Innovation Today

Rosario Sica, Paolo Calderari di Palazzolo
Original version of this article is part of the Social Business Manifesto project – http://socialbusinessmanifesto.com/innovation-today/ 

What is innovation? If we take the dictionary definitions, we find things like “introduce something new” or “a new idea or method, or tool”. In short, a novelty. So then, if one morning you get out of the wrong side of bed, have you been innovative? If you find a new way of using a document are you creating innovation? We believe that this ends up trivialising what is truly innovation. Let’s try to start again from the definition of innovation. From our point of view innovation regards problem solving. It consists in finding new solutions to present problems, or even in discovering problems that people might not even know they have, thus improving their lives.

One of the biggest problems that we have noticed over recent years in innovation concerns the spending and investments that are being made in research and development, expressed as a percentage of the gross domestic product: they have continued to decrease significantly as shown in the table below:

Source: Main Science and technology indicators, OECD

We have less research and development. All the resources are in fact concentrating on development, which means that we are developing products and services for which we know a market already exists. The majority of research laboratories that once existed now no longer exist. All of them, without exception, have cut out projects in which they were investing, in order to concentrate on the four or five projects for which they are certain there is demand. In other words, they are only creating what is commonly called incremental innovation. If we think of the size of problems that the company is dealing with (energy, economic crisis, environment, etc.), these are not problems that will be solved by choosing the colour of an iPhone. These are fundamental problems that have yet to be solved, and we cannot solve them if we remain anchored in what we already know. We need new knowledge, we need to explore new intervention paradigms, and new research, that allow not the expected results, but the unexpected results, and that as a result are capable of changing things.

A search in Google for books with the word “innovation” in the title finds 120,000 books. Just five years ago there were only a few hundred books with the word “innovation”! There are too many books on innovation and too few on real innovation.

Potentials of the Social Web

Where can we find true innovation over the last few years and what are the new paradigms in line with the “network society”? Think about the internet and how it has profoundly transformed our lives. Think about how much time it took for the internet to be successful: 30-40 years for it to become what it is, for it to have such a profound effect on our lives. The internet came out of the Bell laboratories of General Electric. There they invested in pure research, without the slightest idea of what concrete results would have been obtained. The internet itself was an unexpected result, among many, of a great amount of intense research driven by military needs. Where is the research that may generate unexpected results with regard to media communication, new materials, and new energy frontiers? Where is investment being made today to achieve these critical results for our future? We have not seen many initiatives going in this direction.

We are at a turning point, a consequence of the internet: social web. We are starting to see that there are strong possibilities that collaboration will become a fundamental driver to accelerate processes and information exchanges. The possibility for billions of people to start to connect and communicate in new ways has never been possible in the past; it is a significant step forward and offers enormous potential.

The true challenge is how to seize this potential, both as companies and as a society, in order to change the way of innovating. We see two different types of companies: one includes those that we call “winners”, i.e. those companies that are willing to take risks and therefore to upset the market by making things that previously did not exist; the second type includes those companies that we’ll call “losers”, those who are afraid of changing, i.e. companies that have a strong position and are trying to defend it, rather than create new positions for it.

Let’s take the case of Apple: did it listen to its customers, and use an “open” process, when it was thinking of creating the iPhone? No, contrary to what we usually hear, it was a completely closed process, based on the quality of internal Apple resources that carried out research, investigated the problems experienced by people, and had the vision of how a new service could have been. They had the leadership, ability and willingness to take risks. They had the courage to say: “People have never heard of an iPhone, but everyone needs one”, and they created it. We can’t go to customers and look to them for answers, or get a concept of a new product from them when they don’t even have an idea that the possibility of it exists. These are the limits of crowdsourcing.

Leadership and social capital

The heart of the question is leadership. We remember Kennedy’s speech when he announced to America that a man would have been sent to the Moon: it was a risky challenge, but taking this idea forward meant discovering and finding solutions to many of humanity’s problems: this extraordinary vision ruled American society, dragging everyone behind it, because in taking man to the moon America created new industrial sectors, it created innovation, and Silicon Valley was in large part driven by this research. The spin-offs generated by the technology developed for this venture were numerous, but when the space program began no-one could have imagined what the developments would have been: new materials, new technologies for calculation and communications, etc.; or that companies would have been created that today have an annual turnover of billions of dollars and that these new activities would have given jobs to millions of people throughout the world. These results after the fact did not drive the action. People developed the space program because they believed in a problem-solution process that would have allowed them to discover new areas of knowledge.

