First published Research World May 2010

David Murphy talks to Mario Morales, founder and CEO of innovation, strategy and creativity consulting firm Innovare, that focuses on helping companies grow.

Mario, could you give us some examples of the types of areas where you have worked in innovation?
I’ve been involved in Latin America in product innovation, service innovation and business model innovation. On the product front, I have helped pharmaceutical companies to differentiate their offerings against generic drugs. In service innovation, I have helped hotels and banks take their customer experience to the next level. I have also been involved in several business model innovation projects, which is an emerging field, but I think it’s going to be important in the future.

I know you believe that innovation can be systemised. How do you systemise what many think of as a creative process?
Innovation in most companies happens like rain. They do not manage it; they just wait for a creative spark from one of the employees, but they never know when it will happen. It’s usually the act of a hero because most companies are designed to kill innovation, not support it. You have to learn how to make rain, how to manage the idea factory.

It’s a critical process, like sales, marketing or HR. You have to focus the innovation with an innovation strategy, and then train people and develop their skills. Then you put in place a culture of innovation, and metrics to manage it and so improve your performance.

There was a recent study in the Harvard Business Review on innovation DNA – what makes people innovators – and it found that one-third of innovation skills we are born with, the other two-thirds are skills you can learn. So you can teach people how to innovate. It’s about having a great inner curiosity for what is broken in the world, and these are behaviours and competencies that can be trained.

Is there a certain type of person who is more likely to be a better innovator?
People tend to think creative types are ideal innovators, but actually, the definition of innovation is implementing ideas that add value, and the implementation part is generally forgotten.

There are five key roles in the innovation process. The first are the visionaries, who see the future. The second are the creatives, who generate new ideas. Then you have the critics, who are very good at evaluating ideas. The collaborators, who work across departments to break down the silos. And, finally, you have the developers, who make ideas happen.

How do you create a culture and climate of innovation?
To me, in a company where innovation is a priority, everyone is safe to express new ideas. People are allowed to question the status quo. Most companies are designed to kill ideas, or there is an idea monopoly from the tenth floor up.

So the first question I ask when I go into a company is: ‘What happens if someone makes a mistake around here?’ And the answer is usually: ‘They fire you.’ When people are afraid of trying new things, it is not the right climate for innovation. You have to create an environment of trust and freedom for people to try new things, an environment where everyone can bring their passion to work. And you also need to establish practices and processes that allow people to experiment.

And how do you come up with entirely new ideas?
To develop genuinely new ideas, you need to develop four basic skills. The first is observation. For this, you need to have an insatiable curiosity for human needs. You have to see what problems people have in their lives in order to develop insight. Great ideas come from recognising great opportunities, so before you can have a great idea, you need to see a great opportunity, like the CEO of Sony observing people carrying their big music players around and coming up with the idea of the Walkman.

The second skill you need is questioning. You have to question everything. Like Michael Dell, who asked himself: ‘Why do I have to pay $3,000 for a computer when I could buy the parts myself for $800?’

The third essential skill is association, or the ability to connect different pieces of knowledge to create new things. An example is Steve Jobs, who associated his calligraphy classes at university to the computer interfaces he designed at Apple.

And then finally, there’s perspective. If you want to have great ideas, you need to be in contact with diverse people from different disciplines, backgrounds, cultures, countries, and ages. If you always hang out with the same people, you will always have the same ideas. You need to open your mind to new perspectives and world views to come up with new and different ideas.

How can a company best prepare itself for the structural changes that major innovation brings?
Companies should analyse their current business model and ask if it’s appropriate for the type of innovation they want to bring to the market. Some companies have discovered that their current business model is not appropriate for their new innovation. For example, there was a newspaper company that launched an online offering, but in doing so discovered that their readers were into paper, and not up to the level of a technology-based product. So they created a new department, staffed by different journalists, with a different mindset.

Has the economic climate made a difference to the amount of innovation taking place?
There have been a couple of areas where it has been a priority, such as cost reduction to survive, but it’s also been interesting to see customers looking for our services. Companies that were not necessarily in trouble, but which historically have been very innovative, and who now want to make it more systematic – to innovate faster and better.

Now a bank won’t wait three years to develop a mobile application; they will say, ‘In this competitive landscape, we cannot wait for three years, we need to do it faster’.

It’s often said that it is more difficult to innovate in services than in products. Why is this?
Because most tools were made for products, not for a knowledge- and service-based economy, so we see people who need a screwdriver, trying to fix the problem with a hammer. Innovation is possible in both areas, but we don’t have the appropriate tools to innovate in services.

Are there certain sectors that lend themselves better than others to real innovation breakthroughs?
I would not say so, though I have found a greater pressure to innovate in certain sectors like banking or packaged goods, where there is a lot of competition and similar products are offered, so there is a need to innovate to differentiate yourself. The same goes for technology companies, because they are in a constant state of change.

You live in Costa Rica, which seems to be very open to the use of technology. Would you say you can have more innovative nations, as well as companies?
Yes, there is a difference in openness to innovation from one country to the next. If you look at the amount of patents for every 100,000 habitants as a measure of innovation capacity, then you can see that in Latin America, countries like Chile, Colombia and Costa Rica are leading the innovation landscape. And you see in these countries that the government is supporting innovation through its investment policies, because people high up in the government believe in the value of innovation, and this filters down to the companies on the ground, and the people who work for them.

Mario Morales is founder and CEO of Innovare. Its customers include GE Money, Holcim, Cargill, AstraZeneca, Baxter and Toyota. He has started various software companies, including Aura Interactiva, the largest custom e-Learning development company in Latin America.