The expectation ‘bar’ needs to be raised from those practicing innovation, I feel the constant need is for those working within innovation; they have this real need to raise their game significantly. Innovation needs organizing but it also needs a better understanding of its contributing parts.

Learning and Education should always start with us.

The earlier we learn, have open interactions and form linkages, the more we will be ready to advance innovation into what it must become: a discipline highly valued for what it contributes with in terms of wealth and growth potential. Our knowledge becomes a powerful enabler to building out our networks, we are valued for what we know.

We need to find the determination to underpin the capacity for innovation, lying within us all, and that comes from knowledge and education through collaborative learning. So what is your capacity for innovation really like within your organization? Is the learning required for innovation set up in structured ways or left to individual learning and experimentation?

Do either structured or informal ways feedback into the organizational learning system to benefit others? Or is the knowledge gained just left ‘resident’ in the person, not being put to that greater use?

Knowledge exchange is the way forward but we need to avoid the easy paths.

Organizations need to move well beyond their lazy reliance on best practice comparison and they need to find better ways to explore emerging practices. But that takes many into the realm of increasing uncertainties, and most people and organizations are not trained for this exploration and experimentation.

It is easy to copy but we often fail to recognize all the context, all factors that went into making it that one specific organizations good practice, and I guarantee these are not yours!

Best practice does have their comparable uses, but it is your focusing on your own unique issues and needs, that you discover your emerging methods within your own organization is the area to focus, for learning and wanting to improve into those that make your practices really work. Then applying, experimenting and learning from novel practices that provide growing confidence in creative thinking.

Also give some thought for the next practice, those practices that prompt reinvention, they unlock barriers.

New practice gives us all the chance to start such totally fresh thinking, they challenge existing paradigms and move you towards considering new business models. We should always look beyond ‘simple’ improvêment and push out beyond existing thinking into new thinking, that ‘see’s’ things differently. It can radically alter your thinking and enable a breakthrough that provides a new ‘strand’ of value.

Organizations constantly anticipate risk by reducing all the variables within risk and play safe with just being incremental. Is that wrong? No, partly but yes far more! We are in a very volitile world, we need to contain risk but we need novel practicies to deal increasingly with these new complexities. Yet as long as we have our reward systems geared to short-term performance, while we measure leadership success the way we presently do, and the shareholder just expects consistent dividends as their part of the (current) equation, we stay trapped in only offering the predictable. We need to learn differently so as to quickly mobilized and force change if it does not meet this immediate aim of resoving barriers and problems we seem to be coming up against (constantly), we head down the wrong path if we stay on the existing one.We need to venture out and be ready to explore, learning and knowledge contribute to us seeking out new experience where we gain within ourselves.

We are not sustaining our organization and we are not advancing ourselves either, we are destroying much in our current approaches if we do not explore and experiement. We do need to focus more on the competence-enhancing not competence-destroying aspects and that comes from learning and acquiring new knowledge and fresh insights.

We need to re-balance the “risk and opportunity” to push our use of new knowledge into fresh innovation that ‘advances’ on the existing. To recognize the difference, we need to encourage knowledge to be ‘freely’ exchanged, and then provide the environment to encourage a re-educating on ‘seeing and exploring’ new possibilities that allow us to grow.

New Knowledge helps us relate to change, we can see more of it coming and are ready to absorbing it.

As the challenges we are all facing today seem to be coming faster at us, increasingly far more complex to decipher and then re-evaluate, then often we wonder how we should respond. To achieve faster response we certainly need to educate the organization more than ever to open up, to explore, to experiment and search for new knowledge understanding.

We need to absorb more, we need to encourage learning more especially to pursue innovation. We need to actively set up learning ways within our organizations to establish their abilities to recognize the value of new, external information (knowledge), to assimilate it, and apply it to commercial ends.

Can we recognize that choosing the tougher pathway of building our own distinct capabilities, learning block by learning block, is the right one to follow? This allows us to build capacities that are ours

Finding our own way relies mostly on us to find the answers, our answers to our problems to solve. We grow by seeking out our knowledge that we need to progress,  as it feeds our minds to find out unique ways to contribute and share.

