Read any major business publication and you’ll see countless stories on innovation — how to do it, who is doing it, who is not doing it, etc. “Innovation” is one of business’s favorite buzzwords. Companies want to do what has never been done before and they want to be the first to bring the next big idea to their industry. But when you clear away the buzzwords and the jargon, what makes an organization truly innovative?
Paul Almeida, professor of strategy and international business and senior associate dean for Executive Education at the McDonough School of Business, focuses much of his research on that very topic — what factors influence the level and direction of innovation within and across organizations?
Almeida argues that we traditionally view innovations — such as patenting and the development of new products — as being primarily the result of activities engaged by research and development (R&D) labs, universities, etc. But what we often miss is the important role that individuals and their relationships within and beyond R&D labs play in spreading knowledge and ideas, and thereby driving innovation and performance. Looking at an organization’s R&D budget, number of researchers, or the time spent on R&D is an incomplete approach to understanding the sources of the most valuable innovations, which Almeida suggests comes from “taking existing knowledge from multiple sources and putting it together in unique ways relevant to the organizational context.”
The Value of Internal and External Collaboration
A key factor that influences the flow of knowledge and therefore the likelihood of innovation is the presences of social communities. For his research, Almeida looks into the influences of various types of social communities: organizational, technological, geographic, and ethnic.
He finds that these social communities, even if informal, can permit the development of deep relationships among individuals which contributes to the flow of salient and trusted knowledge that can lead to innovation in the firm. This goes against the way many firms currently function as they often rely on secrecy, hiring the best people, and then creating an environment that increases retention and minimizes external collaboration. While there is nothing wrong with this, Almeida warns about limiting collaboration to internal relationships. His research shows that firms whose engineers only collaborate internally tend to innovate but their innovations tend to be incremental and often of little value. External interactions which include joint projects with other organizations, mobility of experts and the circulation of knowledge are key to maximizing performance in innovation.
Creating an Environment to Maximize Innovation
- Understand how knowledge flows. “Knowledge, by definition, has no material content — it is embedded in people and partially embedded in the organizations and communities they form, but it is not necessarily contained within the organizations. Organizations have boundaries; knowledge does not.”
- Identify mechanisms that allow knowledge to flow. “Rather than creating unique knowledge and hiding it, figure out how to position yourself in broader communities, utilizing informal but deep relationships to capture knowledge and bring it to useful gains for your own organization. There is risk is sharing knowledge, but the reward overcomes the risk.”
- Unleash employees to access knowledge. “In a day and age when we bother a lot about our own budgets and our own people, harness talent elsewhere and use it effectively. Create an environment that supports and maximizes communities of all kinds. Encourage employees to form deep relationships outside of the firm and systematically exploit the knowledge gained from these interactions.”