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A CUSTOMIZED ROAD MAP

Normalize Innovation
to Transform Your Firm
No

By JOAQUIM VILÀ

T
oday Apple is hailed as a world leader leaders who set things in motion – then this in-
Do

in innovation. But will it still be so a novation comes with an expiry date.


decade from now? Certainly, Apple Consider the leaders in computers in the
has an innovative corporate culture ’70s, consumer electronics in the ’80s and the
based on a distinctive set of values, principles Internet in the ’90s: Many owed their achieve-
and practices that promote individual initia- ments to the influence of their founders. Yet,
tive, find creative solutions to business prob- with rare exceptions, these same companies
lems and seize opportunities as they arise. But now stand out for their absence from innova-
its culture is also strongly based on the legacy tion rankings, with many having disappeared
of its visionary founders. Unless this culture off the radar altogether.
becomes normalized – transcending the very But consider another set of companies, like

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os
Pfizer, Procter & Gamble, Dannon, General the past six years, I have researched the best
Electric, 3M, Intel, BMW, Johnson & Johnson practices of 40 of the world’s most innovative
and Singapore Airlines. Such companies have firms.
learned to treat innovation in a systematic, Drawing on these findings, I put forth a

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organized way, and their efforts are yielding model that links purpose to idea generation,
long-lasting results. selecting the most powerful ideas from mul-
A recent study by IESE and Capgemini sug- tiple inputs, and then focusing a company’s
gests that the existence of formal processes for creative efforts into specific product or service
steering and governing innovation is closely initiatives, in order to help managers launch
linked to the success of that innovation. And innovation in a more systematic way.
as numerous other studies have shown, com-
panies that regularly innovate end up outper- An Evolutionary Approach

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forming their sector. Innovation starts with an initial awareness-
Nevertheless, 58 percent of the firms sur- raising phase to foster attitudes within the or-
veyed say they do not have an explicit innova- ganization, especially among managers, that
tion strategy. What’s more, 45 percent do not are conducive to innovation.
have formal organizational or well-defined This is followed by a credibility phase,
governance structures for innovation, 49 aimed at achieving early results and demon-
percent do not have a well-defined process to strating to people within the company that
prioritize and allocate time and funding to in- success can be increasingly found in creativ-
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novation projects, and a “stunning” 54 percent ity and innovation.
have no performance indicators to measure The process of systematization results in a
the efficacy of their innovation efforts. portfolio of strategic initiatives for innovation
Why is it so difficult to implement a system in various areas.
of innovation management? In the consolidation phase, the company re-
This article presents a phased methodol- views the way in which innovation is led and
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ogy designed to set a company on the path managed, in order to establish a set of values,
toward innovation. It is based on two decades principles and practices that will strengthen
of experience I’ve acquired through training and nurture the innovation process on an on-
and consulting, both in helping companies going basis.
to diagnose their ability to innovate, as well The transformation to a culture of innova-
as in helping them to implement innovation tion does not happen overnight. Indeed, each
processes linked to strategy. In addition, over of these phases contributes to the progressive
development of an innovation culture. It is
No

necessary to take an evolutionary perspec-


EXECUTIVE SUMMARY tive, following stages that gradually produce
results over time.
Companies that organize of each firm. Implementing The changes will vary in scope and mag-
their innovation efforts in this model in phases allows nitude. In the initial stages, the innovation
systematic, well-managed for progressive development achieved may be a better alignment of people
ways are those whose efforts of an innovation culture. and departments, and simple problem reso-
will be rewarded. So says Joa- The goal is to change the way lution. These accomplishments, in turn, can
quim Vilà, based on the best in which innovation is led be extended to more comprehensive aspects,
Do

practices of the world’s most and managed at all levels of such as developing new product or service
innovative firms, as well as on the organization, so that the concepts, at later stages of the process.
his own extensive experience company can establish a set Moreover, the process does not unfold
of innovation management. of values, principles and prac- the same way in all companies. A traditional
In this article, Vilà presents a tices that will strengthen and organization, with limited innovation com-
systematic model of innova- nurture the innovation pro- petencies, should put more emphasis on the
tion management, which links cess on an ongoing basis. In early stages. Conversely, a company with some
strategy, problem solving and short, it’s about transforming experience under its belt may move faster to-
cultural change, and which is the entire company through ward systematizing and consolidating its in-
custom-tailored to the needs innovation. novation (see Exhibit 1).

