The MT Essays 40th Anniversary: Innovation - Bouncing ideas around

As well as creating brilliant new products and services, firms will need to reinvent themselves too. And the best insights will come via partnerships and ad hoc alliances.

by Trevor Davis and Ian Bradbury, IBM Global Business Services
Last Updated: 31 Aug 2010

If it's a basic fact of business life that change doesn't stop, innovation is concerned with harnessing useful ideas for change to create business value. Look at the wider picture. The world is transforming.

As we enter a new era characterised by 'information on demand', every business must grapple with the challenges of new technologies, emerging business models and the much greater but still uncertain role of nations such as China and India.

The IBM Global CEO Study 2006 - based on interviews with more than 750 of the world's top CEOs and leaders - reveals interesting insights on innovation. The findings show that it is no longer just about new products and services; business leaders are now renewing their business models and operations, too. Business model innovators gain ground on their competition by achieving greater focus and specialisation. They regularly review their market and decide which business components to retain and which to source externally.

Despite the myth that innovation is too critical and proprietary to involve outsiders, the study shows that collaboration is often indispensable.

More than three-quarters of respondents ranked 'business partner' and 'customer collaboration' as top sources for new ideas. Said one CEO: 'If you think you have all of the answers internally, you are wrong.'

The survey suggests that collaboration makes businesses more successful; companies with higher revenue growth reported using external sources significantly more than slower growers. Outperformers used external sources 30% more than underperformers.

Collaboration and business-model reinvention often require major cultural change. The results suggest that this change can only be driven from the top. Commented one respondent from the IBM Global CEO Study 2006: 'Leading, setting direction, laying the cultural groundwork that stimulates innovation - it's essential work for a CEO.'

But where to start? Setting an agenda for innovation involves a set of strategic choices that are often made without sufficient deliberation or with no challenge of assumptions. For example, how to choose between business model, operational and product innovation?

Creating a working environment where inspiration thrives and creativity flourishes remains one of the crucial leadership and management challenges facing companies today.

How else will you secure a continuous flow of new ideas that can be turned into value? This means adopting a collaborative, collegiate and team-oriented approach that still leaves room for rewarding individual contributions to innovation. Despite the value placed on collaboration and partnerships, the study reveals that many CEOs are still only at the planning stage.

While 76% of them agree collaboration is critical, only half say their organisations collaborate extensively. Citing a lack of the skills and expertise needed to partner externally, many of them refer to partnering as 'theoretically easy' but 'practically hard to do'. Plugging this capability gap is a matter of urgency: the results show that the higher the level of collaboration, the stronger the financial results.

Many of the CEOs in our study see business and technology integration as fundamental for the newer forms of innovation. Indeed, organisations with high revenue and margin growth are supreme business and technology integrators, benefitting from more effective and efficient business models and 'daring ideas'.

It's tempting to think that innovation is someone else's job, perhaps a task belonging to the R&D team or the marketing department. In IBM, we believe that although innovation needs orchestration from the top, everyone should be encouraged to think broadly, act personally, and contribute to the innovation mix. What will your contribution be?

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