I clearly believe we do need to understand the strategic importance of the make-up of our innovation capital, yet presently nearly all our corporate boards lack any clear line of sight into this. Why?
Not understanding what makes up the capital is holding innovation back. We are actually constraining growth through this lack of understanding as it makes us all cautious of the future.
If we don’t fully understand the make-up of all our capital should we invest or divert resources to delivering on it? I think it is high time we did.
So what makes up our innovation capital and why is it important to know?
Should we care, does it matter? I would argue it does, increasingly so. Within the innovation capital lies the future of the organization and holds one of the real golden keys to the sustaining performance of the company, or not.
The generally accepted view is that Innovation boosts a company’s earnings, speeds growth, ensures an advantage over competitors, and greatly appeals to shareholders. Put another way, businesses that deliver earnings growth based on a continuous stream of new products and services and new ways of doing business capture the innovation premium.
So tell me, why are we seemingly so bad at identifying what actually makes up our innovation capital, apart from some sweeping generalised statements attached in the accompanying comments within the financial result statements?
We need to find a way to unlock this as we are constantly being pushed for new business models that create, deliver and capture value. It is in the entire make up, the value structure around the offering, and this is made up of distinct capitals that drive the new business towards success.
How do I define innovation capital?
“Innovation capital is the sum of all that promotes the development and changes required for achieving innovation outcomes, within one organization or its broader networked environment, for market place advantage”.
“These are made up of the resources, processes, knowledge and capabilities, that are constantly evolving and highly dynamic to build greater innovating capacity.”
We are searching for what makes-up and provides the true value creation in successful outcomes; in final product, services, knowledge understanding or executing within further business models.
We need to understand what makes up innovation capital far more in the future.
Mostly this innovation capital comes from the different intellectual capitals, those unique sums within each organization, of knowledge made up of our human assets, organizational structures and social partners making up the organizations eco system.
It is when we bring these together in different, evolving ways we transform the knowledge into new economic value, through this organization and personal actions. Financial capital cannot do that; it can only fuel the other capitals, it lies idle until we employ the other capitals.
The hard part is valuing innovation capital as these are constantly being renewed and evolving.
Innovation capital is a set of renewal capabilities and understanding what these are is critical but today is not well understood. We find it extremely difficult to report clearly on the makeup of our innovating capital yet investors are increasingly attributing more to the intangibles, based on limited knowledge.
Determining and being able to articulate the value within these capitals would be truly valuable and would help us differentiate between those that are static or simply repeating, and those that are dynamic, ever evolving, searching for new knowledge.
How can we capture and articulate the innovation capital?
I believe we can. One of the big key’s to identifying innovation capital lies in its stocks and knowledge building assets and their uniqueness in the resources that make this up, in constantly evolving and learning, these are the a real strategic asset.
Leveraging the ‘stock’ of our innovation capital can render different productive value outcomes.
It is our ability to ‘mix and combine’ the innovation activity that it consists of, in all the decisions and activities that occur, from the recognition of a need or a problem, through research, development and commercialization of an invention into successful market outcomes builds the capital.
Knowing this make-up of our innovation capital provides us the potential for driving our future growth. Identifying the real capital that will drive and sustain real advantage, providing the future potential for new wealth should be the essential way we measure organizations performance, not on past financial performance or personal perception, built on limited understanding.
We need greater insights into all our organizations ‘collective’ capitals
It is the ‘combination effect’ of leveraging all our capitals that yields the real lasting sustaining values. Today, we are lost in numbers and details, financials dominate most discussions, we need to encourage exploration into the make up of all our capitals.
Until we can peer under the organizations ‘hood’ a little more and understand the make up of all the capitals then we will continually fail to understand the real innovation activity that generates the value.
We need to know more on what can and does ‘drive’ future performance, what lies at its core or is being built-in for new capabilities and capacities to innovate, looking to secure the future.
If we had a better understanding of the make up the innovation capital, and what makes up the critical enablers, then we are better positioned to qualify and even quantify a more confident future, based on the capital that ‘feeds’ this future potential.
