Example of dominoes move

Example of dominoes move (Photo credit: Wikipedia)

Funding is nowadays, probably, the most important issue related to innovation because without funds it is impossible to produce any serious innovation. I know that saying that creativity is the mother of all innovation is more politically correct than what I said before, and we can find a lot of stories about great innovators that have produced large corporations starting at home. This is only a half truth. For instance, what today we know as Apple is not only the result of two people in a little garage, although it could sound very romantic, but the result of a lot of money dedicated to research and development too.

People like to hear stories about a creative David that can destroy a rich Goliath, but this is only a myopic view of what innovation means. Of course, creativity is one of the fundamental basements of any innovation, but where creativity produces more value for the entrepreneur innovator is finding the way to reduce the needs of investments in order to provide a new product. What I want to mean is that creativity applied to innovation is very different to paint a picture. Jobs and Wozniak did not need to use their creativity to imagine a current tablet, but to imagine a product attractive enough to be sold in a new and unknown market that can be manufactured with their very limited resources and the technology of that time.

One of the main problems of large corporations is their complex structure. There can be a far distance between the true creative innovator and the financial manager. As the chain of middle managers between the investment decision maker and the idea producer increases the probability of funding a good idea decreases, mainly due to two reasons. While the idea moves upwards managers understand worse the technology and the utility for the customer of that idea, and, on the other hand, while the decision moves downwards managers know worse the value of the project related to other possible investment decisions.

An excessive structure is one of the main enemies of innovation. Modern innovative companies try to establish a flatter and more flexible organizational structure. This is one of the reasons why it is very different to manage innovation in a new company than in an old one. An innovation manager cannot act directly on the structure of the company because Human Resource Managers usually are very jealousy of their own task. In old companies, they are accustomed to think in terms of effectiveness of the command from the senior directorate. When you do not think in terms of complexity, effectiveness is seen as something that can be got increasing the number of elements. However, thinking in terms of complexity, any link between elements can have associated a certain degree of uncertainty. Managers are people with different competences and objectives; they are not similar hard discs where you save the same information. An excess of uncertainty produces ineffectiveness instead of effectiveness. This is especially true in the case of innovation, the information flow can be good enough for typical microeconomic variables with a certain excessive old structure, but it can be very bad when we are talking about technology and novelty.

There are two ways to cope with this problem. First of all, we can redesign the structure of the company making it simpler, but this is not so easy on the short-term. Structure is not only a product of an organizational design. Organizations are as live beings and evolve. The structure of an old company is the result of many years of little changes to fit the environment, and while time goes by, the structural changes tend to become permanent. A second option is to introduce additional structure to manage innovation. This is not necessarily an increase of complexity, if the uncertainty of the information flow is reduced. But how can know if this is true? There is only a way to do it: measuring complexity before and after the organizational change.

The experience shows that the second way is not the best way to cope with this matter; however, it can be a proper solution if we look at the long-term. We can introduce additional innovation structure to improve innovation management with the aim of producing a simpler one on the long-term. Innovation structure can provide training in innovation affairs for the managing staff, improving their competences before introducing organizational changes to provide a simpler structure. The success of this kind of strategy is related to the target of the action. If the aim of the action is changing the old structure for a modern and innovative one, we are probably at the proper way, however, if the aim of the action is using innovation as a make-up, preserving the old one we will be increasing the complexity of the company and wasting a lot of money, providing a lot of knowledge about our own competences to the innovation managers that finally can be working at a company of the competition.