Walesbusiness.org

Companies that involve staff in the innovation process appear to do better

INNOVATION and creativity in the workplace are essential in today’s demanding global economy. Consumers demand higher product features, high quality products and services as well as better value for money. Therefore, businesses need to continuously innovate in terms of what they offer the market.

However, businesses often find it difficult to develop a cogent innovation strategy. There is no simple solution. However, adopting certain leadership and business practices can certainly increase the likelihood of developing a more innovative business.

The thesis that I have been working on over the last few years has explored the links between leadership styles and practices that are based on encouraging and developing employees, and innovation. The research aims to develop a much clearer picture of what business leaders and top management teams can do to develop their organizations and become more innovative. A large-scale research project conducted by McKinsey & the London School of Economics, in 2007, suggested that the top 25% of manufacturers in Europe regularly adopted and implement contemporary management practices and processes.

The adoption of contemporary management practices, a major part of process innovation as it’s often termed, is seldom given the same attention as product innovation. However, process innovation or the adoption of new procedures and processes can often lead to businesses becoming more efficient and more effective in delivering their product and services.

A report by the Advanced Institute of Management, in 2008, argued that businesses should be “ambidextrous” in terms of their innovation strategy, that is adopting both product and process innovation strategies and practices. The research that I have carried out in Wales has shown that some of the most successful small and medium enterprises (SMEs) have put in place processes and practices to constantly review the way they deliver their products and services (process innovation) and systems to review and develop their product offering (product innovation).

The first part of my research involved sending a questionnaire to small and medium-sized enterprises (SMEs) across South Wales to find out more about their innovation practices. The businesses who responded were no strangers to innovation, with more than half having developed new products or services in the last year, while almost 70% of respondents advised they had improved processes or working practices, and half stating that this contributed to at least 10% of their companies’ growth in the last year.

However, the majority of the businesses surveyed did not have a formal policy when it came to reviewing products or processes, with 60% preferring to adopt an ad hoc approach.

The study found that innovative businesses have leaders who create an environment within their business that encourages new ideas and gives people the opportunity to try new things.

The study also found the greater use of more vision based leadership styles, like transformational leadership, the higher the innovation score of the businesses was likely to be. The study found that business leaders’ that tend to develop and practice more vision based and distributed leadership practices are likely to benefit from higher levels of innovative activity within their organizations.

It found a link between contemporary leadership styles like transformational and distributed leadership, and innovation. Transformational leadership includes: inspirational motivation, intellectual stimulation, and individual consideration. The majority of businesses questioned were practicing some elements of transformational leadership. The survey revealed that 60% of respondents developed their company vision together with employees and 79% encouraged employees to make suggestions about improving products and processes. Just over half of the businesses questioned recognised the importance of individual development, regularly using coaching and mentoring and encouraging continuous professional development or other learning.

It was also interesting to find, from the data, that the size of the business had little effect on the level of innovation activity. Therefore, I would suggest that businesses of all sizes can become more innovative as the size of the business did not necessarily affect its ‘innovativeness’.

Some of the most successful businesses had developed and implemented innovation practices and processes and regularly encouraged staff to participate in innovation initiatives that reviewed the business processes and its product offering.

In many respects the research supported the assertions made in the Advanced Institute of Management report, as it suggested that firms that developed and adopted both formal and informal mechanisms and processes to regularly consider both product innovation and process innovation tended to be more successful, than those that do not.