September 2011: Innovating an exit for the crisis

In a crisis time, we are always searching for solutions and we can think that innovation is the best option. This thought is only simplifying the problem.

A crisis is a period where the management needs are overcome by the management capabilities. A system under control is not in crisis although its performance was worse.

Innovation, in general, introduces complexity in the business. For instance, when we start a new line of products, we will need additional resources to commercialize the new products and we will make additional management efforts. However, the final effect can reduce the complexity of the whole business when the line reaches a continuous and sufficient sales volume. In example, the new incomes can reduce our need of credit, and can reduce the management efforts related to financial resources.

Following this reasoning, the only interesting innovations are those ones that provide a better control of the business improving its manageability.

At this point, someone could think that I am reinventing the wheel, but in justice, this exposition is improving it. I am providing a formal way to analyze the innovation process based on complexity analysis. This focus can explain all kind of innovations, from product innovation to organizational one.

But, we should come back to the initial issue, how can we manage innovation to avoid a crisis? Innovation management has had traditionally two different approaches. I am going to analyze them in brief.

The first one considers innovation as a result of the technological development process. Then, in order to manage innovation we will need to fund R & D projects, to contract an engineer as innovation manager and impulse the technological development process.

The second one considers the process as a way to adapt the company to the markets. This strategic viewpoint searches for new needs and define new products that can be developed with old core technologies (design management) or sometimes, some kind of technological development will be needed.

Modern innovation management plans use both schemes simultaneously, especially in large enterprises; however, a lot of SMEs only can follow the latter one because a well-trained group of researchers and engineers is very expensive and the dimension of the company can maintain it.

But, where is the economic meaning of this activity management? In a business we select innovation activities analyzing the return of the investment. All innovation professionals know that this one is not a correct viewpoint because many business activities depend on strategic decisions. Sometimes effectiveness is more important than efficiency.

Effectiveness in management can be considered as manageability and this property is strongly related to the business complexity. That is the reason because complexity is a good measure of a strategic process as innovation.

In a crisis, we are searching for actions that provide an effective method to preserve the manageability of a business or economy. As managers we can follow two approaches, incrementing the investments or reducing costs. The importance of innovation is due to the following principle: An innovative solution can be more effective and more efficient than other ones. It can provide a way to increment incomes or reduce costs, and we must assure that the result of our action will provide a more manageable and robust business although it does not provide the highest incomes.

 

Mr. Luis Díaz Saco

Executive President

saconsulting

advanced consultancy services

 

Nowadays, he is Executive President of Saconsulting Advanced Consultancy Services. He has been Head of Corporate Technology Innovation at Soluziona Quality and Environment and R & D & I Project Auditor of AENOR. He has acted as Innovation Advisor of Endesa Red representing that company in Workgroups of the Smartgrids Technology Platform at Brussels

 

© 2011 Saconsulting Servicios Avanzados de Consultoría S.L.U.

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