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Normalize Innovation to Transform Your Firm

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os
Overcoming Fears As with any program of change, innovation
While managers may appreciate the positive can give rise to defensive attitudes, as people
effects that can come from implementing a seek to protect their own interests or those of
systematic approach to innovation in their their units. There may be a degree of cynicism

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companies, the challenges of doing so may stemming from the past failures of similar en-
raise serious doubts in their minds: Which deavors: “We tried the suggestion box, we did
competencies will be required, and do we have the workshops. Nothing changed, they didn’t
them? Where should we concentrate our ef- work.”
forts? How must the efforts of the various units These are excuses, not reasons, for not
be aligned in order to have the greatest impact? implementing innovation. In asking people to
Any program of change will inevitably encoun- embark on a process of innovation, we are not
ter negative reactions and resistance: How will asking to resurrect the same old things that

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we deal with them? were tried and rejected in the past, but rather
Fear of the unknown and doubts about we are trying to tackle the mental barriers that
one’s abilities tend to slow progress in orga- may be preventing people’s innovation efforts
nizations. Overcoming these qualms requires from ever taking off in the first place.
building the confidence of the management The awareness phase aims to put the or-
team in their personal ability to influence the ganization in touch with innovation. This
success of the innovation program. will involve the leadership team, in particu-
Albert Bandura, an eminent psychologist lar, but also everyone else in the organization
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at Stanford University, suggests that the best who will be instrumental in normalizing the
way to create a strong sense of self-efficacy is innovation.
by gradually accumulating small success sto- There are numerous ways of raising aware-
ries, a process he calls “guided mastery.” It also ness. The way you choose to go about it will
helps to become familiarized with the experi- depend on your company’s particular compe-
ences of similar companies that can be taken tencies. Activities include:
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as a reference. In this way, executives can face Q gaining knowledge about innovation
the difficulties before them as challenges to be through forums, ideally in which the reasons
mastered rather than problems to be avoided. for innovation can be openly discussed and
debated.
Awareness: Creating the Q discovering and learning from other suc-
Right Attitude cessful cases, especially if they come from
For innovation to take place, there needs to be firms that your company can identify with.
fertile ground for it to happen. Everyone must Q conducting comparative studies of innova-
No

understand what innovation will mean for the or- tion in your industry and related fields.
ganization, and what it implies for each of them. Q identifying any external factors that may
adversely impact your business performan-
ce, and assessing the necessity of taking
ABOUT THE AUTHOR preemptive action.
Q diagnosing the future strategic health of
Joaquim Vilà is a professor at leading companies and the your company if it continues along the same
of Strategic Management founder of three companies path.
and Innovation at IESE. devoted to innovation: Only when top management is aware of the
Do

Holder of a Ph.D. in Strategic Soft4CRIT-CRITflow, innovation potential is it possible to establish


Management from the Estratègia i Organització and the values, principles and practices that will
Wharton School of the Total Business Innovation. contribute constructively to the realization of
University of Pennsylvania, he His research focuses on innovation.
is a veteran consultant in the innovation management, Metalquimia, an equipment manufactur-
implementation of systematic developing competencies in er for meat processing, began its process of
management to foster management teams, and how introducing systematic innovation in 1998.
innovation in enterprises. He to convey and give relevance It started with the full support of the com-
is also a member of advisory to an innovation strategy pany’s chief executive, Josep Lagares. After
and innovation committees among middle managers. seeing the ratio of commercial success in the

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Normalize Innovation to Transform Your Firm

