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Research

Publication Date: 12 February 2010 ID Number: G00174076

Five Myths of Innovation, 2010 Update


Carol Rozwell, Kathy Harris

Few organizations truly understand the strategic and operational commitment required to
obtain ongoing value from innovation. This research examines five of the most common
myths surrounding innovation.

Key Findings
Many firms are confused about innovation — what it is, what it can do and whether it
can or should be formally managed.

Even those companies in industries considered to be highly innovative struggle to


maintain a consistent and ongoing level of innovation.

An accelerated pace of business change is compounding the problem of how to address


the innovation imperative.

Recommendations
Create an imperative for innovation and establish the explicit link to revenue growth,
operational restructuring or business model change.

Define processes and metrics to encourage innovation that extends beyond the
boundary of a centralized innovation or R&D organization.

Develop processes to tap into "outside" sources of innovation.

Apply technology within the framework of a structured problem-solving process to


encourage participation and enhance ideas.

Recognize the diverse roles required to sustain innovation and reward people for
performing them.

Cultivate the capability for continuous innovation to grow and transform the business
and to stay aware of external threats and opportunities.

© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form
without prior written permission is forbidden. The information contained herein has been obtained from sources believed to
be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although
Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal
advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors,
omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein
are subject to change without notice.
TABLE OF CONTENTS

Analysis ....................................................................................................................................... 3
1.0 The Quest for Innovation ............................................................................................ 3
2.0 Innovation Myths May Threaten the Best Plans .......................................................... 3
2.1 Myth No. 1: Innovation Just Happens ............................................................ 4
2.2 Myth No. 2: Innovation Only Happens in R&D ............................................... 5
2.3 Myth No. 3: The Best Innovation Comes From Inside .................................... 7
2.3.1 Collaborative Open Innovation ....................................................... 7
2.3.2 Idea Marketplaces .......................................................................... 8
2.4 Myth No. 4: The More Ideas We Generate, the Better ................................... 9
2.5 Myth No. 5: We Have Lots of Smart People, so Innovating Will Be No
Problem ............................................................................................................ 10
3.0 The Bottom Line of innovation .................................................................................. 11
Recommended Reading ............................................................................................................. 11

LIST OF FIGURES

Figure 1. Gartner's Innovation Process Model............................................................................... 5


Figure 2. The Dimensions of Innovation ........................................................................................ 6
Figure 3. Open Innovation Model .................................................................................................. 8

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© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
ANALYSIS
This research was originally published in February, 2005. Due to renewed interest among Gartner
clients for innovating their way out of the current economic period of uncertainty, it has been
revised and republished.

1.0 The Quest for Innovation


Enterprises express a desire to be innovative. It is the oft-cited statement from countless
corporate leaders who evoke it in mission statements and pay homage to its value in supporting
corporate growth. But, like many corporate goals, innovation is often more a vague, conceptual
symbol than a clearly defined process. On closer examination, it is obvious that few organizations
truly commit to innovation in a measurable way with head count, process management, funding
or a meaningful reporting relationship to the company's executive leadership.
For most of the past decade, economic growth was booming and new technologies and business
processes were crowding into the marketplace and a precise definition and understanding of
innovation may not have been an imperative. The recession of 2008 to 2009 brought an abrupt
end to the boom times and with the subsequent recovery and return to growth, competition is
being reshaped and the pace of business is faster and more volatile. Such turbulence makes the
need to understand and harness the innovation process far more important than ever before.
The ability to innovate may well be the single most important tool that companies have in helping
them sustain a competitive advantage. GE Chairman and CEO Jeff Immelt commented in an
interview with now defunct Business 2.0 that, "we're all just a moment away from commodity hell."
He suggests that effectively managing innovation is the only solution to the problem. He goes on
to point out that the only reason to invest in companies is not the size of their factories or the
catchiness of their ads, but their ability to innovate. The market rewards innovation. Witness
Apple's stock price as described in Wikipedia: between early 2003 and 2006, the price of Apple's
stock increased more than tenfold, from around $6 per share (split-adjusted) to over $80.

2.0 Innovation Myths May Threaten the Best Plans


Over years of work with Gartner clients on how to create an innovation approach that is
sustainable and reliable, we have identified five myths that threaten to derail even the best laid
plans. They are:

Myth No. 1: Innovation just happens.

Myth No. 2: Innovation only happens in R&D.

Myth No. 3: The best innovation comes from inside.


Myth No. 4: The more innovative ideas we generate, the better.
Myth No. 5: We have lots of smart people, so innovating will be no problem.
To offset the effects of an uncertain business environment, enterprises must step up to new
realities in 2010-2015:

Innovation should be aimed at recovery, return to growth and resolving the


organization's most critical challenges.

