The idea of “innovation economics” may sound like something straight out of Silicon Valley, but it was actually introduced back in 1942 by economist Joseph Schumpeter. In his book, Capitalism, Socialism, and Democracy, he proposed that innovation—meaning evolving institutions, entrepreneurs, and technological changes—was at the heart of economic growth.
“Capitalism can only be understood as an evolutionary process of continuous innovation and ‘creative destruction,'” he wrote. His ideas about innovation and the economy have never been more apparent than today, in a world where the technology industry is on a trajectory of unstoppable growth. However, innovation does not occur in a vacuum. There are sets of circumstances that kindle it, and these are not only important for generating new ideas but also for building ideas into something sustainable.
Back in 2013, Fast Company published an article by writer and entrepreneur Faisal Hoque, who argued that sustainable innovation was dependent on emotional intelligence, cross-collaborative culture, and repeatable processes. A lot has changed since then. This past year has been nothing if not a year of seismic changes, and we’re seeing a whole new economic disturbance impacted by a range of factors, including the new General Data Protection Regulation (GDPR), a new president in the White House, and the breakneck speed at which technology evolves.
The question of how these changes will impact innovation and the economy, and what can be done to adapt, is something every entrepreneur, IT decision-maker, and leader needs to ask.
Discover the keys to sustainable innovation
The first concept Hoque highlighted as a central component of the innovation economy is emotional intelligence. He cites a study from the Carnegie Institute of Technology, which showed that 85 percent of financial success is due to skills in “human engineering,” personality, and the ability to communicate, negotiate, and lead. Just 15 percent is due to technical knowledge.
Emotional intelligence—meaning the capacity to be aware of your own feelings and those of others, to regulate your feelings, and to deploy the appropriate emotions to each situation—goes a long way toward building relationships and optimizing productivity. Basically, someone may have a brilliant idea, but if they can’t work effectively with other people or communicate that idea in a way that resonates, chances are it won’t get far. Emotional intelligence is what enables a leader to inspire and influence, create community, and think about the long term.
The second concept he outlines is the importance of a cross-collaborative culture. It’s no secret that collaboration is essential to business. A Frost & Sullivan study of 946 enterprise decision-makers revealed that 36 percent of a company’s performance was due to the level of collaboration it fostered, which is more than twice the impact of a company’s strategic orientation (16 percent) and more than five times the impact of market and technological turbulence influences (6 percent). Furthermore, research from Nielsen found that larger, more diverse teams generate better concepts.
This power of collaboration is why Steve Jobs redesigned the Pixar offices to bring all the teams—executives, computer scientists, animators, and editors—together into one building with a central atrium. It’s also part of why Google designed a specific floor plan for its employees—to facilitate casual collisions that could result in big ideas. Cross-collaborative teams encourage out-of-the-box thinking, which helps organizations stay ahead of the curve and weather turbulent times.
Finally, repeatable processes are a core part of economic innovation. To keep up in a fast-moving world, organizations have to continue to innovate, improve, and identify growth opportunities. For that, they need to structure their organization in ways that optimize performance. For example, there are many different ways to structure the workday, departmental teams, promotion pathways, and decision-making processes, among other things. Driving sustainable innovation requires companies to experiment, look at the data, and figure out how to structure these things in easily repeatable ways while still allowing for creativity.
Set sail on the winds of change
With so much uncertainty and change in the economy, these three pillars are just as relevant today as they were when Hoque proposed them four years ago—if not more so.
Take the new challenges raised by the GDPR, for example. The law includes a “right to be forgotten” clause that requires companies to provide a clear avenue for people to contact a company and have their data removed from its records if they wish. Companies that rely on customer data will need to become more transparent and creative in their approach to data collection and develop ways to make their customers comfortable with allowing them to store personal information. For this, the emotional intelligence necessary to communicate, empathize, and understand where others are coming from will come in handy.
Similarly, cross-collaborative culture will help decision-makers move forward in a political climate that feels unstable. What will happen with regulations in certain sectors, like health care or the government, seems to change every day, so it’s important to work with a team that can adapt and problem solve quickly. In an environment where technology changes all the time, repeatable processes provide order amid the chaos.
At the moment, there are many factors impacting innovation and the economy, and the best way for IT to rise above these challenges is to ensure their teams are poised and ready for whatever comes their way. Emotional intelligence, multidisciplinary collaboration, and repeatable processes will never stop being relevant—leaders will always need a strong foundation to drive sustainable innovation.