Leadership and Innovation

Leadership and Innovation

Why leadership and innovation

Innovation is something new with an additional value compared to the past; it is everywhere. In a blurred environment, where the concept of value is undefined, solutions are complex and resources are not controllable, innovation requires an act of making sense, setting directions, and influencing, rather than just planning and controlling.

Innovation is changing

• Pace: The speed in which ideas are developed is continuously increasing (e.g. blockchain).
• Novelty: Changes in the reference paradigms.
• Sources and drivers: Traditionally, innovation comes from inside the company (R&D), the supplier, or sometimes the customers. Nowadays, it may come from competitors, people in the street, etc. Innovation is very difficult to manage.

Some key change directions

Society changes which cause innovation. In innovation, the starting point is the need; it is important to understand what is the meaning that the customer is looking for and then develop a solution that provides the features and functionalities the customer is looking for. Nowadays, it is in the other way around: the starting point is to create something that has a space in the market but that nobody is looking for; the starting point is the solution, and then we look at the persons that can be interested. This change in approach leads to a change in how innovation is managed.

Managing innovation is

No more a company function (R&D), a standard process (in terms of innovation management), a planning and control issue.

But rather a pervasive behavior, a visioning process and an enactment process (having a view of what are the possible options of innovation and how to make this vision happen: non-linear process), an act of leadership (need of someone with a clear vision, that can motivate and engage people and take out the best from everyone).

To promote and realize innovation nowadays implies being a leader!

Management

Management (Wikipedia) is coordinating the efforts of people to accomplish goals and objectives using available resources efficiently and effectively. In a changing environment, all terms of this definition keep changing.

Management is changing

• Complex and flexible tasks: Because the environment is very complex – it is difficult to have a clear idea of objectives, resources, and to coordinate them.
• Unpredictable outcomes.
• People as key resources: Companies need people as resources – the real value of a company is created by individuals.

Examples

1. Google: Googlers (employees) are treated very well and are in the best situation possible to be relaxed and think out of the box.
2. FCA: The organizational model of the plans is based on the continuous contribution by employees to the improvement of the process - people at the center.
3. Luxottica: Welfare created by the company for the employees (e.g. provide resources to support children of the families) because without people “we are nothing” and they want to attract the best people.

Management is

No more planning, organizing, controlling.

But rather visioning, engaging (engage the best people), stimulating (stimulate people to achieve the best results).

Leadership is the key: moving from pure management to the role of the leader. Leaders need to reinvent the way to manage the company. To manage a company nowadays implies being an innovative leader!

Some key change directions - from managing to leading

E.g. more traditional approaches to sustainability problems were to build CSR functions (focused programs to reduce emissions, etc.): in the leadership approach, we reshape completely the business around sustainability principles.

So… why leadership & innovation?

Top 10 skills required to work in blue: we are trying to address those capabilities in this course, so we have to be critical and not accept them as they are. HR members have been asked what are the main features people must have to be considered talented people.

Emotional intelligence: the ability to recognize that the results are not too much rational – a small percentage comes from rational approaches (emotions). Rationality is very important but, besides, we need to recognize and manage emotions (e.g. to convince the customers we have to work on emotions). A good leader is able to generate emotions as well.

Stories of leadership and innovation at Politecnico di Milano

• Francesco Brioschi: Founder of Polimi (1863); worked at Politecnico until his death, lecturing in hydraulics, analytical mechanics, and construction engineering.
• Enrico Forlanini: First flying machine; he was an Italian engineer, inventor, and aeronautical pioneer, well-known for his work on helicopters, aircraft, hydrofoils, and dirigibles. He was born in Milan and his brother, Carlo Forlanini, was a famous Italian physician.
• Giuseppe Colombo: First rector and creator of ‘Manual of Engineer’; he was an engineer, entrepreneur, and Italian politician; he played a fundamental role in industry development both in Milan and in Italy.
• Giulio Natta: The only Italian who got the Nobel for science (polypropylene); he is the winner of a Nobel prize in Chemistry.
• Gian Battista Pirelli: The founder of Pirelli (based in Milan), one of the first companies exploiting innovations of Natta; he was an entrepreneur, engineer, and Italian politician; he graduated from Politecnico.
• Giulio (and Anna) Castelli: Founder(s) of Kartell
• Carlo Purrasanta: General manager of Microsoft Italy, alumnus of the School of Management Polimi. About leadership and innovation, he said:
  • Wright spirit: being disrupted sometimes, understanding if we are in line with the values of what we are doing and being able to change.
  • Taking risks: being able to change the boundaries and work close to them. Pushing the boundaries somewhere.
  • Eagerness of continuous learning: merging ideas of different fields.
  • Collaboration and sharing information between people.
  • Imagination: being creative to create something new.
  • Execution: doing it in the proper way.
  • Sustainability: whatever it is, it should last over years, creating value over time.

