How to Recognize Six Systemic Failures of Innovation

By: Chuck Frey

There are six potential types of failure within innovation systems. Are all of yours healthy?

I’ve been reading, like most of us, about failures, serious often jaw-dropping failures in business, banks, markets and even country failures. Most seem to come from the present financial mess that still continues to swirl around us at present.

I recently came across a 2008 EU Innovation Progress Report published through the Inno Policy Unit discussing different levels of innovation failure. There is a timely reminder here, that there is often more than one type of failure involved when markets collapse that need a new innovation response.

The EU suggests there are six types of failure. Let me summarize these six with some of my own interpretations because they can remind us in these tougher times that there are multiple reasons why failure needs to be evaluated from a broader perspective, so as to re-ignite growth across the whole spectrum of innovation, arguablly the only way for new growth to happen. So we need to address all these six different types:

1. Market failures

This is when the mechanisms of the market collapse and are not able to secure long-term investments in innovation due to increased uncertainty and the funding of riskier ventures dry up. We are in the middle of this with the financial institutions requiring bail outs or funding to stimulate investment and fresh investing.

2. Capability failures

This type of failure happens when organizations ignore the warning signs of their actions – such as introducing a new product that wasn’t in the best interests of the company. It may also include managerial deficits, the urge to copy competitors, misunderstanding different aspects of a competitor’s product, ignoring research, ignoring early warning signals from pilots and prototypes, and not having the essential “absorptive capacity” associated with building a more complete understanding, so essential for innovation.

3. Institutional failure

Often universities and research institutes don’t adapt fast enough to the changes going on around them and tend to become stuck in rigid ways of working. In times of greater difficulty, these institutions should be providing fresh ideas and concepts at a much higher intensity to help stimulate debate and offer new ways to innovate. There needs to be even more open dialogue between institutes, business and society.

4. Network failures

This type of failure happens when coopration between collaborators breaks down, often due to one party or another asserting their personal interests. As a result, the quality of trust starts to break down and the network becomes more disconnected. This leads to a lack of genuine interaction on behalf of the common good and this tends to cause higher emotional intensity and conflict that slows down innovation

5. Framework failure

When the framework needed to pursue innovation contains gaps or shortcomings, the health of the system suffers. Resources get diverted, money gets wasted on inappropriate activities and participants take on a more protective stance that stifles innovation even more.

6. Policy failure

This type of failure occurs when suggested ways to improve existing innovation capacity and the need to provide consultative forums to give fresh learning and stimulus are ignored. It can also happen when the innovation team mistakenly believes that the policies that have been set are the right ones and that they don’t need not be constantly reviewed.

All six of these areas of failure do impact innovation. At this time of economic downturn, when we are looking to regenerate growth through innovation within our businesses, we need to think through all these six areas of failure, so we can avoid these hidden pitfalls.

By Chuck Frey

Photo: stress from Shutterstock.com