3 ways for businesses to fuel innovation and drive performance
3 ways for businesses to fuel innovation and drive performance
The Conversation Over the past two years, businesses have experienced unprecedented operational disruptions and market uncertainties due to the COVID-19 pandemic. Accordingly, many business executives are prioritizing innovation to enhance competitiveness and performance.
Summary
"3 ways for businesses to fuel innovation and drive performance" Grant Alexander Wilson, The Conversation (January 17, 2022)
Drawing on a global study of 437 companies across 11 industries and 27 countries, the article identifies three key findings about which innovation practices actually drive business performance — and which are only effective in specific industries.
The research
In co-operation with national conference boards in the U.S., Europe, and Asia, researchers collected data on innovation culture and practices across a broad cross-section of global businesses. The study investigated two central questions: what kind of organizational culture best supports innovation, and which innovation practices universally enhance firm performance.
Key findings
Innovation culture comes first: Companies with strong innovation cultures — where leaders support experimentation, dedicate resources to knowledge generation, and have processes to test and launch ideas — consistently outperformed those without such a culture. An innovation-focused culture is the necessary first step before any specific practices can succeed.
Universally beneficial practices: Five practices enhanced performance across all industries:
- Crowd-sourcing — taking internal tasks and outsourcing them to generate new ideas and perspectives that create value.
- Open innovation — sharing innovations freely among players in the value chain, creating more value-creating opportunities.
- Innovation management software — measuring innovation progress based on the principle that "what gets measured, gets managed."
- Scientific discovery — people collaborating across space and time to deepen knowledge, a recognized trait of top-performing companies.
- Prototyping — creating early test versions of products to reduce risk and increase market performance.
Industry-specific practices: Despite significant hype, three practices only benefited companies in certain industries:
- Stage-gate systems — effective only in manufacturing, IT, and health care. The innovation process is rarely linear enough for this rigid approach.
- Design thinking — beneficial only in arts and entertainment, retail, and marketing industries due to its ambiguity.
- Big data analytics — only valuable for industries that already manage large datasets (finance, health care, IT), likely because other industries lack the capability to manage big data effectively.
Managerial tips
The article offers three practical recommendations for executives:
- All executives should seek to create an innovation-focused culture.
- After an innovation culture is established, companies should engage strategically in universally beneficial practices.
- Some practices should be avoided altogether, as their benefits are limited to specific industries.
The good news
Creating an innovation-focused culture is achievable through deliberate actions: setting innovation goals, encouraging all employees to innovate in their roles, prioritizing individual and organizational learning, removing negative consequences from failed experimentation, and supporting activities with incentives. The universal practices — crowd-sourcing, open innovation, innovation management software, scientific discovery, and prototyping — are accessible to companies of any size or industry once the cultural foundation is in place.
🎴 Interactive Web Practice (Comprehension Check)
Question 1 (Organizational Culture): According to the global study of 437 companies, why must establishing an innovation-focused culture precede the deployment of specific innovation tools or practices?
Answer: The study demonstrated that companies possessing strong innovation cultures—where leadership actively endorses experimentation, allocates dedicated resources to knowledge generation, and institutes clear processes to test and launch ideas—consistently outperformed those without one. Tactical tools and formal practices cannot succeed in a vacuum; without an underlying environment that tolerates risk and prioritizes learning, mechanical implementation fails to produce sustainable value. Culture serves as the prerequisite foundation that allows specific practices to take root and deliver performance gains.
Question 2 (Universal vs. Industry-Specific Practices): What are the five universally beneficial innovation practices identified by the researchers, and how do they differ in scope from industry-specific practices such as stage-gate systems or big data analytics?
Answer: The five universal practices that enhance performance across all industries are crowd-sourcing (externalizing tasks to capture new ideas), open innovation (collaborative value-chain sharing), innovation management software (quantifying and managing innovation pipelines), scientific discovery (cross-boundary collaboration to deepen knowledge), and prototyping (early iterative testing to de-risk market introduction). In contrast, industry-specific practices yield positive returns only within contextual boundaries: stage-gate systems require linear workflows characteristic of manufacturing, IT, and health care; design thinking suits industries comfortable with ambiguity (e.g., retail, marketing, arts & entertainment); and big data analytics requires existing data-management capabilities and large datasets (finance, IT, health care) to produce measurable ROI.
Question 3 (Managerial Implementation): What concrete management steps can organizational leaders take to cultivate an innovation culture where experimentation is encouraged and failure is not penalized?
Answer: Leaders can deliberately cultivate an innovation culture by taking five actionable steps: (1) defining clear, explicit innovation goals, (2) empowering all employees to innovate within their daily roles, (3) prioritizing continuous individual and organizational learning, (4) eliminating negative or punitive repercussions for failed experimentation to foster psychological safety, and (5) providing formal incentive structures and resource allocation to support knowledge generation and trial workflows.
Vault connections
- IBM - Understanding Organizational Structure — Organizational culture is a core component of the innovation culture framework this article advocates. The note's discussion of subcultures and alignment provides the structural context for why culture must come first.
- From Cogs to Collaboration - The Evolution of Management Thought — Traces the historical arc from mechanistic management to the human-centric, innovation-supportive culture that this article's findings require.
- Level 5 Leadership — The leadership qualities needed to build and sustain an innovation-focused culture, particularly the balance of humility and professional will that encourages experimentation without fear of failure.
- Execution - The Discipline of Getting Things Done — The article's emphasis on measurement ("what gets measured, gets managed") connects directly to the execution discipline framework.
- Difference Between Strategy and Tactics — The article warns that innovation practices must be guided by strategy, not implemented in isolation — a direct application of the strategy-tactics distinction.
- A Plan Is Not A Strategy — The article's argument that innovation practices need strategic direction rather than mere implementation echoes this note's central critique of conflating planning with strategy.
- Reverse Innovation — Examines how resource-constrained environments drive breakthrough innovation, providing a complementary framework to the article's universal practices.
- Pros and Cons of Brainstorming — Extends the article's discussion of crowd-sourcing by examining the structural pitfalls of group creativity and idea generation techniques.