications. Theyare: creativity training; innovation training; creativity thinking network; creative scenariobuilding; creative surveys; creative experiments; creative benchmarking; reverse brainstorm-ing; exnovation; multiplication of change agents; kaizen; creative overload; data mining;stakeholders’ councils; intrapreneurship; and parallel groups. These tools deliver a number ofvalue propositions and facilitate:

an innovationist mindset in the organizationa ‘stretch’ vision of the future that can spur innovationsvital intelligence that stimulates innovationsdumping of obsolete activities that creates space for changes and innovationswidespread change and innovation throughout the organizationcontinuous improvements and innovationshigh potential new innovation leads‘breakthrough’ innovations.

In conclusion, the author suggests that becoming much more innovative is a high priorityfor the Third World enterprises. It is also suggested that the organization design that facilitatesinnovations and management tools that help an enterprise generate a continuing stream ofsuccessful innovations need to be incorporated into the core of management curriculum.

ExecutiveSummary

P E R S P E C T I V E S

presents emerging issues andideas that call for action or

rethinking by managers,administrators, and policymakers in organizations

KEY WORDS

Managerial Innovation

Technological Innovation

Organizational Design

Management Tools

Sustainable CompetitiveAdvantage

VIKALPA • VOLUME 31 • NO 1 • JANUARY - MARCH 2006 1

Liberalization and globalization have come of agein most Third World economies, including India,China, and the ASEAN countries. These econo-

mies have significantly liberalized their once statisteconomies and greatly decreased tariff and other bar-riers so that they have increasingly become hyper-com-petitive. To survive and prosper in such economies,companies need to catch up rapidly with internationalstandards of productivity, product/service quality,customer orientation, ethical conduct, and corporatesocial responsibility. One study, for instance, indicatedthat Indian manufacturing productivity was a tenth ofworld standards (Sharma, Nair and Suny, 2000), andIndia and China, not to mention Indonesia, Thailand,etc., rank far below Western countries and Japan onvarious enterprise-related competitiveness indicators(Cornelius, 2003). India, for instance, ranked 45th oncapacity for innovation, 49th onproduct/process sophistication, and59th on customer orientation againstthe 6th or higher ranks for both Japanand the US in each of these areas.

There are two options for lag-gards to catch up rapidly with worldleaders. The first is imitation and thesecond is innovation. A seeminglyquick way of catching up is whole-sale borrowing of Western/Japanesetechnology and tools of management.If, for example, Indian companiesquickly modernize their technologiesand implement such tools as TQM,TPM, Six Sigma, JIT, ERP, EVA,Balanced Scorecard, and so forth, they should narrowthe gap with the West/Japan. But, would that translateinto superior financial performance? This is a moot issue.

There are two reasons for this doubt. First, if all ormost firms in an industry implement the same techno-logy or tool, none may be able to gain a competitiveadvantage. This could happen if the tool is highly rep-licable because its implementation is highly program-mable. The second is that each tool rests on certain statedor unstated assumptions and critical success factors,particularly those relating to acceptance of the tool bythe staff, the information requirements for the effectivedeployment of the tool, the management’s commitmentto employing the tool, the human and financial cost ofimplanting the tool in the organization, and the com-

petence with which it is emplaced. Available evidencedoes not indicate benefits from the adoption of suchmanagement tools in every or even a majority of thecases in which they are tried out, not only in the ThirdWorld contexts (Tripathi, 2005), but also in the FirstWorld contexts (Staw and Epstein, 2000).

The second option available to the Third Worldenterprises for quickly catching up, possibly surpassingthe world leaders, is sustained technical and managerialinnovation. Both the US and Japan provide good exam-ples of the power of homegrown and contextually adaptedforeign innovations. After the Second World War, theUS improvised a whole lot of management innovationssuch as profit centres and divisionalization, various toolsfor the effective management of marketing, finance,operations, and control, and various behavioural sciencetools for motivation, conflict resolution, attitude change,

and problem solving (George, 1972).Japan borrowed quality control fromthe US but contextualized it anddeveloped a number of culture-spe-cific tools like the ringi system ofdecision-making, kaizen, and kanbanthat helped it catch up rapidly withWestern productivity and qualitystandards and even surpass some ofthem (McMillan, 1996). Learning tobe innovative can be very worthwhileto the Third World enterprises be-cause it can provide them with thefirst mover advantage again andagain. This can translate into sus-tainable competitive advantage and

rapid growth in a very competitive environment.

ENTERPRISE INNOVATIONS

In the enterprise context, innovation is applied creati-vity, often involving the coordinated efforts of severalgroups of people for giving rise to something that is bothrelatively novel and useable for pursuing the enter-prise’s goals (Utterback, 1971). The creative idea neednot necessarily have originated in the organization butit is taken up by the organization, developed, tested out,and implemented so that it is relatively unique in its finalform. Indeed, a majority of the ideas successfully devel-oped and implemented by the enterprise could comefrom outside. In one American study of 157 innovationsin firms, 98 of the ideas were picked up from outside

Learning to be innovativecan be very worthwhile

to the Third Worldenterprises because it can

provide them with thefirst mover advantage

again and again. This cantranslate into sustainable

competitive advantageand rapid growth in a

very competitiveenvironment.

2 TOOLS FOR ENHANCING INNOVATIVENESS IN ENTERPRISES

the firm and developed (Utterback, 1974).

Types of Enterprise Innovation

Enterprise innovations come in highly variable impactmagnitudes (Gluck, 1985). There are the so-called ‘bigbang’ innovations, such as the transistor radio and themicroprocessor-based computer, that revolutionize theentire industry or sectors of activity. The others are‘suggestion box’ or ‘kaizen’ innovations. These sugges-tion box innovations can contribute immensely. Accord-ing to one study, 25 million innovations and improve-ments were suggested by the Japanese workers in 1980and these contributed $10 billion to Japanese corpora-tions (McMillan, 1984).

Some innovations are technical in nature while otherscan be labelled managerial. Technical innovations canbe product-related or process-related. Thus, while mi-croprocessor is a technical processinnovation, word processor is a tech-nical product innovation. Technicalinnovations may have contributed avery substantial portion (as much as40%) to the improvement in produc-tivity and, therefore, in living stand-ards in the West (Kendrick, 1979).

