Rigid agencies in complex economic change processes

The last few days I have been a participant in a conference about transformative innovation policy. It was quite a treat to be a participant in an event and not to be a moderator or speaker. The Transformative Innovation Policy Consortium is an initiative of the Science Policy Research Unit (SPRU) at the University of Sussex. Many other governments, research alliances and academics are part of this initiative.

It was great to hear the voices of the gurus whose material I usually only get to read. A core concept of the initiative is the idea that there are 3 frames of innovation policy (Schot & Steinmuller, 2016). In my vocabulary a frame is the punctuated equilibrium that exists between paradigm shifts. The first frame of innovation policy was mainly about R&D and regulation. The second frame shifted towards national systems of innovation and entrepreneurship. The third and most recent shift is towards transformative innovation policy. I will not go into the description of the frames, I want to focus on one thought that struck me during the conference, and it is about the organizations (or agents) that are supposed to help on this process of transformative innovation.

Economic change is a complex process. Transformative innovation tries to achieve a particular (broad) kind of change in a society. A wide range of organizations in the science, technology and innovation domain would have to collaborate and even change themselves to enable or promote transformative change. While some changes may have to do with technology development, adaptation or other kinds of innovation, other changes would be more about social technologies like improving cross silo collaboration, mobilizing a broader range of civil actors into innovation activities, experimenting with policy and learning by doing. However, many these organizations themselves are often very rigid, hierarchical, and to some degree clumsy, especially in developing countries. What I mean with clumsy is that research requires a degree of planning, organizations need to coordinate across disciplines and themes, and that governance and oversight remains necessary and important. So when there is a sudden shift these organizations struggle to change quickly. They are rigid, and many of their internal systems and the predominant organizations culture are designed to withstand distraction, and to plow straight on through obstacles, resistance and confusion. So to a large extent, many of these organizations are primed to ignore weak signals, soft voices and serendipity.

These kinds of organizations are my clients. So let me not complain too much about their ability to make sense of what is going on around them. The ideas shared in this conference would inspire many of my clients and friends working in the Department of Science and Technology in South Africa, and the network of academics, researchers and technology centers we have here. I am excited about many of the concepts, but also weary that there is little space to fail or time to lose due to political and societal pressure to show results.radike_72dpi20130703_MG_0435

 

If the culture cannot change then the business cannot change

I received many comments and tweets about the previous post. Thank you for ideas and comments

Some agreed that innovation is the result of culture. Some said that culture is not only created by management, but also by staff. For instance, the admin pool in a traditional engineering company can be very innovative (and creative) even if the rest of the business is stuck in the 1980s.

Somebody told me that creating an innovative culture is in itself a chicken-egg (low equilibrium) situation, because for a leader to create (or enable) an innovative culture takes innovation in itself. You can see where this is going.

Then I discovered a recent cartoon in my inbox by Hugh Macleod of Gapingvoid fame. This cartoon says it all.

An organization that cannot change its culture (due to too rigid systems, due to lack of management capability, due to its people) has become trapped in time. While some organizations may exist like this due to sheer momentum, due to protection (by law), by continuous funding, or for whatever reason, will struggle to adapt to external change. These organizations are not resilient and they are at the mercy of external supporters (a.k.a clients, benefactors, funders or shareholders).

I was also asked how some organizations can still innovative despite a poor innovation culture. Again, it is of course possible to replace a machine, or for a few people in an organization to design something brilliant, or for a new process to emerge. Of course it is possible. But it takes much more energy, determination of a few, and some really tenacity to be innovative in an un-innovative (what is the right word here?) culture.

I am sure more comments will come.

Cheers, Shawn

I appreciated the comments received by e-mail, but wonder why people are not posting comments to this article? Is the WordPress registration process to difficult? Please let me know. And keep those comments coming!

Innovation as cultural as opposed to innovation as a technique or function

Reflecting on the correspondence I have received after my previous post and recent training sessions with manufacturers, I realize that people are looking for tools and tricks to “fix” innovation. Sometimes it is actually not even about innovation, but about making up for past decisions like not investing in technology or market development when they should have. Others think of innovation as a function, or as a management tool that can be standardized into a job description or an area of responsibility. While this is possible in some contexts, I don’t find this approach to innovation so useful in the smaller and medium sized manufacturing firms and the research/technology institution space where I am working in.

