Dimensions of Innovation

Recently a senior executive of a manufacturing company asked me a question "Should we pursue Radical Innovation or Incremental Innovation?" At that moment, I did not have a clear one line answer. Innovation is a complex subject and the choice between incremental innovation or radical innovation is never straight forward. Individual companies, or group or even employees can choose between the two depending on their strategy, risk tolerance and competition.

Innovation can be seen in two dimensions:

1 Competitiveness

2 Risk Tolerance

All the innovations that happen in industry today can be explained in terms of these four quadrants.

Competitiveness

Competitiveness is an innate feature of the individual or that of the organizational culture. Some companies have a strong competitive nature. For these companies - status quo is not acceptable - and they not only want to win but also ensure that the competition loses.

In most businesses, the culture of competitiveness is primarily driven by the nature of the competition in the market place. If a business does not face intense competition, then over a period of time the culture of the company tends to fall into complacency - and tends to take a reactive action towards innovation i.e, they will innovate only if the competition does so. For example GM considered developing hybrid technology only after Toyota released Prius. Ford & GM are yet to develop the clean diesel engine technology - but Honda, VW, Toyota already have clean diesel engine cars in the market.

Another possibility that emerges with lack of competition - but with a high level of commitment to innovation is that company starts to engage in Anticipatory or exploratory innovation - mainly research. NASA, Bell Labs, a large part of IBM research, Lawrence-Livermoore Labs, Government funded research - all fall into this category.

Risk Tolerance

Risk Tolerance is often a measure of how much money (as % of revenue) a company is willing to spend on R&D without knowing how much benefits it will be getting back. Often company leaders have a higher risk tolerance - This is driven by their personal trait and that trait often rubs onto the entire organization as well. Companies such as Apple, Google, Tata Group, Arcelor-Mittal, Reliance Group, ICICI, Microsoft all have the company leaders driving innovation through their personality.
Sometimes, the high risk tolerance is built into the corporate culture itself. For example, Exxon-Mobil, Texaco, Total, KKR, Blackstone, Texas Pacific Group, (Private Equity firms) Norwest Ventures, Intel Capital, (All Venture Capital firms), Hedge Fund firms, IBM, HP, GE, Bell Labs are the best examples where the high risk tolerance has been built into the company culture.

The four Quadrants

1. Reactive



2. Incremental



3. Anticipatory



4. Radical

Reactive Innovation (Low Risk Tolerance & Low competitiveness)

This is probably the most common form on Innovation - often seen as imitation. Company A will do anything that the company B does. Coca Cola introduced Zero Calorie cola, Pepsi does the same, Pepsi introduces flavored cola, Coca Cola does the same. Another situation will be that the company innovates only when the regulatory norms change. For example Indian companies adapted 4-stroke engines only when the government enforced a stricter emission rules. It has been observed that most companies tend to fall into this category - this is mainly due to competitive pressures and low risk tolerance. Managers are often forced to react when the competition innovates. Often times managers simply get by imitation or outright copying just to stay competitive in the business.

However, being reactive is not a bad thing. Being a fast follower, one can avoid the mistakes done by the lead innovator and at the same time capture more market share or get higher ROI.
Japanese companies are the masters of imitation as innovation. Throughout 1960’s to 1990’s Japanese firms built their competitive advantage by imitating the best in US & Europe. It was during this imitation process, Japanese companies discovered their own advantages. Indian IT, Pharma firms: TCS, Ranbaxy, Dr. Reddy Labs, Wirpo, Cipla, Infosys, Satyam etc. are also following the reactive innovation process. This has ensured that they have a higher ROI. (see Indian style of Innovation).

Incremental Innovation

Incremental Innovation is primarily driven by very high competitive pressures and low risk tolerance. Companies that rely on technology based products (or manufacturing process) often tend to follow incremental innovation. Intel, Dell, Lexmark, Cisco, AMD, Lenevo, Nvidia, ATI, Adobe, Microsoft, Oracle, etc. survive solely on incremental innovation. Incremental innovation is best exemplified by Moore’s law (The number of transistors one can put in a chip will double every 18 months).