An interesting development isinter-organizational innovation. Ri-vals in the same high-tech industryare increasingly collaborating onR&D-based innovations. In thetelecom industry, for instance, in theearly 1980s, ltaltel (the Italian telecommajor) entered into a joint venturewith US-owned GTE and Telettra ofthe Fiat Group to develop digitalpublic switching systems and market them worldwide,and later, teamed up with the French company, CitAlcatel, the German company, Siemens, and the Britishcompany, Plessey, to develop the hardware and soft-ware modules of the digital switching systems (Bellisario,1985). A related development is network product in-novation. The network may include not only rivals butalso vendors, licensors, joint venture partners, andcustomers. Network innovation in home banking is anexample (Pennings and Harianto, 1992). In an Americanstudy of 49 banks that implemented home banking (versus103 that did not), the home bankers had to synchronizefinancial services, telecommunication technology, and

IT. The network created by the home banker companyhad to include not only its customers who wanted toavail banking services from their homes, but also thesellers of goods and services and other local banks inthe network.

Management innovations are those relatively novelchanges in problem solving, decision-making or imple-mentation procedures that improve one or more func-tions such as better control of operations, greater effi-ciency, better coordination, greater capacity to cope withenvironmental changes, better staff motivation, greateraccountability, and better mission accomplishment(Kimberly, 1981). These range widely from innovativemissions, styles of management, growth strategies,functional management, and organizational structuresto flexi-time, TQM, and staff participation in decision-making (Kimberly, 1981).

Management innovations are, attimes, difficult to implement andinstitutionalize, that is, get thewhole-hearted acceptance of thestakeholders. Those comfortablewith the status quo tend to resist suchinnovations because of the fear ofbecoming redundant or of losing outto brash youngsters with the rightknow-how. Many organizations in-troduce such innovations with greatfanfare only to abandon them shortly.Management by objectives, for in-stance, survived in only half of theIndian companies in which it wasintroduced (Maheshwari, 1980).Since many management innovationsare hard to assess in profit and loss

terms, they are hard to introduce in a commercially-oriented enterprise but, once institutionalized, they arehard to get rid of for the same reason even if they appearto be obsolete. Periodically, therefore, bureaucratic andconservative enterprises tend to get saddled with aplethora of removal-resistant policies, practices, struc-tures, and systems that may have been useful innova-tions in the past but are albatrosses round the neck now.

Features of Enterprise Innovations

Most significant enterprise innovations need to copesuccessfully with uncertainty; allocate substantial hu-man and financial resources appropriately; and neutral-

Management innovationsare, at times, difficult to

implement andinstitutionalize, that is,get the whole-hearted

acceptance of thestakeholders. Those

comfortable with thestatus quo tend to resist

such innovations becauseof the fear of becomingredundant or of losingout to brash youngsters

with the right know-how.


ize opposition by stakeholders and gain their support.An innovation, by its very nature, faces uncertainty

on various fronts: technical (the right approach neededto get to the innovative product or activity); the pre-ferences of the intended users of the innovative productor service; and the costs and benefits of the innovation.Such uncertainties need to be tackled with gusto andingenuity if a creative idea is to turn into an innovation.

Enterprise innovations, especially ‘breakthrough’technical innovations, are frequently not cheap. Someof the high-tech US enterprises spend more on researchand development than the total sales of India’s largestprivate sector enterprises. In view of uncertainties, it isdifficult to estimate and control the costs and benefitsof innovations. Too tight a control could impede crea-tivity; too lax a control could result in runaway costs.

Management of Innovation

Innovation implies change in thestatus quo, especially when the inno-vation has a broad and/or deepimpact on the established structuresand processes of the enterprise. Somepeople who have a big stake in thestatus quo may get hurt while thosehaving a stake in the innovation maybenefit. This political nature of inno-vations implies that those entrustedwith an innovation must have theskills of influencing others. Theyneed to be able to neutralize oppo-sition through persuasion and buildsupport for the innovation. Withoutpowerful support, however rationalthe innovation, it has a poor chanceof success.

Management innovation espe-cially can get highly adversarial. Thetechnological innovation’s costs and benefits are usuallyeasier to quantify than those of a management innova-tion; so, there is more rational debate within the organi-zation on the merits or demerits of a particular techno-logical innovation. But, whether a new budgeting orHRD system or a new structure will benefit the organi-zation in absolute performance terms is usually a matterof judgement and may elicit sharply differing points ofview. Besides, a management innovation, such as a newperformance management system, may directly affect

the career prospects of a number of people. While tech-nological innovations can be quite expensive in moneyterms, the psychological costs of management innova-tions can be higher. Therefore, management innovationsrequire a number of ‘political’ skills in their sponsorssuch as the capacity to identify a coalition that willsupport the innovation, proper timing, effective internalmarketing of the innovation, etc.

Since most innovations are very interactive, how thehuman relationships are managed can be a key successfactor. In an American study involving 169 managers,the biggest predictor of innovation success was the qualityof human relations management (Service and Boockholdt,1998).

Mindset differences within the enterprise can im-pede innovations. Sizeable enterprises tend to get de-partmentalized, divisionalized, and decentralized to

realize the benefits of specialization,focus, and accountable autonomy.But, these also create inter-depart-mental, inter-divisional, and inter-level mindset differences (Lawrenceand Lorsch, 1967). Such mindsetdifferences can lead to difficulties inimplementing innovations. A studyof 18 new product initiatives in fivelarge US corporations illustrates theorganizational facilitators and barri-ers of new product introductions(Dougherty, 1992). Only four of the18 new offerings realized their profittargets while seven were clear ‘fail-ures’ (the products were launchedbut then cancelled). The remainingseven were in-between cases. Inter-views with some 80 staff membersfrom different functional areas re-vealed large mindset differences.

