The fundamentals of innovation

 

 

Jens Martin Skibsted is a philosopher and award-winning design expert. We asked him to answer five questions about the fundamentals of innovation. This is the first in a series where we pose questions to leading academics and industry leaders on innovation.

1. What should companies do today to foster innovation as they cut back on costs?

The financial crisis pushed efficiency onto the agenda of nearly every corporation. But there has been a general consensus, particularly among blue-chip companies, that you can’t cut out innovation, research and development. In Denmark, where I’m from, the biggest companies, Vestas, Danfoss, Novo Group and Lego, kept innovation expenditures at a considerable level throughout the crisis.

You have to sustain growth even as you cut back on costs, and, to do this, companies need to become more precise. For example, broad-spectrum research projects should be eliminated. Organizations will also need to decide in which part of the value chain they wish to innovate. Do they wish to create new business areas, also known as the “blue ocean” strategy, or do they want to foster incremental growth — the “red ocean” strategy?

An effective type of innovation that has emerged in this difficult economic environment is denovation. Denovation happens when companies push the envelope so far in one direction that it automatically creates an opportunity for push-back in the marketplace. Overexposure to technical innovation makes customers more likely to begin purchasing simpler, cheaper products. For instance, in the shoe industry, when exotic materials and advanced suspension systems become commodities, customers will eventually discover that a cheap, simple pair of sneakers will do.

Even as denovation has emerged, “open innovation” has received a great deal of attention recently. Open innovation happens when companies invite a community to contribute ideas, harvesting the good will of the stakeholders. Open innovation isn’t the silver bullet that followers of University of California at Berkeley professor Henry Chesbrough believe it to be, but done well and under the right circumstances open innovation can save companies money.