UNIT 4 CREATING INNOVATIVE CAPABILITIES

Creating Innovative

UNIT 4 CREATING INNOVATIVE Capabilities

CAPABILITIES
NOTES
Structure
4.0 Introduction
4.1 Unit Objectives
4.2 Innovation and Innovative Capability
4.2.1 Innovation System Model
4.2.2 The Levels of Innovation
4.2.3 Innovative Capability
4.2.4 Avoiding Innovation Killers
4.2.5 Creating Innovative Capability—The Idea System
4.2.6 Environment for Creating Innovative Capability
4.2.7 Creating and Leading a Culture for Fostering Innovative Capability
4.3 Knowledge-Enabled Innovative Capability
4.4 Summary
4.5 Key Terms
4.6 Answers to ‘Check Your Progress’
4.7 Questions and Exercises
4.8 Further Reading

4.0 INTRODUCTION
Innovation can be defined as an organization’s capability to adapt and evolve repeatedly
and rapidly to stay one step ahead of competition. In modern global businesses and
organizations, growth is not dependent on efficiencies in productivity; it is driven by the
capability of economies to create knowledge and innovate. Developing this capability
should be a consistent part of the strategy and operations of every business. The capability
to innovate is helpful for cash flow through new products and services. To grasp
competitive advantage, organizations need consistent innovative capability. In this unit,
you will study about creation of this capability.

4.1 UNIT OBJECTIVES

After going through this unit, you will be able to:
 Learn about the innovation system model and the levels of innovation
 Understand various aspects of innovative capability
 Learn to avoid innovation killers
 Apply IDEA system to create innovative capability
 Develop environment and culture for creating innovative capability
 Appreciate creation of knowledge-enabled innovative capability

4.2 INNOVATION AND INNOVATIVE CAPABILITY

A combination of old elements gives rise to a new idea. Generation of new ideas by
combining older ones is dependent on one’s capability to identify relationships between
items, which seem disparate. Innovation involves juxtaposing the ideas, which were Self-Instructional
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Creating Innovative earlier considered to be unrelated. It is the capability of finding new and unique
Capabilities
combinations and associations among ideas.
Innovative capability is defined by Kim as the ability to create new and useful
knowledge based on previous knowledge. Burgelman defined it as ‘the comprehensive
NOTES set of characteristics of an organization that facilitate and support innovation strategies’.
It can be considered as a higher order ‘integration capability’. It is the capability that can
mould and manage different key organizational capacities and resources.
Innovative capability needs to pervade through the organization. Although innovation
is induced by technology, the capability needed is more than technical knowledge. In the
modern knowledge economies and knowledge-based organization, the complicated
interactions among individuals, organizations and environmental factors gives rise to
systemic innovative solutions.
The peripheries of products and services also become increasingly fuzzy. An
organization may become the market leader if it inculcates the capability to innovate by
integrating varied data into balanced solution to transform stand-alone technologies,
products and services.
4.2.1 Innovation System Model
The innovation system model integrates and defines the core elements of innovation,
their behaviour and interaction. It makes it easier to understand complicated challenges
to innovation and its dynamics, discriminate its elements and assess them in greater
depth.
This model forms a framework that helps demystify the process of innovation
and its driving forces. It discloses the specific innovation techniques of market leaders
and helps understand what makes them so successful and unique. It is an attempt to
synthesize and define the basic elements of innovation. This model defines the behaviour
and interplay of these elements. As per the innovation system model, innovation comprises
the following six elements:
1. Leadership and management: It provides inspiration, makes key choices,
and organizes the development process.
2. Strategic alignment: It links innovation strategy with corporate goals,
strategy and objectives.
3. Innovation process: It defines who does what, when and how.
4. Organization and people: These channel resources define norms, provide
infrastructure and drive innovation.
5. Metrics: It provides the guidance and control system for innovation.
6. Corporate culture: It determines how the preceding elements behave
and interact with each other.
4.2.2 The Levels of Innovation
There are the following three major stages of innovation:
• Innovation as an event (creative thinking)
• Innovation as a process (making innovation repeatable)
• Innovation as a capability (embedded innovation)
It is not necessary to pass through the preceding stages in sequential order. It is
necessary that the cultural change begins prior to creative thinking. Creative ideas cannot
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thrive without a conducive environment; moreover, it might lead to employee Creating Innovative
Capabilities
dissatisfaction. If the environment fosters creativity, innovation would become repeatable.
4.2.3 Innovative Capability
Like any other business capability (e.g., finance, HR or sales), the capability to innovate NOTES
consists of the following five key components (Figure 4.1):

