An article last week in the Wall Street Journal (March 18, 2008) about how drivers are beginning to blindly trust GPS devices caught my eye. The article reports that by letting the devices overrun common sense, these drivers are “getting lost, hitting dead ends, and even swerving into oncoming traffic.” This reminded me of my growing up years in India, a time when my grandparents used to complain about how “digital watches” were not letting us kids learn how to tell the time.

The problem of overtrusting technology, and becoming inflexibly attached to devices and technologies is an old one. Dorothy Leonard in her Wellsprings of Knowledge wrote more than ten years ago about “core rigidities” which are the twin side of “core capabilities”, arguing that the core strengths of the organization are simultaneously core weaknesses. An organization derives competitive advantage from its core capabilities now, but is unable to extract itself from them and do other things when there is a need.

An innovative organization must recognize this need to remain flexible, which is why I argue that ISmarts is essential to develop and sustain in any organization that seeks to be innovative.

In a recent post titled Innovation at Risk on the innovation blog at Business Week, Lara Lee points out that in hard economic times, companies do not innovate and that innovation happens when the times are good. However, as I see it, there seems to be hardly any correlation between economic good times and innovation. I am thinking back to research that was done at Harvard in the 1980s. This study by Jaikumar et al about the use of new technology in the auto industry found that in the late 1970s and early 1980s, Flexible Manufacturing technology was being embraced by the Japanese auto firms, but Detroit was rejecting it as unnecessary given that they had such large market shares. Well, we now know the results of such innovation lethargy. Thus, for many companies, when the belly is full, it is time to nap. Complacency kills innovation.

On the flip side, does necessity foster innovation? The jury is out on that question too. Some companies foolishly think that innovation is “fluff” that does not contribute to the bottom line and in knee-jerk reactions, in hard times, they shut down innovation when it is needed most. On the other hand, there are numerous examples when companies have used innovation to work themselves out of hard times. So, it is difficult to make a good connection between economic climates and a company’s investment in innovation.

So what is it that drives innovation? To generalize, innovation stems from (a) the recognition of a need and (b) an impulse to fill that need.

Sometimes, the recognition of a need is thrust upon us (especially in hard times) and sometimes, it is spontaneous. Similarly, the impulse to innovate to fill a need is sometimes forced upon us and sometimes seems to have a life of its own. Good companies hedge bets by innovating constantly.

From a personal perspective, I find it thrilling to work on understanding innovation, which I consider one of the most complex and fascinating responses that we humans make to the environments in which we operate.

I heard a fascinating piece on NPR that in some ways relates to the post I put up a couple of days ago on the Tata car and innovation-society dynamic. The whistling thorn tree in Africa protects itself from being eaten up by elephants through an interesting adaptation. It secretes a tasty sap that draws thousands of red ants to it. When elephants try to eat the tree, these mercenary red ants attack them and thus the tree is protected. The NPR piece however piqued my interest further as it went on to discuss an experiment that Dr. Todd Palmer of the University of Florida has been conducting.

Dr. Palmer wondered what would happen to the red ant-tree alliance if there was no danger from elephants. Would the tree stop generating the sap? So in his experiment, Dr. Palmer created elephant-safe enclosures for some of these trees and watched for 10 years. One would think without the elephant danger, the trees would flourish, right? But a decade later, many of the “protected” trees had died and the others were growing more slowly than before. Why? Most of the trees had gradually reduced the production of the sap–when there is no danger of elephants, why produce sap and host red ants? So with sap reduced, the red ants had gone away. But now, various other insects came on to the trees, and some of the trees now have big holes, and others died.

From a business innovation perspective, what is the lesson? First, as I noted in the Tata car post, one never knows how the society-innovation dynamic will play out. As the biologist Mark Bertness of Brown University remarks, “It’s a reminder that you never know what you are going to get when you mess with Mother Nature.”

Second, some analogies between this tree-ant-elephant story and innovation management are also worth considering. Like the analogy between reducing sap production and optimizing production in an organization; or the analogy between the certainty with which the tree assumed red ants are needed only to fight the menace of elephants and the projections that we make with certainty in our strategic decision making.

