Part 2: Innovative working and the impact of recession

2.1 Defining innovation

West and Farr9 emphasised the positive nature of innovation; “… the intentional introduction and application within a role, group or organisation of ideas, processes, products or procedures, new to the relevant unit of adoption, designed to significantly benefit the individual, the group, the organisation or wider society” (p.9). In this report, we adopt NESTA’s definition of innovation as “change associated with the creation and adaptation of ideas that are new-to-world, new to nation/region, new-to-industry or new-to-firm”. This is an intentionally broad definition of innovation, which goes beyond the traditional view of innovation often restricted to technological and product development or R&D environments. The NESTA definition encompasses all sectors and includes new services, business models and processes. Su Maddock, Director of the Whitehall Innovation Hub, supports the view that “innovation is about relationships, not product… the labelling of innovation as innovation of products is not helpful as it misses out a whole stream of people”.

Most of our interviewees suggest that the term ‘innovation’ is not helpful as it is interpreted differently in different organisations. Ourresults showed that organisations that clearly articulate what is meant by ‘innovative working’ are more likely to be successful in their attempt to encourage innovative behaviours. For the purposes of this report, we refer to innovative working and innovative behaviours. We acknowledge that innovation is a process comprising aspects of idea generation and idea implementation and that many different people resources are required. Our literature review examines issues regarding definitions in more detail.

2.2 Innovative working will be reinforced in the current economic climate

History shows that crises often spur innovation. The propensity to innovate is one of the few ways an organisation can respond proactively to a fiercely competitive marketplace. Our interviews confirm that the majority of organisations, in all sectors, ranging from small enterprises through to international conglomerates are now taking innovation very seriously. “Now more than ever, there is an imperative to innovate. The priorities within innovation have changed, with organizations showing a greater focus on delivery of returns” (Jon Bentley, Innovation Leader at IBM Global Business Services).

This view is supported by our survey results, where innovation remains a highly valued imperative for organisations in the UK. The vast majority of the 850 respondents to our survey (78 per cent) reported that innovation was ‘very’ or ‘extremely important’ to their organisation’s agenda in terms of products, processes or business models. Over half of all respondents (58 per cent) indicated that the importance of innovation had increased over the past 12 months as a result of the recession. Results show that respondents believe the economic situation will promote innovative working. For example, as shown in Figure 1, around half of all respondents agreed or strongly agreed that ‘team members will become more co-operative’ and ‘individuals will be given more freedom and opportunities to innovate’. Furthermore, the majority agreed or strongly agreed that the ‘focus on innovation will be reinforced’ (70 per cent). Given the current economic climate, this is a surprisingly strong endorsement indicating that innovation has a key role to play in climbing out of a recession. However, over half of respondents also agreed or strongly agreed that ‘control will become more centralised’ and a third agreed that ‘competition amongst team members would intensify’ both of which some researchers argue are inhibitors to innovative working. Our interviewee responses also indicate that whilst some organisations view the current economic climate as a strong incentive to innovate in all aspects of their business, others report focusing on certain types of innovative working, like incremental innovation in business processes, which typically require fewer resources than more radical forms of innovation. “Innovation is usually associated with the creation of new products but in this climate the focus will shift to cost-effective ways of optimising what we have” (Peter Harrison, Innovation Manager at Entheo, a UK-based innovation and change consultancy).

“The economic crisis should be used as a catalyst for innovation. If that opportunity is not taken, the long-term costs can be evergreater. Playing it safe by choosing less risky projects is a strategy that we have adopted in the past and it failed; it is not the right way to do things for us”. (Claire Whitaker, Director at Serious, an international music producer). Whilst most organisations acknowledge innovation as vital for their long-term success, the literature shows that in a recession many businesses typically sacrifice the financial resources dedicated to innovation. This is confirmed in our survey results, where a third of respondents consider that the available resources for innovation will be reduced as a result of the current economic situation (see Figure 1). Furthermore, almost a third of organisations surveyed reported that resources and facilities were currently not readily available for use in testing new ideas; the imperative is on making more effective use of the scarce resources that they have. However, unexpectedly, given the current economic situation, the large majority of respondents reported being ‘optimistic’ about the future of their organisation (77 per cent).

Many interviewees listed employee engagement as a core resource in promoting innovative working. “We know there’s a causal link between employee engagement and organisational performance. The problem is with the current economic climate, this could damage employee engagement, and people tend to be more committed when they have a sense of safety, a sense of control in the organisation. I’m sure the same goes for innovative working. One of the reasons employees may still feel optimistic is that a crisis helps shift behaviour… there’s almost a sense of anticipation of what might happen and therefore more potential for significant change”. (Linda Holbeche, former Director Research & Policy, Chartered Institute of Personnel & Development, CIPD).

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