Strategy

Measures
and Innovation Capability People
Performance

Process and Technology

Infrastructure

Figure 4.1 Key Components of Innovative Capability

1. Strategy
2. Measures and performance
3. Process and infrastructure
4. People
5. Technology
Strategy: To determine the time, area and procedure of the application of
innovation within an organization, a strategy is needed.
Measures and performance: From the management perspective, it is essential
for innovation to be measurable. First of all, the aim of innovation must be broadly
communicated and rewards for accomplishing milestones must be established to give an
impetus to innovation. This would essentially result in sustainable growth.
Process and infrastructure: A simple and complete process is required for
finding, creating and developing innovative ideas. According to Dorothy Leonard and
Silvia Sensiper, ‘Rapid innovation requires an effective innovation process. The process
of innovation is a rhythm of search and selection, exploration and synthesis, cycles of
divergent thinking followed by convergence’.
People: The employees of an organization create its culture. To develop a culture
of innovation, the employees must accept the actions, values, beliefs and language that
are consistent with this aim. Innovative capability is a skill, and, like other skills, it can be
learned by anyone, even those who are not creative in the traditional sense.
Technology: To enable collaboration between employees, customers and
suppliers, technology can be utilized for innovative processes. It helps overcome
communication barriers at all levels, across all organizations and across business
boundaries.
Sometimes, an organization seems to have catapulted its position in the market.
Actually, these are the organizations that have been following a progamme or strategy
for consistent innovation for several years. For example, Google innovated and designed
its business model of selling search as an advertising medium. In India, Tata’s Nano is a
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Creating Innovative result of insistence on consistent innovation. These organizations continue to innovate
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and succeed. Innumerable innovations are required before an innovation succeeds and
becomes fine tuned to the needs of the market. The repetition of innovation is a really
difficult process. The organizations that are actually considered the pioneers of innovation
NOTES actually may not discover the novel idea; However, their insistence on innovation and
their capability to associate the existing ideas to form a new business model redesigns
the market and defines it in a completely novel way.
However, there are too many hurdles on the way to evolution of innovative
capability. Product is not the real innovation; it is process of generation of value via a
new business model. Generation of innovative capability can be compared to virus. A
virus in the human body mutates and transports faster than existing antibodies that kill
the virus. The antibodies to the virus of innovative capability are the forces known as
‘innovation killers’. Great innovation results from a consistent capability of innumerable
repetitions, each of which designs the innovation in accordance with the market needs.
Principles for creating innovative capability
The principles for creating innovative capability can be listed as follows:
1. The first principle to create innovative capability is—‘empower people,
not ideas’. Ideas may not suit an organization, employees or business strategy.
The employees who generate innovation are the real asset for an organization.
2. A platform to bring people together should be created. It may include some
sort of social media tools such as video conferencing.
3. Facilitating and rewarding participation in creation of innovation must be
rewarded.
Guidelines for creating innovative capability
Certain guidelines to inculcate innovative capability that suits core business are as follows:
 Articulating an inspiring vision of victory in which both the leading team and the
performing team win
 Highlighting the reality that the leading team and the performing team are dependent
on each other
 Creating a common enemy—the competition
 Reinforcing the values that the leading team and the performing team share (e.g.,
commitment to integrity
 Dividing responsibilities between the leading team and the performing team clearly
and visibly
 Anticipating resource constraints produced when simultaneous management of
the demands of innovation and ongoing operations is needed
 Changing the incentives—particularly evaluating the ‘capacity to collaborate across
organizational constraints’ on performance reviews
 Utilizing influential and collaborative members at points of interaction between
the leading team and the performing team
 Sharing credit liberally, with both the leading team and the performing team. When
the innovation initiative succeeds when the innovation initiative meets success