Increase the success rate and speed of new product, process and service development.

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© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
Look for innovations outside of product development in areas like process, service
management and user interface, as well as outside the organization itself.

Look to outside sources for ideas and innovations.


By addressing the five myths about innovation detailed in this research, enterprises will be better
positioned to achieve these objectives.

2.1 Myth No. 1: Innovation Just Happens


Many organizations think of innovation as an unstructured process. Some promote the theory that
innovation is a fortunate series of events that cannot or should not be managed. Others think of
innovation as a "eureka" moment where great ideas spring fully formed from minds of eccentric,
creative people. And, with the advent of Web 2.0 and social computing, still others believe that
their next great idea may be generated and harvested from anyone and anywhere, so they
stimulate, encourage and scan for ideas at every turn.
These beliefs are not without some merit. Innovations can come from anywhere and from anyone
and there are occasions when real game changes emerge from unlikely sources. Best of all, the
freedom to create and innovate is a cultural foundation of many successful organizations —
observers of these innovators hope to recreate this same culture in their own organization.
However, innovation is not usually the result of a random event nor does it require a continual,
inefficient scan for relevant ideas. Sustainable innovation can be achieved through a managed
process aimed at resolving persistent business issues, creating new business models or
designing products and services that address unfulfilled customer needs. A well-managed
innovation process can be designed to elicit ideas that are highly relevant to an organization's
specific or broad business objectives. In short, innovation can become a managed, reliable and
fruitful process.
Enterprises must first focus their efforts by clearly understanding and defining the desired
outcomes for innovation. Is the objective to develop new products, make new markets, create
novel processes or resolve persistent business issues? For example, drug manufacturers may
find that patients often take their medication "on the go" so, having a quick dissolve pill would
increase demand. Or, an apparel retailer may determine its customers prefer products
manufactured using "green" techniques. Defining the business focus for innovation drives and
steers the innovation process toward achieving these desired outcomes.
Gartner's Innovation Process Model defines the four fundamental stages of managing innovation:
Generate ideas.

Evaluate and select the best ideas.

Develop and implement ideas into innovations.


Diffuse and socialize innovations.
See Figure 1 for a representation of this model.

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© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
Figure 1. Gartner's Innovation Process Model

Source: Gartner (February 2010)

This model is invoked by an organization only after its business focus is defined. This innovation
process model is applicable for many different types of innovation including product, service,
process, and business model or strategy. The model should be customized to suit the culture and
overcome the political or other obstacles of the organization. For a full description and guidelines
for focusing innovation and customizing this model, see "Managing Innovation: A Primer, 2009
Update."
Though innovation activities will be highly individualized based upon each company's culture,
business environment and strategic needs, there is a common thread: The better organizations
understand the activities of the innovation process, the more effective they become at bringing
the kind of innovation to the marketplace that will sustain corporate growth.
Enterprises will find that the major factor that impacts innovation in the early stages of the
process is a culture of trust that can accommodate managed risk. In the later stages of the
innovation process, the greater impact is, in fact, a well-managed process that ensures the right
people are involved, funding is available and milestones are met.
Action item: Adapt Gartner's innovation process model to make it specific to the focus and
objectives of your organization. Use it as a part of the innovation education process to ensure that
all participants in innovation projects have a consistent vocabulary and set of expectations.
Action item: Identify the factors that have the greatest impact on innovation in your organization,
both the cultural factors and processes that will improve innovation initiatives. When a deficiency
is detected, take steps to shore it up. For example, if your organization has trouble getting
employees to contribute ideas, design a recognition program that rewards them for sharing their
expertise.

2.2 Myth No. 2: Innovation Only Happens in R&D


Many organizations centralize responsibility for innovation in a small team, incubator or a
research and development (R&D) group. This organization structure has some advantages. Such
teams usually work in isolation and this can speed innovations to market, separate innovators
from day-to-day operational issues and bring together key experts to collaborate on a problem.
For an example of an organization that involved a people from variety of teams to solve a
problem, see "Business Narratives Supplement Traditional Data Analysis."
Despite these advantages, innovation is too important to be left to the research organization
alone. The location of valuable new ideas is migrating away from the center toward the edge. As
we move into a service and knowledge economy, the number of people with useful information
that can lead to good ideas multiplies.
One issue with the centralized model is that the closest connections and deepest interactions with
customers and partners usually occur at the edges of the organization. These people at the
edges hear the "voice of the customer" every day and they actually experience the inefficiencies
or inadequacies of processes or systems. Also, the newest and youngest employees often begin
their careers in customer service, sales or field service positions. In their early tenure, these
people are unimpeded by "the way we've always done it" and are unaware of the political
obstacles of the organization.

