With the prevailing economic atmosphere, many companies are experiencing hard financial times and thus taking measures that are meant to save them from closing doors, but in a real sense, the measures are actually playing a counterproductive role by sinking them further into misery. For example, some companies are reducing their workforce without realizing that this means they are losing experience. Other companies are cutting down on expenses through the reduction of bonuses and allowances offered to their employees. This, unfortunately, leads to demotivation of the employees, something that is likely to impact negatively on the production of the company. All these unfolding leads to one question, is there a way through which a company can remain in good order and function during hard economic times without interfering with the employees’ well-being? The answer is yes; there is a way. Among the most significant strategies to curb this economic crunch is innovation. Due to this point of view, this paper will highlight the importance of innovation to an organization, highlighting the ways through which a company can encourage this creative behavior within its system, and finally give an example of an organization that has succeeded through innovation and how this company applied the principles within its system.
What is innovation, and how is it important to an organization? Since the 17th C, the word innovation and its variants have been in existence. Although the word initially had a negative meaning, it evolved within several years to gain a positive aspect for itself. Forster defines innovation as “The process of creating new products and services, introducing new methods and ideas, or making incremental changes or improvements in organizations” (2009, p 337). While both innovation and invention are forms of creativity, they are not to be taken as synonyms because the invention has the idea of original thought within its context, while innovation has the idea of original thought but also the development of an already existent idea, object, or service.
Importance of Innovation
While quality, culture, and reengineering seemed to be the most vibrant words within the business world during the 1980s, the trend changed with most focus turning to innovation. The concept of innovation took center stage, with some of the business analysts referring to it as the “business theology.” In 2000, for example, most of the companies ranked among the top performers referred to innovation and learning as the only tool that would enable a company to remain on top of the pack. How does innovation impact the performance of a company? According to Forster (2009, p 338), three main reasons make innovation come out as very essential to the day-to-day company efforts to ensure long-term success, longevity, and adoptability.
To start with, he identifies the importance of innovation as a weapon that offers a competitive advantage for an organization. With all companies that were competing within all the civilized countries employing the main management techniques that had been practiced within the eighties, for a company to stand out and excel, it had to come up with something new that had not been used by other companies. Techniques like outsourcing, just in time, total quality, or business process reengineering, and supply chain management were the most common techniques that were applied in almost every organization. Coming up with something nouvelle that had not been employed by other competitors within the market ensured a competitive edge for the company. Although this was the trend by then, the concept can still hold water. Competition cannot be pushed aside when strategizing for long-term success. As a result, it is important that a company comes up with something new that will give them an advantage over the rest. This forms one of the important aspects of innovation. It gives a company a competitive edge within the industry.
Secondly, Forster identifies that innovation leads to flexibility within the management and production processes of an organization. While all the other management techniques performed well within the period of the 80s, the techniques would not be perfect within the current economic system, which calls for nouvelle ideas and great intellectual capital. These would act as the greatest actors that offer a competitive advantage. In addition, the old management techniques would be rigid and inflexible thus, driving a company into limited success. The current business world calls for “non-linear innovative thinking,” unlike the former methods and techniques of management, which emphasized only efficient internal systems. Therefore, survival within this competitive world coupled up with the economic crunch calls for a continuous birth of new ideas, goods, and services instead of a single perfected idea, good, or service. Innovation, therefore, provides an avenue through which a company can come up with new ideas that would give it a competitive advantage.
Lastly, Forster argued that innovation contributes greatly to the overall profitability of the organization and hence high growth. For example, a poll carried out on innovation from 1984 to 1999 showed that the companies that appeared top 20 on the list of innovation experienced a shareholder return that was double their lower counterparts. In addition, the returns on investments made within the field of innovation resulted in an average of 56% as compared to the other non-innovative investments that resulted in an average of 16%. This study was further reinforced by another study from the Boston Consulting Group that was carried in 2005, which indicated that of all the executives who participated in the survey, 87% believed that the growth of an organization depended essentially on innovation. This was living proof that companies’ innovation plays a great role in the total performance and growth of an organization.
A Case Study
One of the companies that have been identified within the leading innovative companies’ lists in the world is WL Gore. Having been in the industry for more than 50 years, WL Gore has managed to excel and attain a turnover of $2.5 billion. With its unique structure of management, the company has ensured that no worker has a job title, and they refer to each other as associates with their team leader John Housego (Smith, 2008). This is the greatest principle that has worked within this organization for its fifty years of existence. The greatest drive has always been their two main goals which are ‘to make money and have fun.’
