Innovation is a topic of great interest to me. That’s why an article entitled “Ten Red Flags for Innovation” recently caught my eye [Stefan Lindegaard, Bloomberg BusinessWeek, 5 April 2010]. At the conclusion of his thought piece, Lindegaard, a Copenhagen-based speaker, network facilitator, and adviser on open innovation and intrapreneurship, asked readers for their thoughts. I’ll add my thoughts to his as I review his list. He writes:

“What are the signs that innovation in a company is set up to fail? Wouldn’t it be great to have a checklist on this? Unfortunately, innovation is too complicated and company-specific for one standard rule. It is possible, however, to become better at spotting the signs of failure. Here’s a list (in no particular order) of the red flags I look for when I talk with executives and innovation leaders trying to get an understanding of their corporate innovation capabilities.”

I agree with Lindegaard that “innovation is too complicated and company-specific for one standard rule.” If innovation was easy, people wouldn’t be writing so much about it. I also agree that are some obvious things to avoid if a company is not going to stifle innovation. Lindegaard begins his list:

• The lack of an innovation strategy — Executives and innovation leaders have failed to link innovation with overall corporate strategy. As a result, the innovation efforts have no clear direction, and there is not the necessary mix of incremental and radical innovation. No strategy, no focused effort, no results.

I’m not sure every company needs a strategy that includes radical innovation; but companies do need to scan the horizon for radical innovations that could disrupt their business. Radical innovation is often very costly to pursue (because it involves a lot of false starts), which means some companies simply can’t afford it. By scanning the horizon for such innovations, however, companies may be able to strike strategic alliances or acquisitions that can mitigate the effects of radical innovations developed elsewhere. Lindegaard continues:

• No definition of innovation — Innovation means different things to different people. Every company should develop its own definition that fits its situation and should use this definition to build a common language for innovation initiatives.

Frankly, I’m not sure what he means by this. He may be referring to incremental and radical innovation mentioned above. To me innovation involves everything from generating ideas, parsing them, creating prototypes, and going to market with products. Unless innovation involves getting ideas to market it is not innovation. Put into a mathematical formula, innovation = new x valuable x realized. If any of those parts is missing (i.e., if any of those traits = 0) then you can rest assured whatever you’re discussing is not an innovation.

• Too much focus on internal capabilities — The future of innovation is open and global. Who will understand this first? You? Or your competitors?

I agree. Some analysts believe the future of innovation lies in radical collaboration. For more on that subject, see my post entitled Radical Collaboration. Lindegaard isn’t saying that companies shouldn’t innovate internally; he’s merely stating that failure to look elsewhere for innovation as well is a big mistake, which is his next point.

• Too much focus on open innovation — Yes, you need to go open, but open innovation is not the Holy Grail. A key to innovation success is the ability to combine internal and external resources and be in a position to act on opportunities.

Although a “not invented here” mindset can cripple a business, so can accepting the notion that your company can look externally for most of its innovation. Internal innovation not only positions you to act more quickly when opportunities arise (as Lindegaard notes) but it also fosters a much better working environment for creative people. You really don’t want all of the creative people working for someone else.

• Internal silos are too firmly ingrained — If you cannot make innovation happen across your own business units and functions, how could you possibly expect your innovation to sing beyond your company borders?”

Here Lindegaard touches on another of my favorite topics — breaking down silos. For more on this subject, read my posts entitled The Curse of Silo Thinking and Breaking Down Silos. As I have pointed out in the past, most of the innovative ideas that make a difference emerge along the borders of different sectors of activity.

• Too much focus on ideas and too little focus on people — People and processes matter more than ideas. Yet too few companies establish programs in which they can identify and develop the right people and match these people with the right ideas at the right time.

I agree with Lindegaard that creative people must know that their ideas have an institutionalized process to go from concept to reality. If such a process isn’t in place, you are simply paying people to dream. Between people and process, however, people matter most. If you don’t have creative people, it doesn’t really matter what process you have in place. Hire the right people and put them in the right environment and the ideas will flow.

• Lack of a strong networking culture — Although executives might acknowledge the value of relationships, they often undervalue the importance of a strong innovation culture. People can figure this out by themselves, they say. Not true. Executives need to establish networking strategies and employees need training that fits those strategies, along with the time to build and nurture relationships.

Long-time readers of this blog know that I’m a big believer in connectivity. This is a tricky area, however. Given too much latitude, employees can waste a lot of time on traditional networking, socializing with other employees, surfing social network sites, and tweeting. On the other hand, policies that are too restrictive destroy the very culture of innovation that the company needs to thrive. As Lindegaard implies, developing and nurturing the right kinds of relationships is what is important.

• Innovation efforts focus on technology or products — Most companies do not work with innovation models, such as the Ten Types of Innovation developed by consultancy Doblin. In that instance, executives are led to focus on innovation within four main categories; finance, process, offering, and delivery. This can help employees and external partners view innovation in a more holistic way.

This is a great suggestion. I recommend clicking on the link to the Doblin site. You don’t want your creative people pigeon-holed just thinking about products. Smart people can provide great value-added when they think about any challenge a company might be facing. Executives need to recognize challenges and then be willing to share them widely throughout the company. Some of the most successful companies actively solicit ideas from their employees (and by that I don’t mean they simply put up a suggestion box). They engage them and reward them.

• It’s all about the usual suspects — Innovation champions and other elite units can work, but the setup of such departments often sends the signal that those guys will take care of it. Other employees might think they do not need to get involved. Sure, everyone should not work with innovation at the same time, but programs or platforms that give everyone opportunities to get involved need to be put in place, too.

This red flag goes back to my last comment. Good companies engage ALL of their employees in improving their business. Elite units are well-suited for special projects and have their place. Innovation champions also have their place; but such champions should be actively engaged throughout a company and not focused on a small group of thought leaders. One of the conundrums faced by large corporations is that it is hard to innovate in large groups. Involving too many people simply complicates the innovation process. Finding the combination of the right people, brought together at the right time, for the right purpose is a real challenge for executives. What Lindegaard is saying is that the right people are not always the usual suspects. He concludes his list with this red flag:

• Executives and innovation leaders underestimate the speed of change — Just look at open innovation, where the race is on for all companies, large and small, to become the preferred partner of choice. That way, they can claim the best positions, begin to build strong, stable ecosystems, and win a short-term race that brings long-term value. Things are changing fast, and executives need to move equally fast to claim their position. Yet too many companies have not even begun thinking about open innovation yet. That could prove costly in the long run.

I call the challenge to which Lindegaard refers “the complexity gap.” Things move so fast in the information age that being flexible is not good enough. A company almost needs to be fluid in order to keep up with the pace of change. As I pointed out in a previous post, in a world where change is a constant and its pace is increasing, stability eventually means diminishing returns. Stuart A. Kauffman, a recipient of a MacArthur Foundation “genius award” and holder of professorships at the University of Calgary and the Santa Fe Institute, avers that a living system must first be able to strike an internal compromise between malleability and stability. To survive in a variable environment, it must be stable, to be sure, but not so stable that it remains forever static. Nor can it be so unstable that the slightest internal chemical fluctuation causes the whole teetering structure to collapse. Companies, although not biological, are nonetheless living systems. They, therefore, must demonstrate the same kind of dynamic stability that Kauffman discusses if they are to move beyond robustness to resilience. Kevin Kelly calls this condition sustainable or persistent disequilibrium. In order to survive in this environment, you must constantly seek a proper balance or you are likely to fall behind. Overall, I think Lindegaard came up with a pretty good list. Each company must assess its own situation, employees, resources, etc. and devise its own best strategy for innovation.