Innovative Companies' Approach To Innovation Strategy

Volume 7, Number 15 Research Summary for Practice 31 DECEMBER 2023 Innovative Companies’ Approach To Innovation Strategy By Mostafa Sayyadi, The Change Leader Consulting Inc. Michael J. Provitera, Barry University I nnovation and creativity have similar com- in two forms: continuous innovation and disbined effects on profitability, but the best ruptive innovation (Fligstein, 2021; Kikkawa, approach to achieving higher profitability 2023). Organizations include continuous innois to consider them separately (Simons, Gupta, vation in their innovation development strate& Buchanan, 2011; Vehar, 2013; Serrat, 2017a; gy so that they can maintain their higher profitBonanno et al., 2023). The novelty created by ability in the market (Kabir, 2019). There is also these two activities is a a need for companies to benefit that somehow disruptively innovate affects profitability to create but also to There is growing interest in the (Beckenbach & Daskaglobal marketplace in innovation. predict future changes lakis, 2013; Kaiserfeld, Organizations should always look and effectively respond 2020). The point of difto them (Sewpersadh, for new innovations so that they ference between these 2023). Through uncan remain competitive. Many two concepts is their derstanding the hidoperational capability. employees and leaders in organiza- den and unmet needs Although creativity and tions strongly believe in the power of customers, disrupinnovation both origiof an effective innovation strategy tive innovation acts nate from the creation as an accelerator and to better manage their organizaof new knowledge, inencourages employees novation is the product tional innovation, but by doing so, to challenge the existof new knowledge that they feel that they may be usurped. ing norm and build a How to develop an innovative can be operationalized new order to optimize to change, improve, products and services strategy remains a mystery. The and optimize existing (Rösel, 2016; Jönsson, critical findings of this research systems (Durst & Ed- solve this problem and suggest that 2017; Chemma, 2021; vardsson, 2013; Kim Moroni, & Zato develop an effective innovation Chiffi, & Pierce, 2013; Kabir, netti, 2022). This form strategy, a long-term approach, 2019; Nakao & de Anof innovation helps ordesign thinking, continuous disdrade Guerra, 2021). ganizations emerge as This change, improveruptive innovation, and incentive leaders in their indusment, and optimiza- systems improvement must be the try. Therefore, it is letion does not always gitimate to argue that organizational mantra. mean extensive changan innovation strategy es in technology; even should include both a small change to improve service delivery is continuous innovation and disruptive innovaconsidered an innovation. Based on our litera- tion to effectively help organizations predict ture analysis, companies must view innovation changes better than their competitors. Keywords: Innovation Strategy, Continuous Innovation, Disruptive Innovation, Long-Term Approach, Design Thinking, Incentive Systems. Copyright © 2023 Mostafa Sayyadi, Michael J. Provitera. This article is published under a Creative Commons BY-NC license. Permission is granted to copy and distribute this article for non-commercial purposes, in both printed and electronic formats Innovative Companies’ Approach to Innovation Strategy The lesson in how organizations responded to the new climate created by the pandemic has taught many organizations in the world that change is always possible. Hence, many routine operations that have now become an integral part of many business processes can quickly become obsolete and be replaced by new operations. Adapting to and anticipating new changes in the business environment sooner than the competitors is tantamount to success (Etemad, 2014; Teece, 2014). In this article, we present the characteristics of an effective innovation strategy and provide implications for organizations that want to be more effective at managing their organizational innovation. What we share comes from our qualitative research among more than 146 senior executives in the UAE branches of 11 innovative companies. The criteria for differentiating between these 11 innovative companies and other companies is the annual ranking of the “50 World’s Most Innovative Companies of 2022” of Boston Consulting Group (Krippendorff, 2022). Table 1 shows the number of senior executives interviewed by industry, interview style, and sampling strategies. The research findings from our two sampling strategies also demonstrate strong agreement across all industry sectors. Characteristics of an Effective Innovation Strategy Characteristic #1: Adopting A Long-Term Approach Our interviews with 146 senior executives in the UAE branches of 11 innovative companies show that they feel the same pressure to achieve shortterm returns as many other organizations, but as a conceptual leader, the focus is usually on the longterm approach. This works, but while it is in the process, many competitors and rivals bid on taking over the organization (Deszczyński, 2021; Rožman et al., 2023). We interviewed research and development (R&D) managers who represented the top organizations in innovation in the world. These R&D managers mentioned that their organizations scored high on a scale they created to assess their long-term vision. In fact, leaders showed that adopting a more long-term approach takes the pressure off and they felt more patient in getting results than their competitors that focus on quarterly results. For example, one R&D manager we interviewed mentioned that leaders are very patient in getting results and usually use a long-term approach in expressing their plan. Characteristic #2: Developing Design Thinking Our findings also show that innovative companies delve deep into the needs of customers to approach problems from a more human perspective. Herein, their solution is design thinking. Design thinking is a mindset built upon a framework of innovation and creation (Thienen et al., 2011; Gallanis, 2020; You, 2022). Human-centered thinking is based on the argument that instead of identifying the cause of problems, the problem can be solved in a completely creative way by working backward. For example, as a result of the 2008 financial crisis, design thinkers had to unwind the many high default risk bonds created as esoteric mortgage-backed securities back into traditional mortgages (Walker, 2014). In our interviews, an R&D manager noted that their company follows Tim Brown’s Harvard Business Review formula for design thinking. Brown (2008) based his Harvard Business Review article on four steps: clarification, idea generation, development, and implementation. These four steps include: 1. In the first step, research should be conducted in the organizations to discover the problems. In this step, experts should clearly identify the areas that suffer from the problem and inefficiency. This step is a goal-setting point to solve the problem. The problem should also be presented in such a way that it can be solved. 