For me, innovation is firstly a value, perspective on how organizations should be. When management says “we are an innovative organization” or “we want an innovative culture” or “our reputation is that we are innovative” then we can move to tools, portfolios, tricks, and tweaks (those things that people in innovation functions must attend to). Many textbooks, articles and blog sites on innovation and technology management are then useful. Actually the challenge is to decide which of the bucketloads of advice to use, and consultants like me typically help organizations to choose a few tools and to then use them consistently and fully. I would dare to say that it is relatively easy to help companies that are already innovative to become more innovative.

The area that I am really intrigued by, are those organizations that are not innovative, or that would not describe themselves as having an innovative culture. Maybe they used to be innovative. Maybe they are innovative in some areas, but not in others. Maybe they had one or two tricks in the past that have now become old. These could be extremely competent organizations, like a research programme, a manufacturer of highly specialized industrial equipment, or an organization that simply design and manufacturers what their customers expressively tell them to make. Even if the outputs of these organizations can be described as “innovative”, these organizations themselves do not necessarily have innovative cultures that constantly are creating novel ideas, processes and markets. In my experience these organizations have technically brilliant people, but management is often not able to harness the genius, experience or creativity of their people. The main reason for this is not a lack of technique, tools or tricks. It is because of a lack of an innovative culture, leading to a lack of innovative purpose. These organizations are trapped. They are equipped for the past, but they are paralyzed by all the choices they have to make about the future. For management, it feels like everything that they have in place are inadequate and need equal attention, ranging from attracting staff with better (or different) qualifications to finding new markets, developing new technological capability, sorting out cash flow and capital expenditure, addressing succession planning, etc.

Improving the innovation culture of an organization is a complex issue. It is not about tasks, functions or tools, but about changing relations between people, within and beyond the boundaries of the organization.

When working with organizations that must improve their innovative culture, motivational speeches, optimistic visions of the future, etc, are not useful and could in fact deepen the crises facing management. Instruments such as scenario planning, roadmaps, foresight techniques, or interventions like starting a R&D unit, a lean exercise to reduce waste, are all addressing the wrong issues and distract management from confronting the real issue that are stifling the organization. It narrows the ability of management and specialists to scan within and beyond the organisation for opportunities that could be used to change the way people work together, think together, solve problems together. The typical employee in a manufacturing or technical environment loves solving problems, love tinkering with novelty. But often management becomes so performance or target obsessed (lean?) that they don’t tap into the latent potential of their people.

Improving the innovation culture process starts with connecting management back with their people. It starts in the present, the now, not the future scenarios, not with using innovation techniques, better analytical tools, and in most cases not with some or other management fad. It goes beyond trying to improve products, processes or business areas, beyond gaps in the management capability. It must look at the relations between people, between what people know and can do now (or in the recent past), and the potential the people see to make small improvements.

When management has the courage to decide to improve their innovative culture it starts a process that cannot be described as incremental improvement, as that sounds too directed. It is rather like a deepening, or an awakening where employees are inspired to contribute, and management is more aware what they can do to enable their employees to become more innovative on all fronts. Of course, management also face the risk that outdated management approaches that does not seek to empower employees to be creative will be exposed, and some tough decisions will have to be made.

For me the most promising approach to improving innovation in an organization is a organization development approach (not limited to design, not based on technical innovation instruments) based on complexity thinking, like our Systemic Insight approach. We are using instruments such as Sensemaker developed by Cognitive Edge to find areas for improvement, areas where relations between knowledge objects (knowledge, artificats, heuristics, etc) and people can be improved, starting from where the system is and then probing to understand what the immediate potential is for improvement. It allows people to take many small steps in parallel to improve the system and to push back the boundaries that have constrained the creativity in the organization.

In my view, building an innovation culture goes far beyond establishing or refining innovation management functions. It is a strategic issue that is initiated by top management, but that will soon spill over into every area of the organization, hence it cannot be driven from a management function like “innovation”.

Instigating innovation: Where to start

I am currently focused on strengthening the manufacturing sector. Increasingly I am speaking at meetings, events, in boardrooms and in front of post graduate students about innovation. In this more engineering-minded world people are asking me the whole time for a few tips to get innovation going.

  • “How about an idea box?”
  • “How about canvassing ideas for a new product design from our customers?”
  • “How about rewarding our engineers with a profit share if they design a new product?”

