'I'm Yet to Find a Company with a Perfect DNA for Innovation'

In their book The Other Side of Innovation: Solving the Execution Challenge, Vijay Govindarajan and Chris Trimble - both faculty at the Tuck School of Business at Dartmouth - have questioned many established views on innovation. In a conversation with BT, Govindarajan explains why.

In your book you argue that innovation is not all about creativity…

Innovation is not just creativity. It is commercialising the creativity. Thomas Alva Edison put it succinctly over a century ago: "Genius is one per cent inspiration and 99 per cent perspiration." Today, too much emphasis is being put on creativity because it is glamorous and does not cost money. As a result, companies have lots of ideas but do not know what to do next. They lack the execution skills. The book is all about solving the execution challenge.

You have said that organisations are not designed for innovation. At the same time, you do not believe that innovation can happen only in a skunk works or a start-up. Isn't that paradoxical?

The challenge is to resolve this paradox. Organisations are designed not for innovation, but for efficiency. They are focused on the ongoing operations and want to make every activity as repeatable and as predictable as possible. Only then can they scale it and make as much profit as possible. Innovation is quite really the opposite. By definition, innovation is unrepeatable and unpredictable. It is an experiment.

One can say that it is here a start-up or a skunk works will make sense. But with a start-up or a skunk works, you can't leverage the core competency and resources of an established business. At the same time, if an established organisation focuses only on efficiency and ignores innovation it will die. That is because old businesses die after some time and new businesses need to take over. It is innovation that delivers the new business. So if you want your organisation to remain an institution, you should innovate inside your organisation.

Is it possible to achieve excellence in ongoing operations and in innovation at the same time?

Yes. The challenge is to avoid the contradictions between an ongoing operation and innovation. We are suggesting setting up of a separate, dedicated innovation team. That way each function will perform on the basis of its respective mantra - ongoing operations will run on efficiency and budgets, while the innovation team can be evaluated on the quantum of learning.

What is the DNA of a good innovator company?

A company that is good in innovation will have three important ingredients. Senior leaders will allocate certain resources (money and people) for growth and innovation. They will also create a separate team to undertake innovation. You cannot get the core team managing the ongoing operations to innovate as well. The innovation team will be linked to the core. The management will look at innovation as an experiment and judge it not on short-term financial criteria, but on how the team has been able to run the experiment and learn from it. If you judge the innovation team on results, you will not get results. If you judge them on learning, you will see success.

How many companies have you come across with this DNA?

I am yet to find a company that has a perfect DNA for innovation. As part of the research for this book, we studied over 25 companies very closely but could not find a single company with all the qualities. What we have done is looked at the best practices of all these companies and put them together for the readers to understand what an ideal innovator company should have. If you ask me which are the companies closest to achieving it, my response will be IBM, General Electric, PepsiCo and Procter & Gamble.

Any Indian company which has in it to become an ideal innovator?

Infosys Technologies and Tata Group are good examples. Infosys started in 1981 as a custom software provider and created the global delivery model. That worked for about 20 years. In 2000, the landscape changed and players such as IBM and Accenture began embracing the global delivery model.

Infosys could no longer run its custom software business at the same level of profitability. But for the next 10 years, it continued to grow profitably through innovation. This it did by foraying into consulting and competing with the likes of McKinseys. Consulting was started as a separate business and a dedicated team was put in place. But the consulting team leveraged the strengths of the core business, which is customer relationships. It also used the global delivery model in consulting to offer a different value proposition to its customers. In 2000 Infosys's revenues stood at $200 million (Rs 920 crore). Today it is $5 billion (Rs 23,000 crore).

Tata Group has done wonders, too. If you recall what the group was like when Ratan Tata took over and what it is today you will understand the fundamental change that has happened- be it in Tata Steel, Tata Motors or any other group company.