Innovation Large and Small, for Young and Old

Q and A with Prof. Antonio Dávila

01/06/2013

Antonio Dávila

Innovation is the sin qua non for staying on top and one of the key ingredients of business success and social progress. But innovation is not just about revolutionary ideas transformed into life-changing products and services. Rather, it can take root in anything from the minor product modification to business processes. When properly managed in all of its versatility, innovation offers business and society a wealth of opportunity.

A Barcelona native steeped in Silicon Valley culture, Antonio Dávila, IESE Professor of Entrepreneurship and Accounting and Control, helps managers and organizations explore how to make the most of innovation for growth and profitability. He discusses some of the highlights of his research with Impact@Work.

In your book, Making Innovation Work you outline seven "rules" of good innovation management. These include exerting strong leadership on portfolio decisions, encouraging truly significant value creation, and breaking down a company’s cultural barriers to innovation. How do these "rules" play out differently in small versus large companies?

Start-ups and small companies have one particular advantage over large companies. Because of their size they are faster, more nimble. They have less bureaucracy and are more directly in touch with the market. Processes are faster, so you can experiment more often and more quickly.

Innovating is more demanding to carry-out in larger companies. There are many more factors to take into consideration. To begin with, taking a gamble in a large company is much harder. Also, you have to go through the proper, highly structured processes to try something new; individuals are not single-handedly coming up with ideas and putting them into action on their own.

But one advantage in large companies is that you see innovation in many different forms. Here, innovation can be more incremental; it can be about continuous improvement or spur small technological changes or a shift in your business model. These are not necessarily the radical, ground-breaking ideas, which are far riskier and difficult to manage in large companies, but they are very valuable aspects of innovation nonetheless.

Innovative ideas and perseverance are not enough for start-ups to succeed. In your research for the World Economic Forum of hundreds of start-ups you outline eight critical growth strategies that can help see them through the roller-coaster ride of growth and set-backs. What do your findings reveal about the different paths to growth and what successful start-ups have in common?

We often associate start-up with technology, but in fact in our study we saw a broad range of successful ventures all over the world and in many different industries. From a new mining venture in Australia that required a huge initial investment in infrastructure and extraction, to an Indian florist enterprise with international reach. And of course, everything in between including the creation of back offices in developing countries.

What became apparent is that successful companies come in all shapes and sizes and succeed because their strategy hits the mark. One size certainly does not fit all, and we identified eight strategies. These include developing a new product in a new category or an existing category, the redesign of business value chain, aggregation of existing players, the "wave," and others.

Despite the range in size, industry and growth strategy followed to succeed, most start-ups’ success is based on the same key ingredients: the quality and viability of the idea, solid management of its execution, a highly talented team, and of course, a good dose of luck.

Innovative and entrepreneurial endeavors are essentially carried out by highly optimistic people. Given today’s less-than-optimistic climate, is innovation still viable?

Innovation is a bit more challenging in today’s context. Even though "necessity is the mother of invention," in the end resources - especially talent and financial resources - are fundamental to innovation. Necessity may spawn one good idea in 100,000, but often this context does not produce anything revolutionary, rather short term solutions for pressing problems.

However, the context of austerity does not mean that innovative endeavors are put completely on hold. A time of crisis is a time of opportunity for some investors. With less people investing, there is the potential for greater returns for those who identify a solid, viable enterprise. You can think about investing in innovation or entrepreneurship a bit like the real estate market: If you invest when the market has hit bottom, then you have a better chance of making a greater return.

In "Goldenworkers: Needs and Trends Analysis Report" a recent study for the European Commission, you explore how older workers can continue to contribute actively and productively to the labor market beyond the current retirement age. What does your study reveal about how they will manage to do so and the types of policies and innovations that can help them sustain or improve their productivity into later years?

In this study we tried to envision what the future for older workers was going to be like. Given a decreasing birth rate, increasing life expectancy and the resulting pressure on pension and social security systems, our career life-cycle will be longer in the very near future.

Given these changes, we tried to understand how older people would fit into the labor market, which profile within the demographic will be in a more precarious situation in their later years, and what types of policies and ICT innovations could better address their needs.

Our study revealed that older workers indeed have many talents that their younger colleagues do not possess. For example, they are generally better at keeping their emotions in check under stress, processing complex problems in extreme situations and using language.

Depending on where the workers fell on our matrix – with level of education on one axis and size of company on the other - there are corresponding policies that can help them continue to participate in the labor market into later years. For starters, we need to renew and adapt the traditionally rigid approach to a career life-cycle, i.e., that we start full-time work sometime in our twenties and continue working at the same intensity until the "official" retirement age. "Goldenworkers" may prefer a salary decrease and in return a shorter work day, more frequent breaks throughout the day or longer vacations.

Discrimination is another important barrier to overcome. All workers should be eligible to participate in corporate training programs, not feel liked they are "parked" at age 60 since they are perceived as having lower productivity.

Life-long learning, especially training in technology, is particularly important. The digital age is extremely intimidating for older workers, but nothing that cannot be overcome with training and user-friendly technology. Both public policies and corporate HR policies can help in this regard, as will user and age-friendly ICT tools.

Fortunately, ICT tools are continuously evolving and improving. Many companies are also developing new software for disabilities, including vision impairment. So innovative efforts are already moving in the right direction to help this demographic overcome their fear of new digital technologies and avoid marginalization from the labor market.