Innovation in customer-facing organizations is most commonly associated with new product and service development, design of new routes to market and other outwardly focused activities.
When driven by a thorough understanding of the customer these development and design activities are substantially enhanced. The results of this work are highly visible and the financial value they add can be easily calculated. Clearly, this kind of innovation is an essential part of a company’s survival.
Internal innovation has taken the form of process improvement. Virtually every company has one or more of these initiatives underway somewhere within the organization. Many have formal best practices programs. Some have adopted Six Sigma. These efforts can produce impressive incremental results. Such initiatives have largely bypassed most marketing and sales organizations, because they are often:
- Disconnected from the mainstream of day-to-day work and are typically viewed as one-off activities or, worse, a passing fad. In short, they are not part of the company’s culture
- Seen to devalue individual contributions of ideas and internal best practices in favor of industry benchmarking and external searches for best practices
- Identified as cost-saving improvements rather than the value-creating actions they can be
- Viewed as made for manufacturing or operations, not for customer-facing organizations
Leading Stanford economist Paul Romer, in his theory of Rearrangement, suggests that value is not added solely by wholly new things. He argues persuasively, and has done the mathematical modeling to demonstrate, that finding new ways of doing things with the resources and materials companies have now unleashes growth and value.
We believe that capturing ideas for doing things differently (Romer calls these ideas “wetware”), and transforming them into common practice (Romer calls these “software”) can be every bit as value-creating as those wholly new things commonly thought of as innovation. Such practices and processes are the core of what might be described as an internal innovation engine.
Any one of the four realities or perceptions we’ve identified would be enough to stop an internal innovation engine in its tracks. The challenge for marketing, sales and service managers and leaders is that they must anticipate and address all four. To meet this challenge and be successful in creating an internal innovation engine, managers and leaders must:
- Develop and support a culture of accountability focused on continuous renewal
- Recognize and build on the value their people bring to continuous renewal efforts both as individuals and in teams
- Use process and technology to create the infrastructure that will support the transformation of ideas into best practice, and ultimately next practice, as part of an ongoing cycle
We believe such an approach of integrating a focus on the customer with proven management methods and processes centered around continous renewal enables the construction of an internall innovation engine and provides the fuel necessary for it to run effectively.
Change of this sort must be led, not dictated, and this may be the biggest challenge faced by marketing, sales and service leaders.