Tata’s Head of HR on Improving the

Tata’s Head of HR on Improving the Innovation Process
Senior executives are constantly searching for the elusive goal of ‘transformative innovation’ to boost corporate growth in an uncertain global economy. Tata’s head of HR spoke to us about how he and his team have helped create a culture that fosters transformative ideas

Business publishers will expend a lot of ink and pixels next week covering the performance of the world’s largest companies during the third-quarter earnings season. Most – such as this Business Insider piece – characterize corporate growth as “sluggish” so far this year

Executives we talk to are confident of the opportunities for growth but know that finding and exploiting those opportunities in ever more complex markets is not easy. And so senior management teams at many firms constantly look for breakthrough ideas that can lead to so-called “transformative innovation” in their products and services. Organizations that successfully pursue breakthrough ideas are able to generate up to twice the new product sales of their peers (30% versus 14% of new sales).

Unfortunately, creating an environment that spurs transformative innovation is a tough task for most firms. Years of economic uncertainty have made executive teams risk-averse; they focus on incremental innovation to improve existing products and ensure more predictable, near-term revenue. In effect, these organizations have traded larger, higher-impact (and riskier) ideas for a greater number of smaller, more manageable (and less risky) ideas. Although CEB research shows that investment in transformative innovation projects is growing, incremental innovation still accounts for more than 80% of funded innovation initiatives.

This modest and slow reinvestment in transformative product innovation alone is unlikely to generate the kind of growth required by many corporate plans. There are simply not enough high-quality, transformational ideas to invest in. In fact, CEB’s global business leader survey shows that three out of four executives think their firms lack the kind of ideas needed to drive growth.

The Dearth of Breakthrough Ideas
Beyond a predisposition for incremental innovation, dramatic organizational changes have damaged the networks necessary to generate breakthrough ideas. So executives hoping to redirect their innovation teams toward more transformative projects must understand how recent changes damaged these networks and take corrective action to reenergize and rebuild innovation teams. Three trends stand out:

1.Downsizing and Reorganization Have Weakened Ideation Networks: Consistently generating, refining, and prioritizing breakthrough ideas requires participation from a web of relationships. Unfortunately, recent organizational changes have altered these networks and relationships substantially—especially for “innovators” (e.g., employees in R&D, engineering, and design functions).
In 2009, almost 80% of innovators experienced a significant change in their organization or role. Even though the pace has slowed, change remains sizeable with nearly 50% of innovators surveyed in early 2012 experiencing these changes in the past year.

2.Mid-Level De-Layering Has Reduced Experience in the Innovation Process: In addition to overall employee network disruptions, management de-layering has destabilized innovation networks.
Mid-level innovators are seemingly being squeezed out of large global organizations, with the number of mid-level innovators falling 19% between Q4 2010 and Q1 2012. As mid-level innovators leave, they also take with them their experience and knowledge. Between 2010 and early 2012, the average tenure of mid-level innovators fell from 12 to 10 years, and the average age fell from 39 to 36.

3.New, Globally Dispersed Research Centers Lack Established, Effective Working Relationships: Finally, innovation teams are more geographically dispersed than ever before. Organizations are shifting funding and resources to emerging markets, creating new innovation hubs to get closer to customers in these regions and take advantage of local (often inexpensive) skilled labor.
However, emerging market innovation centers are presently one-third as productive as developed market centers at generating revenue from new products. CEB research on 75 companies and their innovation teams reveals that this lack of productivity is not due to capability or skill gaps. Rather, it is because of ineffective collaboration between established and new innovation teams in emerging markets and a lack of something that cannot be bought: trust. Innovators have not created enough trust in their counterparts to enable effective collaboration and ideation.

What to Do About It
From working with some of the world’s most innovative large companies, we have seen three activities that reinvigorate employees charged with finding breakthrough innovation. These are:

1.Reconnect Dispersed Internal Networks to Drive Idea Exchange: To reestablish networks and the flow of ideas across increasingly decentralized workforces, organizations must formalize idea sharing across regions. One simple way is to create regular, multifunctional, cross-team interactions to share product ideas, market insights, and recent successes across regions.
2.Enable Staff to Self-Assess Ideas to Improve Idea Quality: By managing the quality of ideas early in the innovation pipeline and purposefully sharpening concepts, the overall time to market for new products is reduced by one-fourth.
3.Rebuild Effective Global Relationships to Encourage Collaboration: One of the biggest barriers to new product development is in effective collaboration between central innovation teams and their colleagues in new innovation hubs in emerging markets. Increasing trust is a critical prerequisite for team collaboration and the primary driver of R&D vitality, delivering almost three times the increase in new product sales than capability building alone.
What Tata is Doing
HR and innovation managers at Tata Group have implemented a number of interesting and successful initiatives to foster a culture of innovation. We spoke to Satish Pradhan,Chief of Group Human Resources for Tata Sons Limited (the holding company of Tata Group).

Tata is well recognized for innovation, and the Tata Nano, the world’s least expensive car, is a good example. What should an organization focus on first to create a culture of innovation like you have at Tata?
I think the first point of entry into this jungle is to socialize the notion that innovation is a good thing. What does it look like? What leads to innovation? What’s the difference that an approach like this will make? Socialization is an important part of the journey in helping people frame issues differently and in having them aspire to be more innovative in a pull sense, rather than having to be held accountable and pushed toward innovation.

It’s about feeding a person’s curiosity to get them to engage in the question: If I really want to have an innovative culture in my organization, what helps? You need to enable people to talk about this and say things such as, “Here is what Clayton Christensen at Harvard thinks creates an innovative energy, and here is what Julian Birkinshaw at London Business School has actually discovered about the qualities of an innovative organization. Let’s have a conversation with these people.”

What tools do you use to help Tata’s group companies improve their innovation capabilities?
There are a few processes and offerings that we provide to the group companies that enable them to look at different dimensions of innovation. Through all these efforts there is a sense of acclimatization that being innovative is not seen as nice to do, but everybody aspires to do it. For example, we’ve put together an InnometerTM based on Birkinshaw’s model. It gives you a dipstick into your own organization, analyzing your innovation process and culture and what you can do to make these more innovative. We also have an innovation management process called InnoMultiplier. This helps identify opportunities that companies should spend creative energy working on. It was developed with input from Clayton Christensen.