You should read this article that argues another phase change is occurring: from a knowledge economy to an Innovation economy. It’s suggesting that even when you have great structural capital (factories, assets, and all that stuff), great financial capital (money!) and great intellectual capital (knowledge and know-how) you will still not be a successful organisation.
Nothing really happens unless you also have innovation capital, which are the assets you build up that let you do value creation.
Now, of course, since the discipline of corporate innovation is still so young, we’re as far away from a decent system of valuation of Innovation Capital as we are from manned starhips that cross the void. At least with intellectual captial you can compare the difference between the book value of all the assets on the balance sheet and the market valuation of a firm and say “yep, that’s how much our know-how is worth!”.
This is a concept that resonates strongly with me. I’ve worked in banks and technology companies – both Lloyds and Microsoft for example – where all of the traditional assets were available in spades. How come, then, neither of these companies has truly produced anything that was game changingly value creating in the last decade?
Organic growth is not the same thing, even though its highly desirable, obviously.
I’m of the view that both lack Innovation Capital, and furthermore, that almost all organisations do. Lloyds has spent the last couple of years building its Innovation Capital up, and it may be we’ll start seeing some interesting new stuff eventually.
I’ve been away from Microsoft too long to have any insight about its capabilities in this area, but no-one is stupid there, so I’d not be surprised to discover they get this also.
Anyway, the point of al this, if its true, is that the role of innovation groups suddenly fits neatly into the value hierarchy of an organisation in the same way that accountants and marketers do.
But I’m also thinking that without a reasonable system for the valuation of Innovation capital, we’re going to be nowhere for a while yet.
Academics and other big-brained people… do you care to take on the challenge?