When thinking about the future of innovation, it is instructive to look back, since it shows that significant innovations have occurred in the process of innovation itself. Companies moved from inside-out innovation, where firms build on core strengths to conquer adjacencies, to open innovation. P&G is a prime example of this deep trend. In the past, nearly all innovation came from inside P&G; now most new innovations are sourced from the outside using an approach called "connect and develop." This trend will continue plus a few others highlighted below.
Google's approach is a prime example "quantum innovation," which is defined as out-of-the box thinking that is disruptive to competitors and even the company itself. The paradigm shift underlying moonshot innovations seldom fits the current business model and organization's structure. It usually starts with a very broad sense of purpose and audacious goals, such as Google's desire to organize the world's knowledge or Tesla's desire to make electric cars commonplace. This is what entrepreneurs like Richard Branson (Virgin), Elon Musk (SpaceX and Telsa), Sarah Blakey (Spanx) and John Mackey (WholeFoods) excel at. Cancer Treatment Center of America is doing this as well by re-imagining the world of cancer care, with the patient placed foremost in everything that happens.
New Organizational Forms
The traditional 9-to-5, Monday-through-Friday work environment of old is giving way to many new organizational forms. We now see virtual companies; internal and external networked partnerships (think Uber and Airbnb); and companies that spin off new startups. Other new forms include ambidextrous organizations, which can focus on existing products while also keeping an eye on creating new products or markets, and front-to-back companies, which place the customer at the center of all of their activities. Finally, there are "sense-and-respond" companies such as Zara, a retailer that quickly translates fashion trends into a shipment of new products twice a week. This flurry of innovation in organizational forms will continue to be fueled by technology and changing approaches to work-life balance.
Globalization and outsourcing have led to "reverse innovation." The world is no longer a one-way outsourcing street moving from West to East. While the West still exports many high-end products and services to developing nations (and still sources cheap labor), innovations in emerging markets are now flowing back to the West as well. This is happening with Brazil, China, and India across such diverse fields as biofuels, IT, and medicine. New approaches to making cheap artificial hips in India, for example, are finding their way back to the U.S. and Europe. Plus, reverse innovation often means frugal innovation, which is welcome in a world where access to capital, land, labor, and natural resources has become a pressing strategic business issue tied to sustainability.
Many breakthroughs came out of a sequence of mistakes or failures. Clearly, not all mistakes are bad; many are portals of discovery. Adopting a more tolerant mindset about mistakes opens the way for testing new processes and projects, even ones that may not look promising initially. Many successful innovations do not become so until they are nourished at an early stage and endure many setbacks, failures, and adjustments. As Honda's founder noted, "Success is 99 percent failure." Rather than wait for brilliant mistakes to occur by happenstance, cutting edge companies may actually encourage deliberate mistakes, defined as testing beyond your belief system--just to see. Such experiments cannot be justified using rational cost-benefit analysis. Instead, they require leaders and a culture that views mistakes as portal of discovery.
How to Innovate for the Future
When the world is changing at breakneck speed, innovation becomes an organization's most important weapon. History offers a few key lessons about how to wield that weapon in the future:
- The world is a big place: don't limit yourself to just innovation from within your company.
- Aim high: otherwise, incremental innovation can cause you to miss out on breakthrough opportunities.
- Experiment with new organizational structures that are agile and horizontal.
- Practice frugal innovation and learn from the bottom of the pyramid as well as top.
- View mistakes as portals of discovery: every failure has learning as a silver lining.
- Cultivate leaders who thrive on uncertainty, take the long view, and champion change.