While innovation is often thought of as an isolated individual breakthrough, it is more often than not the consequence of a great number of sustained, collective actions. In many firms, highly innovative concepts often fail to be implemented, not because the core ideas are not sound, but rather because they are not supported by the right organizational dynamics. To improve the chances that innovative concepts are converted into practice, this article discusses the impact of organizational dynamics on innovation. Through the strategic use of organizational resources, firms can create efficient innovation curves that maximize the likelihood of innovation and minimize the use of firm resources to put new ideas into practice.

Sources of Corporate Innovation

While it can be defined in many ways, innovation in essence is the process of doing something in a new or original way. In business, innovation does not involve something that is merely new but also creates a measurable organizational improvement that leads to the generation of shareholder value.

Innovation in business is a new thought, product or procedure that creates a measurable organizational improvement that leads to the generation of shareholder value.

Innovation can impact literally every element of a firm, from the design of its offices to how it carries out recruiting activities to the products and services that it offers. In practice, innovation is highly relative as ways of thinking or working that would be extremely novel and create value in one firm may have long been in practice or even become obsolete in another.

Contrary to the common view of innovation as the chance product of the sustained trial and error of genius, innovative ideas are not rare. Given that weak points and inefficiencies find their way into every conceivable corporate strategy and process and the powers of human ingenuity, it is very difficult to imagine that any person engaged in a task would not have at least one decent idea as to how that task could be done in a better way.

Of course, not all innovative ideas have the same practical potential. Some ideas if they were implemented would simply not improve a particular organizational process, would make it worse or would have negative operational consequences on other parts of the firm. Other ideas would in fact improve an organizational process, but the cost of implementing them would be so high that it would outweigh the benefits that would be obtained.

Despite the many factors that reasonably disqualify putting innovative ideas into practice, there are still a large number of ideas that could be implemented but are not. This is a significant issue for every firm because it effectively means that latent shareholder value is not converted into real shareholder value. A key reason why good ideas are not put into practice is organizational dynamics.

Not putting good ideas into practice means that latent shareholder value is not converted into real shareholder value.

Four Types of Organizational Innovation Dynamics

While innovation is commonly viewed as the brilliant insight of a single person, in reality innovation is the result of the sustained efforts of what can be a large number of people with different organizational functions, skills and internal and external relationships. Given this, one of the key factors in determining whether a good idea gets put into practice is not the merits of the idea itself but rather the dynamics of the organization or context where the idea is implemented.

Innovation Resistance. The first type of organizational dynamic is one where innovation is simply not supported or is in fact actively discouraged. In this type of firm, people are not encouraged to offer innovative suggestions and if they do offer new ideas they are not given serious organizational consideration. While this sounds like a firm that few people would like to work for, innovation resistance can counterintuitively be useful where the likely costs of innovation would clearly outweigh their benefits. While few firms can resist innovation for long and remain successful, it is quite common for even highly innovative firms to focus on implementing processes and procedures that are currently in place rather than trying to change them at some points in time.

Innovation Resource Gaps. The second type of organizational dynamic is one where ideas are actively encouraged but the firm simply does not have the resources to determine what ideas should be implemented and how. The process of implementing a new idea, particularly one that will have a significant impact on firm operations, often requires a great deal of analysis and planning. This analysis and planning, moreover, must often be carried out by a number of people with different skills and organizational perspectives. This analysis further must often take into consideration the perspectives of third parties that a firm works with and potential clients. Many firms simply do not have the resources necessary to carry out this analysis.

Innovation Overload. The third type of organizational dynamic does encourage and have the ability to analyze proposed innovations but tries to implement many different ideas at the same time, resulting in a situation where none of the ideas are implemented successfully. This can lead to competition for internal resources or the practical situation where a step forward to implement one good idea represents a step backward for another. This results in innovation and organizational gridlock where organizational innovation budgets are spent, many organizational resources are actively deployed but no real innovation progress is made.

Innovation Implementation. The fourth type of organizational dynamic is one where the firm does not only encourage and have the resources to properly vet innovation proposals, but also successfully implements new ideas. While successful implementation often depends on many factors, some of which are in the control of the firm and some of which are not, one key factor for innovation success is an efficient innovation curve.

Innovation Curve Efficiency

The innovation curve can be thought of as the relationship between an innovation strategy, the use of firm resources and firm organizational dynamics. This curve is defined by a use of firm resources to support, analyze, design and implement a proposed innovation across a defined organizational operating environment. An efficient innovation curve is one that provides that greatest positive innovation impact with the least amount of firm resources. Conversely, an inefficient innovation curve is one that provides the least amount of positive innovation impact with the greatest amount of firm resources.

An efficient innovation curve is one that permits the greatest positive innovation impact with the use of the least amount of firm resources.

Innovative curve efficiency is highly dependent on each firm’s DNA, resources, business circumstances and of course the nature of and need for the proposed innovation. For some firms, the most efficient innovation curve will involve the use of a broad set of firm resources over a short period of time while for others it may involve a staged approach over a long period of time where innovation implementation buy-in and momentum is increasingly created.

Conclusion

Many ideas that could be implemented and create shareholder value are not put into practice. One key reason for this is organizational dynamics. By viewing innovation as the product of the combined efforts a wide set of internal and at times external firm resources, firms can strive to design innovation curves that maximize the likelihood of positive innovation impact and minimize the use of firm resources. This approach increases the likelihood, not only that the innovation process will create shareholder value, but more broadly set in motion organizational dynamics that will lead to further innovation in the future.