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os
EXHIBIT 1
Maturity Stages to
Innovation Excellence A HIGHLY
INNOVATIVE
THE PATH TO INNOVATION EXCELLENCE AN COMPANY
INNOVATIVE
DEPENDS ON YOUR COMPANY’S MATURITY

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COMPANY
LEVEL, BUT THE JOURNEY CAN START
AT ANY STEP.
Excellent

Optimized Continuous
innovation
A COMPAN Y
KEEN TO Using
INNOVAT E Managed creative Superior
A Company problem- results

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That Innovates Establishing solving
Developed Sustain-
By Chance processes techniques
Pursuing ability
Sought Creating Setting
opportuni-
portfolios of multiple
Motivated ties projects and indicators of
Occasional and driven Leveraging initiatives success
One-off creative
Exploring Proactively
Casual projects competen-
addressing
Nonexistent through trial cies
op
Some Isolated and error challenges
Not effort, but no efforts
externally organiza-
oriented tional Based on Capability Maturity Model Integration (CMMI) and the
alignment experiences of Ibermática, Metalquimia and IESE
Reacting to
changes too Goals not
late clear Q launching programs for generating and
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Resigned gathering ideas; for example, setting up


a meeting room that operates according
to creative principles, such as reflection,
introduction of new products rise from 30 per- collaboration, mental stimulation and ga-
cent to 88 percent, Lagares personally went on mes; or launching a virtual platform, such
to lead the company’s transformation based on as Critflow, that encourages employees to
creativity and systematic innovation. contribute ideas about problems proposed
by management, and offers incentives for
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Credibility: Proving It Can Be Done participation, as Chaordix does.


Once management is convinced, confidence Combining these methods often produces
must be built across the organization in their more robust results. Specialized consultants
ability to profit from their innovation efforts. are usually brought on board to help imple-
As such, it is vital to show that the organization ment them, although it is good for employees
can achieve better results by taking an innova- to acquire these competencies for themselves,
tive approach. Some of the actions that build leaving the consultants to focus on more com-
credibility include: plex issues. Having a few small, initial suc-
Q holding workshops on specific problems, cesses helps to build confidence among the
Do

and showing how, with simple techniques, skeptics and empower the pioneers: “We can
the people in the organization are able to do it, we are competent.”
add value; recognition should be given for This is effectively what happened at the
the best ideas. insurer AXA Ireland when it launched its
Q addressing a complex problem using creati- Mad House program aimed at generating new
ve techniques that transcend the limitations ideas. It started by gathering seven employees
of a traditional, rational approach; the prin- to brainstorm customer solutions. Some 200
ciples of “design thinking” as popularized by ideas emerged, of which 20 were implemented.
companies such as Ideo, Frog and Humanti- The success of these early initiatives helped to
fic provide good examples. build wider credibility for innovation.

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Normalize Innovation to Transform Your Firm

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Transformation With Results
Various companies have been able to achieve successful results, simply by adapting the flexible

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methodology of systematic innovation management to their own needs.

PREFABRICATS PLANAS Q Size: Large (750 employees in While many companies in the tile
QSector: Building materials Spain) sector have ceased operations, Cre-
QSize: Medium (110 employees) Q Strategic Challenge: Maintain taprint has seen its revenues climb
QStrategic Challenge: Reorient privileged position of profitability from 6 million euros in 2008 to 30
business; serve customers without within the international group million euros in 2011, with a 150

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geographic limitations percent increase in profitability.
Roche Diagnostics Iberia adopted
In 2007, Prefabricats Planas’ methodical innovation in 2003. TELEFÓNICA GROUP
market was within a 200-kilo- Although it is a subsidiary of Roche QSector: Telecommunications
meter radius of its factory in the Diagnostics, the company in- QSize: Large (280,000 employees)
Catalonian province of Girona. This novates regularly, and more than QStrategic Challenge: Lead the
greatly conditioned the organiza- 15 percent of its employees are digitization of the real economy in
tion’s design. The received wisdom involved in various aspects of in- targeted sectors
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was that concrete doesn’t travel novation. While operations in Spain
well, so there was no use trying to have been affected by cuts in health Telefónica introduced its own
be competitive beyond this region. spending, the company continues method of innovation management
The innovation plan redefined to lead the market, and it is achiev- in 2006. Its organic growth model
the way business was done, and ing solid results in Latin America. is evolving into an open model,
challenged several aspects of man- involving multiple partnerships and
CRETAPRINT
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agement. agents, and aimed at extending its