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© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
A second issue with the centralized model for innovation is that the innovators are often focused
on top line opportunities such as developing new products, services or technologies. Therefore,
the enterprises that address innovation only through an R&D organization may miss the
opportunity to grow the bottom line as well. Enterprises can innovate in many dimensions that
extend beyond products and services as shown in Figure 2.

Figure 2. The Dimensions of Innovation

Source: Gartner (February 2010)

Technology is also a source of innovation and in recent years, many enterprises invested in
technology tools that support improved work practices and collaboration among employees and
across value networks. These organizations have created team workspaces and purchased
collaboration, content management and social software solutions. They have also experimented
with tools for modeling and simulation — all in an effort to increase productivity.
As these technologies and products mature, organizations often reach the inherent productivity
limits of the tools. Thus, organizations need to shift their innovation emphasis toward
improvements in processes and integrating individual tools into a cohesive work environment.
They need to explore ways to get more revenue from existing products by tapping into new
techniques for product line extensions plus marketing and communication approaches that
include social media. This dimension of innovation is depicted by the yellow shape labeled "new
go-to-market approach" on Figure 2.
Smart organizations will also not limit their search for good ideas to the marketing department but
instead will call upon a wide internal network of employees for suggestions. Oftentimes, the
people responsible for business process execution have valuable insight about how those

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© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
processes could be improved. This dimension of innovation is depicted by the red shape labeled
"new process opportunity" on Figure 2.
Action item: Before going out and soliciting ideas, ensure that you will be able to do something
with them when they come in. Ensure that you have the authority to make changes, the resources
to act on the new ideas and the clarity of mission to know which ideas to prioritize.
Action item: As you plot out a portfolio of innovation campaigns or events, make sure to include
some that target people who work in adjacent areas to the problem domain. For example, if you
are looking for creative ways to streamline the customer support process, involve people from
sales, marketing and quality management in the campaign. If you feel particularly bold, ask
current customers to share their ideas.

2.3 Myth No. 3: The Best Innovation Comes From Inside


When enterprises pursue innovation, they should consider how and why firms conduct their own
research and develop their own products, processes or services. According to economist and
author Edith Penrose, there are two reasons firms develop their own R&D organizations.

To ensure someone is focused on options for future growth.

To ensure someone is focused on competitors and market trends as an insurance policy


against adverse changes in the firm's environment.
Historians peg the genesis of the modern industrial research laboratory to 1856 when English
chemist Sir William Perkin discovered how to synthesize mauve dye from aniline. By 1890, the
German firm Bayer had constructed a modern lab that contained books, lab equipment and a
dedicated team of researchers. Bayer's model lab was soon copied by other chemical
manufacturers seeking a steady stream of innovation. While a dedicated R&D team ensures that
the organization will keep its focus on innovating products and services, it is a mistake to think
that this should be the only source of new development ideas.
Another issue is that an organization's success in R&D — which is meant to foster growth
through new products, services or markets — often ends up stifling innovation. This happens
when the firm becomes unwilling to fund projects — even small projects — that have uncertain
outcomes, preferring instead to underwrite only projects that have a higher probability of a
successful, marketable outcome. For example, enterprises tend to assess the potential of a
technology through the lens of their current business model. Therefore, there is a negative bias
against projects that fall outside of the current operating paradigm which might be an existing
product set or customer segment or geography.
Organizations that suffer from this bias can take several approaches to overcome it with open
innovation methods. Two approaches are collaborative open innovation and idea marketplaces.

2.3.1 Collaborative Open Innovation


The bias against working outside the current operating paradigm is described by Harvard
Business School Professor Clayton Christensen in "The Innovator's Dilemma." He suggests a
better approach is to define the reason a business or organization exists is to produce products
and services that help a customer get a job done. So organizations should continually ask
themselves, "What is the job my customers need to get done with my product?"
Enterprises that succeed in the practice of "we exist to help a customer" face three imperatives:

Address the basic conflict between organization-based design and user-based


design. The developer of an innovation has to acquire information from the user to feed

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© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
into product or service design and must imagine how a solution might perform. Users,
on the other hand, know what problems need to be solved but are unlikely to be able to
create the solution themselves. Thus, engaging the user customer or partner in a
meaningful way early in the process leads the innovator to better needs identification
and solution development.

Creating a business or partner development function that is connected, properly


staffed and uses technology to enable and support the business processes.
Rather than limiting the use of suppliers and other business partners to a specific
deliverable, innovators should view them as a strategic source of innovation. Examine
how an innovation could lead the organization to a new market or how existing
intellectual assets can be out-licensed to another firm that can bring the product to
market. See "Innovation in IT Services: A Working Definition and Key Characteristics."

