Being an innovative organization is a key ingredient for success, but managing the innovation process is even more critical, according to Professor Calie Pistorius, the vice chancellor and principal at Pretoria University in South Africa.
He says the potential impact of innovation on the competitiveness of a company and industry emphasizes the need for a structural approach to the management of innovation.
"Innovation can, and must, be managed like any other business process. No company would even consider not formally [conducting] budgeting, planning, marketing and related business processes," he said.
Speaking at the South East Asian Regional Computer Confederation (SEARCC 05) in Sydney earlier today, Pistorius said those that take a laissez faire approach to the management of innovation do so at their own peril.
Many companies, often industry leaders, which on the face of it were very healthy from a financial viewpoint, have failed, he says.
"The reason for their failure can very often be traced to failure in or neglect of other areas of importance such as innovativeness or organizational culture, rather than financial problems," he said.
Innovation ahead of all else is what boosts the value of a company and ultimately what counts on the stock markets, he added.
"If you can convince people you are an innovative company, you have a share premium," Pistorius said.
He cited studies which refer to the premium that investors are willing to pay for innovative companies, known as the innovation premium.
Pistorius says innovation encompasses elements of creativity, invention, ingenuity and entrepreneurship. As a formula it is represented as: Invention + Market Exploitation = Innovation. But innovation is much more than invention.
"There must also be a successful market acceptance of the invention." This component is typically associated with the adoption, diffusion and commercialization of the innovation," he said.
From a technological standpoint, as the technologies mature, they tend to become imbedded in the company's organizational structure and culture.
"Market leaders in particular, are prone to a single-minded focus on what they do best. In their quest for improved efficiency with their core competences, which typically also includes innovation in these technologies, companies often lose sight of emerging technologies that have the ability to substitute and replace their proven technologies," Pistorius said.
"The market leaders become so accomplished in their core technologies that the emergence of new technologies more often than not catches them by surprise. They then find that they have neither the skills nor the organizational culture to adapt or switch.
"As the markets then switch to the new technologies, the market leaders falter and new companies become the new market leaders. Very often the attacking innovations come from an entirely different industry, and so do the new market leaders."
Pistorius' message was simple: mange your innovation now and prosper later.
IDG is the official organizer and media sponsor of the SEARCC 05 conference.