Since 2010, Prefabricats Planas QSector: Machinery for decoration services across the entire chain of
has secured contracts in numerous of ceramic tiles operators, suppliers and customers.
European countries, with projects QSize: Small (45 employees in 2008, In recent years, Telefónica Digital
located more than 1,000 kilometers 90 in 2011) has created a subsidiary special-
from headquarters. In 2012, more QStrategic Challenge: Revitalize izing in innovation and new services.
than 70 percent of Prefabricats the business; enter new field of It has also launched new efforts
Planas’ revenues came from long- technology to support entrepreneurs, such as
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distance projects. Wayra. It is committed to the decen-


In 2006, Cretaprint introduced a tralization of innovation. Thanks to
ROCHE DIAGNOSTICS IBERIA systematic approach to innova- this ecosystem, the group remains
QSector: Medical diagnostic sys- tion management. A year later, it a leader, despite the global financial
tems and solutions introduced digital inkjet machines. crisis.

Eventually, an innovation director post Systematization: Ensuring Results


Do

was created. As the number of innovation pro- A good innovation plan starts by defining what
grams grew, they developed specific criteria you want to accomplish, and then identifying
for selecting ideas according to the type of in- the areas of strategic importance that require
novation. change. Linking innovation to business strat-
Over a five-year period, more than 70 per- egy lends tremendous strength to your plan. It
cent of AXA staff participated in some form of serves to capture the interest of senior man-
innovation activity. Customer satisfaction im- agers, focuses the efforts of numerous depart-
proved significantly, which reinforced the idea ments that might otherwise feel left out, and
that innovation was making a sizeable contri- helps everyone to allocate resources more
bution to results. effectively.

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os
Transferring this responsibility to a middle manager – a
director of R&D or someone similar – without top-level
support would be a mistake, because these managers

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have neither the necessary authority nor power.

Once the strategic areas are defined, the contribute most to creativity and innovation
aims need to be identified. “Defining the desired will support the development of a wider culture
future” and other “design thinking” tools can of innovation.

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help in this process. After idea generation comes the formal
The strategic objectives can vary. A hospital evaluation process, which is the responsibility
I consulted for saw an emerging market oppor- of members of the senior management team,
tunity in community care services and focused who are usually also members of an innovation
its innovation efforts in that direction. A dis- council. This process normally entails several
tributor sought to solidify relationships with filters, tailored to company criteria. One of the
key suppliers, in order to innovate its regional aims is to come away with a portfolio of projects
distribution channels and services. A traditional and initiatives that can be launched.
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business in the mature industry of construction These projects and initiatives need to be
opted for organizational innovation instead. carefully defined and planned. This requires
Management purposes go further, ranging appointing those people who will be part of the
from solving business problems and market development teams. These teams should com-
challenges, to bridging internal development prise a broad range of individuals beyond the
gaps, to addressing the frustrations of custom- usual areas of R&D and marketing.
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ers and other clients; in short, doing anything At this point, you will need to set up gover-
necessary to unblock whatever impedes prog- nance bodies to manage the innovation program
ress toward the goal. The role of management is of change. Transferring this responsibility to a
to define the challenges and encourage a broad- middle manager – a director of R&D or someone
based approach to idea generation. Managers similar – without top-level support would be a
are also instrumental in determining the selec- mistake, because these managers have neither
tion criteria for projects and in mobilizing key the necessary authority nor power.
collaborators. Experience shows that it is much more ef-
No