Our view of leadership and innovation

Can innovation be learned without experiencing it? Can leadership be learned at all/without experiencing it? We think not!

Drew Dudley – Everyday Leadership

Alternative views of organization and the role of people

Mechanistic system: Organization as a "machine"; Objective: predictable and finalized behaviors; clearly defined and specialized tasks and roles; centralized decision-making structures and vertical information flows; process standardization and direct supervision; high formalization of the organization; individuals as "spare parts".

Organic system: Organization as a "living organism"; Objective: ability to adapt to the context; broad and rich roles, evolving, not univocally allocated; decentralized decision-making, flat and lean structures, horizontal relationships and flows between peers; mutual adjustment and competence standardization; low formalization of the organization; individuals as "organs".

The importance of people skills

The company point of view

What determines whether the organization will continue to deliver sought-after products, develop cutting-edge technology, and make sound investments is the people and the organizational culture and structure. Organizational behavior studies the influence and impact that individuals, groups, and organizational structure have on behavior within an organization for applying such knowledge toward improving an organization’s effectiveness. Leadership is a key part of it. Organizational behavior is an essential tool for managing effective teams and helps to understand and predict human behavior in an organization.

The individual point of view

Managers need to know how to get the most out of people. Teamwork, cross-cultural communication, conflict handling, and negotiation skills are needed early and often in today’s organizations. Individuals that understand the organization and its behaviors have the advantage of managing an organization. Understanding how organizations really work is key to rising to the top levels of management. When you become some sort of supervisor or manager, your people skills will make or break your career.

Innovation strategies

What is innovation

Key dimensions of innovation may be exemplified by Coca Cola:

• Product innovation: The company produces many different products on which it can do product innovation (e.g., energy drinks).
• Packaging: Coca Cola is very innovative in terms of packaging.
• Process innovation: The bottling process allows them to be very efficient and productive and to produce the products locally efficiently and effectively.
• Environment and sustainability of the products: Environmental challenge (e.g., campaign: polar bears drinking Coke); the company is very capable of using threats (environmentalists complain about non-efficient refrigerators) as opportunities (new eco-friendly refrigerators).
• Technology: Production system, technologies used, using new technologies/combining existing technologies.
• Communication: The company communicates very effectively.
• Social impact: Higher reputation due to technological innovation.
• Capabilities: How do we innovate? Creating, adding, implementing, making...

With reference to the frame of Purrasanta (three types of companies: successful with always the same product, successful by changing over time, unsuccessful), Coca-Cola belongs to the first group.

Method: Innovation should be systematic; we should be able to innovate many times to be successful, not just once. Strategy: To innovate, the main driver for innovation (e.g., bottling process: the main driver of innovation is technology, for example, the new refrigerator: the main driver is stakeholders – not customers – pushing the company). Relating to different drivers, we have different strategies.

Definitions of innovation

According to the Oslo Manual 2005: An innovation is the implementation of a new or significantly improved product (good or service), process, new marketing method, or a new organizational method in business practices, workplace organization, or external relations.

We need to move forward from pure product ideas. Every time companies do something different from their business, they are innovating. We have to think about innovation for every single element of the company and not just for the product.

Something new that doesn’t improve is not an effective innovation: the aim of innovation is to improve the existing business of the company by providing something better.

Economic perspectives on innovation

Schumpeter (1934): Innovation is the implementation of new combinations. It is not necessary to create something completely different and new; it is enough to put together existing things in a different way.

Freeman (1974): Invention is “an idea, a sketch or a model for new or improved device, product, process, or system”; innovation (in the economic sense) “it is accomplished only with the first commercial transaction involving the new product, process.” He stresses the implementation phase: it is not an innovation until the invention is implemented.

