Evaluating and Developing Innovation Capabilities with a Structured Method

Introduction As unexpected changes and global competition have become recurrent features in the current business environment, the pressure for innovation and organizational self-renewal has considerably increased. In fact, it has been argued that organizational capacity to continuously innovate, modify, change, and re-create organizational resources, capabilities, and strategies is the main source of sustained competitiveness in turbulent environments (e.g., Eisenhardt & Martin, 2000; Grant, 1996; Hargadon, 1998; Leonard-Barton, 1995; Nonanka & Takeuchi, 1995; Teece, Pisano, & Shuen, 1997). The development and maintenance of such a dynamic capability for continuous innovation can be assisted by metrics and tools that identify the organization's main strengths and weaknesses in innovation management. Several innovation management measures and audits have been presented in the academic literature (e.g., Cormican & O'Sullivan, 2004; Kianto, 2008b; Radnor & Noke, 2002; Tang, 1999), but most of them seem to be based on the technological perspective on innovation (Hallgren, 2009). In other words, they view innovation in terms of new product development and focus on assessing and improving the stages of the product innovation process. However, innovation is not restricted to the production of new products, but can also pertain to the development of novel services, processes, strategies, and business models. Furthermore, production of novelty does not need to be limited to the research and development activities of the organization, but can be seen to take place all across the organization. Therefore, metrics based on a wider conceptualisation of innovativeness, including the ability to produce many types and sizes of innovation as well as involving a wide range of organizational actors, would seem useful. This paper presents a method suited for organizations aiming to assess and develop their capacities for company-wide sustained innovation. The method is based on the application of a survey method called ORCI (Organizational Renewal Capability Inventory) (Kianto, 2008a, 2008b) in organizational development. Specifically, the paper conceptualises innovativeness in terms of organizational renewal capability. Organizational renewal capability is based on the knowledge-based view of the organization (Spender, 1996) and addresses the ability of an organization to produce sustained learning and innovation, that is, new products, processes, practices, insights, and mental models, which enable the organization to adapt to external changes as well as to create change from within the organization (Kianto, 2008b; Leonard-Barton, 1995; Poyhonen, 2004). The organization's capability for renewal determines how efficiently it is able to use its resources for learning and innovation and, thereby, to achieve competitiveness over other companies with identical resources but less renewal capability. For example, two organizations might have similarly educated and competent personnel, but the firm that is better able to organize a working environment that motivates and enables the employees to utilize their skills and knowledge for continuously improving work practices would achieve a higher competitiveness. Thus it is not the resources possessed by a firm themselves that drive performance, but the organizational capabilities for orchestrating and managing them (Penrose, 1959; Sirmon, Hitt, & Duane Ireland, 2007; Sirmon, Hitt, Duane Ireland, & Gilbert, 2011). Especially in turbulently and unexpectedly changing environments, the ability of the organization to change and modify its resources and routines in a flexible and agile manner is a key factor impacting its sustained competitiveness (e.g., Eisenhardt & Martin 2000; Teece, 2007; Teece et al., 1997). Furthermore, in their extensive review of innovation management measures, (Adams, Bessant, & Phelps, 2006) observe that there is a lack of research reporting on how such measures have actually been used in practice by real organizations. …