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Innovation or change?

June 26, 2014

There is at present lively debate within academia about the meaning of innovation and, in particular, whether ‘disruptive innovation’ really exists. As with many academic discussions, it is quite likely there will be no final resolution, but the topic is timely because it reflects similar confusion within the commercial world.

“Innovation is this year’s big thing”, according to a headline from Spend Matters. Unless my memory serves me badly, I seem to recall many others making similar assertions for at least the last 5 years. Indeed, at IACCM we have been extolling the importance of innovation in contracting and commercial practices for many years and introduced specific Innovation Awards three years ago.

But what does this actually mean? Are we talking about functions that lead innovation, or perhaps more about enabling innovation? And when we use the word ‘innovation’, what exactly qualifies – when does a ‘change’ become an ‘innovation’? One has only to look at many of the initiatives hailed as ‘innovative’ to recognize that the bar today is set pretty low. So does this confirm that ‘innovation’ is yet another meaningless fad, or that those in groups such as Procurement, Contract Management and Legal can ignore it since it simply does not apply?

Innovation applies at many levels and is often evolutionary. Mobile phones would be a good example, since mobile communications had been around for many years. Also, just because something is innovative does not mean it is beneficial or successful. Many claimed ‘innovations’ would more properly be classified as ‘imitations’ – just because it is new to me does not make it new to the world. And innovation is certainly not limited to technology. Commercial innovation can have just as much impact on the market.

So far as I can tell, innovation tends to come from a readiness to ask questions. It requires a degree of observation and a belief that things could be done differently and better. Sometimes it is a reaction to outright failure or perceived impossibility; other times it is about improvement. For example, when financial institutions sought to expand into India and Africa, it was quickly evident that traditional bricks and mortar offices were not the answer. Alliances with mobile phone providers were a good example of commercial innovation. Today, partnering between traditionally non-aligned industries is a common path to innovation.

Disruption is often a consequence of new entrants to a market, but this is not always due to innovation. Companies from China and India are now penetrating global markets at a rapid rate and proving more flexible and nimble than their long-established Western competitors. But in general, their success is driven more by their commercial flexibility. They are not inhibited by traditional views of risk, compliance and bureaucratic analysis. At some point, they may feel a need to institute stronger controls, but in the meantime their success is forcing many Western corporations to re-evaluate their processes and practices.

Overall, I would suggest that much of what we term ‘innovation’ is actually more about change or about differing perspectives. However, that does not mean the concept is unimportant. Indeed, a readiness to question, challenge and generate new approaches is fundamental to survival – whether as a business or as a function.

 

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