Many innovations today are associated with companies as opposed to individuals: why is this, and what does it tell us?
Today many innovations are associated with businesses as opposed to individuals. There are several reasons behind this phenomenon. Rapid development of knowledge management practices and processes in companies can be mentioned as one of the primary reasons behind many innovations being associated with businesses as opposed to individuals. Levels of sophistications of knowledge management systems in organisations have been increasing with rapid paces during last several years and this tendency has had positive correlation with creativity and innovation in most organisations.
This argument can be better explained by referring to the concept of knowledge life cycle. According to this concept, knowledge life cycle comprises capture, verification, codification, integration, synthesis, dissemination and utilisation stages. Towards the end of the last stage organisational knowledge has a great potential to be used to make innovations of products, services and processes through collaboration and teamwork.
Senior level management in increasing numbers of businesses do understand the importance of creativity and ‘thinking outside of box’ in terms of producing innovative products and services and attempt to shape organisational culture accordingly. One of the most innovative companies of the present day – Google is a suitable case study to justify this point.
Specifically, Google offices around the globe are famous for their unique, innovative and highly informal design to encourage creativity amongst employees. Moreover, Google practices ’20 per cent rule’ according to which employees are free to spend one fifth of their paid time at work doing activity of their choice that does not have to be aligned with the corporate strategy (Kotter, 2013). Such a move enables Google to introduce innovative products and services in a regular basis allowing the company to diversify to a great extent.
Many other companies are also following this path to varying extents in terms of creating informal work environment and encouraging employees to suggest ideas and improvements of business processes. However, this was not the case only several decades ago, when tall hierarchical structures in many businesses and high levels of bureaucracy in various organisational processes suppressed creativity spirit in employees resulting in fewer innovations.
Another reason of why nowadays many innovations are associated with companies as opposed to individuals is related to the amounts and availability of funds. Technological innovations often require considerable financial investments, and rare individuals do possess financial reserves of such an amount so that they could realise their innovative ideas and projects in an individual manner.
Many global companies, on the other hand, do possess vast cash reserves that assist in production of innovative products and services and initiation of innovative processes in many levels. For example, US-based global automobile and trucks manufacturer Ford Motor Company has spent more than USD 2.3 million for research development programs during the year of 2012 (Annual Report, 2012), and there are many other global corporations with even greater research and development spending budgets. Accordingly, increasing research and development budgets of companies can be specified as a valid reason behind many innovations being associated with companies instead of individuals.
Lastly, advanced levels of developments in many areas of science can be highlighted as an additional factor that fuels the tendency of many innovations being associated with companies instead of individuals. For example, introducing an innovation in the area of smartphones requires an in-depth knowledge of chip system, application processor, screen technology etc. and all of these areas contain abundant amount of knowledge that is difficult to be comprehensively learned by a single person.
Businesses on the other hand, have research and development teams, and team members may possess knowledge about different aspects of smartphone technology and therefore they have more chances to make innovations compared to a single individual, because combined knowledge of team members can be used in a synergetic manner.
Greater share of innovations belonged to individuals rather than companies in the last century because the levels of knowledge required in order to make a breakthrough in an industry was considerably smaller compared to the level of knowledge required to make an innovation.
Annual Report (2012) Ford Motor Company
Kotter, J. (2013) “Google’s Best New Innovation: Rules Around ‘20% Time” Forbes, Available at: http://www.forbes.com/sites/johnkotter/2013/08/21/googles-best-new-innovation-rules-around-20-time