The post Seeking out knowledge that feeds our innovations first appeared on Building Your Innovation & Ecosystem Intelligence.

The post Deeper read or quick summary? Depends on the time we have. first appeared on Building Your Innovation & Ecosystem Intelligence.

Deloitte has set up different thinking tanks. An exceptional one is Deloitte University Press who publishes some really good original articles, reports, and periodicals that provide insights for businesses, the public sector, and NGOs. They break down their topics into these:

The post Finding knowledge and research to help you learn and adapt first appeared on Building Your Innovation & Ecosystem Intelligence.

How can we liberate that creative energy we have within our organizations, how can we achieve higher engagement?

How can we learn, share and transform the knowledge that is all around us, simply flooding in? How can we translate the data flowing in with the knowledge insights and innovation outcomes expected? How are we going to unleash the creativity that goes with new knowledge?

We need to actively encourage connected minds for value-creating opportunities and knowledge sharing for innovation to flow right across the organization. All the raw data needs connected and engaged minds.

“For this, we need to think about installing a modern engagement platform that has the knowledge and learning as its beating heart”

Why do we need to build this modern engagement platform? Big Data is knocking on your door.

We need increased capacity to ‘listen and capture’ understanding. We need to deploy some filtering and analytics as ‘big data’ becomes increasingly part of our organization’s lives. We need to go beyond analytics.

“We urgently need a system of absorbing and translating data’s raw power to turn these into measurable innovation outcomes”.

We need a structured system where we manage any absorption of data through its different stages of translation into valuable knowledge, to see its potential and then to realize the (new) value out of it for new innovation outcomes.

With all this new data flowing in, you need to turn it into valuable knowledge by capturing all the interactions, offering search and discovery services, organising different events and scenario management and be able to retrace the interaction history. We need to think beyond just data discovery.

“We need to equally build a knowledge-sharing system and this will require as much a robust technology solution as at the raw data front end structured on a scalable learning approach”.

We need to find ways to merge data and information to turn this into ‘actionable’ knowledge and eventual valuable new innovation. We do need to think harder about building beyond analytics into these engagement platforms.

It is here you actually mine the raw knowledge and transform it. We need to absorb in our organization’s capabilities or we will simply overload them with just data.

We need to shift from scalable efficiency to scalable learning.

Firstly and most important for me, is our need to understand the building of learning and experiences through the Absorptive Capacity framework as I think it will have an increasingly valuable part to play in managing data, information and knowledge going forward.

A fair time back two researchers, Cohen and Levinthal (1990) pioneered the concept of absorptive capacity, further defined as the ability of an organization to identify, value, assimilate, and apply new knowledge.

Since their 1990 publication, the concept has been further developed and given rise to many thousands of published papers on this subject.

The value of absorptive capacity is that when organizations have some prior knowledge and awareness they are more receptive to adding new understandings and new ideas. They can build better value from not just the knowledge but the structured application of it.

“As ‘big data’ grows we need to move from potential to realized outcomes”

Organizations that encourage and set about learning consciously and consistently will set about the search for the new ideas coming from all the incoming sources by having this already established learning structure in place. They are far more likely to better recognize new ideas that might lead to innovation.

Exploiting our learning requires framing

I would suggest those organizations that exploit the Adaptive Capacity framework are more likely to develop a deeper understanding of integrating, exploiting and experimenting with any new knowledge. Then they are in that ‘better’ shape to set about placing the data and knowledge gained into a new setting, framing new concepts or hypotheses, to push this knowledge forward into new innovation.

“We need a structure where we are constantly, consciously advancing learning, extracting its value, turning this into valuable new potential and successful innovation outcomes.”

This gaining of continuous knowledge encourages constant learning and this has a positive feedback cycle as it builds the capacities and capabilities for future innovation activity for the increased potential for new value.

Absorptive capacity, once recognized and established as a system, promotes the search for new knowledge that greatly increases the capacity to make the necessary new connections for new innovation to happen.

The ability within our knowledge gathering needs a continuous focus and methodology of approach.