Business issues (segments, competition, forecasts, etc.)figured frequently in interviews with people in marketresearch but much less frequently in interviews withmanufacturing, field, and technical personnel. Issuesrelated to selling were rarely mentioned by technical andmanufacturing staff as compared to field personnel, andso on. There were strong mindset differences relatingto new product development. For instance, the technicalpeople focused on specifying what the product could do,and what the users wanted in terms of product speci-

While technologicalinnovations can be quite

expensive in moneyterms, the psychological

costs of managementinnovations can behigher. Therefore,

management innovationsrequire a number of

‘political’ skills in theirsponsors such as thecapacity to identify a

coalition that will supportthe innovation, proper

timing, effective internalmarketing of theinnovation, etc.


fications, while the manufacturing people were prima-rily concerned about the product’s durability, qualitystandards, etc., and the salespersons were concernedabout how quickly the product could be changed to meetcustomer requirements. These were, however, comple-mentary concerns. Had there been joint problem solvingand decision-making, the launches might have beenmore successful.

Small teams for spearheading innovations may bevery useful. Research efficacy can go down in teams withmore than seven members (Martin, 1984). Even largeorganizations can, however, be innovative if they usesmall teams for developing innovative ideas (Peters andWaterman, 1982). Successful large high-tech enterpriseslike 3M and Hewlett-Packard have many ‘skunk-works,’each dedicated to a specific innovation through a small,highly committed team of professionals who play avariety of roles without losing focus (Roberts, 1977).

Innovation generally has twodistinct phases. The first phase in-volves the conceptualization anddesign of the innovation; the secondinvolves its execution and institu-tionalization. The conceptualizationphase is marked by much brain-storming for alternatives and thisrequires administrative flexibility,high interactivity among all con-cerned, and expert-based decision-making (Burns and Stalker, 1961).

The implementation phase requires a different modeof management: a lot of careful estimation of costs andbenefits of alternatives, planning, control, and monitor-ing (Khandwalla, 1977). This requires the coordinationof many groups of specialists and an attempt to motivateall the innovation stakeholders. The links between basicresearch, development, manufacturing, and marketingof the innovative product need to be carefully estab-lished (Moss, 1985). If any of these is weak, the inno-vation could fail. All this requires considerable ‘profes-sional’ management.

In the business sector, innovative ideas have highmortality. In the US, only 2 per cent of the new productideas eventually become commercial successes and onlyone in seven products undergoing development suc-ceeds in the marketplace (Booze, Allen and Hamilton,1980). Thus, a very large number of innovative ideasneed to be generated to step up the rate of innovation.

Secondly, to raise the success rate, especially of productinnovations, planning, coordination, monitoring, andsharp customer focus become indispensable. Productinnovations need to be tailor-made to clearly identifiedgaps and needs of the customer. Collaboration with thecustomer in the form of joint prototype testing, speci-fication, development, evaluation, marketing, etc., canbe quite helpful. In the British medical equipment in-dustry, continuous interaction between the producerand the user led to a 65 per cent success rate as againstthe 20 per cent rate without such interaction (Shaw,1988).

ORGANIZATIONAL DESIGN FORINNOVATIVENESS

In a hyper-competitive environment, it is not enough toinstitute an occasional innovation. Competitive advan-tage can be sustained if the enterprise comes up with

a continuing stream of successfullyimplemented innovations. For thisto happen, the organization needs tobe designed for innovativeness. This,however, is not easy. At the enter-prise level, frequently, there aremajor blocks to innovativeness andthese are mostly internal to the or-ganization (Burns and Stalker, 1961).These take the form of internal bar-riers to communication and action,coordination difficulties, poor con-

trol and follow-up, poor definition of objectives, inad-equate business analysis, inadequate creativity, a workculture that resists change, etc. (Utterback, 1974). Sinceorganizational barriers to innovation tend to be greaterin large organizations than in smaller ones, an Americanstudy indicated that small firms produced over 20 timesas many innovations per R&D dollar than large firms(Rastogi, 1987). In a study of 50 ‘breakthrough’ innova-tions of the 20th century, every advance came from arelatively small firm (Klein, 1977). Large enterprisesneed to adopt an organizational design that avoids thepitfalls of large size and also enhances innovativeness.

Thus, the key for enterprise success in the competi-tiveness sweepstakes in a globalized economy is devel-oping an organization for sustained and successfulinnovativeness (Hamel, 2006; Khandwalla and Mehta,2004; Ravasi and Lojacono, 2005; Voelpel, Leibold andTekie, 2005). The organization’s growth and competitive

Competitive advantagecan be sustained if the

enterprise comes up witha continuing stream of

successfully implementedinnovations. For this to

happen, the organizationneeds to be designed for

innovativeness.


strategies, its organizational structure, the style ofmanagement, the management systems, especially hu-man resource management and so forth, need to bedesigned for sustained and successful innovation andaligned for this purpose.

The organizational design that is required is quitedifferent from the textbook prescriptions for profession-ally managed organizations. The growth strategy needsto emphasize opportunism and risk-taking over ‘focus’;the competitive strategy needs to emphasize learning,networking, and a constant stream of innovative pro-ducts and services over such defensive strategies aspushing ‘power brands,’ or one of the ‘pure’ strategiesadvocated by Michael Porter (1980); the structure needsto be highly divisionalized, decentralized, and flexiblewith numerous cross-functional project teams that sup-plement regular functional departments; human resourcemanagement needs to induct fromoutside as well as identify fromwithin the organization numerouschange agents and potential innova-tors, groom them, ensure that theyhave enough operating space toinnovate, and reward them whenthey deliver; the top managementneeds to get engaged in the planningand monitoring of innovations; andso forth. Such a design has been foundto be associated with superior cor-porate performance (Khandwallaand Mehta, 2004).

PRINCIPLES OF CREATIVEPROBLEM SOLVING

Besides instituting an innovations-friendly organization design andprocesses, there are several tools thatcan stimulate innovations in an en-terprise setting. These tools are notprogrammed ‘how-to-do-it’ kits but,rather, broad approaches that can accommodate a lot ofcontextual modification and adaptation and value ad-dition by organizational actors. Most of them are derivedfrom ‘principles’ of creative thinking and problem solv-ing (Khandwalla, 2004). It may be useful to list theseprinciples, for enterprises can design new tools on theirown that meet their needs based on these principles:• Logical thinking is not the only effective mode for

solving real life problems. Associative thinking (Areminds one of B, B of C, C of D, etc.), empathicthinking (putting oneself in the shoes of another oreven of a thing), bisociative thinking (examining anissue from two or more quite different perspectivesand then trying to integrate the ideas yielded by thedifferent frames of reference), metaphoric thinking(seeking an arresting metaphor for the problemsituation and then working out its implications),fantasy thinking, and dialectical thinking (a seriesof statements and rebutting or questioning counter-statements) are some of the other modes of thinkingthat can yield useful insights.

