Producing Innovation: A Systems Approach

Almost every organization wants to produce meaningful innovation. It is an area to which the most attention is being given today.

Innovation is just one component in what is being called "change management." Organized abandonment, continuous improvement and systematically exploiting success are the other components of change management.

Indeed, only after an organization develops policies and procedures for abandonment, improvement and exploitation can the organization hope to be a successful innovator.

In subsequent articles we will discuss the other components of change management. This article focuses on using a systems approach to producing and managing innovation.

Of late, the subject of "a systems approach to innovation" has become "in," with dozens of articles, seminars, podcasts, webinars and the like devoted to it.

Peter F. Drucker once defined innovation as:

"The design and development of something new, as yet unknown and not in existence, which will establish a new economic configuration out of the old, known, existing elements.

"It will give these elements and entirely new economic dimension. It is the missing link between having a number of disconnected elements, each marginally effective, and an integrated system of great power."

An Example and Its Lessons

It is this "systems" aspect of innovation that is invoked when we say Thomas Edison created a new industry.

In an excellent Harvard Business Review article (November, 2009) titled, "How To Jump-Start the Clean-Tech Economy," Mark W. Johnson and Josh Suskewicz wrote:

"Thomas Edison grasped the systemic nature of technological transformation a century ago when he introduced the electric light bulb. He realized that the technology he envisioned—no matter how innovative—couldn’t by itself sweep aside the kerosene-based lighting industry.

"Instead of asking how he could solve the technical problem of inventing a light bulb, Edison asked how he could get consumers to switch from kerosene to electricity. He understood that despite the many advantages of electric light, it would replace kerosene only if it had its own, economically competitive network.

"So, while scores of people worldwide worked on inventing a light bulb, Edison conceived a fully operational system. His technical platform included generators, meters, transmission lines and substations, and he mapped out both how they would interact technically and how they would combine in a profitable business.

"Edison tested his concept in a pilot project...on a small scale in Lower Manhattan, a favorable foothold market because the buildings were close together and filled with potentially enthusiastic customers: Wall Street firms that were eager to be on the technological cutting edge and that had employees who worked long into the night.

"It was not coincidental that he was demonstrating his system to the very people who could fund its expansion.

"He also used his public standing to acquire regulatory support—for example, to get the needed permits despite opposition from the lamplighters’ union."

All the ingredients of creating a successful electricity business existed, except one. Adding the electric light bulb created an entirely new economic capacity.

Said Drucker: "Innovation is not invention or discovery. It may require either—and often does. But its focus is not knowledge but performance—and in a business this means economic performance."

Edison, in essence, asked: What is lacking to make effective what is already possible?

To describe the need is not to satisfy it. But, according to Johnson and Suskewicz, describing the need gives a specification for the desirable results. Whether they are likely to be obtained can then be decided.

Another Example

In the 1970s, the publishers of Industry Week magazine co-founded a company called Penton Learning Systems (PLS is the owner of this website and IQPC).

PLS's mission and purpose was to "supply the missing link between a number of disconnected colleges and universities, each marginally effective in designing and developing short courses for managerial and professional workers, and an integrated system of great power."

The Concept Was Simple

Let's say Michigan State University (MSU) offered the best short course on Developing the Annual Marketing Plan... and California Institute of Technology (CIT) offered the best short course on Conserving Energy in Buildings and Plants.

MSU could "import" CIT's Energy Management course and "export" its marketing planning seminar to CIT.

If 100 schools entered the consortium, and each provided just one outstanding two or three day seminar and faculty member, then every institution would have access to 100 outstanding seminars and faculty members.

The concept proved valid: 105 colleges and universities joined the consortium.

Schools, such as Southern Methodist University, University of California-Berkeley, University of Cincinnati, California Institute of Technology, Northwestern University, Michigan State University, University of Minnesota and the like became active "importers and exporters" of timely seminars that could be offered to their local markets.

For 15 years, Penton Learning Systems managed this consortium with great success.

It assisted in the design and development of over 30,000 short courses/seminars in the fields of quality management, project management, finance and accounting, marketing management, strategic planning and the like.

The Point?

Schools could not by themselves continuously define and staff salable short courses that met a wide variety of training needs of institutions in their market area.

In reality, universities and colleges know how to produce degree-granting programs.

But most know very little—or have the appropriate marketing intimacy knowledge—to design and develop a continuing series of timely short courses that solve very specific problems target audiences in their local markets face.

PLS's innovation was to supply the missing link between a vast number of disconnected colleges and universities and combine them into an integrated system capable servicing the training needs of the markets they served.

All the elements were there. What was lacking was the simple element of a dedicated entity designed to organize a disorganized industry.

Other value-added services were required: the disciplined selection of a faculty that could face an adult audience; the design of the right programs; direct marketing expertise; negotiation with faculty to keep their fees realistic and sensible; and a logistical support system to facilitate the exporting/importing of quality faculty.

Tremendous economies of scale were achieved. New economic capacity was created for each and every school in the network.

In Conclusion

Maximizing opportunities looks for the best way toward realizing the ideal business. Thinking through the ideal business design—that is, focusing on the whole rather than parts—increases the probability of success.

Johnson and Suskewicz summed it up best when they said:

"The framework for thinking about new systems consists of four interdependent and mutually reinforcing components: an enabling technology, an innovative business model, a careful market-adoption strategy and a favorable government policy."

The systems approach is required not only for clean-tech businesses. It is now a requirement for every institution in society—businesses, government, colleges and universities, and the like—that want to produce and manage meaningful innovation.

A piecemeal approach won't suffice. To produce real innovation executives must be able to see resources and efforts a whole.

Partial analysis is likely to misinform, misdirect, and end in failure. Only the overall view has a reasonable probability to succeed.