The systematization phase is also a time to fective to form an innovation council in which
reinforce awareness and credibility among all members of the senior management team are
employees. As the innovation program kicks well represented. Many companies form such
off, senior managers need to remain actively committees, with varying structures.
involved, so as to counteract any employee re- BBVA, for example, has an executive innova-
sistance, which is counterproductive to the in- tion committee and another at the operational
novation effort. level, and each business unit has its own. At Ikea,
Resistance will be less if employees have there is a steering committee for international
been allowed to participate as much as pos- projects, and a management committee for each
Do

sible in the front-end stages. Apart from getting country. Nestlé, meanwhile, has 15 innovation
employees to generate ideas in creativity work- committees in Spain alone, one for each busi-
shops, it is vital that there be systems in place, ness unit. At Roche Diagnostics Iberia, the in-
like easycrit, to capture those ideas, so that em- novation committee comprises the CEO, three
ployees feel that their contributions are genu- division directors and three unit directors.
inely being registered and taken seriously.
If handled well, employees will begin to Consolidation:
make this process a habit, and they will be forth- Making It Sustainable
coming and self-sufficient. Providing recogni- An innovation system will not take hold unless
tion and incentives for the collaborators who it is underpinned by transformational leader-

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Normalize Innovation to Transform Your Firm

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os
It is important to grasp that innovation is, above all,
transformation. To mark this distinction, it is telling that
Tetra Pak renamed its Innovation Process Board the

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“Transformation Council.”

ship. In this regard, how senior managers be- “Mistakes will be made. But if a person is
have throughout the entire process becomes a essentially right, the mistakes he or she makes
determining factor in ensuring lasting capacity. are not as serious in the long run as the mis-

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Senior managers must show a clear com- takes management will make if it undertakes
mitment and a strong will to support innova- to tell those in authority exactly how they must
tion. As one vice president of Procter & Gam- do their jobs.
ble said, people need to know when they come “Management that is destructively critical
to you with an idea that you are going to listen when mistakes are made kills initiative. And
to them, even to the extent that you are willing it’s essential that we have many people with
to change some of your own processes to give initiative if we are to continue to grow.”
their idea the chance it deserves. This role of leaders – not only of setting am-
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For this to happen, you need to have open bitious goals, but of managing progress toward
channels of communication, and employees those goals by supporting personnel as they
must be actively encouraged to engage in in- run up against adversity – will ultimately de-
novation. Ikea, for example, lets employees termine whether an innovation culture takes
dedicate time considering how to improve root or withers over time.
company operations. BMW allows engineers
An Orderly Transformation
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to pursue some early-phase projects that even


their managers may not be aware of. It is important to grasp that innovation is,
Despite the challenges that arise during above all, transformation. An innovation
this process, managers have the responsibility process will require changes in procedures,
of following the road map and helping to move knowledge bases, organizational relationships
the organization forward. This requires having and leadership styles. Anything that implies
a bold vision, and leading with conviction. no change is continuous improvement, not in-
For the Indian industrialist Ratan Tata, novation. To mark this distinction, it is telling
No

chair of the Tata Group, his dream of provid- that Tetra Pak renamed its Innovation Process
ing all Indians with an affordable means of Board the “Transformation Council.”
transport became the impetus to innovate. The construction materials manufacturer,
Though this posed a major challenge for engi- Prefabricats Planas, understood this back be-
neers, in 2008 Tata succeeded in introducing fore the financial crisis hit the sector hardest.
the world’s cheapest car, the Nano, priced at Prior to 2007, the company had undergone
roughly $2,000. training on creativity and innovation capabili-
Don’t make the mistake of believing that ties (awareness), and had organized workshops
this is the exclusive domain of recent start- to glean ideas from staff on business issues
Do

ups. Consider what William L. McKnight of (credibility). By 2007, anticipating that the
3M said more than half a century ago: “As our construction boom could not last, the man-
business grows, it becomes increasingly nec- agement team developed an ambitious strat-
essary to delegate responsibility and to en- egy, which involved significant changes in the
courage men and women to exercise their ini- orientation of the business.
tiative. This requires considerable tolerance. A wide range of people were invited to
Those men and women, to whom we delegate give their input on the issues and opportuni-
authority and responsibility, if they are good ties arising from the new strategy, and they
people, are going to want to do their jobs in introduced a specific procedure for selecting
their own way. ideas.