• Both ‘convergent’ thinking and ‘divergent’ thinkingneed to be utilized for creative problem solving.Convergent thinking involves such processes as de-fining key terms, a clear statement of the problem,

its analysis into various components,identification of the criteria for judg-ing the efficacy of the solution, choos-ing among alternatives on the basisof these criteria, etc. Divergent think-ing is much more exploratory andhas a ‘trial-and-error’ in its opera-tion and involves an unconstrainedlisting of options, fantasying, com-ing up with arresting metaphors,getting into out-of-box thinking thatmay sound impractical or even cra-zy, etc. Convergent and divergentthinking frequently proceeds in cy-cles of logical and out-of-box think-ing until a solution is found that isboth novel and effective.• For encouraging divergentthinking, it is necessary to keep one’scritical faculties in abeyance for thetime being and adopt a more playful,open, and experimental mindset.• Creative thinking is inhibited

by defensiveness and fearfulness and stimulated bycuriosity, openness, independence, and adventur-ousness.

• Questions, not answers, are the creative acts of in-telligence. Questions widen search; answers freezesearch.

• There are different forms of creativity and some-what different skill-sets are required to manifest

Besides instituting aninnovations-friendly

organization design andprocesses, there are

several tools that canstimulate innovations in

an enterprise setting.These tools are not

programmed ‘how-to-do-it’ kits but, rather, broad

approaches that canaccommodate a lot of

contextual modificationand adaptation and valueaddition by organizationalactors. Most of them arederived from ‘principles’of creative thinking and

problem solving.


each form. Essence creativity manifests as novelideas, points of view, paradigms or angles. It re-quires excellent abstraction skills and some of themost notable examples are to be found among theworks of great scientists, mathematicians, and pio-neering artists. Elaborative creativity manifests asinnovative elaborations of ideas or paradigms thatotherwise may be familiar. It requires the ability tovisualize the implications of ideas, link perspectivestogether, transform a concept into a fully developedprogramme or activity or event or product, andweave complex and unique designs. Expressivecreativity is novelty in the way the commonplaceis presented be it through word or paint or musicor through any other medium. It requires felicitywith off-beat and vivid use of a medium. Entrepre-neurial creativity requires cal-culated risk-taking and the abi-lity to spot and seize opportu-nities and convert an idea or apiece of information into a via-ble enterprise. And, some of themost fascinating examples areto be found among the ranks ofsuch Indian entrepreneurs asJamsetji Tata, GhanshyamdasBirla, Dhirubhai Ambani, AzimPremji, and Narayana Murthy.Existential creativity is the abi-lity to grow and develop one’sown self in distinctive ways sothat the emerging human is unique and is frequentlyfound notably in creative professionals. Empower-ment creativity manifests as activities that empowerothers in unique ways such as those of empoweringleaders like Mahatma Gandhi.

MANAGEMENT TOOLS THAT STIMULATEINNOVATIVENESS

Tools have been developed that enhance an enterprise’sinnovativeness (Khandwalla, 2003, chapters 9 and 11).To be fully innovative, the enterprise needs to have amindset of innovation at all levels and in all the functionsof the organization. Those with a yen for innovation needto interact with one another freely so that something likean innovation movement gets started. The staff needsto be trained in techniques of creative or out-of-boxthinking and problem solving. Innovation as a process

needs to be widely mastered. The enterprise needs todevelop a challenging enough vision of the future thatcan induce stakeholders to innovate to respond to thechallenges. The management needs to generate vitalintelligence that generates innovative responses. Theenterprise needs to sweep away periodically junk activ-ities, products and so forth that impede innovation sothat space is created for innovative changes. A largenumber of innovative change agents need to be trainedand given space to innovate and change. The enterpriseneeds to promote great many small innovations thatcontinuously improve the processes and products of theenterprise. High potential new leads have to be iden-tified for future growth. The enterprise also needs topromote radical, off-beat innovations that can drama-tically improve the position of the enterprise in the

industry. Sixteen management toolshave been developed to deliver thesebenefits (Table 1).

Creating an InnovationistMindset in the Organization

The following three tools can helpgenerate an innovationist mindset inthe enterprise and also diffuse wide-ly the skills needed for innovation:creativity training, invention train-ing, and creativity thinking network.

Creativity Training

Many people think that creativity isGod-given. However, a review of

over 140 studies of creativity training programmes hasclearly indicated that creativity can be taught (Torrance,1987). Another survey of over 100 studies indicates thatcreativity training is generally effective: performanceimproves on tasks that are similar to those used duringthe training (Westberg, 1996). By the early 1990s, overhalf of the US Fortune 500 companies had given their staffcreativity/creative problem solving training in someform or the other (Ford and Harris III, 1992).

Creativity training works best when it seeks tostrengthen those forces that promote individual, group,and enterprise-wide creativity and weaken those forcesthat impede creativity at all the three levels (Khandwalla,2003). The forces that promote creativity are the rightkind of working environment (diverse tasks, flux, au-tonomy with accountability, encouragement from bossfigures to innovate, tangible rewards for successful

To be fully innovative,the enterprise needs to

have a mindset ofinnovation at all levelsand in all the functions

of the organization. Thosewith a yen for innovationneed to interact with one

another freely so thatsomething like an

innovation movement getsstarted.


innovation, etc.); strengthening of the motive to innovatefor the benefit of the organization and its stakeholders;raising the capacity for divergent, off-beat, out-of-boxthinking and problem solving; stronger presence in theenterprise of those with a fire in the belly, curiosity, risk-taking ability, independent thinking, etc.; and a goodgrounding in such techniques of creative thinking asbrainstorming, questions checklist, attributes grafting,synectics, and reverse brainstorming (Khandwalla, 2003,chapter 4). The forces that impede creativity are exces-sive fear in people such as the fear of failure, aversionto ambiguous situations, fear of humiliation, fear ofsocial ostracism that manifests as conformity, etc.

