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The innovation gap


Reynaldo C. Lugtu Jr.

Reynaldo C. Lugtu Jr.

I recently sat as one of the judges in a startup idea pitching competition participated in by colleges and universities in Metro Manila. Either the selection committee did a poor job screening the participants or the quality of ideas and/or students are just declining. The startup ideas pitched ranged from outright incongruous to grossly dumbfounding, like building a spreadsheet for recording order entries (we know this commonly as Microsoft Excel), or an app for building a community of freelancers (now being done in Facebook groups).

This is not to belittle the effort of those kids who participated, but it’s symptomatic of the dearth in teaching innovation in schools in particular, and the lackluster state of innovation in the country in general.

This is evidenced by the 2018 Global Innovation Index (GII) study co-sponsored by the UN World Intellectual Property Organization which ranked the Philippines 73rd out of 126 economies, which was steady from a year ago.

While strengths of our country were cited such as knowledge absorption, firms offering formal training and research talent in business enterprise, trade, competition and market scale and market capitalization; key weaknesses were likewise highlightedsuch as in human capital and research index as determined by expenditure on education, pupil-teacher ratio, global research and development companies’ expenditure, and ease of doing business – positioning the Philippines as ‘below average’ in regional innovation ranking.

In my conversations with business and government leaders, they clearly acknowledge the importance of innovation to advance their organizations. In fact, they all get the definition of innovation right, that is, it’s the introduction of something new, like a new idea, new method, or product.
But the innovation gap, based on my assessment, stems from three areas, namely:

Lack of common understanding of what innovation is. While most business leaders know the basic definition of innovation, there’s an apparent misunderstanding of how it happens, where it happens, and when to make it happen.

Innovation is essentially solving problems – may it be organization-level or macro-level. It’s finding novel solutions to problems, and it involves key important skills – critical thinking, creativity, and in this day and age of complexity, data analytics.

I’ve discussed extensively in previous treatise that critical thinking is declining in our country due to rote memorization pedagogy in public and private education system. This translates to a pool of human capital in organizations that lack critical thinking; hence, the lack of innovation in many organizations.

There’s also a lack of disciplined approach to innovation in many organizations. The common misconception among many business leaders is that innovation is all about making new services and products. While product or services is one area where to innovate, there are other areas where organizations can potentially innovate.

In the innovation workshops I conduct, using the Ten Types of Innovation framework of Keeley, et al., there are ten areas in an organization where to innovate – profit model, network, structure, process, product performance, product system, service, channel, brand, and customer engagement. I add an eleventh element which is culture and people. This framework provides the guidance and where, how, and when to innovate, precluding the nebulousness of the innovation process.

Lack of innovative leaders. The kind of leaders in organizations determine the innovation outputs of its employees. Many leaders lack the preparation, mindset, and experience to lead their organization to innovate. One symptomatic benchmark I use is when I see suggestion boxes in company hallways which attempts to promote innovation. This is far from a disciplined approach, much so from building a culture of innovation.

Lack of organizational culture that fosters innovation. The lack of innovative leaders results in the lack of a culture of innovation. In a culture profiling survey I conducted in a conference, all 107 participants showed that the lowest attribute in their organizations is risk taking and innovation. Risk-taking is a critical component of nurturing innovation in an organization, and leaders are responsible for fostering the innovative culture in their organizations. Many of the organizations I surveyed are mired in bureaucratic processes and risk-avoidance.

In my next article, I will discuss ways on how to address these innovation gaps. In the end, leaders play a critical role.

The opinions expressed here are the views of the writer and do not necessarily reflect the views and opinions of FINEX. The author may be emailed at

The author is President & CEO of Hungry Workhorse Consultancy, Inc., a digital and culture transformation firm. He is the Chairman of the ICT Committee of the Financial Executives Institute of the Philippines (FINEX). He teaches strategic management in the MBA Program of De La Salle University.

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