We are presently seeing signs of the emergence of an innovation economy. It will replace the knowledge economy that went before it, and the replacement will be as inexorable as the tide. The fact is it’s increasingly obvious that even organisations with superb knowledge economy credentials – companies such as Microsoft and General Motors, for example – weathered the recent global economic crisis little better than those companies based on industrial age economics such primary industries like agriculture and mining
Industrial age economics are founded on the thought that companies win if they have bigger stocks of money and physical assets like factories than their competitors. A knowledge economy company, though, acknowledges that stuff that’s not physical and financial, such as patents, brands, and goodwill are also valuable. They can calculate this value by subtracting their physical and financial assets from their market valuation. The result is the market value of their knowledge assets.
However, even organisations with very large knowledge capital valuations experienced poor performance during the downturn. Its obvious that something else is needed to explain what happened.
What’s missing is “Innovation Capital”, defined as the set of people, infrastructure and processes a company organises to translate its knowledge capital assets into unique new value. The structures and systems that result from this, generally, mean the company starts work on things which are outside of “business as usual” – the day to day activities companies do which drive most of their value.
New innovation capital is created whenever an organisation makes investments that let them do work outside of business-as-usual. Unsurprisingly, those organisations which do this and generate greater innovation capital for themselves, are much better at responding to events which are unusual or unique.
This is why organisations with very good knowledge assets didn’t always perform as well as expected during the recent global crisis. Faced with an unexpected crisis, they weren’t able to do much when their business-as-usual production underwent major change overnight.
How do you create more innovation capital? The answer is simple: you need to invest in processes, tools and people to create a structured innovation programme.
A structured innovation programme takes time to set up, and the exercise is fraught for new players with no experience doing so.
There’s no need to panic, though, because there are many excellent resources available online. Spending a little bit of time doing research before you begin will likely reap handsome rewards.