Sometimes, especially in relatively old, conserva-tive organizations, the biggest blocks to creativity andinnovation are not at middle and junior managementlevels but at senior levels. In these enterprises, it is usefulto subject senior executives first to creativity training toremove blocks and convince them about the practicalityof creativity. At the least they would desist from oppos-ing innovations. This strategy has worked for severalenterprises in which I have provided creativity trainingto top and senior level management.

As an example, in the late 1970s, I provided crea-tivity training to batches of senior managers of an Indiansubsidiary of a British MNC in the gas business. Anumber of innovative actions followed (Mukherjee, 1989).A team effectiveness survey improved teamwork andcommunications. The CEO informally met managers atall levels once a month and so did division heads. Formalcommittees were set up to tackle productivity, safety,HRD, housing, etc., and action was initiated for improv-

ing the MIS, cost reduction, better capacity utilization,personnel management, PR, growth strategy, and workculture. Training programmes were organized forstrengthening many skills. There was a clear tilt towardsdecentralization and participative decision-making.

A number of innovative moves followed. The hold-ing company’s shareholding was reduced to enable theIndian subsidiary to avoid the restrictions on growthand diversification imposed by the government on MNCs.Specific and ambitious targets were participatively setand vigorously pursued. One whole level of manage-ment was eliminated and SBUs were created for new,innovative ventures. Many bright young managers wereidentified and given challenging responsibilities. Newmarkets were explored. Several product innovations andmodifications were made. The company entered intocontracts with other enterprises to manage their gasplants and market their products. It also entered intojoint ventures with SOEs. Exports were increased, plantcapacity was augmented, R&D was stepped up, ancil-laries were developed, marketing was professionalizedand so forth. In 1982, profits reached four times theirlevel in 1979.

Structured creativity training programmes such asFuture Problem Solving can be quite useful at lowerlevels. It is a six-step process (Kurtzberg and Reale,1999). In the first step, fuzzy situations are presentedto trainees such as customers switching to a competingbrand. Next, the trainees generate several alternativeproblem statements of the situations and identify thecomponents of each problem. Further, they work out asingle problem statement and brainstorm for solutions.

Table 1: Value Propositions and Tools for Delivering Them

Value Propositions Delivery Tools

Creating an innovationist mindset in the organization Creativity trainingInnovation trainingCreativity thinking network

‘Stretch’ vision that spurs innovativeness Creative scenario buildingVital intelligence to stimulate innovations Creative surveys

Creative experimentsCreative benchmarkingReverse brainstorming

Dumping of obsolete activities ExnovationBringing about widespread change Multiplication of change agentsContinuous small innovations Kaizen

Creative overloadHigh potential new leads Creative data mining

Stakeholders’ councilsSecuring ‘breakthrough’ innovations Intrapreneurship

Parallel groups


Then, they agree on the evaluation criteria and applythem to each solution. Finally, they identify the ‘optimal’solution.

Innovation Training

It is not enough for an enterprise to generate manycreative ideas. These have to be transformed into useableinnovations. Several models of innovation training havebeen developed such as the three components McCor-mick model (McCormick, 1984). Trainees are initiallypresented with a problem faced by an early innovator.Next, they study the personality and lifestyle of earlyinnovators. In the third, they are given assorted junkmaterial to invent a product or a process.

There is an even more elaborate eight-stages pro-gramme (Lillrank, 1995):• Trainees are made much more aware of the impact

of innovations.• They learn how to maintain an innovator’s log of

their innovating efforts and howto utilize junk to invent a newdevice for a function.

• They learn to identify a poorlymet need and create a ‘bug list’of present irritants.

• They master a checklist of ques-tions called SCAMPER.

• They learn how to research,evaluate, and select solutions and also to generatecriteria for evaluating solutions.

• They experiment with designs and tools or gettechnical assistance for creating a model.

• They learn ways of naming the innovation andmarketing it.

• They produce the device and explore outlets.In an experiment with 700 kids, it was found that

those who underwent all eight lessons produced moreinventions than those who had only one lesson (Lillrank,1995).

Creative Thinking Network

A creative thinking network can quickly spread theculture of creativity and innovation throughout anenterprise. The OZ Creative Thinking Network, startedin DuPont’s Industrial Fibers Division, US, is an interest-ing example (Tanner, 1994). Seven employees who werecommitted to understanding the tools of innovation andcreativity in the workplace at a time of severe compet-itive pressure from foreign players organized it in 1986.

The network grew to 600 members by 1993. The networksought to expand the company’s knowledge related tocreativity and innovation and to promote internal en-trepreneurship.

The network met once every six weeks and theparticipants generally numbering 100 to 150 sharedexperiences and knowledge. They ranged from plant-level operators to top managers. Experts such as inven-tors, innovators, professionals, people from R&D, andrepresentatives of innovation teams were invited to speak.Trainers of creativity techniques were utilized in work-shops. External experts were invited to speak on creativeproblem solving, the environment for creativity, apply-ing creativity, managing innovation, laughter and crea-tivity, fables for rousing imagination, etc.

The network launched such projects as an innova-tion fair, honouring of innovators, seed money for novelideas, and the publication of a book of humorous car-

toons-cum-essays titled ‘Are WeCreative Yet?’ Over 20,000 copies ofthis book were distributed.

‘Stretch’ Vision that SpursInnovativeness

Creative Scenario Building

A challenging but plausible futurescenario can galvanize many inno-vative options to respond to it. The

‘Delphi’ technique can generate such a scenario (Helmar,1964). For this, a group of experts is recruited but theiridentity is not revealed to one other. Each tries to vis-ualize the situation in the somewhat distant future inthe area of concern (such as the nature of a dynamicindustry like IT) — as it would be or as it could be withappropriate effort. These scenarios are shared but with-out revealing the identity of the authors (so that thevisualizer is not influenced by his/her sentiments to-wards the others) and each member is asked if, basedon the fresh inputs provided, he/she would like to modifythe scenario earlier visualized. After several such rounds,a consensus or two tends to emerge and the exercise isended.