Intel follows Moore’s law to the word and has consistently come out with successful products: Pentium, Pentium-II, Pentium-III, Pentium-IV, Xeon, Itanium, Itanium-II, Centrino, Centrino Duo etc.

Another reason for incremental innovation arises when an imitator decides to leapfrog the competition by a series of incremental innovation. Toyota Lexus is a good example of incremental innovation designed to leapfrog competition.

A good think about incremental innovation is that the ROI on R&D investments can be predicted with reasonable accuracy. The entire computer industry today practices incremental innovation and companies which cannot keep pace with competition lose market share. The key to succeed with incremental innovation is to know what the customers want in the future and then provide it.

Anticipatory or Exploratory

Organizations which pursue anticipatory or exploratory innovation are often disconnected from the business. These organization have a very high risk tolerance and have a low competitiveness. Most government sponsored research labs - NASA, Lawrence-Livermoore labs, DRDO, NAL, ISRO, BARC, C-DAC, C-DOT, CPRI, CFRI etc. fall into this category. University funded labs - Caltech, MIT, etc. also fall into this category.

Many large companies usually have dedicated a certain % of their annual revenue for R&D and these R&D projects were not usually tied to any products or to any particular time line. These R&D labs also fall into this category. Examples of these are several.

One of the best examples is Bell Labs. While all the cutting edge research was done by Bell Labs - an this was all anticipatory innovation. R&D work done at Bell Labs during this phase were highly exploratory and had little commercial implication. As a result Bell Labs spent several billions of dollars with very little to show in terms of benefit to the customers. For all the money spent by Bell Labs - it completely missed the Internet revolution and it also missed the cell phone revolution. But Bell Labs deserves the credit for developing several path breaking innovations in Fiber Optic technologies, Digital technologies, UNIX etc. These innovations were purely anticipatory - i.e., the rational driving these innovations is that Bell Labs expected the technology to move in that particular direction.

Another good example will be Xerox’s PARC. Palo Alto Research Center was created with a certain budget - but with no clear mandate. Xerox’s business managers were expected to pickup some of the technologies developed by PARC and commercialize it. Over a period of time PARC developed several innovative technologies: Ethernet, GUI, Mouse, Post Script printing etc.

Radical Innovation

Radical innovation is probably the rarest kind. Mainly because of the factors that drive it - high risk tolerance and high competitiveness. But in the recent times, there has been lot of radical innovations - the Silicon Valley’s tech sector thrives on radical innovations.
Radical innovation is not easy. It requires high risk tolerance and a high market competitiveness. The company leadership should have a high competitive spirit, must intimately know the market requirements, have the right kind of technological capabilities and have a huge appetite for risks - and also the ability to manage the company is the product/service fails in the market. All these characteristics at the same time is difficult to manage and sustain for a long period of time. Often times radical innovations need a completely different business models. Even highly successful companies find it difficult to sustain radical innovation over a period of time.

The best example of Radical innovations are: Apple Inc., 3COM, Palm Computing, Juniper networks, @Home, Casio, SMART car, Google, Pixair, Segway, Disney Studios, IDEO, Illumination & Light effects, etc. Even these companies find it difficult to sustain radical innovations over a period of time. The biggest challenge in sustaining such radical innovations is managing failures - when a product fails, shareholders revolt against the management - thus killing potential future radical innovations.

Companies in developing countries - BRIC (Brazil, Russia, India & China) today are looking at radical innovations as the means to become globally competitive. In India, Tata Motors has launched an ambitious project to build passenger cars for less than $2500 (Rs 1 lakh) - this is a perfect case of Radical innovation. Ginger Hotels have also developed a radically different business model for a completely self service hotel. ICICI bank has developed innovative services to cater to India rural masses, Reliance Communications and Bharti have developed radical solutions to manage their communication network - which offers the world’s lowest cost of cell phone communication services - and being highly profitable at the same time. Cemex in Mexico has developed a radically innovative business model to sell cement to small & medium customers.

