It's people, you stupid!

What is the most crucial factor that determines whether a potential innovation will make it or not? Many policy makers think they know, and they try to support their favourite factor, being it focussing on high-technologies, spend more money on research, support for intellectual property rights, better access to finance, more entrepreneurship or better cooperation between science and industry.

When you ask a successful entrepreneur who has started and grown many innovative businesses during their working life time what for them was the most crucial factor in making innovation happen, you always get the same answer: innovation starts and ends with people. You need a group of talented and skilled people who can make it happen. These people, according to the successful entrepreneur are the most important assets of the firm. Companies that don’t innovate often claim that lack of finance is their main reason for not innovating, while companies that are successful innovators claim it is due to their skilled and competent employees. According to these successful and innovative firms, money will always be attracted by good ideas. It is the good ideas themselves and knowing how to execute them which determines if innovation will become a success or not.
For any process of innovation, you need talented people. First of all you need people with different skills and competences, in order to reach all the different topics that relate to innovation: technology, marketing, design, fashion, culture, business, finance, law etc. For this you need people with good education, with experience in their job and they need to be free to give their input in the process. Besides the need for skilled people, any innovation process starts with the collaboration between a group of people, individuals. A CEO might decide that innovation is important for the strategy of the firm, it’s the employees that have to make this a reality. And with more international trade, globalization, open innovation and further increase in the complexity of products and services, the people that make innovation happen are not exclusively working in the same firm, but create collaboration between different firms and organisations, both public and private.

To innovate is therefore also to create a network of people that collaborate and exchange knowledge and experience based on trust, creating consensus, be open to good ideas and suggestions for everybody. What is even more important work teams working on innovation, is that the activity goes beyond the normal business activities and tries to establish something new what has never been tried before by the same firm or firms. More creativity and more problem solving, trial & error and anticipating and responding to unexpected events are essential in the process of innovation. This required the full commitment of the group engaged in the innovation activity and is not a standard process that can be managed from high in the hierarchy in the firm.
In a more globalised world, innovation not only takes place between different organisations locally, the collaboration often takes place at a global level. Different inputs into the innovation process, like knowledge, design, technology, marketing could be provided from anywhere in the world by any partner. The open collaboration between individual that takes place is more and more a cross-firm and cross-cultural event. Management literature of innovation and policy makers dealing with innovation often neglect this individual perspective. More attention should be paid to the role of people in the innovation process, the importance of trust building, and how to transform our companies into flatter, adaptable and learning organisations in which employees get more responsibilities and the to be more self-managing, how to deal with the need for less barriers between organisations and between countries that now hinder collaboration and open innovation. These barriers include cultural, psychological and social barriers, inherited by a historic culture and need to be dealt with.

For any country, this means that to foster innovation in the country, first more attention should be paid to establish real high quality education. When people receive good education, they have the knowledge to come up with new innovative ideas. In order for them to try out these ideas and translate them into projects, it is important that there is an environment (in the country and in the company) in which people feel free to suggest new ideas, feel responsible for the wellbeing of the company and are not afraid that they will be criticized and worked against, because the idea seems to strange, unrealistic and nothing that has ever been done inside the company. Foreign investor and national policy makers should start paying attention to the role of individual people in business and innovation and create and maintain an environment in which trust can be build, people have the means as well as the responsibility to share, collaborate and engage in innovative activities. To create such an environment means more attention to social, cultural conditions and a shift in focus towards individual people. The new Finnish strategy for innovation includes a shift from investing in companies towards investing in people. Also innovative global competitive companies such as Google focus on a creating a working atmosphere in which employees feel valued and responsible to participate. Such examples deserve to be followed by others.

[An adapted version of this article has been submitted to the magazine 'Invest in Lithuania']

See also this video Where Richard Floriday speaks about economic development, I just found several days after I wrote this article.