‘Innovation’ literally means ‘renewal’, but when it comes down to it the definition really isn’t as clear-cut as all that. But whatever form innovation might take on, organisations cannot innovate without meeting a number of basic requirements.
Aard Groen keeps a small transistor radio in his office on Groningen’s Zernike Campus. While this may not seem like anything remarkable, it carries a special significance for the lecturer in Entrepreneurship and Valorisation in Groningen University’s Department of Economics and Business Administration. “The emergence of transistor technology is a textbook example of how innovation works,” he says. “When transistor radios first entered the market, tube radios were the standard. They were superior from a technological point of view, had a superior sound and were more reliable. Yet transistors provided two major advantages: their compact size and energy-efficiency. This soon led to the manufacture of portable radios and built-in car radios. These novelties turned out to make such an impact that the majority of US radio manufacturers wound up filing for bankruptcy within the span of a few years. General Electric and Philips are two examples of innovative companies that did have the prescience to carve out a healthy slice of the market, having been involved in developing transistor technology into what it is today.”
Groen studied the adoption of innovative technologies by small and medium-sized enterprises (SMEs) as part of his PhD research. “People tend to associate innovation with the in-house creation of new products or services,” he says. “But the ability to adopt the findings of other businesses is just as important for organisations. My thesis centred on the question as to why some companies are quicker to embrace new developments than others.” The lecturer believes we can find the answer to this question by focusing on the presence of four ‘capital dimensions’ in the organisation.
Groen: “The first of these dimensions is a solid strategic process. This doesn’t mean some business plan stuffed away in a drawer somewhere, but real, clear goals that are regularly assessed and adjusted. The second dimension is knowledge. The higher the level of knowledge within the organisation, the quicker it will be to embrace innovations. The third dimension is the network dimension. In other words: to how many other players in your value chain – and their networks – are you connected? And to what extent are you taking advantage of those connections? This is really crucial when it comes to innovation: without proper integration into networks, you lack the input of suppliers and research and educational institutions, you fail to build relationships with government authorities tasked with issuing permits, and you also miss out on financial backing, because investors will think twice before getting behind a solo flyer. Finally, the fourth dimension is efficiency. You need to be able to efficiently manage your existing business in order to have the financial scope to explore and experiment.”
Ecosystems of small and large businesses
Groen cites the availability of – and interaction between – strategic, cultural, social and economic capital as the key ingredients of innovation, irrespective of whether it originates in the organisation itself or is imported from elsewhere. Scale size does not play nearly the same role, he says. “My thesis supervisor when I was doing my PhD, Bart Nooteboom (Professor Emeritus at Groningen University – Ed.) wrote back in the 1990s that there is no ideal scale size for innovation, but that under certain circumstances SMEs perform better, while large companies will thrive in other situations. Sometimes flexibility and adaptive ability make all the difference, while in other cases it might be having the wherewithal to fund long-term development processes,” Groen says. “That’s why what we call the ‘ecosystems’ of small and larger companies tend to be fertile grounds for innovation. Which really just goes to show the importance of the network dimension.”
Jeff Gaspersz, a professor in Innovation at Nyenrode Business University, joins Groen in emphasising the instrumental role networks play in innovation. He believes businesses should also involve external clients and entrepreneurs in the process of finding opportunities for innovation. “Invite business owners from other sectors to give presentations on how they made innovation happen in their organisation. Make sure to seek out people who operate in a different line of business or industry, as the spirit of innovation is fuelled by cross-pollination and by learning about solutions culled from a variety of sources.”