In 1958, a couple, Bill and Vieve Gore started a small enterprise in the basement of their house. The business maintained a low profile until 1960 when they got their first boast which was an order from Denver to supply an insulated ribbon cable of the length of 12 km. In 1964, Gore witnessed an opening of offices in London, which was their major international venture. In 1969, the company witnessed their product fly to the moon as their high-temperature cables were used within the seismographic equipment worn by Armstrong and Aldrin. The same year, the company came up with a new material, Gore-Tex, whose products were launched into the market the following year. The first commercial order for Gore-Tex was experienced in 1976 with the same material being used by NASA’s Astronauts during its inaugural space shuttle mission in 1981. Four years later, the Prince Phillip Award is given to the Medical Products division of Gore for their service to humanity. In 1988, Stephen Venables climbed to the summit of Everest without bottled oxygen. He uses gore material. In 1990, Gore-Tex saved one member of the Antarctica exploration team during a mission. In Russia, Gore-Tex finds itself as the construction material at the Space Station MIR. In 1996, Bosnia witnessed a 25,000 member troop clothed in Gore-Tex as the company cloaks a $1 billion annual sales record. The industrial products division came up with the elixir guitar strings, which were used by the great Carlos Santana in 1997. In 1998, Gore found itself on the list of ‘100 Best Companies to Work for in America’ by the Fortune Magazine. In 2000, Gore came up with a new product, the Windstopper fabric. From 2004 to 2007, Gore UK maintains the number one position in the ‘100 Best Companies to Work for’ by the Sunday Times. In 2008, Gore marked its 50th anniversary. Currently, WL Gore has a turnover of $2.5 billion with an employee base of 8,000 with 45 branches around the world (WL Gore & Associates, 2009).
Encouraging innovation in an organization and how it is Applied at WL Gore
As the researchers pointed out, different organizations have been found to be more innovative as compared to others. This calls for analysis to understand why some organizations will come up more innovative than others and what the factors within the organizations that promote innovation are. One of the greatest ways to promote innovation is through the reduction of bureaucracies (Hamel & Breen, 2007, p 5). The two argue that a hierarchical management structure concentrates its information flow in a more vertical way than lateral. This means that peers don’t communicate. They only communicate with the supervisor. This offers fewer chances for innovation. A lattice management structure allows communication between peers. It encourages person-to-person and team-to-team communication, which is essential for an all-directional flow of information. This encourages service to peers and not to the boss. It also contributes to closer interpersonal relations. As Forster puts it, the only way to encourage innovation is through endless communication. For learning to occur, he argues that there must be information sharing and open communication. This, he argues that leads to cross-fertilizing of newborn ideas and hence resulting in great business ideas (Forster, 2009, p 365). This could be encouraged by working in an open, single large room.
This is inarguably evident in WL Gore. This organization boasts of no management layer or organization charts. Though it is divided into several departments, each department has a leader who is democratically chosen by his peers based on his administrative capabilities. No leader is chosen from the top (Stern & Marsh, 2008). As a result, no one at Gore commands another one to do anything. Decision-making is based on group agreements.
Natural leadership plays an important role in the promotion of innovation in an organization. Through natural abilities, one can be able to mobilize the group and reach agreements without breaking the team spirit. This contributes to great team-building and hence production (Hamel & Breen, 2007, p 6).
This aspect of leadership is present in WL Gore. None of their leaders are referred to as managers or bosses. The leaders of the groups and departments are referred to as leaders. Furthermore, the leaders are not appointed from the top. They are voted for by their peers after demonstrating leadership skills. By excelling in leadership within a group thus leads to a greater follower size. In addition, firing a group leader is not the function of the overall leader. The group has the capacity to fire its leader in case of poor performance. Under the leaders, nobody delegates duty to the group. Each group chooses its own tasks and excels in them (Smith, 2008). In choosing the overall leader, the associates were given the opportunity to choose someone they would be willing to follow without any name. In addition, the absence of supervisory and bossy people to boss the workers around and the use of small groups promote communication. WL Gore encourages communication as associates are given time to discuss their group tasks and to come up with new ideas. Furthermore, the ability of an associate to mobilize volunteers who are ready to work with him also encourages communication. Finally, all associates work in a single open room; thus peer to peer communication becomes encouraged.