Implications for Indian Firms

Indian companies have to realize that the competition for them has increased exponentially. Market deregulation and globalization has altered the competitive landscape completely in the last decade. Indian firms - mainly manufacturing firms are slowly realizing that if they need to survive they need to innovate. Their old ways of doing things are no longer valid. Companies need to find ways to innovate - and being innovative is going the critical factor for success. It does not matter if you are reactive, incremental, anticipatory or Radical - all types of innovations are better than no innovation.

Indian IT firms - mainly TCS, Infosys, Wipro have developed a radical business model for Global IT service delivery - the "on-site, offshore model" and today are experimenting with several new ways of delivering service.

Indian pharma & Medical companies are developing new & innovative methods to deliver medical services to patients worldwide. If these experiments succeed, India will become a global center for medicine and medical services.

On the other hand, progressive Indian businesses have adapted Radical innovation wholeheartedly - Tata Group, ICICI, Reva, Reliance Group, Bharti Telecom etc. have developed new business models to meet the requirements of radical innovation.

Yet, there are thousands of Indian companies that are yet to wakeup to the new world of competition through innovation - and these companies are in real danger of dying.

Closing Thoughts

The dimensions of Innovation model was conceived to help companies and managers understand their core abilities and develop innovation strategies which is more inline with their capabilities and market conditions. The model helps companies understand their best chances of success with different styles of innovation - and can help leaders/managers build the necessary capability to manage innovation - both in terms of technology development and business models.

Leaders & managers can look at other firms which fall under their innovation models and learn how to manage more effectively. For example, If the company wants to pursue radical innovation - then its managers are better of studying about Apple or google and then mapping the factors/capability required to develop radical innovations - i.e., build capabilities to know and intimately understand customer’s future requirements, learn how to overwhelm competition with new products, manage high risks etc.

Leaders and managers must understand that innovation projects within their company can fall into several quadrants - but the overarching goal/objective or guiding principle of innovation can lie in only one quadrant. Knowing which quadrant is most beneficial for them is critical for long term success.

Cultural Diversity & Affirmative Action

Infy turns to more states for affirmative action for SCs
India's Affirmative Action Rocks the Boat

Private companies in India are slowly waking up to the new corporate responsibility - Affirmative Action. Public sector in India and the government has been promoting affirmative action in form of forced reservation through the ‘quota’ system for decades. But only now, private companies have started to look at taking an active step towards voluntary affirmative action.

A voluntary affirmative action will be tough to manage for most Indian organizations. To begin with, most organizations are not exposed to the concepts of affirmative action - most people confuse affirmative action with reservations and have a negative mindset towards it. Given the recent public backlash to reservations at IIM & IIT, the private sector in India can expect similar backlash from their own employees to affirmative action. In addition, most employees are not aware of how to handle & manage affirmative action. Almost all Indian companies do not have policies and procedures to handle affirmative action. There is virtually no grievance cell to handle any discrimination cases and the list goes on. Implementing affirmative action implies a radical shift in company’s policies.

Thus implementing a voluntary affirmative action will have a deep impact on Indian organizations. It is therefore very important to understand the how people react to cultural differences - before embarking on a plan to improve cultural diversity via affirmative action.

Reactions to Cultural Diversity

History shows that throughout the entire human civilization has repeatedly demonstrated four distinct reactions to cultural diversity:

1. Genocide
   
   Genocide represents that the society is willing to kill other human beings who are culturally dissimilar with that of the society. Genocide is usually the first animal instinctive reaction to diversity, or the most primitive of the human reaction. As the society advances and develops, the society realizes that Genocide is not a good option - and the reaction evolves into segregation.
   In India for example, there has been several examples of Genocide. By Genocide I mean demonstration of extreme anger or discomfort or even killing. In an extreme cases, whole groups of people may be killed. In India, there has been no recent instances of large scale murders - but caste based massacre is quite common in rural India. In office environment, an example of Genocide may be that of extremely public demonstrations - strikes and public intimidation of the minority groups.
   