The truth is, many manufacturing enterprises, especially the smaller ones, are too sliced into specific functions. Design designs, manufacturing manufacturers, salesmen become creative about delivery dates, and accounts, well, they count costs. This hierarchy makes information flows about potential improvements, new market opportunities and some old tricks that could become useful again very difficult. The cost of coordination in these enterprises are very high. In these silo-based organizations the costs of finding information, new signals and new ideas from outside the organizations is extremely high, and in general, these organizations struggle to learn.

A second problem is that most smaller manufacturers are mainly focused on product innovation. Which does not mean being focused on knocking the socks of their customers with frequent improvements or brilliant designs. Unfortunately many of the more traditional manufacturers are focused on how to get the price down or how to sort our quality issues. Which is actually a kind of process improvement, except that it is a very narrow kind of process improvement. The challenge with this incremental approach is that you can at most only grow and develop as fast as your customers can articulate what they want. Competitors or substitutes can also upset market relations by coming up with novel solutions that an incremental approach struggles to generate.

A third problem is that innovation is only done when customers demand it. It is passive. It lives in bursts to get things right, and then it settles into a problem solving mode until a next customer makes some unreasonable demands.

What many manufacturers lack, especially those in the more traditional sectors like metals and engineering, is a focused effort by top management to build an innovative culture that is actively trying to find product, process and business model improvements. It must be focused internally, in order to constantly rethink the business and its core processes, and it must be focused externally, to what customers and competitors are doing. The really good companies are also looking beyond current markets and competitors to new technologies and how they might shape the future.

This far I have addressed a business perspective. But research organizations, technology transfer centres and industry support centres can also get trapped in a low innovation culture.

I am now working with a few industry groups and research and technology centres to find out how these organizations can move beyond “catching up” and responding to change towards anticipating what is next. It sounds really simple, but by simply mobilizing more and more people in the organization to start searching for what’s next has already yielded amazing results in a short time. Maybe I am over optimistic, but already I can sense the innovation cultures change in these organizations as more and more people become involved in searching for possibility.

A quote that is attributed to William Gibson goes “The future is already here – it’s just not evenly distributed”. Step one is get more people involved in searching for what is already here, it is just not recognized inside the firm or industry.

New series: Instigating Innovation

I have been developing a new capacity building method and training approach that brings together my work in innovation systems promotion  and my work on improving technology and innovation management. I call it “Instigating Innovation”.

I chose “instigating” because it has a more positive ring to it than provocation or incitement. While it is a noun with mainly a positive tone, it is a bit more aggressive than support, enable or encourage or even stimulating. I have been referred to in my past as an instigator of change so I thought this was a good idea.

Why was this effort firstly necessary and secondary so rewarding?

My work on innovation systems is mainly aimed at assisting meso-organizations such as technology transfer centres, research centres and universities to be more responsive to the needs of the private sector. While it only takes a few interviews by a senior decision maker from one of these institutions to a few leading enterprises to get the organization to improve its offering to the private sector, it does not solve the problem that these institutions often needs a continuous process of innovation itself. So while they can respond to the needs of the enterprises (for instance by launching a new service, or making a key technology available, etc), they often are not able to innovate constantly in order to anticipate what they private sector might need in the future.

With my other hat on, working in the private sector to improve the management of technology and innovation is focused on helping individual and on rare occasions, groups or networks of enterprises to formalize or improve their management of innovation. Here my challenge is that most enterprises innovate by accident, or have elements of an innovation management approach in place without knowing it. But it is not systematic nor is it consistent.

So both supporting institutions and enterprises lack some very basic frameworks to focus their existing development and learning processes to ensure not only short term results (new products & services, process improvements, cost reduction, etc) but to also ensure longer term success (playing in the right markets, selecting the right technologies, investing in the right kind of knowledge, partnering with the right people, etc). Furthermore, most enterprises and supporting institutions have something else in common: they often face resource constraints with the most versatile of their staff being involved in problem solving and not thinking about the future and what may be possible sometime down the line.

I set aside most of March and had great fun reading through my collection of articles, books, reports of past missions, and speaking to entrepreneurs and development practitioners I trust. Based on this investigation I decided on the following criteria for instruments to include in the Instigating Innovation module:

  1. Each instrument or concept must be relevant to both enterprises and meso-level organizations05 building innovative capacity small
  2. Each instrument must provide a very simple framework that can be illustrated on a flipchart
  3. The simple framework must be usable as a workshop format that allows people to reorganize or explore their current and future practices
  4. The frameworks must be scalable, both in depth (allowing pointers for a deep dive into an issue) and in width (useable for a product, issue, portfolio or the strategy of the organization as a whole).
  5. Lastly, I did not want to be the consultant with a project, I want to be the facilitator that enables change and that builds long term sustainability into the organizations that I work with.

