Last year’s dramatic decline in oil prices caused a wave of corporate uncertainty that spread across the Middle East, forcing many companies to examine how they do business. As if on cue, the immediate reaction of many organisations to the new reality of dried-up liquidity was to deploy classic cost-reduction techniques. But with firms desperate for alternatives, a door was opened, a door which innovation advocates promptly stepped through. As organisations began turning to innovation, several types of corporate behavior were observed in the Middle East:

• Innovation as an offering: These organisations perceived innovation as a complicated product or service enabled by a sophisticated technological platform. In some cases, these organisations would develop a new product or service, but never a sustainable innovation programme.
• Innovation as a brand: These organisations wanted to treat innovation as a face-lift, in most cases never going beyond a marketing and communications strategy, leaving other dimensions of their business untouched.
• Innovation as an identity: These organisations focused on developing a corporate culture of innovation, transforming their business via a strategy and vision that focused on talent management and corporate citizenship and ultimately resulting in a sustainable innovation programme.

For organisations looking to treat innovation as an identity, consider the following:

Talent management

Innovation is a reflection of an organisation’s vision and culture. Those that are successful have transformed innovation into a behavior practised among their corporate citizens versus just a concept or thought, which is typically found at organisations that treat innovation as an offering or brand.

The Middle East, long a region of strategic trade routes, has become an international hub of human capital movement, creating rich soil for innovative ideas to spring. For decades, enterprises have enjoyed access to a mix of international and local talent. During this time the focus of the talent management function has been to build their organisations’ recruitment and learning capabilities. This focus aimed to ensure, firstly, the right fit of a candidate to a specific job, and then to promote an employee’s development along a well-defined career path.

However, the recent race towards innovation has imposed new requirements on talent management. This has brought light to two critical elements for success: diversity and community building. With the former, a recent study, whose findings were published by the Harvard Business Review, provides compelling evidence that diversity unlocks innovation and drives market growth. According to the report: “Companies with two-dimensional diversity out-innovate and outperform others.” Employees at these firms are also reportedly 45 per cent more likely to report that their company’s market share grew over the previous year, and are 70 per cent more likely to report that the firm captured a new market.

In that regard, talent management, by introducing an element of diversity into an organisation’s hiring criteria, may in fact give themselves a “leg-up” on the journey to becoming a firm that is successful at innovation. With the latter, by developing programmes that focus on community building, organisations promote a spirit of corporate citizenship, key for an organisation where ideation is an integral part of the business, and where employees are not afraid to see their ideas fail.

Forgiving failures

When it comes to innovation, often businesses underestimate the degree of market forgiveness of the failure of new ventures. Some of the most recognisable examples include the trust that Elon Musk’s Tesla retains despite the occasional “weaker-than-expected” financial results. Another example is the UC-Berkeley student lawsuit and allegations of compromised email privacy on top of several less-than-successful ventures such as Google Wave, which have not prevented Google from attaining market dominance or successfully launching new innovative products across market segments.

While critically important to the success of an innovation programme, accepting failure in the corporate setting in the Middle East can be slightly more challenging than in other regions. This can be attributed to a set of exogenous (economic model) and endogenous (culture) factors, particularly in the GCC, where a majority of the workforce is comprised of expatriates. For expatriates, the aspiration to relocate to a new region and take on a new job naturally creates pressure on the employee “to prove oneself” and, in many cases, it can take up to several years for a professional to obtain the level of comfort needed to share their innovative ideas when factoring in the risk of failure and the potential of becoming “permanently stigmatised and marginalized”, according to Fadi Haddadin, Middle East economist and policy analyst.

Haddadin adds that “without tolerating a large number of failures, it is impossible for Arab economies to achieve true innovation”. In that regard, incremental positive changes are attainable, but will require proactive engagement from the leadership of governments, the private sector and civil societies, endorsing both ideation and a tolerance for failure.

Good governance

While the agenda of many organisations in the Middle East already prioritises innovation over other strategic goals, their approach on how to realise the strategy requires examination. A major pitfall for organisations that invest in the development of a “tolerant-to-failure” culture is overlooking the need for a good governance model and processes. Innovation is an undertaking that cannot be delegated to any single function or to lower levels of an organisation. It remains a top-management responsibility and must consider some of the following:

• Establishing the vision for the innovation programme
• Defining roles and responsibilities for the innovation stakeholders
• Defining how to measure the innovation programme
• Defining a budget for innovation
• Coordinating and prioritising innovation activities across functions
• Establishing executive management routines regarding communications and decisions

Organisations will face many impediments during their innovation transformation journey. To overcome these challenges while augmenting the company’s growth and commercialisation initiatives, they will need to equip themselves with adequate talent management and the right governance structures. This, along with a strong voice from the top empowering employees to collaboratively generate ideas without fear of failure, will drive many businesses in the region forward.