   
2. Segregation
   
   Segeragation is the isolation of minority group within the organization. Large organizations will often have several groups of people - with each group having its own cultural identity.
   
   Segeration in the corporate world can take several subtle forms - such as glass ceiling, blaming, racial slurs etc. In India however, segregation is still common. Though caste based discrimination has reduced, but the society is yet to evolve into a truly integrated one. Segregation is more prevalent in the rural areas and in areas with low education standards.
   
   Segregation in form of "Glass Ceiling" is also prevalent all over the world - especially at the higher end of the organization - i.e., senior management levels. India is no exception to it. Almost all ~100% of Indian CEOs are from the upper castes.
   
   Segregation is the second stage of social evolution. Once a society learns that it cannot destroy the ones which do not conform to its norms, the society will tolerate it - but will maintain an arms length distance.
   
   
3. Assimilation
   
   Assimilation is next phase of social evolution. This occurs when the society learns that it can no longer afford to keep the cultural minority group segregated - it will try to assimilate it - i.e., try to make the minority group accept the norms and practices of the majority group and see to it that there are no/little cultural differences.
   
   France, in year 2006 passed a bill banning all public display of religion. This is a perfect example of forced assimilation.
   
   In the corporate world, the power to assimilate a minority is so immense that it usually succeeds at least at the surface level. For example, In US, all holidays are centered around Anglo-Saxon culture. People from Asia, Africa are forced to accept that. Hindus, Buddhists & Muslims do not have the option of taking a different set of holidays which are in-line with their religion. In India, corporate too have the same problem.
   
   Normally assimilation will be welcome if the minority group is really small or negligible But as the population numbers of the minority group grows, there will be resentment. But this resentment will be demonstrated by small gestures - such as celebrating their local cultural events publicly etc. For example look at how the Irish Society in the US displayed its culture during St. Patrick's day during late 1800’s. Or see how Indians in Silicon Valley or Indians in London display their culture during Divali.
   
   
4. Integration
   
   Integration is the final and the most evolved phase of the society. In this phase, both the majority & minority groups will have build a mutual respect & trust. This takes a lot of efforts from both sides. But once it is achieved the society is very stable. In Corporate India, several castes and religious groups have been successfully integrated. But these are mainly forward castes, and a few backward castes. Getting to a total social integration in India will take some time.

Closing Thoughts

Corporate India is now embarking on the inevitable, irreversible path of social integration by means of voluntary affirmative action. Company managers - especially HR must tread cautiously. Organizations must research the possible implications of voluntary affirmative action and then develop plans to mitigate any adverse reactions before implementing the plans.

Voluntary affirmative action is not enough, companies must make plans to integrate the entire organization in a phased manner - and have plans, procedures and practices inplace to avoid any segregation. Mistakes in this process will lead to lots of negative publicity, low employee morale and high attrition - and this will inevitably lead to losses.

Indian corporates can look at some of the best practices at the Tata Group, Wipro and see how these companies have fared at social integration.

Fast Innovation - The new imperative for Indian Firms

Several medium sized Indian companies are waking up to the new reality - that they have to innovate or perish. Unfortunately these companies do not have time on their side and are hard pressed to develop new products, expand into new markets and develop new line of services in the shortest period of time.

Knowing Indian firms and managers, I know that these companies are capable of executing rapidly - especially when there is a fire. This ability and the dire need to innovate makes a perfect case for companies to make a case for Fast Innovation.

Fast innovation can create substantial impact to the existing business. It can result in:

1. Fast time-to-market for a new products.



2. A highly differentiated product or service offering



3. Cause major disruptions in the market place.
   

Fast innovation - i.e. The need to speed up the innovation cycle can dramatically alter the business environment. For example, if Toyota decided to fast track the development of its hybrid technology and committed to its commercialization way ahead of its competitors. This fast move - even when it was done in full sight of everyone caught Toyota’s competitors off-guard. Detroit’s big three were still of the opinion that Hybrid technology will not be economically feasible when Toyota introduced Prius in 1997. It took a solid seven years for GM & Ford to release their hybrid vehicles.