This was a very rewarding exercise. Not only do I love reading about innovation, change and technology, I love finding better ways to explain these concepts. It was also great to find a way to connect my work on innovation systems, which often seems abstract, with the tough decisions that the enterprises that I work with must confront and address. I tend to work in the more technical domains dominated by academics, engineers, scientists and manufacturers, so finding a simple yet convincing way to add value to what these clever people do was important.

I will in the next few posts reveal a little bit more of the tools I selected and how it can be used.

Thank you for the EDA team in Bosnia and Herzegovina who motivated me to turn this idea into a capacity building format and who agreed that I try “Instigating Innovation” on their team during my visit to Banja Luka in May 2015!

Instigating Innovation in Banja Luka with the team from EDA
Instigating Innovation in Banja Luka with the team from EDA

Systemic Insight – Economic development is about introducing options, not bringing solutions

Marcus and I have just posted a new article on the Systemic Insight website. The post is about our recent article that was published in the IDS Bulletin (Vol 46.3) and is titled “Explore, Scale Up, Move Out: Three Phases to Managing Change under Conditions of Uncertainty”. 

Please note that in future all my posts specifically about complexity and resilience will be published on our Systemic Insight website. To my regular blog readers it may be worthwhile to also subscribe to the feed on that site. We promise to write more often now that the foundation for our applied research theme on complexity in development has been created. We already have many customers using our approaches and this area of work is promising and rewarding. We have added a new page to the Systemic Insight site that explains some of our most frequently asked about services related to complexity thinking applied to development.

On this site I will keep on writing about Private Sector Development in general, and particularly on innovation and innovation systems.

Your feedback, comments, emails, phone calls, tweets and likes are appreciated. Let us know what you think and what you would like to discuss, read about or just “air”.

Best wishes,

Shawn

Post 5: Various regulatory and environmental factors that shape the behaviour of enterprises

This is the 5th post on building technological capability. I have written many posts before on the environment in which innovation and technological capability development takes place, so this will only be a short summary.

In this perspective, we investigate how various regulatory and environmental factors shape the behaviour of enterprises. It combines the meta level (sociocultural) and macro level (generic framework conditions) of the systemic competitiveness framework (Esser et al., 1995).

Specifically, we seek to establish whether or not firms have to innovate through the incentives created in the broader environment. Firms’ innovative efforts are not usually the result of enthusiasm for innovation but the outcome of necessity – firms have to innovate because their competitors are innovating too, and because they will get forced out of the market if they do not innovate. In turn, this means that firms that are experiencing little competitive pressure will often not be inclined to put much effort into innovation, which is perfectly rational as innovation always involves cost and risk. It is important to note that the enabling environment is not only a function of different kinds of government policy, it is also affected by private sector policies such as decisions to collectively invest, collude and compete.

While some of these issues can be identified through desktop research, interviews with key industry leaders or experts will quickly reveal which socioeconomic factors affect the investment and experimentation appetite of the business sector.

A second dimension relates to the incentives for other actors in the system to support the development of technological capability in formal and informal institutions. For instance, national-level policies direct universities to offer particular kinds of courses, but do they provide the incentive for academics to develop teaching or research programmes that improves the capacity of enterprises or innovators?

Hint: I have learned that when interviewing entrepreneurs to understand their perspective on the innovation system (a.k.a the technological system) around them, never to start with the regulatory environment and the broader environmental factors. You will hear a million reasons why the whole system is conspiring against entrepreneurs to be competitive, innovative and optimistic.

Gaining a deeper understanding of an innovation system and how to build technological capability is not rocket science. I propose that you start with understanding the enterprise perspective on collaboration on competition first (post 1 and 2 in this series), then continue to better understand the relationship between formal education and the industry (post 3), then the creators and disseminators of informal and technical knowledge (post 2) and only then ask about the regulatory systems and the environmental factors.

In the end it is not about the presence of entrepreneurs, institutions that enable knowledge to flow, institutions that address persistent market failure, or an supportive framework conditions. While all of these matters, it is about how they interact. A checklist approach will not work. Having a university or a few innovative enterprises does not guarantee that a society or community has institutionalized technological capability. Technological capability is about the dynamism between these different factors, it is about relationships, spill-overs and trust. These are only created over time as a result of positive interaction between individuals, organizations, both formally and informally.