For this to happen, it does need continuous focus, we need to build greater absorption capacity. If organizations take the alternative route of wanting to squeeze every last drop out of the existing innovation activity or research department, organizations over time develop as bad learners, they begin to ignore, assume they have the knowledge and get fixed in their mindsets.

They totally rely on data and don’t apply their knowledge and they fail to translate this into meaningful outcomes.

Those that fail to seek out and absorb, will certainly tend to reject faster and increasingly adopt the “not invented here” syndrome. That can only last for a limited time before ‘innovation decay’ and ‘data overload’ do set in, people become frustrated and finally give up and leave, and when they do just remember all their knowledge goes with them also.

“There is a real risk that all the incoming data can be totally overwhelming, we need to structure a learning system to absorb, exploit and translate for measurable innovation outcomes”

In managing new innovation outcomes we need to apply absorptive capacity as a learning framework

We certainly understand that today innovation is not confined to the walls of one particular company. The world ‘absorbs’ more innovation than we can turn into greater value but we need to attempt to capture this and see if and where its value might lie.

If we agree that most innovations happen outside often self-imposed boundaries then we have to extend outside all our existing boundaries and go beyond. We have to open up our organizations and collective minds to draw in the knowledge so as to allow it to reside, circulate and be translated into new forms of understanding.

Absorptive capacities give us the system on which we can encourage the gathering, understanding and translation of knowledge. It underpins engagement and also helps manage the ‘raw knowledge data’ that needs transforming. We all need to be able to have ‘syncing’ capabilities of learning.

We need a system to capture and allow knowledge to flow, and a strong absorptive capacity has three main outputs which result from the flow of external or distributed knowledge that is allowed to flow internally.

“With the creation of new knowledge and insights, these can create new innovation that then leads to new economic and social value”

Achieving a clear engagement platform for all to gain from

So in our need to achieve a greater engagement from everyone within our organizations we need to recognize the importance of having a ‘modern’ engagement platform available, a central place for scalable learning to take place so we can structure the new knowledge and insights coming into the organization.

As we increasingly need to engage, where outside knowledge combines with our internal understanding and needs, then we do need to think about scalable learning to anchor and then diffuse new knowledge into potentially more valuable innovation outcomes that are measurable and linked back through the learning cycle.

The post We need the engagement platform for translating big data learning first appeared on Building Your Innovation & Ecosystem Intelligence.

I wrote at the time we can have a surprisingly strong influence on impact, as we are in a highly connected world. It is through our organizing and influencing abilities we can all partly determine our innovation future.

I suggested we have nine impact points to consider:

1. What are the triggers to growth
2. How do we deal with our legacy issues
3. What will offer us improving performance
4. The place of tacit knowledge
5. Our ability to build platforms and road-maps to build engagement.
6. The absolute skill of execution
7. How we set about adapting to change
8. What is important to empower and provide trusting environments
9. How should we measure success in appropriate impact.

So let me take this one step further.

For me the book “The Medici Effect” written by Frans Johansson holds an important place in my thinking. “Our breakthrough insights are at the Intersections of ideas, concepts and cultures” and it is the potential of exploring these intersections comes our high points of impact.

Impact has to have reasons, it has to unite and it has to have understanding of what gives it that different ‘impact’.

Our leadership today has tended to forget “positive” impact within their chase of the short-term; they are contributing more “negative” impacts in the pursuit of immediate gain. We need to institute a change in thinking.

Recently a new book came out, called “Moments of Impact” written by Chris Ertel and Lisa Kay Solomon. It is a wonderful book in that it describes the pathway to how too “design strategic conversations that accelerate change”. It tackles the way to deliver complex questions in clear ways and brings back that critical understanding of “empathy” for broader groups to relate to, by listening, detecting patterns and then they can be deciphered in what needs changing.

So our ability to listen, to discern patterns and to seek out new impact points through more intersection points does offer for a real potential to really change the game. These can be at global, organizational, social, competitive and personal levels of impact.

Where do we start to deliver positive impact though?

