Innovation is the bedrock of future prosperity, argues Colm Reilly, but too often businesses ignore this need and damage their prospects.

Innovation is necessary for future survival, but when times are hard it is innovation that tends to get squeezed. Business leaders should be adjusting the rudder towards new forms of collaborative working.

Organisations are forgetting to manage their future

Managing the long-term future is vital to corporate survival. Organisations need to be working today on the innovations that will form their stock-in-trade in five or ten years' time. Yet in a climate where business grows more unpredictable by the minute, managers have little time to think beyond the immediate future. The drive to cut costs, combined with resource constraints, makes breakout innovation seem like a luxury.

The risks of failure to innovate

By neglecting innovation, an organisation is putting the control of its future on hold. There will not be time to catch up later, because when the economy picks up the pressure on managers will become greater still. Before that happens, businesses face a more immediate risk.

A step change in the market- such as the emergence of a new competitor, a new customer segment or a new groundbreaking technology - could create havoc, leaving companies that have no mechanism for achieving breakout innovation poorly placed.

We need better ways to tap external resources

For future sustainability and profitability, companies must position themselves to react quickly to changing market conditions and customer needs - and that means finding ways to innovate, despite economic pressures and market volatility.

Companies need to create an innovative culture and look beyond their own four walls for resources and ideas.

Where companies outsource elements of their R&D at present, there is a tendency to farm out the least popular projects. Alternatively, some companies set up supply-chain collaborations, where for example the client retains overall responsibility for the design of the product, but delegates the detailed design of a particular component to an external supplier.

The full value of external collaboration is only realised when both parties contribute fully by providing ideas as well as resources, thereby sharing in the value generated.

The innovation grid

The answer for companies is to set up and exploit 'innovation grids': partnership networks where knowledge and resources can be shared. Members of the grid can agree to give one another access to their know-how, helping to make informed decisions, rapidly and with less risk.

Accessing the right grid can open up virtually unlimited opportunities. Learning about a range of business cultures and their processes can suggest innovative possibilities that would be a long time emerging within a single industry or company.

Gaining flexibility and agility

Companies joining an innovation grid quickly gain flexibility and agility in a number of dimensions. They can take advantage of other participants' investments - whether in plant, people or know-how - to complement their own long-term innovation efforts or to make rapid changes in direction.

Accessing a wider and deeper skill base

Given today's pace of change, it is no longer realistic for one company to attempt to develop and maintain all the skills it needs in-house. The winners will be those that learn to work in ways that accommodate both internal and external resources and technologies in a culture of 'open innovation'. Whilst it is difficult to predict which technology or what sort of culture you will need to access next, being part of the right innovation grid will give you access to a diverse range of technologies, cultures and "change makers".

Companies will benefit from the grid in a managerial dimension as well as a technical one. Managers can locate suitable peers with whom to compare notes on technological and market trends and other R&D relevant issues.

This real-time access to the latest events and ideas will ensure that managers never get caught unawares -- they will have advance warning of potentially disruptive new technologies or ways of working.

Conclusion

An organisation's future depends on agility in response to change - which ultimately equates to its ability to innovate. A culture that fosters new ideas is a necessary but not sufficient condition for innovation. In today's stringent economic conditions, companies must also optimise their use of external resources. By establishing and exploiting an innovation grid, a company positions itself ideally both to thrive into the future and to excel in the present.

Colm Reilly is country head of PA Consulting Group.