Why Innovation
You might ask why innovation is so important
in the first place? Even so, why would I want to change the
culture of my organization?
That's a very fair question to ask before undertaking
an innovation effort. You rarely find a management team that
doesn't have growth on its agenda and for good reason. Equity
markets price in a substantial premium for growth —
at times the premium has reached 3 to 4 times GDP growth expectations
for the market as a whole1. While that kind of
exuberance may not apply to your industry, a recently published
report2 showed that the 25 most innovative companies
as a whole were able to grow their margins 3.4% per year vs.
just 0.4% for the broader S&P 1200. As a result, this same
group also significantly outperformed in terms of total shareholder
return generating 14.3% per year over a ten year period vs.
just 11.3% for the broader index. Successful innovators simply
achieve higher margins and generate higher shareholder returns
— and what business wouldn't like to see that.
Successful innovation requires a company culture
where there is support and a willingness to take calculated
risks. Innovators can often feel like they are out at the
end of the limb, and not always sure who's holding the saw.
But companies trying to change their business approach rarely
start with a review of their culture. No matter how sophisticated
your innovation process or your technology, those elements
alone won't deliver the kind of growth expected today if people
are not excited about the company where they work.
Companies that want to grow through innovation
must have a strongly collaborative and engaged culture. Culture
creates the support system or foundation that enables engagement
and risk taking. And employee engagement pays other big benefits
— a 2003 study3 showed that employee engagement
is directly correlated with growth and even with cost of goods
sold. Companies with higher employee engagement simply outperform
on a broad number of metrics.
To find out where your
culture stands request our innovation
diagnostic.
1 Profit from the Core, Chris
Zook & James Allen, Harvard Business School Press
2 Boston Consulting Group, Innovation 2006
3 2003 Towers Perrin Talent Report
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