Besides reading the two books mentioned above let me lay out the purpose in a group of ideas where one feeds off of the other, they mutually reinforce each other. The strength is in the combining forces.

There are a group of ideals I like to offer up as ones to ‘gather around’ for higher impact returns, to ‘enable’ our potential. These are:

• We need to connect new knowledge with increasing good emerging practice
• We need to foster increasingly the trust and identification needed to explore and exploit
• We need to strengthen our alignments and look to offer appreciation more
• We need to build within ourselves more responsiveness and agility
• We need to understand the impact of our actions and decisions and what these really mean to our business, the society and the people within it
• We have to reduce leakage- that constant knowledge loss that leads to depreciation within our performances, we need to constantly renew ourselves.
• We need to sharpen our minds and gain more confidence in the choices we are making, the avenues of our creation to lead towards a new wealth, growth and set of values.

Where I put my focus is on the intersections of combining four value building vectors

Firstly we have innovation

Innovation needs a sharper meaning and focus within our organizations, it needs to be ‘crafted’ far more, and it needs to have a greater alignment and validation. It needs increased facilitation and understanding. We need to change many of our existing innovation practices that we perform into ones that deliver this increasing impact.

We need to look simply beyond ‘just’ innovation in product and services, we have to link this more into our social needs, to design different business models that give opportunity for different organization design, agility and vitality.

We are far too often stuck in the incremental mode and must find ways to get out of this rut or we never achieve ‘real impact’ and move the growth needle to a stronger value point.

Secondly we need to seek out more value-based relationships.
These need to be broader, closer and allowed to be more imaginative in cooperation and outcomes. We need to seek out different ‘pools’ of knowledge and complementary expertise.

We should leverage for all it’s worth our collaborative, network, technology skills to explore and push boundaries for discovery.

We need to have in place some mechanisms that allow for a greater choreographing of specific events and growing knowledge understanding to be able to come together due to this value-based set of relationships so we provide for more moments of impact.

Third, we need to enhance economic value as our business goal

This comes through clarity of purpose, alignment and collaboration. We need to scan our markets, our competitors and the changes constantly happening in our market environments to gather increased insights. We need to hone our selection and design of new solutions by better scanning and investigating,

We need to think of impact in different ways, ways like containment, improvement, reduction, improvements and efficiency. We need to consciously seek strategies that DRIVE growth.

Lastly, we have the application of knowledge to learn and apply

We need to learn how to trade in the new economy, the one called the idea economy. This is the place where we learn, grow, seek out impact and grow. It is the intelligence within our broader capitals, those often called the intellectual capitals made up of social, human, structural, relationship and learning.

It is by finding new combinations within these different capitals we learn to combine resources, capabilities and competencies in new and different ways. To achieve a growing positive impact we need to develop problem-solving abilities, we need to be allowed to visualize far more and to explore these ‘concepts’ more freely.

We need to focus on the creation, exchanging and acquisition of new knowledge. We need to release all the ‘idle capital’ that lies all around us to bring it back into contributing value.

We need to combine these four intersections for seeking out the positive impact.
It is finding the future value-creating points where you can extract the hidden values waiting to be discovered.

We need to promote the “thinking experience” and develop in us all the three parts, firstly of inductive thinking through direct observation, then the use of deductive thinking from analysis and logic and finally, the abductive thinking of determining what could be possible and valuable

We need to relearn how we work, how we think and how we search to combine. Our knowledge learning capacities provide the solutions to the delivery of high impact areas where we all gain in growth and wealth creation.

A time to re-equip ourselves in new ways is way overdue.

It is time we learn how to combine these intersections within our organizations. It is partly a rediscovery but it is far more a growing discovery of what is simply all around us, waiting for the right way for it to be found.

This comes from a ‘greater’ combining of different ideas, seeking out new combination, exploring different intersections that can lead to new insights for breakthroughs for innovation to happen, and then delivering these higher-value impact points we need to prosper and thrive.

The post Combining the higher-value impact points for innovation intersection. first appeared on Building Your Innovation & Ecosystem Intelligence.