In India, Mahindra & Mahindra (M&M) fast tracked the development of its SUV Scorpio. The rapid development and commercialization of Scorpio enabled M&M to become leaders in the luxury SUV market in India. M&M’s main competition Tata Motors, Hyundai, Toyota could not respond to M&M in time - and Toyota abandoned its SUV product line - Qualis in India.

The new Imperative

Firms all around the world can adapt fast innovation - and bring about dramatic improvements to their revenue & bottom line. However implementing a fast innovation requires a dramatic change in internal operations & management skills. But the benefits are worth the efforts. Fast innovation is particularly useful for companies that have traditionally worked in a stable business environment - but are facing increasing competition.

Reducing the Time-to-market for new products

In most stable industries, every company in that sector knows the product roadmap and knows when a new product will be introduced. If one of the players decides to speedup its innovation and bring a new product ahead of the competition, then it will potentially catch everyone by surprise. Bringing a new product early into the market will have another advantage - win customer’s mindshare and also gain the first mover’s advantage. A possible side effect of reducing the time to market is that it reduces the total negative cash flow required for the development cycle and make it possible to attain a positive cash flow from the product earlier than expected.

Another advantage of reducing the time to market is that it results in a highly differentiated product in the market.

A highly differentiated product or service offering

Introducing a highly differentiated product has several benefits. The foremost benefit is to win customer’s mindshare and wallet share. It is also observed that customers are often willing to pay a premium for a highly differentiated product or service. For example, people are willing to pay a high premium for Apple’s iPhone.

Companies that take the risk of introducing a product ahead of its times will reap good rewards in terms of higher margins and greater marketshare. However, it is difficult to repeat and sustain such high margins over a period of time. So when competition comes out with a similar product, the market innovator can drop the price and still maintain market share.

Cause major disruptions in the market place

Speeding up product introductions can cause major disruptions in the market place. By leaping ahead of the competition, the company has the opportunity to re-write the rules of business and can shape the market place to its needs. For example, introduction on PC made Intel, IBM & Microsoft dominate the PC market for a long time. During this period, these companies were able to write the rules for the PC business. Intel & Microsoft have been able to hold on to their pole positions and have retained the ability to influence the market place. RIM's Blackberry rules the roost when it comes to business cell phones. This was possible only because RIM was able to introduce a new technology - that was way ahead of the competition. Blackberry caused a major disruption in the marketplace for business cellphones.

Major disruptions in the market place often upsets the existing players - thus force them to cede market share and profitability

Closing Thoughts

Fast Innovation is need of the hour for companies that are stuck with intense competition and are engaged in a bloody battle in the "Red Ocean". Successful implementation of fast innovation projects will give companies an opportunity to define their own "Blue Ocean" and define the market rules for it.

Several medium sized companies in India are looking at Innovation as a means to gain competitive advantage should look at fast innovation - and speed up new product introductions. Companies such as Eicher Motors, Ashok Leyland, TVS group, SPIC, Bajaj & others are the best candidates for such fast innovation.

Best Practices to Bring out Innovation in any Organization

Business leaders today want to create a culture of innovation in their organization. Building a culture of innovation is not easy. Like all cultural changes, creating an innovation oriented culture will take time. Leaders must understand this and also understand that there are several steps of creative process before reaching the world of innovation. It takes strong leadership to build an innovative culture.

To build a culture of Innovation, leaders should implement to the following business practices, institutionalize them in the culture - by training managers in these practices and then doling out promotions and rewards to those who employ them (the following best practices) successfully.

