Kickstarting technological innovation
Sep 01 2014
In a typical TOT deal, technology development and innovation remains confined within designated and isolated design and research centres. The buying firm has little leeway in affecting even incremental changes to the original design without permission of the technology owner. The company’s in-house innovation capabilities remain stunted and its dependence for foreign technologies, in fact, gets exacerbated.
This happens when strategic alliances and joint ventures break down or end (such as Hero Honda for motorcycles) or when FDI is being encouraged by the government in vital (and hitherto protected sectors such as defence production). Hero Motocorp had to reorient its entire research and innovation programme to develop newer and better models than its competitors (which includes Honda).
British defence production companies such as Rolls Royce and BAe Systems have already announced major investments in manufacturing and research centres thereby signalling partial independence from its joint venture partners in India. Kickstarting systematic in-house innovation involves a painful task of unlearning the existing ingrained mental processes, and putting in place a new set of values requiring different mindsets, risk management systems, and ways-of-working.
The first major change action point is to address the question: where does innovation take place in the company? Rather than remaining confined in a closet, the innovation process has to be regrouped around cross-cultural and diverse teams. It is a leadership task to ensure that teams work in an environment of mutual trust, constructive criticism, and seamless communication, otherwise no ideas would get exchanged. If a company claims (and each one does!) that employees are its biggest assets, then they need to be treated not just as factors of production, but as humans and colleagues with a mind of their own. ‘People skill’ has to be demonstrated at every level, starting at the board level. Beyond organisational structure issues, the firm has to tap the energies and possibilities with its network of suppliers and customers. They too have assets, ideas and criticism that can be gainfully employed to launch the innovation processes. For flow of ideas and innovation-driving contributions from employees, a just and transparent reward and recognition system must be in place.
As an example, Henkel —the 133-year-old global personal care and hygiene company — launched a ‘Top-to-Top’ initiative with the objective of creating tangible value addition for its customers. The salient features of this programme were teams having people with diverse backgrounds, open feedback, clear recognition of individual performance, and customised development plans. The management also ensured that the organisational structure augmented customer contacts at the highest management level rather than constraining these.
An innovation programme can be built around a few inter-connected modules such as growth, competitiveness, and talent management. Diversity in teams is a key factor in setting up innovation platforms. These teams can comprise of a broad mix of personalities, experiences and talent, bringing forth different perspectives to a given situation. At the personal level, it helps talented individuals to go through a variety of learning opportunities on diverse assignments under culturally different settings. There must be a clear strategy in place so that everyone knows how the company is going to grow and where the growth is going to come from. Growth is fundamental for survival, without which a company will not be able to pay salaries and manage its costs. Recently we came across a company that increased the salaries of its executives and workforce by 15-20 per cent without knowing how it will sustain this in a scenario of declining margins and sales. For initiating systemic innovation, business strategy, corporate budgeting exercise, value-addition on production floors, and financial targets should be closely knitted together.
Finally, the importance of creating a pipeline of future corporate leaders and managers cannot be overstated in any technology and innovation leadership strategy. Long-term success will depend much on its ability to recruit, train and integrate, and retain executives, engineers and other specialists. There is a large body of work on changing adult and entrenched mindsets and organisational psychology (those interested can look up Skinner’s experiments on conditioning and positive reinforcement, Chris Argyris’ experiments on permanent learning behaviour, and Leon Festinger’s theory on cognitive dissonance). Senior and experienced managers can be tapped to narrate their success stories that can become — with some effort — knowledge repository with clear lessons for training purposes. We can learn from some Chinese companies which have become global innovation leaders in their own right, shrugging away the tag of ‘cheap copycats’.
(The writer is a professor of strategy and corporate governance, IIM-Lucknow)