We can ‘fall over these ideas’ or we can find ideas or concepts through explicit search. Then to translate these and turn them into something new and different we need to have established some sort of diffusion and dissemination processes.

Having this established as a sustaining system provides an essential source to building organizations capabilities and competencies.

The more we work external knowledge the more we potentially enhance and multiply its value from a single idea into the potentials for multiple innovations. Having a systematic framework can be dramatic for generating new knowledge and gathering ideas for new innovation potential.

Throughout this post I’ll link into previous posts that you might like to explore but this is not necessary.

The issue is how we set about adopting and adapting new knowledge.

Each organization we work within collects its knowledge in different ways. Each has special characteristics, systems and ways to set about doing this. Often finding the knowledge is highly random. Many cases the knowledge we are searching for already resides in the organization, sometimes when we go outside we find one of the paths of this knowledge actually leads back inside our own organization. When this happens it leaves us puzzled on how and why this happens.

A long time back two researcher, Cohen and Levinthal (1990) pioneered the concept of absorptive capacity, further defined as the ability of an organization to identify, value, assimilate, and apply new knowledge. Since their 1990 publication, the concept has been further developed and given rise to many thousands of published papers around this subject.

 The value of absorptive capacity is that when organizations have some prior knowledge they are more receptive to adding new understandings and new ideas.

Organizations that encourage and set about learning consciously set about the search for new ideas and by having this already established ‘learning’ are far better at recognizing new ideas that might lead to innovation.

These organizations develop deeper understanding of integrating and experimenting this new knowledge and set about placing it in a new setting, concept or hypothesis, to push this knowledge forward into new innovation. They are consciously advancing learning.

This gaining of continuous knowledge encourages constant learning and this has a positive feedback cycle as it builds the capacities and capabilities for future innovation activity. Absorptive capacity, once recognized and established as a system promotes the search for new knowledge that greatly increases the capacity to make the necessary new connections for new innovation to happen.

For this to happen, it does need continuous focus. If organizations take the alternative route of wanting to squeeze every last drop out of the existing innovation activity or research department, organizations over time develop as bad learners, they begin to ignore, to assume they have the knowledge and get fixed in their mind sets. They fail to absorb, they tend to reject and take on increasingly that “not invented here” syndrome. That can only last for a limited time before ‘innovation decay’ sets in, people leave and the knowledge often goes with them also.

The problem also can lie in too much knowledge

The other vital part of understanding absorptive capacity is its terrific benefits for diffusion and dissemination of ideas. As the knowledge we glean from outside comes inside it can confront, it can challenge the “what we know”. It is at these times we must stop the initial reaction of “let’s reject this” and allow time for a deeper evaluation, making sense from this different perspective. Looking through alternative lenses helps here.

Organizations are always in a hurry. They design innovation pipelines to get narrower and narrower. They want to quickly dismiss ideas that don’t fit in their norm, the system is poorly equipped to handle different, more challenging thinking, yet this is the very place radical, breakthrough and disruptive innovation ‘sits’. Organizations must find better ways to resist allowing knowledge pathways to become narrower before the knowledge, insights and potential connections have been well absorbed.

Allowing a greater access to new sources of knowledge, discussing emerging innovation concepts by diffusing the understanding does allows for increasing those ‘real’ connections where something really different beyond the existing can be shared as emerging.

It is allowing the absorptive capacities to fully work through the knowledge gained, to improve your capacities. Providing innovation and your ideas and concepts extended time, you can provide for different connection points for exploiting innovation impact even more. If you allow for this additional time to explore and discuss specifically in the search for those more radical connections and outcomes, you have the potential for far more.

We do need to allow knowledge inside our organizations to flow more openly

We need to stop the ‘cognitive blinders’ that constraints the diversity of opinion by allowing concepts or knowledge to be more broadly seen and worked upon, shared more openly. Make innovation far more open inside the organization as well as outside. Practice a more ‘holistic’ open innovation is highly valuable for pushing beyond the current incremental approaches, simply because knowledge is only residing with a few chosen people. We do need to avoid all the cognitive traps around.