An organization that promotes mentorship and support is much likely to promote innovation as compared to one that is based on bossing around (Hamel & Breen, 2007, p7). Through the identification of one’s capability, mentorship and support will allow the new entrants to work to their best level owing to the fact that they have the opportunity to work in a field that they fit most. In addition, the mentorship and support program, as compared to its bossing, leads to an atmosphere that encourages trust and not fears, as seen in other programs. Such an environment can be achieved through a lack of supervisors and other high-ranking bosses within a hierarchical management structure. In addition, the cream of people hired has to top. An organization should put emphasis on recruitment procedures so that they come with very talented people in the job market. This, according to Forster, encourages innovation. Furthermore, the organization should hire diverse talents through the identification of the needs of the organization. The diverse talents will help solve the diverse problems of the organization (Forster, 2009, p 358).
At WL Gore, no one is hired in a position of a narrow job description. Instead, new entrants receive their recruitments within large broader roles as business development leaders, HR specialists, or Research and Development engineers. Later, they are assigned to a sponsor who helps them pass through the different groups within the departments until they find the most appropriate position for them. An associate is free to change his sponsor if he feels like it. Unlike other organizations where the employees are responsible to the boss, at Gore, the associates are responsible to their groups. This means that they don’t assign any boss or supervisor to any group. This is aimed at satisfying one of their core principles which dictate that the employees at Gore have to work within a “high-trust and low-fear” atmosphere under which employees are mentored instead of being bossed (Hamel & Breen, 2007, p7).
An organization that offers its employees time and freedom to experiment is most favored to maintain a standard of innovation. There should be enough freedom to offer the employees time for engaging in new ideas and projects. The organization should offer ample time for employees to bring up their new ideas and, together as a community, work toward achieving success. This can be achieved through contributions by other members in terms of their commitment, talent, and experience (Hamel & Breen, 2007, p 8). Forster argues that through the hiring of the right people, a company increases its chances of innovation. However, these people must be given the right culture, incentives, and atmosphere to make use of their brains. This can be achieved through the organization’s readiness to invest time and resources into its employees. Therefore, the company must encourage a culture of innovation and entrepreneurship. Employees should be given time to research and come up with new ideas, which in most cases should not be thrown away without further thought (Forster, 2009, p 364).
This is exactly what has been the mother of invention at Gore. Here, patience to nurture ideas and avail time for their growth mark the main principles. Ultimate growth through the breakthrough of ideas marks the main belief at Gore (Deutschman, 2008). To achieve this, the employees at Gore are given half a day every week to work on their own without being interfered with. This, in addition, is what marked the main breakthrough of the company. It was Bob Gore, the Son of Bill Gore, the founder of the company, that accidentally discovered that PTFE could be stretched, and this formed the beginning of the Gore-Tex, the main product of the business. In addition, the guitar string manufacture came from Dave Myers, an engineer based in the cardiac implant department (Hamel & Breen, 2007, p 8). With the help of other volunteers, Myers developed his idea into a great business product that currently, elixir guitar wires enjoys a selling advantage of two to one ratio with the closest competitor. This is because of their quality to last 3 to 5 times the normal guitar wires and held their tone three times the standard of the industry.
Another way that an organization can create an innovative culture is through ensuring that its employees have a willing commitment to their work in place of resigned compliance. The organization should not offer assignments. Instead, they should offer freedom for choosing works that will lead to commitment. By giving employees the freedom to choose what they deem fit for them, an organization is likely to win commitments from them. This, in turn, leads to innovation (Hamel & Breen, 2007, p 9).
At Gore, each group accepts a task. They are not assigned from the top. Each group negotiates for favorite tasks between the peers. While the contribution to the success of the team by an associate plays an important role during the process of rewarding, associates, therefore, find it as an initiative to commit to the team’s project without supervision. In addition, a group is free to refuse a request, but once the request is agreed upon, there is a total commitment to it (Hamel & Breen, 2007, p 9).
Such an atmosphere makes the employees work hard through being energized instead of finding the work demanding encourages innovation (Hamel & Breen, 2007, p 10). Making internal plans to encourage workers to develop commitment will lead to development within the organization. With such things, the workers will develop an attitude to work hard.
At Gore, each associate is ranked against another every year. This is done through statistics collected from 20 of his colleagues in the department. Those who are ranked highly in terms of their contributions to the success of the groups eventually get a larger pay as compared to those who rank low. At Gore, a worker graduate scientist can earn more than an experienced Business leader because of his contribution. In addition, all employees who work for Gore for more than a year have 12 % of their salaries in terms of shares of the company, and the employee can cash his shares when leaving the company (Hamel & Breen, 2007, p 10).
The absence of emphasis on a key business can lead to innovation within an organization. Clear-cut boundaries of the core business only serve as rigidity and hinder flexibility within the organization’s activities. Organizations should therefore give their employees the freedom to pursue their interests without feeling impeded (Hamel & Breen, 2007, p 11).
