We tend to associate innovation with creative inspiration -- an act that can be neither predicted nor planned. And yet, two professors of operations and information management argue in an informative new book that innovation can be managed systematically. Specifically, they focus on the idea of companies creating tournaments to foster a wider variety of new ideas.
Innovation Tournaments: Creating and Selecting Exceptional Opportunities (Harvard Business School Press, 2009), by Christian Terwiesch and Karl T. Ulrich, both of the Wharton School, focuses on “innovation tournaments” as a tool companies can use to identify promising new ideas for innovation. Much as “American Idol” uses a tournamentlike approach to identify a few promising performers culled from the hundreds of thousands who audition, companies can use tournaments to identify new opportunities. Companies can seek these ideas from employees, from people outside the organization, or from combinations of internal and external sources.
Innovation Tournaments provides a how-to guide for setting up and administering an innovation tournament. The authors also have set up a Web site (http://www.innovationtournaments.com) offering free tournament software they call “Darwinator.”
While grounding their work in academic research, Terwiesch and Ulrich have written a pragmatic book that targets executives and managers. The book avoids much of the mythology and hype that often surrounds innovation. Moreover it offers many thought-provoking observations. The authors point out, for example, that when companies initially consider new business ideas, they can benefit from having many proposed ideas because when it comes to innovation, a company is generally looking for a few best opportunities rather than many mediocre ones. And if you assume that the quantity and average quality of opportunities holds constant, then having greater variation in those proposed ideas provides greater chances that a few will be very, very good ones.
Although companies strive for consistency in many of their organizational processes, in innovation it would be better “to produce one truly exceptional opportunity and ninety-nine lousy ones rather than one hundred merely good ones,” Terwiesch and Ulrich write.
The authors distinguish between industries in which companies need to be very aware of external sources of innovation and those in which “guerilla innovators” don't offer much competition. In the first instance, think of the beverage industry: virtually anyone could come up with an innovation. In the latter, consider the large aircraft industry: most kitchen-table inventors can hardly compete.
While discussing the different ways to structure tournaments, the authors point out that -- in their experiences -- almost all companies can benefit from considering more ideas for innovation while in the early phases of selecting ideas.
This article is adapted from “A Systematic Approach to Innovation,” by Martha E. Mangelsdorf, which appeared in the Summer 2009 issue of MIT Sloan Management Review. The complete article is available at http://sloanreview.mit.edu/smr/.