Delphi can generate innovative anticipatory actions.Shell’s experience is revealing (De Geus, 1988). In 1984,the ruling price of oil was $28 per barrel. However, thecorporate strategic planning director asked managers tovisualize what would happen if by 1986 the price of oilfell to $16 a barrel — an apparently unlikely event. They

It is not enough for anenterprise to generatemany creative ideas.

These have to betransformed into useable

innovations.


visualized the response of the government, the compe-tition, and the company scenario. A number of innova-tive responses was considered. Shell was ready witheffective action when the price of oil fell from $27 a barrelin January 1986 to $10 in April 1986.

Vital Intelligence to Stimulate Innovations

Creative Surveys

Enterprises often survey their staff and customers forvarious purposes. Creative surveys are those that eithersolicit rarely gathered information and/or use thatinformation innovatively. A good example is ltaltel’ssurvey of its image held by various stakeholders in 1981(Bellisario, 1985). ltaltel, an SOE, got consultants to assessits public image and reasons for it. Feedback to man-agement instigated many changes and innovations, suchas in the company’s trademark, logo, product design,and the décor of the company’s fa-cilities. Sears Roebuck, the US retail-ing major, surveyed its stakeholdersand developed a mathematical mod-el to link together the financial indi-cators, customer satisfaction, and em-ployee morale (Rucci, Kirn, andQuinn, 1998). The model predictedwhat would happen, for instance, tofinancial results if employee attitudeschanged or customer satisfactionchanged. Sears University was set up to offer courseson how to use this model and the enterprise’s selection,promotion, and compensation of managers was alignedwith how well they did on all the performance indica-tors.

Creative Organizational Experiments

Pilot studies or projects can be turned into creativeexperiments to yield reliable and novel intelligence. Thiscan be done fairly simply by identifying a ‘control’ groupthat does not undergo change so as to be able to comparewhat happened in a project or a pilot study with whathappened in a control group in the same period. Evenif no ‘control’ group is possible, as when setting up anew plant, careful periodic measurement of key varia-bles like efficiency can yield valuable, reliable informa-tion. Information turns into creative intelligence whenthe experiment is in an uncharted area such as theinstallation of a Balanced Scorecard system, JIT, TQMor EVA. At the least, such pilot experiments can reveal

pitfalls to be avoided before full scale up. They can becreative also when the information gathered is used forwidespread brainstorming for novel options.

A post office in Shimla in Northern India undertookan interesting experiment in the early 1980s (De, 1984).Each person in the post office was assigned only one taskand the culture was of constant checking by superiors.The post office performed several functions: mail col-lection and delivery, money orders, mail registering,insurance of parcels, banking facilities, provision of postalstamps, dispatch of telegrams, etc. Each counter handledonly one of these functions. A customer with severalrequirements had to go from one counter queue to anotherthus wasting a lot of time. A survey revealed muchdissatisfaction among the 40-strong, unionized staff.

Initially, the mail delivery persons were organizedinto teams. In each team, instead of individuals special-

izing in only one function, the func-tions of overall supervision, mailcollection, delivery, recording, etc.,were rotated. The result was that thearea covered per postman and thedelivery load per postman got nearlydoubled. This teamwork innovationspread to other local post offices.

Creative Benchmarking

Benchmarking is commonplace butcreative benchmarking is not. Normally, enterprisescompare themselves with industry-specific standards orthe standards of industry leaders such as the numberof employees needed to produce a unit. Benchmarkinggets creative when standards are sought of the trulyoutstanding even if the pace-setter does not belong tothe industry: for example, the staff motivation of a highlycharged army unit or NGO whose members may wellbe willing to risk their lives to accomplish the missiongiven to them. Even ordinary benchmarking can becreative if the information it yields is used to brainstormon novel ways to close the gaps revealed.

Ford Motor Company, US, had a serious quality andsafety problem in the late 1970s. It lost $1.5 billion onsales of $37 billion in 1980. To restore its image, itdeveloped a car named Taurus (Shook, 1990). The in-novative part was that Taurus was benchmarked on 400separate automotive features with the world’s best carsand it was decided to surpass these cars on each of these.Taurus turned out to be a great success. Also, on account

Information turns intocreative intelligence when

the experiment is in anuncharted area such as

the installation of aBalanced Scorecard

system, JIT, TQM or EVA.


of other actions that the Ford management took, thecompany could raise its sales to $52 billion and earn $2.9billion in 1984.

Reverse Brainstorming

The technique of brainstorming can be used not only togenerate many novel ideas but also to find unnoticedproblems with the selected option. All choices are basedon assumptions and frequently many of these are notarticulated in the discussion. In reverse brainstorming,the accepted option is attacked from the competitor’spoint of view through a brainstorming process. Manyweaknesses may come to light. The option is re-exam-ined to eliminate the revealed weaknesses. GE is knownto use reverse brainstorming extensively. ‘Devil’s advo-cacy’ is a variant of reverse brainstorming. An analyticalmind plays the role of opposing any proposal that ismade by an innovation team so that unnoticed issuesare brought out into the open for discussion.

Dumping of Obsolete Activities

Exnovation

Conditions change and the policy orpractice that was once a worthwhilechange or innovation may currentlybe quite obsolete. This problem isacute in many bureaucracies. AnAmerican study indicated that forevery dollar spent by the govern-ment on enforcing a new government regulation, the costto business could be ten times more (Weidenbaum andDetina, 1978). In the UK, ministers for deregulation wereappointed to identify damaging or unnecessary regula-tions and simplify or eliminate them (CommonwealthSecretariat, 1995). Nearly 900 such regulations were dealtwith.

Old, large enterprises also suffer from needlessregulations and policies. ‘Exnovation’ is a good way ofidentifying and deleting such junk (Drucker, 1985). Itmakes sense every few years to identify and delete thepolicies, practices, rules, and regulations that the organi-zation presently has that have outlived their utility sothat space is created for new and innovative policies.Continental Airlines, for example, offers a dramaticexample of exnovation. Following losses in the early1990s, a new management publicly burnt the 800-pagebook of rules and replaced it with an 80-page manual(Brenneman, 1998).