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4.2.4 Avoiding Innovation Killers Creating Innovative
Capabilities
Diligent managers in big organizations often find it difficult to innovate owing to the
innovation killers. These innovation killers generally remain hidden as protectors of the
organization, or more appropriately protectors of the past. Certain people make all attempts NOTES
to kill innovation. The principal reasons that are usually cited against the capability to
innovate are as follows:
 It involves risk.
 It is unpredictable.
 The market analysts’ expectations should be satisfied.
Certain innovation killers that hamper the evolution of innovative capability are as
follows:
 Negative attitude: It is the tendency to focus on the negative aspects of
problems and expend energy on worry.
 Fear of failure: It refers to the fear of looking foolish or being laughed at.
 Stress: It decreases the quality of all mental processes. The person suffering
from stress does not have time for innovation.
 Following rules: It is the tendency to conform to accepted patterns of belief
or thought and accept the status quo. It hinders creative thoughts.
 Making assumptions: The tendency to assume also hampers the process
of innovation.
 Over-dependence on logic: Investing all the intellectual energy in logical or
analytical thinking by means of a step-by-step approach kills imagination and
intuition thereby hampering innovation.
4.2.5 Creating Innovative Capability—the IDEA System
The acronym IDEA has been created to describe a system for developing innovative
capability in any organization. The elements that this acronym signifies have been
described as follows:

I Identification of Innovations

D Development of Innovative Culture

E Evaluation of Innovations

A Action

Figure 4.2

 I—identify all innovations: It is necessary to find out the areas and the
procedures to create innovations. This can be done by means of the following
techniques:
o Brainstorming sessions
o Problem-solving exercises
o Creating an innovation mindset
A system for recording the innovations must be devised. All the employees of a
company must have access to a system of recording their innovative ideas.
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Creating Innovative  D—develop an innovation culture: To evolve innovative capability, innovation
Capabilities
must be made a part of everyday thought process. A culture of innovation must
be inculcated by providing examples of innovations and motivating the generation
of novel ideas. The employees must be trained to find out innovative solutions to
NOTES problems and find probable ways to utilize that solution to avoid future problems.
 E—evaluate all innovations: Creation of an ‘innovation review group’ within
an organization to evaluate innovations submitted by employees can help develop
innovative capability in a particular direction. This group may comprise employees
from different departments. The employees from different departments would
have different perspectives on the issue. Moreover, innovations may affect a
particular department in a way that is not anticipated by the employees in other
departments.
 A—action: Merely creating lists of innovations is not enough. Action to implement
the most valued innovations is essential. The following steps are suggested for
this purpose:
o Tracking the results, such as enhanced profits, decreased expenditure and
increased customer base
o Sharing the positive results throughout the company to motivate further
innovative thinking
4.2.6 Environment for Creating Innovative Capability
Terri Kelly said in a presentation at the MIT Sloan School of Management, ‘A lot of
companies ask about “How do you innovate? What do you invest in R&D?” These are
not really the right questions to ask. We would flip that and talk more around “How do
we create the right environment where collaboration happens naturally — that people
actually want to work together, that they actually like to be part of something greater
than just the individual contribution?” And if you get that part right, all the other pieces
fall in place that allow us to create this great innovation cycle’.
The environment for creating innovative capability depends on cultural features
within an organization (refer section 4.2.7). It is essential to encourage and nurture the
environment suitable for innovative capability. Developing the environment that motivates
people to think in unusual and creative ways requires some standardized strategies and
techniques. It is not enough to develop a well-organized business. Businesses require
certain standard processes and routines to succeed whereas creating innovative capability
needs thinking out of the ordinary. These two appear to be entirely different. That is
why, while fostering an environment for innovative capability, care must be taken to
motivate and permit unconventional thinking.
When an organization begins to evolve strategies to encourage innovation, it has
to determine the following factors:
 The areas of focus (where to begin the process of creating innovation)
 The techniques of bringing in the element of innovation
 The procedure for motivating everyone to innovate
The CEO and top management team should be responsible for developing the
environment for effective innovation. They have a major role in designing and developing
the vision that fosters innovative capability. Usually, only limited success can be achieved
in innovation in the absence of a clear vision about where the company is going.
Management must create the challenge, the inspiration to push people to stretch, to
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make the current vision and goals bigger. At the same time, it must be realistic. The Creating Innovative
Capabilities
CEO must see his/her job as creating employee excitement and passion, not just as
measuring employee satisfaction or financial performance. The following elements need
attention while creating a strategy for this purpose:
1. Communication NOTES
2. Challenge
3. Time horizon
Communication: A principal element of creating innovative capability is
knowledge within the company. If everyone in the company has a clear understanding
of the goals and objectives, it would be easier to create innovative capability. A key to
designing this environment is internal communication, which is based on openness and
developed with trust over a long time.
Challenge: Innovative capability can be enhanced by setting forth one or more
challenges to the appropriate people. A challenge is necessary to provide the drive and
the impetus innovate. For instance, President John F. Kennedy told the Congress that it
was his intention that the United States would put a man on the moon by the end of the
decade (of the 1960s), and bring him back to Earth safely. This challenge motivated a lot
of inventions, developments and advances (i.e., transistors, micro-electronics, medical
monitoring devices, telecommunications devices and so on). The challenge set forth and
effectively communicated by President Kennedy gave impetus to several inventions.
The resulting innovations in technology have changed the life, the business and the ways
of communication.
Time horizons: An organization may apply different techniques based on the
amount of time needed for thinking, developing, testing and bringing to the market. A
short-term project would need a smaller number of employees. Such a project would
have a smaller scope of necessity (Table 4.1). With the expansion of the time range, the
size of the team and the scope of the project also expands. The value obtained as well as
the risks also increase in proportion to the scope of the project.
Table 4.1 Time Horizon for Innovation