Let’s really adopt open innovation, internally as well as externally. It is allowing not just new knowledge in but to allow this new knowledge to flow and be absorbed and then can be better translated into new application or worth. There are significant roadblocks within open innovation today that need resolution.

The art of harnessing knowledge lies in our intellectual capital

When we are chasing after new growth we do need to employ all our capitals. Today the dominant capital is financial, it rules the others and that stifles knowledge, innovation and the potential for being different. Financial capital tends to be based on past numbers or immediate concerns, it struggles with the future. It wants to reduce time, risk, inefficiencies and replace this with always improving the rate of return on the financial capital.

We need to think about a better way to judge ‘rate of return’ and that should be on recognizing the critical importance of the other capitals, those that make up the intellectual capitals. Broadly these fall into human, structural and relationships. They are the capitals that make up the value and provide the new generating value that are embedded in the personnel, organizational routines, and network relationships. They provide fresh capital through innovation and strategic renewal.

There is an incredible set of connections between all the parts of intellectual capital, absorptive capacity and knowledge that make for new innovation and give us the real chance of value creation. I’ll discuss this set of connections further in a subsequent post.

Thankfully some organizations are becoming enlightened

Knowledge and Innovation are engaged at the ‘hip’, they are inseparable. To separate them both would die, one feeds the other. It is through the application of approaching them through a system like absorptive capacity you can generate the flows needed to keep our search for new ideas stimulated, our innovations pushing forward and allowing others to benefit and build on this knowledge further.

If you have not considered the place for absorptive capacity and its value, it is high time you did. It might be your missing link.

The post Absorptive Capacity, Knowledge Management and Innovation first appeared on Building Your Innovation & Ecosystem Intelligence.

I enjoy a lot of what Steve Denning writes and his series in nine parts on “Why Amazon Can’t Make a Kindle in the USA” (start here http://onforb.es/oK1Cxh ) has really hit home on the seriousness we are facing in Western countries over innovation capabilities.

He mentions the “decades of outsourcing manufacturing have left U.S. industry without the means to invent the next generation of high-tech products that are key to rebuilding its economy”, as noted by Gary Pisano and Willy Shih in a classic article, “Restoring American Competitiveness” (Harvard Business Review, July-August 2009).

The pursuit of profit is killing innovation
Last Friday, 18^th November, he followed this series of articles with a further one on a talk given by Clayton Christensen entitled “How Pursuit of Profits Kills Innovation and the U.S. economy” (http://onforb.es/rZ7l8U )  and that so much of our basic thinking taught in business schools and promulgated by consultants is partly the cause.

So I was faced with a ‘double sit up’ not a double latte, of Denning and Christensen, and that did more to wake me up than the caffeine intake I was having.

The bottom line is that major segments of the US Economy have been lost, in many cases, forever and that equally applies in Europe.

On the other side of the Pond- the EU and its Innovation Union.
Máire Geoghegan-Quinn, Commissioner for Research, Innovation and Science and Vice- President Antonio Tajani, responsible for industry and entrepreneurship have said: “As we emerge from crisis in the teeth of fierce global competition, we face an innovation emergency.

If we do not transform Europe into an Innovation Union, our economies will wither on the vine while ideas and talent go to waste. Innovation is the key to building sustainable growth and fairer and greener societies. A sea change in Europe’s innovation performance is the only way to create lasting and well-paid jobs that withstand the pressures of globalisation. ”

With an ageing population and strong competitive pressures from globalisation, Europe’ s future economic growth and jobs will increasingly have to come from innovation in products, services and business models.

This is why innovation has been placed at the heart of the Europe 2020 strategy for growth and jobs.

The long list of ‘must do’s’ suggested within the EU recommendations all are shouting after the horse has bolted from the barn. In both Europe and the US we are losing our capacity to innovate as we are rapidly losing our knowledge and experience built up and we are facing a ‘knowledge deficit’ exported over many years to developing countries.

This will place these countries even in more a dominating position in years to come.

We may be in a series of financial crisis but the ‘knowledge deficit’ one will be even more damaging to our future prospects.

