What is your understanding of “innovation?”
Dutta: Executives thought for a long time that innovation was about creating new products and services. But today, we know better. The vision of business leaders has enlarged to encompass broader human and social goals. Business is not just about profits and economic gains. Business is also about doing good – about having a positive impact on the lives of people – both employees and the broader social context in which businesses operate. When you see things in such a perspective, innovation is fundamentally about finding ways to improve the lives of people – be it customers, employees or society in general.
Do you think information becomes the raw material for innovation?
Dutta: In my view, people are the most important raw material for innovation. If you have good people with the right attitudes, innovation will happen. People innovate because they get passionate about something. This in turn leads them to create new ideas, gather the support of like-minded colleagues and then together implement the new ideas. In all of this, the ability to gather and utilize knowledge – and information as a precursor – is critical. Knowledge feeds into the idea creation process, facilitates sharing across individuals and supports the implementation process.
People are passionate by nature. People want to innovate by instinct. If not we would all be still living in caves! Thus the best way to recognize and use opportunities for innovation is via people. Firms need to attract the best people and to provide them with the right culture and incentives to explore their passions. Good people always come up with ideas. The challenge for firms is to encourage these ideas, to sift through them for the better ideas, and to mobilize the collective energy of the organization to drive towards successful implementation of the chosen new ideas.
What do you understand by an “intelligent company?”
Dutta: I guess different people would interpret the term differently. For me, an intelligent company would be one that is engaged in a continuous dialog with its different stakeholders – customers, shareholders, employees and society. From dialog comes knowledge and appreciation of mutual concerns and this leads to appropriate and intelligent action.
What abilities must an enterprise have to be “innovative?” And where would you begin to encourage innovation?
Dutta: There are different ways to encourage innovation. I would like to mention two – both of them linked to how executives work and spend their time today. First, if you accept the fact that businesses have both economic and social goals, then this broader role of business has to be made a part of every executive’s daily work. Why not require an executive to spend a fixed proportion of his or her time on some social program? Why not reward business teams to think of products and services that achieve both economic and social goals for the firm?
Second, there is a requirement to free up time in the daily lives of executives. Today, executives are over-worked and exhausted from just meeting the requirements of current business goals usually profit orientated. How can you expect an executive to stop and think about doing things differently if he or she does not have enough time to go through the daily onslaught of emails! “Thinking time” has to be designed into the daily work schedule of executives. The ability of executives to think and act differently has to be encouraged.
What drives innovation, and what role does IT play in driving innovation?
Dutta: Technology is a great enabler of innovation in firms. Today technology is so deeply embedded in the business practices of organizations that it is virtually impossible to create any new product, launch any new service or reorganize internally without requiring the active support of technology. ING Direct for example, has built one of the most globally successful online banks, by directly leveraging the power of the Internet to enter mature, developed markets such as Canada, the United States, France and Germany. Without the Internet, ING Direct’s entry into these markets would have been much slower and more expensive via acquisitions.
Technology not only allows for new ways of doing business, but it is also a wonderful magnifier of human talent and ideas. For example, the cell phone has not only revolutionized the way we communicate socially and professionally but has also directly led to the improvement of the lives of many poor people around the world. For example, GrameenPhone, the largest phone company in Bangladesh, has a unique focus on using micro-credit to finance the purchase of mobile phones by rural women who in turn use the mobile phones to provide telephony services for a fee to other villagers.
How would you measure the quality of innovation management?
Dutta: There are two useful measures – the proportion of the revenues of the firm being derived from new products and services and the level of employee satisfaction. Innovative firms keep investing in new products and services and this is reflected in the revenue flows accruing to the firm. Happy employees also direct more of their passion and energy to the firm’s goals and drive the pace of innovation in the firm.
What are the effects of globalization and the acceleration of business life having on innovation?
Dutta: The biggest impact is that innovation is becoming global. The Internet has made geographical boundaries redundant for many businesses. By exploiting global connectivity, firms are hastening the pace of innovation by having multiple teams work asynchronously but in a coordinated manner across time zones. The rise of Asia also means that the nature of innovations is changing. For a company such as Nokia, China – with the world’s largest market of mobile phone users – has become a more important source of innovation in handset design than Europe or America. NCSoft, a Korean company, has rapidly become the largest online gaming company in the world. The likes and dislikes of discerning consumers in Asia are changing the dynamics of innovations for firm globally.
Innovation costs money. How can an enterprise afford that kind of expense?
Dutta: There are always two sides of innovation – the cost of investments and the value generated. One has to consider both aspects at the same time. Often we make the mistake of only focusing on costs. This is not surprising. Costs are usually more easily measured, have to be incurred in the short term and have an immediate impact on trade-offs in resource allocations within the firm. Value on the other hand is usually more difficult to measure, is typically further away in the time horizon and generates direct benefits only later on.
The key word here is “balance”. Too much of a focus on costs can inhibit innovation. Too much of a focus on value can lead to poor cost-control and a sub-optimal allocation of resources in the firm. The solution to this balance is simple, yet complex. It is leadership, leadership from the top to identify strategic priorities, to focus energy and resources for innovation along the chosen strategic priorities and to create the right culture and incentives for encouraging employees to invest in innovation.
How can barriers to innovation like hierarchies and controls be overcome in a company?
Dutta: Innovation requires an open mind and the freedom to explore. Hierarchies and controls go in the opposite direction – they restrict openness and freedom. However, I do not believe that hierarchies and control are thus bad and should be eliminated. Both aspects – control and freedom – are needed and balancing them is not easy. Thus many firms find it easier to set up special Greenfield units outside the core organization to support radical innovation.
What goals does the competence center eLab@INSEAD have, and what is your personal vision as director of it?
Dutta: Innovation is a central theme in the research agenda for eLab@INSEAD. The goal is to identify best practices, to facilitate the exchange of ideas and to create a collective momentum towards action. For example, a couple of years ago SAP and INSEAD identified the accession of the new EU member states to be an important event in the development of the knowledge economy in Europe. Together, we initiated some original research to benchmark the relative levels of achievement of all European states according to the eEurope framework. The results were discussed in a high level meeting at the European Union and have been published as a book titled “The Information Society in an Enlarged Europe” by Springer-Verlag (February 2006). My vision as director of eLab@INSEAD is to have an impact on our understanding of the multiple facets of our digital economy by using the platform of eLab for such collaborative efforts.