Developing the capability to manage a portfolio of risk. To ensure that higher-risk


projects are not consistently turned away, organizations need to improve their capacity
to manage those projects within a portfolio whose overall risk is still acceptable.
Figure 3 illustrates an example of how organizations (in this case, a manufacturer) and their users
can collaborate to enhance the innovation process. The internal-only process confines projects
within the dashed lines, while processes that allow collaboration and new business models or the
collective can open up other avenues for innovation. This open innovation model was described
by Henry Chesbrough in his books "Open Innovation" and "Open Business Models."

Figure 3. Open Innovation Model

Source: Gartner, adapted from Open Innovation (February 2010)

2.3.2 Idea Marketplaces


In 2010, the workforce is highly mobile and capital is not flowing freely so companies need to look
outside their own organization to seek innovation expertise. InnoCentive is an interesting example
of a business built on the marketplace model that facilitates the flow of "solutions" generated by

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© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
scientists in response to specific challenges from an organization or business. Here is an
example of how it works:

An idea seeker posts a challenge on InnoCentive.com (such as, "Please provide data
and evidence to support the identity of the common efficacy of three compounds").

Challenge solvers vet solutions and respond to InnoCentive, which then forwards
solutions to the idea seeker.

The idea seeker reviews submissions and selects the solution that best meets the
requirements. InnoCentive issues an award to the solver.
InnoCentive launched in 2001 and quickly signed up more than 70,000 scientists (challenge
solvers) from around the world that get paid bounties for solutions to challenges posted on the
site by idea seeker companies. Today, 200,000 engineers, scientists, inventors, business people,
and research organizations in more than 200 countries are invited to solve problems. Challenge
solvers may be paid up to $1 million for their solutions based on the value assigned by the idea
seeker. See "Idea Marketplaces: Access to a World of Innovation" and "The Business Impact of
Social Computing: Real-World Examples of Value Network Collaboration."
Action item: Identify innovation projects that are not meeting their project milestones. Evaluate
when they are candidates for an idea marketplace challenge.
Action item: Organizations that decide to open up the innovation process will need to rethink the
intellectual property (IP) governance model so it balances the need to protect the organization
from "IP leakage" with the need to reveal information in order to engage external participants.

2.4 Myth No. 4: The More Ideas We Generate, the Better


Frequently, firms try to create a frenzy of excitement around innovation, based on the premise
that the more ideas you can generate, the better. But, the facts do not support this premise.

One example comes from a publishing company that established an innovation program
led by an innovation council. It ran unfocused campaigns to collect "good ideas." After
an innovation council culled through the entries, it ended up discarding all but two of the
more than 680 ideas submitted — a hit rate of only 0.3%.

Another example comes from a case study of a pharmaceutical manufacturer. It


conducted a rigorous idea management program but decided that only 2.5% of the ideas
submitted were worth developing further.
This means that the proper focusing of ideation and handling of ideas is one of the most critical
aspects of successful innovation programs. Organizations with well-established innovation
programs find that running "ideation campaigns" or events is an effective way to garner possible
solutions to pressing problems.
Recognizing and defining a problem or objective is an essential first step in the ideation process.
As legendary inventor Charles Kettering put it, "A problem well-stated is half solved." Once ideas
have been submitted during an ideation campaign, it requires persistence, collaboration, open
minds and determination to convert even a good, well-defined idea into a working innovation. See
"Innovation and Idea Management: Make These Decisions First" and "Five Pitfalls of Ideation and
Best Practices for Avoiding Them."
Idea management tools can help organizations focus the innovation process by stimulating idea
generation, improvement and evaluation. Tools, of course, only support the innovation process.
They do not make a company inherently more creative or instill a corporate culture able to deal

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© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
effectively with innovation. However, once the organization has developed its innovation
capability by establishing the foundation for innovation (that is, clarifying the business need,
assigning resources, creating an innovation process flow map and identifying key areas for
innovation), technology can support the ideation process.
The experience of enterprises that have used idea management tools to run ideation campaigns
led to the following findings about successful innovation management:

Leadership and organizational structure are essential. There needs to be a facilitator to


guide the innovation effort and a champion who has an urgent need to solve a pressing
problem.

The events to garner ideas must be very focused on a specific business or technology
issue that excites people's passion, rather than a vague concept such as "decrease
expenses."

Rewards and recognition have to be built into the program for both the people that
submit the ideas and the people that enhance and improve them.