Gore has been a champion in this field. The associates have been left to come up with their own innovations without feeling any boundaries of the core business. Although the company has four divisions, those who head them do not stress the core business. This has resulted in more than 1,000 different products within the same organization. It can also be identified that Gore found a niche in the music industry despite having had any interest in the field. Should they have had a defined core business boundary, they could not have emerged as the leaders in guitar strings (Deutschman, 2008).
An organization that encourages innovation must be cautious in its risk-taking. It must ensure that it does not engage in the behavior of engaging in unnecessary risking. This means that the company should not engage in big bets unless all the likely problems they might encounter are well cleared. Important assumptions should be tested through cost-effective ways that do not put the company into great losses. First, the idea has to be real. It must be in a position to solve a real customer problem. Then, the idea should have an edge that will enable them to win over their rivals, and finally, the organization should identify the worth of the idea to the company (Hamel & Breen, 2007, p 12). However, cautiousness should not justify throwing away ideas before they are tested. Forster purports that a company that encourages innovation must be patient with ideas. Furthermore, the ideas should be taken from all fields by ensuring that there are no limits. The employees should not be fenced because fencing makes them think like sheep in a fence. They will fail to be innovative. It should encourage brainstorming through the discouragement of criticism. Owing to the fact that all innovations start as silly ideas, all suggestions that look silly should be recorded and discussed thoroughly. They should go for the number of ideas as compared to quality. Finally, the ideas must be pushed to their maximum limits by considering approaches from all angles of the idea (Forster, 2009, p 361).
Gore understands this concept like nothing else. Gore ensures that they do not bet on their investments. They do not make big investments without ensuring that the assumptions of the idea are well tested and all the likely problems cleared. At gore, an idea is nurtured with patience. The company is ready to suffer losses for a long period of time but come up with a product that sends them flying past their competitors. As a single unit, they work towards ensuring that all their products meet the capacity of “real, win, Worth.” This is important in deciding whether the risk is worth taking. By answering these questions, the relevant questions on how the product will solve the customer problems, how it serves as an advantage over the competitors, and how the company will benefit are all answered (Hamel & Breen, 2007, 13).
Finally, fun and humor form an integral part of innovation. As scientists put it, humor is closely related to creativity. According to Forster, ideas emerge mostly from the child-like parts of our human nature that respond to humor and fun. From these parts of our nature arise human creativity and experimentation. Although this was known for a long time, the mainstream business has absorbed the idea lately. This has encouraged companies to come up with strategies that encourage humor and fun in their daily activities (Forster, 2009, p 360). This concept is evident at WL Gore. One of the main principles at Gore is to “make money and have fun.” (Smith, 2008). According to Housego, Gore is not the favorite place for people who are interested in career paths and social status. By joining Gore, your aim should be to have fun and make money, and live happily.
Conclusion
It is therefore important that an organization takes into account the role played by innovation in its growth and sustainability. Because this does not appear accidentally, they have to take initiatives to promote innovation within their organizations by ensuring that they create the mentioned atmosphere. Just like WL Gore, they could be listed among the greatest companies in the World. To achieve this, the companies should ensure that they are well aware of the risks they are likely to undergo before embarking on investing in a new idea. They should also make sure that its employees are given motivating factors like rewarding all hard-working employees and also making them feel that they own the company. This will make them work hard without being supervised because the failure of the company means that they also fail. In addition, the company should not have a hierarchical structure where bosses delegate the duty to the junior staff. Instead, the associates should be made to choose the tasks that they feel are good for them. Experimentation being one of the greatest ways of encouraging innovation, companies should be in a position to leave their employees to experiment on any idea they feel they can develop into something good.
With all these things put in place, the organization will comfortably win the war against its competitors. This is because they will be flexible and efficient; they will be in a position to increase their revenue by developing products that meet the customer’s needs. This will enable them to stay for a long time and expand without experiencing the threats of economic crunch as experienced by WL Gore, who has put these factors into consideration and experienced the greatest success.
References
Deutschman, A. “The Fabric of Creativity.” Fast Company Magazine. 2007. Web.
Forster, N. (2009). Maximum Performance: A Practical Guide to Leading and Managing People at Work. 2nd ed. Dubai: www.maximumperformance.ae
Hamel, G. and Breen, B. (2007). “Building an Innovation Democracy: Management Innovation in Action” from The Future of Management. New York: Harvard Business School Press
Smith, N. (2008). “Profile:WL Gore” Institute of Engineering and Technology. Web.
Stern, S., and Marsh, P. “The Chaos Theory of Leadership.” Financial Times. 2008. Web.
WL Gore & Associates. (2009). “About Gore.” Web.