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4. The "implicit knowledge"
As I observed in the second post of this Saga producing innovation most likely requires "implicit knowledge" something that it is not available off the shelf but has to be learned through experience.
This applies to individuals as well as companies. It is not a case that some companies seem to be more innovative than others, they seem to have innovation in their DNA. And it is not a case that just declaring: "We are going to be an innovative company" does not make it happen. If you look at Telecom Network Operators it is easy to say that they are not "innovative" companies although their leadership is often stating that they are going to be "innovative" companies. And in the few occasions where, indeed, innovation happened, it happened in the marketing area (the pre-paid card was surely one), not in the technology area, although they are companies that thrive on technology.
Implicit knowledge has to be learnt through experience, it cannot be taught. No surprise then that several observers are explaining the greater level of innovation that is seen in the Silicon Valley by a culture that understand failures, since through failure you gain experience and you can move on. In Europe failure is not seen as a step in the growth but as a proof that "that is not your job".
At company level the implicit knowledge is not found in individual employees nor in clusters of them (although having smart employees is crucial). Rather, it is found in the company processes, its DNA. Changing employees without changing the processes does not help. And we have seen, are seeing this, over and over in many companies that are facing a systemic crises such as the one brought forward by the Internet (the infamous Over The Top, as many Telcos would say) and declare they will innovate as a countermeasure.
There are some interesting studies, the most famous ones stemming from the landmark work of Ronald Coase, The nature of the Firm, showing that it is basically impossibile to change the "nature" of a Company, to disrupt its processes. This is because those processes have been finely tuned over years, decades, and have made the company effective on the market. Any change to them would decrease the company effectiveness and make it less competitive in the market.
It is easier to create a brand new company, with different processes and nurture it into an innovative company than to change an existing one. We have seen over the past decades a few cases of companies that have been reinventing themselves by spinning off a new company and provide it with the support to grow (IBM PC division in the 80ies, HP-Snapfish in the last decade, to mention just two of them). But we have also seen many big companies disappearing because they failed the "change" process (DEC, Honeywell-Bull to name just two).
Implicit knowledge is a fundamental aspect in innovation and being able to create it is the win or lose bet.