The real crisis is not the current financial one; it is knowledge application for job creation.
We are simply losing our knowledge to create things close to home we are being ‘forced’ to seek global collaborations as knowledge simply is found and extracted where it is best served. How can we reverse this for many nations needing revitalization as knowledge leads to jobs. For many, we need a massive bailout plan, not for our financial debts but for our growing knowledge deficits.

Any declines, closures and more importantly, as the business firms continue to push to go overseas and chase low cost manufacturing places simply sets off a powerful chain reaction. Expertise is lost, advanced research suffers as more trained people seek meaningful work that relates to their skills and qualification overseas, increasingly in countries outside the US or Europe.

In manufacturing, in significant decline in Europe and the US for many years, those daily interactions between process and engineering leads to new design, fresh thinking to solve problems so knowledge builds up in locations closer to the manufacturing point and then, more businesses are ‘forced’ to locate closer to where the action is. As Pisano and Shih state in their HBR article “

In the long term an economy that lacks an infrastructure for advanced process engineering and manufacturing will lose its ability to innovate.”

The argument is we adopt a more strategic approach to innovation.

This I couldn’t agree more with. Innovation must become more of the overarching policy objective, it needs to go well beyond leveraging our strengths, and it needs to draw back in lost knowledge before it is too late.

We need to reverse the outsourcing policies driven by short term gain and not accounted for in the total ‘cost and benefits’ that society eventually pays.

We need to alter not only the measuring criteria spoken off with Clayton Christensen’s phenomenon of “driven by the pursuit of profit” in the above mentioned article, it lies in calculating a different ‘rate of return’ (IRR) so well put within this article.

This last article from Steve Denning (re Pursuit of Profits) sums it up

“Thus when a firm calculates the rate of return on a proposal to outsource manufacturing overseas, it typically does not include:

• The cost of the knowledge that is being lost, possibly forever.
• The cost of being unable to innovate in future, because critical knowledge has been lost.
• The consequent cost of its current business being destroyed by competitors emerging who can make a better product at lower cost.
• The missed opportunity of profits that could be made from innovations based on that knowledge that is being lost.

The calculation of the IRR based on a narrow view of costs and benefits assumes that the firm’s ongoing business will continue as is, ad infinitum. The narrowly-defined IRR thus misses the costs and benefits of the actions that it is now taking that will systematically destroy the future flow of benefits.

The use of IRR with the full costs and benefits included would come closer to revealing the true economic disaster that is unfolding”

Different mindsets and different solutions are needed for a better Innovation Union.

At a time when the external environment is highly dynamic, businesses that exist today (irrespective of where they locate) may be gone tomorrow. To survive in this world, a different kind of mindset is needed and if I may say- imposed.

The traditional ways we see our business, in isolation of the dynamics going on around us where profit maximization driven by management’s preoccupation on efficiency at often the cost of real innovation. The drive for cutting costs to meet the quarter and thus losing more knowledge that resides within, and then the consistent outsourcing, this relocating chase, is an eventual death-spiral for many economies.

Whole communities that had previously built around ‘knowledge clusters’ suffer and go rapidly into decline and over the long run, simply die and fade away, not relevant any more- gone overseas!

Our continued loss of knowledge, with our continued uneven recognition of the real value of innovation, will continue to feed this death-spiral unless we can somehow reverse these trends.

Moving more knowledge and the associated assets away from the US and Europe might seem sensible for today’s managers and financial backers but this is exporting knowledge and experience and this makes up innovation, it is where improvement, breakthroughs and future competitiveness come from.

We are rapidly losing know-how, it is what is happening that give me greater cause to worry for our long term prospects than the financial crisis. We are losing our competitive positions as any growth in the economy is in investing in knowledge for people to innovate.

How far can we go on this slippery slope as money does quickly follows where knowledge resides, and this is rapidly moving overseas, located increasingly in Asia.

Until we recognize this, we can ‘shout’ long and loud but the (knowledge) horse is fast galloping away from us and we will be left with simply pockets of incremental innovation, while others lead, we will simply follow along in their dust.

The post Innovation is simply in crisis near you. first appeared on Building Your Innovation & Ecosystem Intelligence.