How HR can support innovation (Guest commentary)

As firms get smaller, HR needs to leverage market intelligence

Canada’s future economic prosperity rests with its ability to innovate. Organizations need to leverage market intelligence to introduce high-tech products and services that cannot be easily replicated and increase the frequency and reduce the cycle time of new products and services.

Simultaneously, organizations are getting smaller as they outsource or offshore the low-value part of the business and leverage low-cost production internationally.

Since most HR internal headcounts are rationalized on some ratio of HR resource per total company headcount, the value HR demonstrates in the future must be different because organizations will be leaner and a lot more self-reliant. More importantly, most new managers emerging from university or college, especially MBA programs, have a better understanding of leadership and coaching. The fundamentals of people management and organizational behaviour are generic and integrated into most specialized degrees and diplomas. Therefore, the importance of having many internal HR resources dedicated to people management issues will dwindle.

The opportunity ahead for HR, then, is to focus on the innovative and intellectual resources that drive sustainable innovation. These resources revolve around the intersection between: innovation as a strategy; change management; differentiated systems; and internal and external collaboration.

Sustainable innovation must be central to an organization’s strategy if it wants to remain competitive. However, most business leaders think about innovation in the form of product enhancements, continuous improvements and business process improvements. These approaches are incremental improvements designed to compete on products and services.

However, in an age of globalization where converging technologies are dramatically transforming every industry, a company’s sustainable competitive advantage is no longer between products and services because these are easily replicable. It is the ability to fundamentally rethink and innovate the way we do business that will set an organization apart.

These capabilities include the ability to seek out new ideas, think and act strategically, analyse cause-and-effect variables that extend beyond traditional horizons, think and act cross-functionally and the ability to translate an innovative idea into a financially viable solution. HR can play a leading role in measuring, diagnosing and developing these capabilities through an innovation index, for example, instead of conventional employee satisfaction surveys. An innovation index may measure the rate of new product introductions and the percentage of total sales generated from different products. It could also assess the rate of new ideas generated by employees and how these new ideas are evaluated and translated into action plans. Moreover, it could also show whether the reward and recognition systems reinforce behaviours that lead to generating and commercializing innovative solutions.

Change management can help facilitate fast execution of any new or changed business strategy by identifying and leveraging the internal influence network within the organization of early adopters, change agents and laggards. For example, by understanding which employees influence each other positively and negatively, and their communication styles, HR can play the role of organizational sociologist to target communications and change management solutions to the early adopters in the internal influence network map to increase the speed of early adoption and execution.

Faster execution of an innovation strategy also requires that HR customize its systems to different parts of the business. Since customer segments and their market conditions change frequently, the organization’s capabilities and processes must be differentiated and agile to respond to these changes. HR can play a significant role in the execution process by adjusting the performance metrics, its reward and recognition systems and succession plan to a business unit that serves a different market segment. Efficiency metrics in a performance management system makes sense in a part of the business that is the “cash cow” but not in an area that is trying to incubate new products and services in new market segments. Rewarding speed of commercialization or percentage of revenue or market share derived from new product introductions within a certain time frame is probably more appropriate.

Internal and external collaboration breeds innovation. Internal collaboration can be exclusive to a new product development department or it can permeate the whole organization so the masses equally contribute to innovation. Collaborative technology that democratizes the innovation process can help enormously.

Great ideas are not the exclusive domain of the “chosen” talent or the upper echelons of organizational hierarchies. Collaboration should also occur between the organization, its customers and suppliers, and computer software can provide the link if the organization’s culture is committed to an approach that democratizes innovation. Globalization doesn’t just lead to leaner supply chains, but rather it also affects the geography of innovation so organizations also collaborate with external non-traditional resources to create value.

HR can play a supportive role in creating collaborative networks through spearheading cross-functional and cross-level approaches to problem-solving, championing collaborative technology, initiating contact with external “idea” resources like amateur scientists and consumers and implementing bonus and recognition systems that reward everyone involved.

HR can take advantage of the opportunities ahead by stepping outside its traditional domain and creating the mindsets and systems that drive innovation.

Malcolm Gabriel and Pierre Robitaille are seasoned professionals in HR management. They can be reached at (416) 735-0504.

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