Time Horizon 1–2 years 3–6 years 7–20 years

Type of Incremental Step by step Breakthrough
innovation
Incentive Individual Team basis Personal security, fame, secure
basis; retirement, sabbaticals
current year's
profits
Team size Small (1-3) Larger (10- Very large
100)
Management Autocratic Consensus Bureaucratic
style driven

Developing an environment in which innovation is inspired usually has a strong

correlation with the long-term success of an organization. All the preceding elements
are crucial to the effective innovation process. Developing innovative capability and an
environment conducive to it must be a part of strategic planning. Long-term survival and
viability of an organization depends on it.

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Creating Innovative 4.2.7 Creating and Leading a Culture for Fostering Innovative
Capabilities
Capability
A culture of innovation provides competitive edge since it enhances the capability to
NOTES sense change and respond to it. The culture that fosters innovative capability is more
than new ideas. It has the following features:
 It is repeatable.
 It is predictable.
 It is sustainable.
Numerous organizations aspire to become innovators; however, few of them
succeed. The principal reason is lack of an effective culture for fostering innovative
capability. Creation of such a culture is difficult. It can induce several changes to the
basic concepts, strategies and principles of the organization. The major factors that lead
to creation of innovative-capability friendly culture are as follows:
Leadership: It is clearly a major factor. Innovation may involve diverting resources
to different activities. It requires generation of the culture that is conducive to new ideas
and one that does not punish failure. Holding leaders responsible for creating this type of
culture to foster innovative capability can also be an important factor and may involve
putting metrics in place to assess leadership performance.
Metrics: There are two types of metrics:
1. Financial such as the percentage of revenues that come from new products
2. Behavioural such as increasing collaboration across different groups,
gathering customer input on new ideas and reaching outside the firm for
new ways to move the business forward
Collaboration: It is critical for a culture that fosters innovative capability.
Innovative individuals form networks that create cycles of innovation. One idea should
generate others and so on (refer Section 4.3).
People: It is an important factor. Some people are natural innovators while others
can be trained to innovate. Creating networks of innovators across different sections or
levels can prove helpful in the creation of ideas. This would also help ensure that the
innovative ideas permeate through the organization. The main characteristics of innovation
network are as follows:
 It should not be layered and should be as open as possible.
 It may stretch beyond the organization to leverage outside expertise.
 Various skills may be needed to design the network work—research skills,
analysis, project management, financial skills to determine returns and
production skills to convert ideas into action.
 It should inspire trust amongst its members.
 It should foster a risk-free atmosphere to share innovation.
The process of developing a culture for fostering innovative capability
Creating a culture to inculcate innovative capability is difficult because it requires
challenging the status quo. Apprehensions of failure of innovative idea is also a roadblock.
However, while creating a culture of innovation, it must be accepted that not all ideas
can be truly successful.