Practice-1: Select the most creative individuals to lead the innovation efforts

Organizational innovation is dependent of individuals who can drive creative ideas into innovation. It is therefore imperative that the creative persons lead the innovation efforts. This is best done by selecting the "innovation champion". Innovation champion is the person who is creative, has adequate experience and leadership skills. The innovative champions must then be provided with adequate resources to develop creative ideas and carry it to innovation.
Leaders must explain this step clearly to all managers - so that they understand the stages of the creative process. It is vital that all managers understand the process of innovation and their roles in the process, else internal office politics can kill all efforts towards innovation.
Innovation champions must be chosen on the person’s ability to promote creativity within his group, capture the ideas and motivate the team to completion of the creative idea into innovation.

Practice-2: Create a Neutral Zone

Creative ideas requires lots of protection from the nay sayers when the ideas are in the early stage. This implies that the innovation team will need a kind of protective cocoon within the organization. This implies changing policies and procedures a bit, providing the tools and resources and ensure a hassle free work environment.

The innovation champion and the leader share the responsibility to go through the preparation stage and see that the group is adequately equipped. This "cocoon" must be protected from rest of the organization during the initial stages of its formation - else the business pressures will destroy all creativity among this group.

Practice-3: Give your innovators space & time to "play"

The innovation group will take some time to come up with creative ideas, play around with it and sometimes even mess up a bit. These activities may look like waste of time & resources. But during this incubation stage, these frivolous activities are all necessary to allow activating the deeper parts of the brain to solve a problem and make new connections. For a typical results-oriented executive, this can be hard to do - especially when the creative team happens to be a team of is expected to work in creating new blockbuster product or a dramatic business process. The senior executive who may have assigned the task may be hard pressed to let his innovative team have the time and space to produce truly transformative solutions. The key to letting people have room to "play" is to refrain from judgment of their activities or methods.
It is the responsibility of the leader to provide executive protection during the "play" time of the innovation group.

Practice-4: Resist the temptation to look for immediate results

As a leader if you are looking for immediate results, then you do not need an innovation team. Almost anybody & everybody in the organization can come up with incremental solutions or recommendations. There is no aspect of the business that can’t be improved through study and modification. If you are looking for immediate results, then opt for incremental improvements - improvements that can be executed by the existing teams in the organization.

If you are looking for a radical innovation, then the leader has to be prudent in setting deadlines. It is true that setting some kind of time pressure is essential to create focus among the creative teams and this will result in timely innovations. However, overusing of deadlines and results oriented management practices will kill all creativity. The best practice is to have close communication with the innovation teams so that leaders can develop an acumen for setting a beneficial timelines.

Practice-5: Give your personal commitment to implement the best ideas

Innovators seldom have any salesmanship. Given a choice they would prefer to work in isolation, play with their ideas and or generally rub others who are less creative the wrong way. Leaders who encourage innovation must act as the first line filter to test the best ideas and solutions, choose the ones that are that should be implemented. This must be done with consultation with the innovation champion and the innovation team. Once the ideas are chosen for implementation, then the real work of the leader begins.

The executive leader must commit resources of internal sales and marketing to promote the project within the company, build the ground support for the project and create the necessary momentum necessary to bring the new idea into fruition. This takes strong leadership skills: courage and persistence, and an ability to work the political and social process involved in getting others to adapt to innovation. Once the project is successfully implemented, the innovation team must be publicly rewarded to encourage other innovators and rest of the organization. Such public display by the top leadership will send the correct signal to rest of the organization about the value & importance of innovation.

Practice-6: Build the creative talent

Leaders who encourage innovation must also take a personal interest in building the necessary talent required. Leaders must be involved in selecting the members for the innovation team - even in the recruitment process. In addition, the innovation team may require additional training and skill enhancement. Executive leaders must take an active role in all phases of building this creative talent.

Closing Thoughts

Leaders who want radical innovation - must be willing to walk the whole nine yards. Making a statement or sending a memo or ordering a team to innovate will not deliver the desired results. If one looks at the most innovative organizations, (Google, Apple, HP, Toyota, etc), one can see several leaders within these organizations who are driving the innovations. These leaders themselves are not the innovators - but they know how and when to develop the creative talent and that brings about those wonderful innovations.

How Innovative is your Organization?