Now the situation is completely different: there is no driving vision; everything revolves around cost-cutting, and that is a very serious problem. Companies like Nokia, who had dominant positions on the market, are very cautious, and do not want to squander the advantage and destroy or deteriorate the ecosystem around them in which many benefit from the value chain they created. Take what happened, for instance,
with the arrival of IP voice servers that made the voice nothing more than another Internet application: everything that the business had been built on, and everything that had been defended for years by keeping others out, now seems like a common commodity, because anyone can create a voice application. Thus, these companies end up adopting very defensive behaviours, which in fact become major obstacles to innovation: the people inside these companies are isolated and the chance of them being able to do things that are truly new is becoming all but impossible.

These heritages are becoming serious obstacles; we have business models that are no longer up to date, that no longer allow us to generate past earnings: the CEO of a telecommunications company must think in the short term, three or four years at the most, trying to maximise the value of shares in that restricted period. This means that what the company can do is limit itself to what it already has, to what can give in the short term a certain return – even if small – and what it cannot do is invest in long-term research, necessary in order to have a future.

As a result, the staff within an organization end up destroyed, as they are deprived of an environment of exploration, of reasons to take risks, to do something truly new. It is no coincidence that the breakthrough innovations of the last 15/20 years did not come from telecommunication companies.

It is time to talk about social capital and innovation. Today we have real possibilities of creating great innovations if we are able to combine two things: the vision and leadership of a Steve Jobs with the potential of the people within the company, or rather its social capital. If a company can do that, it can take assume a dominant position on the market.

Social innovation: building communities for innovation

To focus on social capital, a starting point is the digital generation: a generation of young people have grown up with this technology and no longer consider it “technology”, but rather their way of being in the world. They are not digital children because of digital technology, but because they were children when this change happened. This technology has been internalised by them because it allows them to carve out spaces for themselves, where they can do the things they need whilst growing up: create their own identity, have fun, do crazy things. MySpace or Facebook were not successful because of the technology, but because there was a new form of expression by this generation, in which they could express and acquire knowledge or simply act like kids. The crucial point of all of this is that new generations are established on social relations, and their way of existing in the world is today mediated by this technology. When individuals from this generation start working at an organization – such as a large company – they feel suffocated if people start telling them what they cannot do, and if they are isolated by those social tools that have made them what they are. These tools, instead of being seen as a threat (as many CIOs do), should be seen as opportunities: the consequence of social networking that these individuals experience and that has created their identity, is that in this way they have created collaboration without wanting to, they are collaborating in ways that were inconceivable in the past. This is the potential that is found in what they do, but how can it be exploited within companies?

The social capital or, in other words, the network of formal and informal relations existing within the company, represents how the company itself truly works. Each organization has a formal structure, from which it can be deduced who holds what positions and who reports to whom; but when we try to understand how things really work, we discover a completely different network: people know who to turn to in reality to make fast and effective decisions, regardless of what the organization chart says. Each person knows who to turn to if he/she has to collect up-to-date information on a technology or on the product market. This relation network – the social capital – is what we must free up today if we want to exploit it to our advantage. So, how can we make it grow?

Today platforms exist that allow people to find others like themselves, who can be found in parts or roles that are very different from the company, but who share the same passions or the same experiences. For the first time people are allowed to discover and rely on this sort of intangible network within organizations, whose existence was not even known about before. It is a way of seizing the possibility for these people to find each other and start working together in ways that were unimaginable up until now. Organizational silos are bypassed. These platforms also highlight the contribution that the individual can bring to the group.

Should we tend towards incremental innovation or towards radical innovation? We believe that this is the wrong question, and that the right question is: can we have both? Is it possible to have the leadership, vision and culture that allow an organization to take risks, at the same time allowing people within the organization to come together in completely different ways than in the past, in order to use this strength to guide the change? It is possible if we are able to create the right motivation and the right context.

The answer is not just in the technology. Everything depends on the organization and its culture. It is not about “capturing” ideas, but rather about building communities. The fundamental point is that key players be identified, the right people at the right time, to transform their network and their informality into a business value. From these assumptions – of social capital as a true element of a company’s distinction and advantage – approaches such as Idea Management and Social Innovation are born.