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 Leaders must improve the techniques they relate to and interact with the Creating Innovative
Capabilities
employees. There is a dearth of well-trained leaders who can capitalize on the innovative
spirit and develop a culture for innovation. Innovation has a crucial role to play in the
success of an organization—a small unit or a global one.
Several organizations pay more heed to streamlining and cost-cutting to achieve NOTES
short-term growth in income. On the other hand, innovative leaders always make effort
to find new ways to generate value by:
 Launching new products and services
 Entering new markets
 Rethinking established processes
Developing such a culture requires a well-defined process. This process must
accomplish the following three objectives:
1. Focussing on the ‘correct’ challenges
2. Finding appropriate solutions to those challenges
3. Implementing the best solutions
The preceding objectives develop into the following three ‘portfolios’ an organization
must create (Figure 4.3):
1. A portfolio of challenges
2. A portfolio of solutions
3. A portfolio of projects

Innovative Capability

Challenges Solutions Projects

Figure 4.3 Portfolios of Innovative Capability

A portfolio of challenges: Every organization has to face certain challenges,

which may include:
 Technical challenges (e.g., how to create a particular medicine)
 Marketing challenges (e.g., how to best describe a product to increase market
share)
 Human resource challenges (e.g., how to improve employee engagement)
The capability of an organization to innovate pivots on its capacity to identify and
solve challenges. Challenges are sometimes referred to as problems, issues or
opportunities. These challenges may come from the following components of business:
 Customers
 Employees
 Shareholders
 Consultants
 Vendors
 Competitors
Determination of the specific challenges that, if solved, would prove more valuable
is the most important for an organization that seeks to foster innovative capability.
Prioritization of issues is crucial for saving resources. Most companies spend all of their
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Creating Innovative time finding solutions to problems that just do not matter. Therefore, for generating a
Capabilities
culture that is conducive to innovative capability it is essential to surface, identify and
codify prime issues. This would offer an organization mastery at valuing, prioritizing, and
framing the issues. After the issues have been prioritized, the next step is to find solutions.
NOTES A portfolio of solutions: Every challenge has several probable solutions. There
are several techniques to find the solutions. Certain challenges are solved during the
thinking process by the person who creates the innovation. Such challenges are not
presented to the organization as a problem to solve. Other challenges may be more
complicated and need specialized expertise. To solve these challenges, the right person(s)
with the right knowledge are required. Some of these may need less technical expertise
and may be solved through creative thinking. For each challenge, determination of the
mechanism that would best yield a viable solution to the problem is crucial. One of the
following mechanisms is generally applied for this purpose:
 Internal individual/team: It is the most usual technique for tackling issues.
This is the case when an organization utilizes internal resources to solve
problems. For instance, a development team can be assigned to develop a
particular product. The members of this team are paid to solve their product
development challenges. Brainstorming is generally the tool used for this
purpose.
 Internal members: Sometimes, the people who typically do not work on this
problem are able to find the best solutions. For instance, a customer service
representative may find a great new branding idea. This can be accomplished
via company-wide competitions.
 Outsourcing (single external source): A third-party can be hired to tackle
certain issues. This party can partially implement the solution. This party must
be liable for delivering the result.
A portfolio of projects: Creating a culture to develop innovative capability requires
the ability to take all of the chosen solutions and turn them into programmes/projects so
that they can be converted from ideas into reality. Multiple techniques can be utilized for
this purpose. Two such techniques are as follows:
1. When there is great uncertainty about customer interest, an organization
may just develop an idea into a project instead of analysing the situation. It
Check Your Progress involves designing a project on the basis of an innovation and trying it in the
1. What is the market.
generation of new 2. A ‘waterfall’ type technique is more linear and depends heavily on analysis
ideas dependent
on?
and testing (analyse, design, build, test, deploy).
2. What are the key During implementation of an innovative idea, it is essential to measure the value
components of the proposition for each project, having the courage to change direction, or, in some cases,
capability to
innovate?
killing ideas altogether.
3. List the reasons Bottom line
that are usually
cited against the If the culture of an organization is developed on the basis of surfacing, solving and
capability to
innovate.
implementing valuable challenges, it can make innovation repeatable and predictable.
4. How can
This needs more than one technique—it needs an entire innovative capability. The bottom
innovative line is, ‘When the speed of change outside an organization is greater than the speed
capability be within, it will be out of business’. In modern global business, the speed of change is
enhanced? faster than ever. The culture of innovation, if developed properly, can offer the
organization an edge over the competitors in a volatile market.
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Identifying the opportunities to innovate Creating Innovative
Capabilities
Identifying the opportunities to innovate requires creation of the organizational culture in
which innovation is given importance and collaborating with others (both in evaluation of
opportunities and designing the outputs from innovative activities) is the norm. The NOTES
following parameters indicate that an organization has evolved this capability:
 Well-developed procedures for capturing and evaluating business opportunity
 A culture of broad mindedness to develop new mechnisms to tackle issues
 An expectation of knowledge sharing to find better solutions through the proposal
process with teams routinely reviewing opportunities to see what they can add to
innovate

