Purpose and Innovation

Purpose and Innovation
Nikos Mourkogiannis
Strategy+Business, October 26, 2006

Michael Porter asserts that “Innovation has become perhaps the most important source of competitive advantage in advanced economies.”  And yet, when Booz Allen Hamilton recently conducted a study of the 1,000 biggest spenders on innovation — the companies with the largest research and development budgets around the world, they found no significant correlation with any measures of corporate success.  None.  Not profits, not revenues, not growth or shareholder returns.

In other words, the simple decision to invest in innovation is not enough.  How you invest, and especially how innovation serves a larger Purpose, determines the value of your investment.

In “Purpose and Innovation,” an October 26, 2006 e-news report from Strategy+Business, Nikos Mourkogiannis explains that Purpose helps innovators see beyond current convention — it actually improves the quality of innovation.

Mourkogiannis is the chairman of the board of the consulting firm Panthea Ltd., and a senior advisor on leadership to Booz Allen Hamilton.  Formerly a senior executive with the Monitor Group, Westinghouse, and General Dynamics, he taught international negotiation at Harvard University.  He is also the author of Purpose:  The Starting Point of Great Companies.

He contends that Purpose counters the natural risk aversion that large companies have to innovation.  It thus increases the quantity of effective innovation, often without raising the price tag.

Think of innovation as taking place within a mental space.  In a company without Purpose, this space has three dimensions:

1.       Understanding of the technology.

2.      Understanding of the customers.

3.      Understanding of the competition.

In a company with Purpose, this three-dimensional space becomes four-dimensional.  The extra dimension is understanding of the Purpose.  The fourth dimension makes it easier for the innovator to think outside existing conventions.

There are four types of Purpose:

  • Discovery, such as IBM’s Purpose to seek out the new “beyond our present conception,” or Sony’s Purpose to “innovate in a useful way.
  • Heroism, such as Ford’s Purpose to use machines to improve the world, or S.G.  Warburg’s Purpose to maximize the achievements of the elite.
  • Excellence, such as Berkshire Hathaway’s Purpose...