Knowledge Creation: The Basis of Authentic Innovation

As a student of innovation for over 25 years, a recent study of Toyota’s innovation management system is challenging some of my beliefs, biases and assumptions.

Thanks to Tom Ruhe of Hewlett-Packard Company and Bruce Beihoff of Whirlpool Corporation, who gave a presentation on Toyota’s unconventional wisdom at the Innovation Practitioners Network meeting in Dallas last week. I am taken back to basics: to a renewed understanding of what innovation is, in the first place, and its proper place in the scheme of things.

Ruhe recently shared how Al Ward defined innovation, through the experience of Toyota, as “learning applied to create value” [for customers]. Don’t let the simplicity or brevity of Ward’s definition deceive you. Ward seemed to know what Toyota has experienced: knowledge creation is the basis for authentic and substantive innovation.

So much of what we hear, read and even experience ourselves these days relating to our organizations’ attempts to innovate lacks this basis in knowledge creation, particularly creating knowledge where it matters. Too many of our innovation efforts are motivated by the desire to differentiate or create something new without either a deeper understanding of the value that is needed or the causalities of the underlying system. It is no wonder that we remain for the most part disappointed in the results of our innovation investments. The Boston Consulting Group’s latest survey reaffirms previous surveys’ conclusions of the dissatisfaction of executives in the returns on their innovation investments (Business Week, May 14, 2007).

Would Toyota bring to market a product or feature innovation simply because it is new or different? I suspect not. While novelty, patentable inventions and differentiation may be necessary in highly competitive markets, new value for customers is even more important. It is the foundation for authentic and substantive innovation.

For the past several years I’ve been participating in an interesting but largely theoretical debate regarding which comes first, invention or discovery. Now after being introduced to Toyota’s approach to innovation management, I am ready to conclude what they learned some time ago. Discovery (i.e., creating new knowledge where it matters the most, especially to customers) precedes invention and is essential for it. At least two practical implications stem from this insight:

•  delay efforts to generate solution ideas until such time as a solid hypothesis, experience-based insight and/or understanding of the system is developed, and

•  spend time up front in knowledge creation efforts—particularly through collaborative diagramming of relevant systems, experimentation (both thought and actual experiments), and clarifying purpose and potential value.  It is absolutely necessary and will pay off handsomely in the long run.

Innovations that are not based upon knowledge creation end up short-lived if they have any life to begin with.

This article was originally published in Innovating Perspectives in May 2007. For this and other back issues of our newsletter, please visit our website at innovationsthatwork.com or call (415) 387-1270.