4.3 KNOWLEDGE-ENABLED INNOVATIVE

CAPABILITY

Most of the organizations depend on their ability to consistently deliver new and
improved products and services. It is becoming increasingly apparent that one of the
most important drivers for many knowledge managers at present is helping their
organizations develop innovative capability. Earlier, the focus was on removing
roadblocks to innovation; in the modern scenario, organizations need to innovate
incessantly. The innovative capability needs collaboration-based knowledge
management.

Creation of Knowledge-Enabled
Innovative Capability

Collaboration Organizational Innovation

Learning Management

Internal collaboration; external collaboration, creation of a

learning organization, re-utilization of existly knowledge learning
from innovation activity, identification of opportunities to innovate.

Figure 4.4

Creating knowledge-enabled innovative capability

There are six factors together that create the organizational capability that is known as
‘knowledge-enabled innovative capability’. These are:
1. Internal collaboration
2. External collaboration
3. Creation of a learning organization
4. Re-utilization of existing knowledge
5. Learning from innovation activity
6. Identification of opportunities to innovate
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Creating Innovative In addition to the six factors, the elements that support innovative environment
Capabilities
are as follows:
 Courageous and supportive leadership
 Sense of direction and purpose in the organization
NOTES
 Culture of experimentation, trust and openness
 Engaged and committed manpower that feels stimulated and challenged by
the issues
 Appropriate IT support for management of information, explicit knowledge
and connecting people
 Time permitted for learning, knowledge sharing and conversation
It is obvious that, in order to be successful, knowledge-enabled innovative capability
must be ingrained in the cultural principles of an organization.
The six factors listed earlier reinforce each other, and, consequently, development
of knowledge-enabled innovative capability should be approached in an integrated and
holistic way by developing capacity across all the factors simultaneously. For the sake of
simplicity, the preceding six factors are grouped into the following three broad categories:
1. Collaboration
2. Organizational learning
3. Innovation management
1. Collaboration: In 1992, Nonaka described the significance of knowledge sharing
and transfer in organizations as a stimulant for creating innovative capability. The
ability for effective internal and external collaboration forms the basis for
knowledge flows that enable people to make new asssociations among ideas
stimulating the creation of new knowledge with the potential to result in innovative
products, services or processes.
Internal collaboration is related to evolution of the techniques that support
people collaborating with other people across organizational boundaries, functional
limits, technical disciplines and so on within the organization. Internal collaboration
that fosters innovative capability in an organization is indicated by:
 Corporate procedures that actively support and encourage collaboration
 A broad range of collaborative tools made available to employees and used
appropriately
 Dynamic networks that exist across the organization, independent of
hierarchy
 A demonstrable recognition that collaboration is a natural approach to problem
solving and innovation
 A high value placed on knowledge from others
External collaboration involves the processes that help people in associating
with other organizations and then transferring the knowledge generated from
those relationships to others elsewhere in the organization and integrating it with
internal knowledge.
Indications of the level of capability in this area are as follows:
 The proof of productive collaboration with a wide variety of external
organizations, including competitors, and the recognition that improving
relationship management is a core competency
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  The processes that help learn from collaborative relationships Creating Innovative
Capabilities
 The partners involved in innovation activities and mechanisms to permit
calculated risks
2. Organizational learning: There are two aspects of organizational learning, which
NOTES
are useful from the perspective of innovative capability. These aspects are as
follows:
1. Creation of a culture, which is responsive to and welcoming of change
(refer Section 4.2.7)
2. Development of the unique organizational capacity to re-utilize knowledge
after its creation, effectively establishing organizational memory and a
baseline of knowledge that will inspire future innovations
Developing a learning organization requires creation of an organizational climate
that responds to and welcomes change. Such organizations are flexible and
adaptable.
The main characteristics of a learning organization are as follows:
1. Continual and dynamic learning entirely embedded into everyday functions
and procedures
2. Ability and understanding to convert learning into innovation
3. Widespread inspiration, empowerment and idea generation within a change-
oriented culture
Re-utilization of existing knowledge requires the following provisions:
 Well-established mechanisms for employees to record the knowledge they
have obtained from carrying out the business of the organization (be that as
individuals, teams, project members and so on)
 Mechanisms for other people to re-utilize the preceding knowledge at a different
time and place
Indications of the level of capability in this area are as follows:
 Prevalent maintenance of corporate knowledge capture and sharing
mechanisms as well as well-populated corporate repositories to support that
sharing
 Straightforward ‘single search’ facilities across all repositories
 People actively searching the repositories and re-utilizing the information
captured in them
 Convenient procedures to associate those who create knowledge assets with
those who use them
Improvement in knowledge re-utilization generally requires relatively formal Check Your Progress
processes and systems. For instance, an architectural organization uses database 5. What are the two
technology and processes (e.g., learning from design reviews) to stimulate aspects of
knowledge re-utilization within an individualistic and creative culture. organizational
learning, which are
3. Innovation management: It is a repeatable business process that starts with useful from the
anticipating opportunities in the future by scenario planning and continues through perspective of
to create new product, service or business model. There are two ways in which innovative
capability?
a knowledge perspective makes a difference to management of innovative
6. How is innovative
capability: capability
inspired?