Bringing about Widespread Change

Multiplication of Change Agents

Given a long period of a sheltered economy in whichchange was at a discount, many enterprises in the ThirdWorld have been saddled with a large unfinished agendaof change and innovation. Many change agents arerequired to bring about the needed innovations. Severalenterprises have shown ingenuity in identifying andempowering large numbers of change agents. At theailing Steel Authority of India Ltd., the new CEO firstmet some 25,000 members of the staff singly or in groupsto get acquainted with them. Later, he developed aturnaround strategy titled Priorities for Action. Next, hecoached some 500 senior managers in two-day work-shops on the turnaround strategy. These senior manag-ers, in turn, conducted similar workshops for theirsubordinates. Thus, a very big army of change agentswas created (Krishnamurthy, 1986).

At Siemens Nixdorf, Germany,the new CEO met some 8,000 mem-bers of the staff even before joining.On joining, he initially identifiedthree change agents who, in turn,identified 30 and so on so that even-tually some 2,000 change agents wereidentified. They were sent on a 13-week tour of the US to visit the SiliconValley enterprises and companies

undergoing restructuring. They also got coaching froman expert. Some 400 managers were provided specialentrepreneurial training and 250 of them were givencharge of the newly created SBUs (Kennedy, 1998). GM,US, transferred some 7,000 data processing personnelto IDS, its dynamic subsidiary, to absorb the latter’sdynamic mindset (Kharbanda and Stallworthy, 1987).

Merely identifying a large number of change agentsis not enough. They need to be empowered throughtraining and exposure, and then, when they are ready,they need to be given autonomy in bringing about changesand innovations in their areas. They also need to be heldaccountable and, when they succeed, they need to berewarded.

Continuous Small Innovations

Kaizen

The lower level staff is a huge reservoir of competenceand ideas. But, it is seldom tapped for innovation in

Old, large enterprises alsosuffer from needless

regulations and policies.‘Exnovation’ is a goodway of identifying and

deleting such junk.


traditional and authoritarian corporate cultures. TheJapanese have developed systems for tapping this res-ervoir that they call kaizen. Kaizen facilitates little chang-es and innovations for continuous improvements inproducts and operations. The Japanese Association ofSuggestion Systems as well as the Japan Human Rela-tions Association has catalysed the use of effective kaizensystems.

Kaizen is a potent source of innovations. In the 1970sand 1980s, Japanese car companies continuously erodedthe market share of US companies. One reason was theeffective use of kaizen by the Japanese companies. Ac-cording to one study, GM, US, received less than onesuggestion per employee per year and adopted less thana quarter of the suggestions received while Toyota ofJapan generated nearly 18 suggestions per employee andadopted nearly 90 per cent (McMillan, 1984)!

Kaizen works when it is managed well. The Gov-ernment of Singapore initiated kaizen in the form ofquality circles called Work Improvement Teams (WITs).Hundreds of WITs were started. Each WIT, consistingof the entire work team including thesupervisor had a trained facilitator.Several thousand innovations andimprovements were suggested andimplemented. These contributed tothe administrative excellence of theSingapore Government (Ng, 1990).

The Scanlon Plan is anotherproven source of numerous smallinnovations (Schuster, 1984; Thomasand Olson, 1988). It is a gains-shar-ing plan in which the team as a wholedecides how the gains are to beshared even when the innovation hasbeen proposed by a particular mem-ber. While the innovative idea is always welcome, ul-timately, it is effective implementation that counts and,for this, the whole team needs to support the innovation.This support is forthcoming because the team as a wholedecides who should get how much payment as incentive.

Creative Overload

Overload is commonplace in organizations but creativeoverload that stimulates innovations is not. Many amanagement creates an overload on the staff throughoverly ambitious targets but then does not apply cre-ativity in achieving them. Often, these targets are not

met and then there is much fault-finding, responsibilityshirking, and a pervasive sense of failure. LakhanpalNational, an Indian producer of batteries, and a subsid-iary of Matsushita Electric, Japan, used overload crea-tively (Khandwalla, 1992). It decided to double its pro-ductivity in just three years. To be able to do this, insteadof focusing only on the output of batteries per employee,each department/section undertook to double its per-formance in three years. Over 70 different challengeswere identified. Such diverse areas were targeted asreduction by half in the rejection rate of good batterycells, manpower employed in the parts section, rate offalling of the battery jacket on the floor, water consump-tion, level of inventories, etc. A cross-functional teamwas formed for each challenge and every staff member,including the CEO, was a member of one or more teams.Each team brainstormed on how to go about achievingits target. There were no financial incentives but therewas appropriate financial and other support to the teamand public recognition whenever a challenge was met.Most of the targets were met in three years.

Some enterprises such as 3M,US, create an overload by requiringthat at least, say, 25 per cent, of thesales in any year should be fromproducts developed by the companyduring, say, the previous five years(Fortune, 1988). This sends a power-ful signal throughout the organiza-tion for speeding up new productinnovation.

Thus, the way overload can bemade creative is by breaking theoverall ‘stretch’ into do-able smalltasks, putting cross-functional teamsin charge of each task, getting the

team to brainstorm for options, and rewarding and rec-ognizing success.

High Potential New Leads

Creative Data Mining

Enterprise data are mostly used for very limited account-ing or MIS or marketing purposes. ‘Knowledge disco-very’ is a method for creative data mining that seeks touncover innovative new uses of information.

Knowledge discovery looks for links in the infor-mation available with the organization or accessible to

The lower level staff is ahuge reservoir of

competence and ideas.But, it is seldom tapped

for innovation intraditional and

authoritarian corporatecultures. The Japanese

have developed systemsfor tapping this reservoir

that they call kaizen.


it. The idea is to identify previously unknown patterns(Siau, 2000). A merchandise store may have informationon the sales of hundreds of products. Credit card salescan provide a lot of information on the buyers such astheir income, occupation, age, gender, marital status,residence, buying habits, etc. Statistical analysis canhelp the store identify the most profitable goods, theirbuyers, and their buying habits. This can facilitate in-novative and more sharply focused packaging, display,incentives, etc.

Knowledge discovery starts by specifying the areaswhere innovative action is a priority. Next, the data thatcan be mined for patterns are identified and preparedfor analysis. Further, data mining is attempted throughclustering, regression, cross-tabulation, correlation orother statistical techniques. Finally, there is brainstorm-ing for interpreting the information and its application.