See any other analogies?

What is the connection between competition and innovation? When an organization focuses on its competition, is it good or bad from an innovation perspective? Hamid Shojaee has an interesting post that details this issue in the context of Microsoft. The post took me back to when I used to teach an HBS case on the browser wars between Microsoft and Netscape.

According to Shojaee, Microsoft’s overfocus on its competition kills innovation. While Shojaee is right, he is only partially right, because this ties back into what we mean by innovation. Shojaee’s perspective on innovation is one that is common but only partial: that all innovation is radical, paradigm-shifting. In fact, most innovation is incremental. If Toyota implements 1 million new ideas every year, what does that say about innovation in Toyota? 1 million new car designs, or new car features, or new business processes? As has been well-documented, most of these 1 million ideas lead to incremental improvements.

In fact, from the ISmarts perspective, a focus on competition is necessary for innovation. Analytical ISmarts allow a firm to watch the market for trends, watch competition for new ideas, and sift through all that the ideas “out there” to construct a portfolio of innovation projects. As a Gartner study found, many smaller firms which do not have the resources to invest in original R&D, watch the competition for new ideas that look promising (analytical ISmarts), reverse-engineer and implement these ideas (operational ISmarts), and then market them aggressively in their local markets (communicative ISmarts). In this innovation strategy that Gartner terms “fast follower”, innovation paradoxically does not rely on invention.

A new manifesto titled Slow Innovation on the ChangeThis site caught my attention. The author, Derek Cheshire, a UK-based consultant, borrowing from the slow-food movement asks, “There is immense pressure to innovate quickly or to rush to market, but does this bargain of speed versus quality really benefit a company?” Instead, Cheshire suggests creating the “innovative company whose structure and culture are conducive to long-term growth and sustainability.”

This ties into the definitional chasm of innovation–is innovation evolutionary and revolutionary. As I have often argued, this is a false choice– innovation is certainly both incremental and revolutionary. Stephen Jay Gould came up with the controversial theory of “punctuated equilibrium”which describes evolution as long periods of evolutionary stability broken by shorter spurts of change.

Despite its controversy among evolutionists, I find punctuated equilibrium accurately descriptive of the most innovative companies. A culture of innovation in an organization provides the ground on which constant experimentation, a constant nudging of boundaries happen, and every so often, there is a breakthrough. Unfortunately, the paradigm of innovation being radical, non-evolutionary has so sublimated our innovation mindsets, that we have closed ourselves to the idea of both incremental and revolutionary innovation happening together. Matt May, a fellow Wharton alum, has a book on Toyota in which he finds that Toyota implements 1 million ideas every year. This is characteristic of an innovative company–many small, incremental, evolutionary ideas, and a few revolutionary ones that punctuate the equilibrium.

In the same vein, a couple of years ago, I read about a book called Business at the Speed of Molasses by Joey Reiman at Brighthouse. It doesn’t seem to have been published yet.

In an op-ed article in the San Jose Mercury, Krisztina Holly argues that the word “innovation” is overused to the point where it begins to lose its meaning. I agree. For Holly, “true innovation is the process of translating new ideas into tangible societal impact.” This broad definition is very appealing because it sidesteps (or encompasses) all the debate about “revolutionary and evolutionary innovation” or “disruptive versus incremental”One of the main things that I find missing in definitions, debates, understandings/misunderstandings about innovation is the “human dimension.” 200 years of the industrial age and a century of scientific management has made us blind to the driving force of innovation–human intelligence. From an intelligence perspective, at Vivekin Group, we use the following definition:

“Innovational capacity is the ability to solve new problems or create new products by adapting to a market, shaping it, or selecting a new market in order to best deliver business value.”

The three actions in the pursuit of novelty—adapting, shaping, and selecting markets—comprehensively cover innovation. An innovator will use intelligence to make the best choice among the three options depending on the operating context. Because the context in which an organization exists and operates continually changes over time, adaptation (incremental innovation), shaping (disruptive innovation), and selection (opening a new market) are all required for innovation.