Managerial point of view on innovation

To shift the trade-off among performance to better fulfill existing needs or to generate a new performance dimension for new needs. Innovation is not about moving on the trade-off curve but about transforming the trade-off curve itself (by creating something new). The idea of improvement is something better compared to before. One of the key problems is how to overcome trade-offs (innovation helps improve the trade-off curve). E.g., environmental sustainability in trade-off with cost (for example, a company producing textiles from waste of oranges: reduce waste and substitute chemical-based products).

What is innovation?

Innovation is something new, but how can we say that something is actually new? It can be new for the market: innovation for the market (not already existing in the market – e.g., Starbucks in Italy for the first time), or it can be new for the company: innovation for the company (even if it is already existing in the market).

When we talk about innovation, we can refer to: strategic innovation, product innovation, process innovation, organizational innovation, market innovation, etc. E.g., Coca Cola light is not something new for the market (RC Cola Diet was already existing) but it is perceived as innovation because it is new for the company; the company has a higher impact on the market than RC Cola Diet and they exploit it much better.

Types of innovation assets

In order to have innovations, it is important to have both:

• Innovation assets: Necessary to enter a new market with innovation, to create innovation (ideas, engineers, etc.).
• Complementary assets: Not needed to create innovation; they are used to win on the market, once the innovation has already been created (advertising, efficient production, etc.).

RC Cola Diet had a lack in complementary assets because it did not have the resources to transform the invention into sustainable innovation.

Typologies of innovation

• Innovation for the market: External challenge (e.g., RC Cola Diet).
• Innovation for the company: Internal challenge (e.g., Coca Cola Light, Pepsi Light).

We have the highest degree of innovation when a product is new for both the company and the market.

What is an innovator?

There is a difference between inventors and innovators. In the innovation lies the idea of the implementation and the idea of combination of existing things.

Examples in technology

Technology: Meucci was not able to patent his invention and he did not create a company and he did not industrialize the invention (since he had no money). What Meucci did is an invention and not an innovation. On the contrary, Bell was able to patent and put the product on the market, starting from something that was already existing: he developed the telephone; what Bell did is an innovation: he had the ability to transform an idea into a business opportunity, something with a market value; he had the ability to exploit the idea.

Innovation process

Innovation is more than simply coming up with a good idea; it is the process of growing them into practical use. Innovation is composed of two parts:

1. Idea generation (value creation).
2. Conversion of new idea into business opportunity (value appropriation).

Innovation equation

INNOVATION = INVENTION * EXPLOITATION

An idea is not an innovation. How many inventions are transformed into innovations? There is a huge drop between ideas and concepts (less than 10% of ideas go to the market): the number of ideas that become concepts is very little and the number of concepts that become real products is even littler. Ideas are fundamental if we want to innovate, but the process of exploitation and implementation is crucial.

Examples of technology/solution brokers

Many times, innovators are nothing more than (very) smart technology/solution brokers.

Examples

1. In 1866, Mr. Sholes (a mechanical engineer from Milwaukee) created the first typewriter by combining (brokering) existing technologies:
   • Forward movement (one step for each pressed key): from watches.
   • Back movements leverage: from sewing machines.
   • Keyboard: from telegraphs.
   • Hammer mechanical movements for printing each letter: from pianoforte.
   It is an innovation because it is a new composition of existing technologies for a new function.
2. United Colours of Benetton postponed the moment in which they colored the clothes in order to be closer to the trend of the new season (traditionally companies colored raw materials and then created different products with the existing colors); Dell customizes as late as possible – they produce as many modules that the customer can request to assemble as they prefer: same principle as Benetton. Both Dell and United Colours of Benetton postpone the decoupling point: they both adopt a postponement strategy to deploy the assembly-to-order strategy. The Dell strategy was an innovation for both the company and the computer industry. Innovation many times comes from the ability to draw solutions from different sectors into our sector.
3. The innovator is able to replicate the innovation process. The companies that can be called innovators can continue the process of innovation and not just make a single innovation: they replicate success.
   • Apple: The first Apple innovation was the innovative idea of user friendliness and design – the concept – which is still the key of Apple’s innovation (in Apple II they completely rethought the input/output interface). Apple III was a major failure: they needed too much time to develop it; then they started a new project, less innovative for the market but innovative for the company: in Macintosh, the key of innovation is the higher user friendliness (graphical interface).

Product-Service System

Does the market just want products? Does the market want products and services? Maybe the market wants a product-service system? We have to consider that innovation can be attached not just to the product itself. A product-service system is the sum of a product and service integration that delivers a comprehensive solution to the customer.