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Creating Innovative 1. Improvement in the efficiency and effectiveness of innovation by learning
Capabilities
from the innovation activities being undertaken across the organization
2. Knowledge of the data, reducing the risks involved in recognizing the best
innovation project opportunities in which to invest the organization’s resources
NOTES
Managing innovation requires creation of mechanisms and systems to develop
the organization’s capability to be more efficient and effective when it innovates.
The indicators of this capability are as follows:
 Prevalent realization that learning from innovation needs to be a core
competence of the organization
 Persistent attempts to devise the mechnisms for improving the proficiency
and efficacy of innovation.
An approach for knowledge-enabled innovation capability
The knowledge gained by collaboration, both internal and external, and managing
innovation nurture the evolution of innovative capability. The way an organization learns
is a major key organizational competency. The knowledge management tools and
techniques have the principal role in developing this competency.
Enhancement of innovative capability via organizational learning is supported by
the following techniques:
 Introduction of incentives for internal collaboration into the performance
management system
 Utilization of searchable databases and intranet and extranet
More informally, when organizations trust staff enough to use social collaboration
spaces and messaging boards, they offer additional opportunity for useful associations to
stimulate innovative capability
Innovative capability cannot be formalized. However, it is evident that innovative
capability is inspired by creating the kinds of working spaces and cultures that permit
people to relate to each other and have the freedom to experiment.
Several organizations desire to formalize their attempts to develop innovative
capability. However, they face the following issues:
 How do the mechanisms of a particular organization compare with best
practices?
 How can the processes and mechnisms be improved without suppressing the
efforts of teams which are already innovating effectively?
The capability to deal with the preceding issues can be developed by performing
an innovation audit. This audit is done to explore specific elements of each of the key
pillars of an innovation dynasty, identifies gaps, and provides an architecture for the new
process and organizational form. The steps for an innovation audit are as follows (Figure
4.4):
Step 1: Creation of a growth blueprint In order to develop innovative
capability, an organization must have a clear vision and allocate resources to accomplish
that vision. The vision must be the growth blueprint of the organization. The senior
management team must define strategic targets and limits and generate a balanced
portfolio of growth opportunities that reflects its strategy.
Step 2: Creation of the driving force The force that drives the innovative
capability comprises the following two components:
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 1. Isolated screening and development mechanisms that focus on scrupulous Creating Innovative
Capabilities
reduction in uncertainty
2. A novel vision that helps to manage the projects, which are associated with
high assumptions and low knowledge
NOTES
If the preceding components are missing, unknown corporate forces tend to
systematically design new ideas in a way that makes them seem like those the company
has had in the past. It would deny the organization the opportunity of following highly
differentiated strategies.
Step 3: Support for the driving force A well-defined strategy, proper allocation
of resources and a the novel vision will not be able to produce innovative capability if the
management does not create a supportive environment and lead by example. The
organizations that succeed in creating this environment develop a language of innovation,
collaborate substantially with external elements, create policies and incentives that inspire
people to take well-managed risks for innovative growth. The management of such
organizations remains actively engaged in the idea screening and development process.

