Creativity & Innovation Highlight Report

Enterprise-wide innovation may give firms an important, hard-to-duplicate competitive edge

Thoughts of innovation permeate today's business world. The motivations for this focus include market advantages related to customers and competition and workforce advantages related to talent and performance, according to a study reviewed in the Journal of Business Research (Simpson, Siguaw, & Enz, 2006). But perhaps a comprehensive 2006 study conducted by HRI (i4cp's predecessor) and the American Management Association titled The Quest for Innovation said it most succinctly: "...innovation is a prerequisite for success - and perhaps even for survival."

Far more than the traditional view of research and development (R&D) geared toward breakthrough discoveries or incremental product enhancements, today's focal point is on enterprise-wide innovation, recognizing the importance of creative thinking in every aspect of business. It is here - in a firm's processes, operations, organizational structures and business models - that innovation can truly become a differentiator.

Still, investments in R&D, numbers of patents and other traditional innovation indicators are valued as a reflection of continuing commitment to innovation, and some of those measures portray a healthy respect for its importance. Total R&D spending in the U.S. alone was forecasted to top $338 billion in 2007, an increase of 2.85% over 2006 expenditures, with the majority going to development ($203.0 billion), according to research from analysts Battelle in Columbus, OH, and R&D Magazine (Duga, Grueber, & Studt, 2007).

Nevertheless, the avenues approaching innovation are broadening, and collaboration has become a central theme. According to a survey of 1,221 executives worldwide conducted by research firm Bain & Company, 65% of respondents agreed they "could dramatically boost innovation by collaborating with outsiders, even competitors" (Rigby & Bilodeau, 2007). And the outsourcing of research and other aspects of innovative work is growing; half of U.S. R&D leaders expect to increase R&D outsourcing between 2.5% and 10% in 2007, and 42% project increases of up to 2.5%, according to the IRI Trends Forecast (Scinta, 2007).

Part of the reason for this broader approach is that innovation affects the bottom line. A 2006 IBM global CEO study, Expanding the Innovation Horizon, in which 765 in-depth interviews were conducted with company leaders around the world, found that better-performing companies (using five-year operating margin growth) placed twice as much priority on business model innovation as did underperforming firms (IBM Business Consulting Services [IBM], 2006). And some experts assert that open innovation provides such advantages as lower risks, the ability to tap into the creative minds of others and the financial benefits of offering unused intellectual property to the market (Docherty, 2006).

That makes overcoming barriers all the more important. Insufficient resources, the lack of a formal innovation strategy and an absence of clear goals and priorities were noted as the top three barriers to innovation by the 1,396 executives responding to the global AMA/HRI study (American Management Association [AMA] and Human Resource Institute [HRI], 2006). And a 2006 survey of 76 C-level and non-Clevel executives at large U.S. firms named too little collaboration, too few incentives and the lack of "endto-end" innovation processes as the most significant barriers to innovation, according to the Economist Intelligence Unit (Accenture, 2006).

Many firms, though, are making notable progress in infusing innovation into their everyday work. For example, McDonald's Innovation Center in Romeoville, IL, houses some 70 employees devoted to testing new ideas. Ken Koziol, senior vice president of worldwide restaurant innovation, credits rapid prototyping for getting ideas "from the blackboard to 3-D as fast as we can" (Penttila, 2007).

The HR profession can play a role in building organizational appreciation of creativity and innovation. From the competencies it seeks in new employees to the training and rewards it provides, HR is in a position to help mold a culture that embraces and promotes innovation.