Many of us have flashes of inspiration from time to time.
However, very few of us move these potentially brilliant ideas into reality to make a difference in our businesses (an economic innovation) or in the communities in which we live and work (a social innovation).
One of the most succinct and enduring definitions of innovation was produced by the late Theodore Levitt, past editor of the Harvard Business Review, who said “Creativity is thinking up new things. Innovation is doing new things.”
To be an innovation, an idea must not only be novel but it must create value, wealth and welfare for business and society, through the development of new products, services, designs, production processes, organisational arrangements structures and business practices.
The seventh and most recent Australian Innovation System Report, published in 2016 by the Office of the Chief Economist, brings together a body of evidence on Australia’s innovation performance. It estimates that as much as 50 per cent of long-term economic growth in OECD member countries can be attributed to innovation and that this contribution is expected to grow into the future. It also shows that the relatively few firms that are ‘persistent innovators’ are confined to industries such as IT and pharmaceuticals and that these firms enjoy 18 times the value added growth, four times the employment and five times the sales growth of intermittent innovators in the same industry.
he report also labels Australia as a ‘business process innovator’ rather than a ‘product or service’ innovator which follows other countries rather than leads them. In other words, Australian business innovation often involves introducing and adapting goods and services already developed by others. Indeed, only 5.5 per cent of businesses surveyed reported delivering new-to market goods and services and less than one per cent of all innovation active businesses reported innovation expenditure of $5 million or more. Australia is a creative country which is great at developing ideas but not so good at commercialising them.
The Australian construction industry mirrors these attributes and was ranked as a mid-level performer, with total estimated business sales from innovation goods and services being 3.3 per cent out of 15 other industry sectors. Research shows that while our project management and worker skills are world-leading, our industry has a relatively low absorptive capacity to new innovations and that we lag behind other industries in bringing new ideas to market.
There are too many institutional, regulatory, cultural, contractual, contractual and organisational reasons for this poor performance to list here. However, a good place to start in becoming better at commercialising our new ideas is to get some basic terminology correct and address the common confusion in the use of the terms ‘ideas’, ‘inventions’ and ‘innovations’.
In simple terms, ‘ideas’ are new concepts that haven’t been actualised or made into something tangible, ‘inventions’ are ideas which have actually been made real, and shown to work and ‘innovations’ are inventions that have been implemented to directly address the needs of business and society. Of course, the process of moving an idea from concept from innovation is not easy and it has been estimated that over 99 per cent of ideas, no matter how strong they are, never get this far. As Howard Aiken, the designer behind IBM’s first computer, once famously said, “Don’t worry about people stealing your ideas. If your ideas are any good, you’ll have to ram them down people’s throats.”
The importance of thinking about diffusion is demonstrated by the cautionary tale of how Xerox missed one of the biggest opportunities in modern business history when it failed to successfully commercialise the world’s first personal computer in 1973. Few people realize that this was created by a team of Xerox researchers in its Palo Alto Research Centre in California and that it included a mouse, an excellent user interface, a laser printer and an Ethernet. The mistake that Xerox made was that it failed to communicate the significance of their monumental achievement and lost out to IBM, Microsoft and Apple, who most people now assume to be the pioneers of modern, personal computers.
There has been a huge amount of research into the process by which an idea becomes an innovation and arguably the most useful model has been produced by American professor of communications Everett Rogers. The model shows that this involves five key stages:
- The knowledge stage
- The persuasion stage
- The decision stage
- The implementation stage
- The confirmation stage
Stage 1: The knowledge stage
This is when stakeholders are told about an idea’s existence and gain some understanding of how it works and benefits them. Key stakeholders will need to be provided with information about an idea and its merits before they are likely to engage with it. For some stakeholders, where there is a recognised need for the program before they engage with it (demand-led social innovation), receptivity to information will high. For others, where there is no recognised requirement to engage, information must be presented in a persuasive way which creates a need for the idea that was not previously understood (supply-push innovation).
Stage 2: The persuasion stage
Persuading potential customers to adopt a new idea is a complex process which can take considerable effort and time to get to the tipping point where they will suddenly fall into line and start adopting an innovation en masse. Research shows that innovators who reach this point the fastest are likely to be those who focus their message on the reason for their idea (the ‘why’) rather than what the idea entails (the ‘what’) and on stakeholders with similar values and beliefs. This maximises their chances of success in securing an emotional connection in promoting their idea.
Social reinforcement is also an important part of the persuasion stage because research tells us that people make decisions not only on the basis of their own opinions, but also on the opinions of others with whom they are socially connected. So it is during the persuasion stage of the innovation process that ‘change-agents’ and ‘opinion leaders’ play their greatest role in overcoming systemic norms which often act as a barrier to innovation.
Stage 3: The decision stage
The decision stage involves a person making a decision about whether to adopt or reject a new idea. This stage is often the most difficult in the innovation process and most innovations get adopted at a frustratingly slow pace. Research indicates that the time lag between persuasion and adoption depends on a wide range of factors. Generally, a new idea will be accepted faster if:
- It is perceived as better than the idea it replaces
- It is consistent with existing values and needs of users
- It is perceived as easy to use and understand
- It can be tried out without commitment
- The results of implementing it are observable to others
- The system into which it is introduced is densely connected
- It has a low cost of adoption
- It is open to inspection
- Past experiences with similar ideas are positive
- It has greater utility
- It does not require coordinated decision making and consensus for adoption
- Physical artefacts tend to be accepted and adopted faster than abstract ideas and services
- It brings about incremental rather than radical change in existing routines
- It does not threaten or discredit earlier products
- It is not protected by IP and copyrights rights
- It is offered exclusively and can provide competitive advantage
- It comes from non-competitors
- It does not change or challenge existing roles and power structures
- It is required by law or regulation as opposed to being voluntary or ambiguous with existing laws and regulations
- It is sympathetic to existing cultural norms, customs and habits
Stage 4: The implementation stage
So far, the innovation diffusion process has been only a mental exercise. In contrast, implementation involves putting the idea into action. Implementation is said to be the Achilles heel of strategy and is generally undertaken poorly. Research shows that the most common reasons strategic plans fail include:
- Poor planning
- Unrealistic goals and deadlines
- Poor risk management
- A lack of buy-in and ownership by stakeholders
- Poor communication
- Incompatibility with existing systems, structures and cultures
- Other activities taking priority
- Poor monitoring of success
- No accountability for success.
Stage 5: The confirmation stage
It is at the confirmation stage that stakeholders seek feedback about the effectiveness of the new idea that you have put in place. They get this information from official and unofficial sources and based on this information they will decide to continue supporting the program or to walk away. Therefore, the ability to measure and report the success of a new idea in a verifiable, transparent and evidence-based manner, is critical to the sustainability and longevity of your new idea.
Good luck with your new ideas! In an increasingly competitive and knowledge intensive world, both Australia and its construction industry badly needs more innovators.