Stakeholders’ Councils

Every enterprise has multiple stake-holders: owners, managers, staff,unions, customers, vendors and soforth. Most of the time, the view-points of only a few of the stakehold-ers are taken into account whilemaking decisions. Stakeholders’councils bring in more voices in theprocess and, therefore, stimulate newways of approaching problems (Free-man and Reed, 1983). The way for-ward is by setting up a council of therepresentatives of each major classof stakeholders. Each council meetsthe management a few times a year to exchange infor-mation about the enterprise’s prospects and the prob-lems encountered by the class of stakeholders. Thestakeholders are encouraged to make suggestions.

SnB Bank, Denmark, has developed a way of gettingits various stakeholders to influence the way it operateswith the help of Copenhagen School of Business (Pruzanand Zadek, 1997). The bank has identified the values itshares with various groups of stakeholders notablyemployees and customers. It has set up ‘dialogue cir-cles,’ one for each class of stakeholders, in which themanagement and the representatives of the class ofstakeholders discuss periodically the extent to which thevalues are lived up to and the concrete steps that havebeen taken or can be taken to improve this. Feedback

from questionnaires given to stakeholders is also dis-cussed at the meets and areas of improvement are iden-tified. The bank budgets specific resources to implementimprovements and innovations and the bank’s staffrecruitment and appraisal processes reflect the valuesshared with the stakeholders. Concretization takes theform, for example, of specifying how jobs should beperformed by the staff to reflect stakeholder values, howcustomers can get sound advice and service from thebank, how supervisors should listen to the viewpointsand suggestions of their subordinates, and how employ-ees can experiment with new ideas.

Securing ‘Breakthrough’ Innovations

Intrapreneurship

In a turbulent, competitive, but opportunity-rich envi-ronment, the development of star potential products on

a fairly constant basis is necessaryfor sustained competitive advantageand rapid, profitable growth. Amer-ican studies suggest that only one in50 new product ideas succeeds in themarket (Booze, Allen and Hamilton,1980; Quinn, 1985). Thus, to grabfuture opportunities, organizationsmust pursue many novel ideas atany point of time and try and de-crease the mortality rate of novelproducts. Intrapreneurship canachieve both.

The way intrapreneurshipworks in some companies is by the

management welcoming any novel product idea, evenif it is a far-out one, from employees and outsiders(Pinchot III, 1985). If the idea is seen to have high futurepotential, the proposer of the idea is given a budget andmodest facilities to work on the idea and hire a cross-functional team to develop the idea further. A seniorcorporate manager provides support and guidance tothe team. The team is kept away from the R&D depart-ment because the R&D chief’s priorities may clash sharplywith those of the team. Following product developmentand testing, a presentation is made to the corporatemanagement. If the proposal passes muster, productionis scaled up with the team head as the likely CEO of thenew division. Intrapreneurship tries to cross small,entrepreneurial teams with the resources and systems

The way overload can bemade creative is bybreaking the overall‘stretch’ into do-able

small tasks, putting cross-functional teams incharge of each task,getting the team to

brainstorm for options,and rewarding and

recognizing success.


of the large corporation without stifling creativity in away that provides the enterprise with a stream of highpotential growth products.

Over the years, researchers have thought ofintrapreneurship as a mode of management. They haveproposed four dimensions of intrapreneurship: newbusiness ventures; innovativeness; organizational self-renewal; and proactiveness (managerial initiative andrisk-taking). Indeed, scales have been developed tomeasure the extent to which the organization isintrapreneurial in terms of these fourdimensions. In a comparative re-search of American and Slovenianfirms, the extent of intrapreneurshipwas associated with the growth rateof the firm (Antoncic and Hisrich,2001).

Parallel Groups

Parallel teams can be set up fordesigning highly innovative prod-ucts, projects or activities (Bleicher,Bleicher and Paul, 1983). Both theteams may be given the same man-date but are encouraged to workindependently and evolve distinctive approaches. Cre-ative advertising agencies sometimes field two or moreteams to develop a promotional strategy for a client(West, 1993). Before finalizing the strategy for aproduct launch, IBM reportedly sets up multiple teamsto develop and test alternative products with custom-ers. The idea is to find out which product morph thecustomers may be willing to pay for most profitably.After parallel groups make their presentations to man-agement, there is some kind of a shoot-out for selectingone of the alternative designs. However, there is

generally an attempt to incorporate the strengths of thelosing design in the winning design.

CONCLUDING COMMENTS

The Third World economies need to grow fast to providedecent living standards to their impoverished people.If they are market economies, as most of them now are,they can grow fast if their enterprises become globallycompetitive and master the art of seizing the opportu-nities offered by globalization. Innovativeness offers a

huge opportunity to these enterpris-es for rapid growth and sustainablecompetitive advantage. But, innova-tiveness is not easy for enterprisesnurtured in hitherto protectionisteconomies and authoritarian andconservative cultures. Major organ-izational redesign is needed involv-ing big mindset changes and majorchanges in strategies, structures,human resource management sys-tems, and practices and style ofmanagement. If that could be suc-cessfully attempted, the stage would

be set for innovativeness. If the 16 tools described in thispaper are adopted after necessary context-governedmodifications, the rate of successful innovation could bedramatically increased with attendant benefits to societyand economy. Most of these tools are not part of thestandard MBA curriculum. The latter, too, needs to bemodified to bring the organizational design for innova-tiveness and the tools to stimulate innovation centre-stage in management schools so that a large number ofyoung managers develop an innovationist orientationand play the roles of change agents.

Intrapreneurship tries tocross small,

entrepreneurial teamswith the resources and

systems of the largecorporation without

stifling creativity in a waythat provides the

enterprise with a streamof high potential growth

products.

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Pradip N Khandwalla retired as Professor of OrganizationalBehaviour at the Indian Institute of Management, Ahmedabadin 2002. He has published a dozen books on organizationtheory and design of organizations, turnaround management,creativity and its management, public sector management,

styles of management, etc., and nearly 80 papers in refereedjournals and scholarly anthologies. He is now a managementconsultant and serves on several corporate boards,institutional governing councils, and government bodies.e-mail: [email protected]


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