Organizations tend to lose their creativity and creative energy over a period of time. This is especially the case when the company makes mature products. So older the organization and more mature their products, the less innovative will be the company. There are exceptions but in general this observation holds good.

For example, take a look at the present state of Radio Shack - once it was such a vaunted company. But today it is struggling to survive. Radio Shack has been a mall based retailer and till date it does not have a strategy to effectively compete with big discount stores. The company is unable to change to this new paradigm - As a result it will suffer a slow painful death.
Ford, GM, Crysler - all the big three from Detroit are struggling today. These auto majors have spent enormous amount of money on R&D, and have lots of innovative ideas within their R&D groups - unfortunately these ideas are not being converted into products. Just look at their 2007 model cars and compare them with Toyota or Honda or VW.

When I see these companies, the phrase "Innovate or Perish" sounds very true.
In Indian context, "Innovate or Perish" is also true. Free market and global trade has forced Indian companies to be very competitive. Reacting to this change, Indian companies in general have responded favorably well - and have developed several business innovations to compete with the well heeled global giants. The best example will be Tata Motors (TELCO). The company is facing competition from global giants in every segment of its product lines and the company has responded through innovation: Tata 407 LCV, Tata Pickups, Indica, Ace, Indigo etc.

Among the dying & dead companies in India are those companies that failed to innovate: Hindustan Motors (HM), PAL, Standard Motors, Ideal Jawa, Coal India Ltd, LML, Koday’s, Syndicate Bank, Canara Bank, Vijaya Bank, Indian Airlines, and the list goes on.

It is in this context, a senior executive asked me a question "How do you know the innovation potential of an organization?"

It is easy to see if there are innovations in an organization. But in case of an old organization the potential to become an innovative organization may be there, but it may not be obvious at first. So this question set of a thought process - and developed this eight points to measure or gauge the innovative potential of an organization.

1. Defining Goals: See how clearly the ogranization has defined the goals & objectives. If the current goals & objectives are well defined and is easily understood, then the organization can also clearly define its innovative objective.
   
   
2. Generating Solutions: Pose a problem statement to the members of the organization and see how they generate solutions. If the solutions are novel and instantaneous then the organization has a great innovation potential. If the ideas are the usual ones, then pose a challenging hypothetical question which needs unusual answers.
   
   
3. Choosing Solutions: As a continuation of the above step, ask their management to choose solutions to the hypothetical solution. One can also see if the management’s risk tolerance in choosing the solution.
   
   
4. Implementing Solutions: A good measure of the organization’s innovation capability is to look at thier execution track record. See how the organization has executed various projects in the past. If these projects are successfully executed and implemented, then the organization has the ability to implement & carry through innovative ideas.
   
   
5. Conflict Resolution: The skills needed to reslove conflicts within the organization is vital for an innovative organization. If the organization in the past has demonstrated good success in conflict resolution - and does not have a adverseral approach with its vendors, employees and contract labor, then the organization has the ability to resolve issues internally.
   
   
6. Change Management: Innovation is often accompanied by massive changes needed within the organization and also changes to the business environment. If in the past the organization has successfully demonstrated its ability to manage change, then the organization is ready for innovation.
   
   
7. Recruitment Process: Innovation requires diversity. Having a culturally diverse workforce is a good sign. See how the organization is handling its recruitment process. See if the organization is open to recruiting people with diverse backgrounds. As a thumb rule, greater the diversity - greater the innovation potential.
   
   
8. Organizational Culture: Innovation requires stong individual leadership. The organizational culture which promotes individualism will also wmpower creative individuals and teams. Organizations which have a strict hierarchy in decision making - with the "boss" being the final authority often fail in innovation.

Closing Thoughts

These eight points give a good indicator of the organization’s ability to innovate. Often times organizations - especially old and established organizations are often assumed to be "innovation challenged". But if the organization demonstrates these eight points successfully, then the organization as such is ready for innovation and proably has lots in innovative ideas - but is being currently held back due to leadership issues.