Support for the Driving Force

Creation of Driving Force

Creation of a Growth Blueprint

Figure 4.4 Innoation Audit

4.4 SUMMARY
In this unit, you have learned that:
 Innovation can be defined as an organization’s capability to adapt and evolve
repeatedly and rapidly to stay one step ahead of competition.
 Innovation system model integrates and defines the core elements of innovation,
their behaviour and interaction.
 A ‘new’ idea is a combination of old elements. Being able to devise new
combinations depends on the capability to discern the relationships between
seemingly disparate items.
 The capability to innovate consists of the following five key components:
(i) Strategy
(ii) Measures and performance
(iii) Process and infrastructure
(iv) People
(v) Technology
 The three major stages of innovation are as follows:
(i) Innovation as an event (creative thinking)
(ii) Innovation as a process (making innovation repeatable)
(iii) Innovation as a capability (embedded innovation)
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Creating Innovative  The principles for creating innovation are as follows:
Capabilities
o Empower people, not ideas
o Create a platform that brings people together
o Facilitate and reward participation
NOTES
 The principal reasons that are usually cited against the capability to innovate are
as follows:
o It involves risk.
o It is unpredictable.
o The market analysts’ expectations should be satisfied.
 There are six factors that create the organizational capability that is called
‘knowledge-enabled innovation’. These factors are listed as follows:
(i) Internal collaboration
(ii) External collaboration
(iii) Creating a learning organization
(iv) Re-using existing knowledge
(v) Learning from innovation activity
(vi) Recognizing the opportunities to innovate

4.5 KEY TERMS

 Innovation: It can be defined as an organization’s capability to adapt and evolve
repeatedly and rapidly to stay one step ahead of competition.
 Innovation management: It is a repeatable business process that starts with
anticipating opportunities in the future by scenario planning and continues through
to create new product, service or business model.

4.6 ANSWERS TO ‘CHECK YOUR PROGRESS’

1. Generation of new ideas is dependent on one’s capability to discern relationships
between items, which seem disparate.
2. The capability to innovate consists of the following five key components:
(i) Strategy
(ii) Measures and performance
(iii) Process and infrastructure
(iv) People
(v) Technology
3. The principal reasons that are usually cited against the capability to innovate are
as follows:
 It involves risk.
 It is unpredictable.
 The market analysts’ expectations should be satisfied.
4. Innovative capability can be enhanced by setting forth one or more challenges to
the appropriate people.

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 5. There are two aspects of organizational learning, which are useful from the Creating Innovative
Capabilities
perspective of innovative capability. These aspects are as follows:
(i) Creation of a culture, which is responsive to and welcoming of change
(ii) Development of the unique organizational capacity to re-utilize knowledge
after its creation, effectively establishing organizational memory and a NOTES
baseline of knowledge that will inspire future innovations
6. Innovative capability is inspired by creating the working spaces and culture in a
way that permits people to relate to each other and have the freedom to experiment.

4.7 QUESTIONS AND EXERCISES

Short-Answer Questions
1. What is innovation system model?
2. How are innovation killers avoided?
3. List the principles for creating innovative capability.
4. How is knowledge-enabled innovative capability created?
Long-Answer Questions
1. Describe the significance of environment and culture for creating innovative
capability.
2. How is culture for fostering innovative capability developed? Discuss.
3. Write a short note on knowledge-enabled innovative capability.

4.8 FURTHER READING

Tidd, Joe, John Bessant and Keith Pavitt. Managing Innovation: Integrating
Technological, Market and Organizational Change. New York: John Wiley
& Sons, 2005.
Oden, Howard W. Managing Corporate Culture, Innovation and Intrapreneurship.
Westport, Connecticut: Quorum Books, 1997.
European Journal of Innovation Management, Vol. 9 No. 2, 2006.

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Author:
Jaspreet Kaur: Faculty in New Era Institute of Professional Studies
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