Monday, November 20, 2006

Org Chart for Innovation

In many client situations we are asked "What's the best way to organize for effective innovation?" We believe this is very client-centric, and can be defined by the go to market strategy, how important innovation is as a strategic investment, the reach and breadth of the product lines and business units, and so forth. But gradually we are starting to see a more consistent organization theme, and I'd like to share it with you.

Organizing for innovation is difficult for at least three reasons:

1. Senior management is enthusiastic about innovation and wants more of it, but isn't sure how to structure or fund innovation, and sometimes is even unsure what "innovation" is.

2. Innovation cuts across organizational boundaries and functional groups, so it can be hard to determine who "owns" innovation

3. Ideas and initiatives need to have a home where the ideas solve a problem and can be funded.

So, corporate has involvement and interest in innovation, but probably should not dictate which ideas to implement or how to organize for success. The business units or product groups have a vested interest in innovation since they can fund short term and long term profits and differentiation, but are often distracted by day to day quarterly results and don't have the resources to bring to bear. Both agree it should be done, and both have a vested interest to see it done well.


In many organizations, we are beginning to recommend a "top-down" and "bottom-up" approach, where the corporate team provides some funding, strategic intent, resources and shared tools and processes, and the business unit provides the ideas, metrics and goals. In this approach, Corporate teams can be involved in innovation without dictating which ideas are right, and business units can find additional funding and resources to help evolve an idea and start evaluation and investment.

A shared model also means that as more business units or product groups take advantage of the shared resources from corporate, a more consistent language and approach can be used across the organization. Starting with only a few resources and processes, eventually the corporate Center of Excellence may include people, processes, a database of previous ideas and experiences, knowledge of what's worked and what's failed, software tools and other capabilities to assist the business unit. Business units will benefit from leveraging skills and dollars and consistent frameworks and tools, and by gaining insight into what other business units or product groups are doing.

This approach leads to more consistent innovation language, processes, tools and experience across the organization, helps ensure ideas work within the corporate structure and align to corporate strategy, provide greater visibility to ideas and increase collaboration.

There are clearly other approaches - on one extreme is an incubator, in which people leave the business unit to become part of the incubator and then return to the business unit or start a new business as a result of the evolution of the idea. I think taking people out of their structure entirely breaks relationships that can be valuable and makes it hard to return to the business unit. On the other end, innovation run completely at the business unit or product group level will create a host of problems with redundancy, investment in ideas that don't align to corporate strategy, rework and inefficiency.

I think in the end the shared model, with corporate providing the shared infrastructure, resources, tools and processes, and the business units providing the ideas and the people to work the ideas is probably the best approach. I've included a small graphic to begin the debate.

If you have ideas about the "best" organizational approach to innovation and care to share or debate our approach, please leave me a comment.
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posted by Jeffrey Phillips at 10:46 AM

78 Comments:

Blogger Dennis D. McDonald said...

Jeffrey,
This is quite interesting. I have used it as a jumping off point for my own post, "Is Innovation Management a Process or a Project?" (http://www.ddmcd.com/innovation_process.html)
- Dennis

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