The idea management campaigns must be well publicized so champions receive


participation from a range of people who feel passionate about the issue.

The review team must include subject matter experts who can properly evaluate ideas
on their merit without regard to personal gain or loss.

Those ideas selected for implementation must be rapidly moved into the pilot stage.

All contributors need to receive acknowledgement of their submissions in a timely


manner, as well as an explanation of how the ideas were evaluated.

Information is available to everyone recognizing the initial contributors and describing


how ideas are actually implemented. This recognition is a reward for the contributor and
an incentive for future contributors.

Performance metrics need to be established so that employees are encouraged to


submit ideas and take risks — even if they result in "failure."
See "The Innovation Culture: Definition and Critical Success Factors" and "Tactical Guideline for
Innovation: Creativity Craves Tension and Testing."
Action item: Create a foundation for innovation by intentionally designing idea generation and
evaluation processes to elicit highly relevant ideas and to effectively evaluate and select winning
ideas.

2.5 Myth No. 5: We Have Lots of Smart People, so Innovating Will Be No


Problem
Getting the participation of smart people during an ideation campaign or event does not
automatically lead to innovation. There are countless people and "style" issues that must be
reconciled during the innovation process. A variety of skills are integral to the innovation process,
though some skills will be more important at different stages of the innovation process than
others.
It is important that organizations deal with the requirement to assemble a diverse team in a
coherent, consistent and companywide fashion. There are a variety of different style classification
schemes that companies can use to select people and styles required to make up a strong,

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diverse team. Some of these include Kirton Adaption Innovation Index (KAI), Myers-Briggs,
Herrmann Brain Dominance Indicator and Six Hats. The key is to pick one and use it to build a
balanced team where people play the role that most suits their skills. A balanced team will include
people with the ability to:

Create: ideate (invent) new concepts.


Adapt: improve upon existing ideas.

Connect: network with others to seek out new ideas and trends.

Realize: find the flaws in ideas before they are implemented.


Act: make the ideas work operationally.

Drive: initiate and lead programs.


The most challenging skill to find is the ability to tap into the network. It requires interaction skills
as well as a comfortable grasp of social software and social networking technology. See "Best
Practice: The Innovation Catalyst Team."
Going forward, expect to see some companies introducing a new role in the organization — the
chief innovation officer. It will be their task to manage the innovation process by blending the right
people with the right skills in order to fuel innovation that is in line with the company's goals and
strategies. Chief innovation officers will need to be well connected in their organizations and
familiar with some of the style classification schemes mentioned above. This person will be an
innovation catalyst — they do not own all the decisions about what to innovate nor which ideas to
select, but they do own the process of catalyzing and bringing together lots of people in the
organization to innovate together.
By connecting the support of "top down" leadership with "bottom up" direction, the chief
innovation officer can build powerful networks of intellectual capital with clear accountability and
performance measures. The net result will be to compress the normal time scales for innovation
development. Companies that can sustain a continued pace of implementing innovations (not
simply spending on R&D) will garner increased shareholder investment and attract the best
employees and suppliers.
Action item: If your organization has created an innovation catalyst team or council, ensure the
team collectively has a balanced set of skills including the ability to create, adapt, connect,
realize, act and drive innovation.

3.0 The Bottom Line of innovation


When enterprises think innovation, they must think enterprisewide. The need to innovate applies
to processes, technologies and organizational structure, as well as management and leadership
styles. Organizations that want to develop innovation as a core competency must create a culture
in which innovation can thrive, and then extend the process to the entire employee base. They
also need to set clear objectives and allocate both budget and personnel resources to establish
enterprise innovation as the de facto approach for achieving business growth and operational
excellence.

RECOMMENDED READING
"Managing Innovation: A Primer, 2009 Update"
"Idea Marketplaces: Access to a World of Innovation"

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© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
"Innovation and Idea Management: Make These Decisions First"
"Five Pitfalls of Ideation and Best Practices for Avoiding Them"
"Business Narratives Supplement Traditional Data Analysis"
"The Innovation Culture: Definition and Critical Success Factors"
"Tactical Guideline for Innovation: Creativity Craves Tension and Testing"
"Innovation in IT Services: A Working Definition and Key Characteristics"
"Case Study: Pacific Northwest Bank Innovates the Branch of the Future"
"Case Study: Turkish Bank TEB Builds a Culture to Promote Innovation"
"Case Study: BI Projects Help ICICI Consolidate Its Operations After Explosive Growth"
"Bank Branch of the Future: Which Deployment Model Should You Use"
Henry Chesbrough: "Open Innovation" and "Open Business Models"
Clayton Christensen: "The Innovator's Dilemma" and "The Innovator's Solution"

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