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Normalize Innovation to Transform Your Firm

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os
Since 2009, Prefabricats Planas has pur- It’s In Your Hands
sued an innovation portfolio that is completely If a company innovates regularly and in a well-
transforming its business. organized manner, it will acquire new capabili-
While the rest of the sector in Spain has ties and undergo a gradual transformation. In

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seen its operations dwindle to 10 percent of doing so, it will reach more advanced stages of
pre-crisis levels, Prefabricats Planas has main- development.
tained an enviable 83 percent of its business. Accompanying this process should be the
It has been able to do this partly by expand- values, principles and practices of transfor-
ing its geographic focus, but more important- mational leadership, which nurture a culture
ly by offering new products and services, and of innovation over time.
by introducing organizational innovation. You will achieve a robust, customized cul-
Thanks to its transformation, Prefabricats ture of systematic innovation to the extent

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Planas finds itself in a stronger competitive that you develop an innovation capacity that is:
position today. Q wide-ranging, across different categories;
Many other companies of widely varying Q continuous, allowing initiatives and projects
sizes, sectors and degrees of complexity have to be spawned on a regular basis;
been able to achieve similar results, simply Q distributed throughout the organization;
by adapting the flexible methodology of sys- Q focused on strategic issues, challenges and
tematic innovation management to their own business opportunities relevant to your
companies’ requirements (see “Transforma- firm;
op
tion With Results”). Q aimed at delivering results.
Having such a culture in place will bestow a
“Yes, But We’re Different” business legacy stronger than any that may
Despite the many success stories, systematic have been left by an entrepreneurial founder.
innovation management frequently elicits the The continued success of the company will be
following reaction: “It’s fine for some, but we in good hands.
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can’t do it, because our company has unique


features that make it different from the rest.”
In their book Winning Through Innovation:
A Practical Guide to Leading Organizational
Change and Renewal, Michael L. Tushman and TO KNOW MORE
Charles A. O’Reilly selected companies from
vastly different sectors and locations that were Q Miller, P., K. Klokgieters, A. Brankovic and
recognized for their achievements in innova- F. Duppen. “Innovation Leadership Study.
No

tion, and they studied the levers that managers Managing Innovation: An Insider Perspective.”
used to foster a culture of innovation. Capgemini Consulting/IESE, March 2012.
Although each individual company, by it-
self, did nothing particularly revolutionary, Q Vilà, J. “Innovative Culture: Values, Principles
what all the companies did do the same is and Practices of Senior Executives in Highly In-
worth noting: They all tolerated honest mis- novative Companies.” In Innovation: Perspectives
takes; most treated employees as human be- for the 21st Century. Spain: BBVA, 2010.
ings, not resources; they rewarded innovative
contributions; and there was full managerial Q Vilà, J. and J.A. Muñoz-Nájar. “Managing In-
Do

commitment. novation: Systemizing the Innovation Process.”


In other words, the values, principles and IESE Alumni Magazine, July-September 2004.
practices that would seem to foster innova-
tion are fairly universal, regardless of the sec- Q Masifern, E. and J. Vilà. “Interconnected
tor or geographic location of your particular Mindsets: Strategic Thinking and the Strategy
business. Certainly, innovation management Concept.” In New Managerial Mindsets: Organi-
needs to be adapted to the peculiarities of zational Transformation and Strategy Implemen-
your business context. But I would insist that tation, edited by M.A. Hitt, J.E. Ricart and R.D.
the principles as described in this article can be Nixon. Chichester, England; New York: John
applied generally. Wiley, 1998.

IESEinsight This document is authorized for use only by XAVIER SERRANO at CESA - Colegio de Estudios
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