Post 3: The role of various organizations involved in education

This is the 3rd post in the series on building technological capability.

Contrary to common belief, building technological capability does not start with eduction. That being said, education matters and certainly makes any upgrading effort much easier. It is not only about the basic qualifications, but also about the ease with which existing employees can further their education.

With education institutions we include all forms of education, from basic to technical, vocational to post tertiary education. We also include public as well as private providers of education. Education lays an important basis with regards to skills, but also increases the absorptive capacity of a society. Advanced forms of education includes research.

In general, when we assess the role of education in assisting enterprises or industries to upgrade, we want to know how responsive the education system (broadly speaking) is. If a new standard is agreed upon in industry, how long does it take for the technical Universities to include this in their programmes? If a new disruptive innovation takes place, how fast is the curriculum updated? I remember back in the 90s when I studied for the first time, how the software we used at the university was no longer available commercially. Fortunately, all those Lotus 1-2-3 shortcuts still worked on Excel, I still use it today 😉

While the responsiveness of the education sector is important, what is ideal is a education system that not only responds to the needs of the private sector, but it preempts or anticipates what is needed next. This is very important for the manufacturing sector. Graduates must know not only what is now mainstream, but also what is expected or coming soon. This is where large parts of our South African university system lags behind. But this is not unique to South Africa.

A last point I want to make about the education sector is that it is also important to understand the role and contribution of the private sector to the education sector. In many countries there is a close relationship between the private sector and for instance universities. Companies contribute to to not only basic education infrastructure, they often fund research positions and projects. An industry that is complaining that they don’t get from the education sector what they need is most likely also not contributing through finances or advice.

Post 4: Technological Institutions that disseminate knowledge

This is the fourth post in this series about building technological capability.

In 2011 I explained how we define technology in a broad way. This definition looks beyond hardware to include knowledge and organization of the different elements. For instance, if a company decides to achieve a new standard of compliance, that is seen as a technology. This technology involves the way processes are organized, the knowledge of how to achieve and maintain this new standard, and the physical and knowledge infrastructure involved in the enterprise.

Firms depend on a variety of public and private technology institutions in order to compete, innovate and grow. Examples range from access to basic research all the way to access to technical problem solving. The measurement, standards, testing and quality assurance (MSTQ) of a country is also assessed from this perspective. The density of interaction between various technology institutions, as well as the interaction between the firms and the technology institutions, is an important factor in the innovation trends in a sector. Various kinds of technical services such as knowledge-intensive business services play an important role in knowledge spill-overs between different firms.

We call all these carriers of technological knowledge “technological institutions”. While some of these institutions are publicly funded (like a research centre, national standards organization or an start-up incubator), some could also be privately funded (like a supply chain development office at a multinational, a specialized equipment provider that provides training and technical support, etc). Specialist and technical service providers, management consultants, researchers and manufacturing extension experts all fall under this broad category. Some charge full service, others provide public goods, but all disseminate knowledge to enterprises.

An organization like a Technology Transfer Centre hosted by a University is located between an Education Institution (post 3 in this series) and a Technological Institution, and often it behaves like both. The Technology Stations Programme in South Africa is an example of an institution designed to fit the space between technological intermediaries, universities and enterprises.

It is noticeable that in many developing countries, the technological institutions that disseminate technological knowledge and that makes scarce technology available to industry are weak or missing. While some stronger enterprises may require and be able to absorb more technological knowledge, the domestic institutions often provide generic services that do not meet the expectations of these leading enterprises. In middle income countries, leading enterprises may simply disengage from the domestic technological institutions and engage with service provided in other countries, further reducing the scale of knowledge dissemination and weakening the system further. This leads to a situation where most enterprises in the country only have access to generic and low-value services, while leading companies and multinationals connect with global sources of knowledge and technology.

You may be surprised to find out which organizations are identified by enterprises if you asked them where they receive technological and specialized knowledge from. I typically ask “who do you turn to when you get stuck?”. In most cases, equipment suppliers, engineers employed by larger companies, or a junior lecturer with high levels of enthusiasm are identified as the most important sources of knowledge or technological advice. I have found this same pattern in many countries, the most important carriers of knowledge are not formal organizations, but individuals.

The result is that the cost of finding knowledge, or gaining access to scarce technology is high, and that those with broader networks are most likely able to gain access to this important resource while those that depend on public goods or generally available information are unable to access the necessary information.

I will explain in a future post how we can diagnose and improve the domain of technological institutions in order to improve the technological capability of enterprises.