2. Second, organizations should look for new ideas and create new knowledge. In this step, human capital should be encouraged to produce ideas to solve this problem and put the organization on the right path to solving the problem. 3. Next, the most practical ideas are screened from non-practical ideas, and then the best idea Table 1: Statistics of Interviewees by Industry, Sampling Strategy, and Interview Style Sampling Interview Number Number Number Number Number of Number of Strategy Style of Interof Interof Interof Inter- Interview- Interviewees viewees viewees viewees viewees ees (Con- (Accommo(Automo- (Mining) (Educa- (Finance) struction) dation and tive) tional Food SerServices) vices) Opportu- Unstruc13 17 21 11 11 7 nistic tured Targeted Unstruc9 18 13 8 6 12 tured 180 Volume 7, Number 15 Sayyadi, Provitera is selected. This selection is the distinguishing point between innovation and creativity. In this step, the best idea is converted into action (i.e., innovation). 4. Finally, the best idea is selected and presented to the relevant departments to solve the problem and generate value. Characteristic #3: Disruptive Innovation is Continuous The next important characteristic of innovation strategy in the companies we interviewed is the simultaneous focus on continuous and disruptive innovation. By simultaneously focusing on these two tenets there is a clarity of roles in the distributive innovative prowess of organizations (Kaplan, 2012; Malodia et al., 2019; Liboni et al., 2023). By collaborating among the various departments, the innovative process is reinforced, thus leading to continuous and disruptive innovation (Bjerke & Johansson, 2015; Vivona et al., 2023). The findings of this research indicate that employees and managers in the companies we interviewed perform their duties through extensive collaboration among departments. The key kernel here is that incentives for collaboration are provided in highly innovative firms. Many silos exist in less innovative firms because the culture does not promote collaboration (Serrat, 2017b; Lupova-Henry et al., 2021). Silos by themselves are not a bad thing, there just needs to be some form of connection channel between them to enable engagement across silos (Serrat, 2017c). Interestingly, we found that many of these innovative companies follow Clawson’s formula for success. Clawson (1998), senior management consultant and author of Level Three Leadership, suggests that innovative quality development teams must really understand the concept of innovation, and they must have highly interactive meetings. In the companies we interviewed, program managers and the strength of individual leadership coupled with a successful hiring process seek out talent, effectively onboard them, and draw upon their skills when necessary. Characteristic #4: Create Incentive Systems To be innovative, organizations must also design incentive systems that work. Rewards must be based on both individual achievements and innovative team accomplishments, and this is a creative incentive system (Aschenbrücker & Kretschmer, 2022; Homburg et al., 2023). Building a network of professionals is not enough. The senior executives at the innovative companies we interviewed demonstrated an understanding that employees need to be nurtured and motivated. The best way to do this is to provide incentives and remove silos and fiefdoms. One senior executive mentioned that incentive systems are used to acquire new ideas so that employees can more effectively participate in innovative activities. Intellectual capital can be built with a Muma Business Review strong foundation based on incentives and a culture that strives for innovation and creativity (Lovrich & Pierce, 2018; Le Chapelain, 2019; Roth, 2022). By adopting a long-term approach and being patient with results in the short term but also rewarding people accordingly, leaders in innovative companies anchor their organizations in a solid foundation for success (Errida & Lotfi, 2021). Conclusions Given the nature of incentives, it is easy for organizations to get off track and find their company piled deep in inertia. Our analysis of innovative organizations shows they have instead embraced a continuous and disruptive innovation focus. Although the study was primarily designed to thoroughly look at the main aspects of innovation strategy in the UAE branches of innovative companies, there are kernels for all executives to learn from. The key here is that our findings highlight the potential of applying a long-term approach, continuous disruptive innovation, design thinking, and effective incentive systems. Today, organizations must reach a complete alignment from problem recognition to solution implementation. 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Provitera- [email protected] Review This article was accepted under the constructive peer review option. For futher details, see the descriptions at: http://mumabusinessreview.org/peer-review-options/ 183 Innovative Companies’ Approach to Innovation Strategy Authors Mostafa Sayyadi works with senior business leaders to effectively develop innovation in companies, and helps companies—from start-ups to the Fortune 100— succeed by improving the effectiveness of their leaders. Michael J. Provitera is an Associate Professor at Barry University. He is an author of Level Up Leadership published by Business Expert Press. 184 Volume 7, Number 15