Management teams want innovation because innovation can bring differentiation in the market and organic growth, which are two strong drivers of profit and market attention. The challenge that innovation presents is: where should it be done, and who should be doing it? I think there are at least five different "locations" for innovation, and by identifying these locations we can begin to determine the tools and techniques necessary for each location to thrive, and who should be working on ideas in each location.
Now, these "locations" as you may have guessed by now are virtual, but very important. Just as a company has a formal org chart and the "real" organizational power chart, innovation can exist in a number of different virtual spaces. Let's look at a few of those now.
Within R&D and/or a product group. This is the natural, comfortable place for innovation to reside. In fact in most firms it already lives in this space, so the management talk about innovation is either reinforcing the existing innovation or threatening this team by expanding innovation outside of this "location". The processes for innovation - at least incremental product innovation - already exist.
There are challenges to defining innovation at just this level or location. Innovation should be about more than simply defining the next iteration of a product, and the R&D teams and product teams clearly don't hold the monopoly on insight into new services or business models, which should also be fair game for innovation. So, while this location is a good one, I doubt it is the only valid "location" for most firms.
Across product groups. What happens when you company needs to innovate across lines of business or product groups. Perhaps there's a large opportunity to innovate by combining several of your products or solutions into a new "whole product" for the customer. Where does that innovation reside? Now there are suddenly two or more cohabitating groups with different approaches and different compensation models trying to work together on innovations in a virtual space. This becomes a bit more tricky and may demonstrate a need for a center of excellence where the teams from different business units or product groups can work together more effectively - away from each others' teams and turf. Again, we still are really only focused here on product innovation, although crossing corporate functional boundaries may raise the awareness of service or process innovation.
White Space innovation. Who is responsible for innovating in the "white space" of your organization? Should each product group and/or R&D team work to create new products in the spaces where your products or offerings are missing today? Who sets the direction and strategic vision for the white space innovation? If created, who will own and manage the products or services for the white space? Location is not just an issue of strategic intent, it is also an issue of ownership. Ideas conceived for the "white space" that do not have ownership in a product group or line of business over time may be accurate but will fail, as corporate teams simply don't have the experience or bandwidth to identify, own and grow a product or service innovation.
Innovation between a business and a partner. Who is responsible for this "location" - a virtual space between your company and one or more business partners who have agreed to innovate around a new product or service? Who owns the responsibility for the investment, the business development, the legal headaches necessary to work with people who are partners or possible competition? This is a very important "location" as few firms have the footprint to cover a wide range of capabilities, technologies and markets, so partnering will often make sense and add a lot of value, if you can get the groundrules established. Ownership of the idea and the product or service long term is obviously a big issue. Who decides where the idea resides?
Innovation in the open. If you've followed the concepts of open innovation to their logical conclusion, you'll know that truly open innovation - user or customer generated ideas and content - are where innovation is heading. Who in your firm manages the interaction between your customers and your prospects and their ideas and content? I think we can predict fairly soon that there will be people in every business who are responsible for helping to shape and manage customer innovations. In our area, there are several small photolithography shops where anyone with an idea can create a small prototype of the product they've invented. If prototyping becomes mass market, anyone with an idea can present a reasonable facsimile to any firm. Will yours be ready to review the new products and services and content generated by "average" folks?
In each of these areas, the classic management issues are very different. Span of control, management communication and direction, ownership, control and strategic alignment change dramatically as we move from "location" to "location". As your firm considers its innovation strategy, tools, processes and methods, look first at the "locations" where innovation is important. The locations will dictate the changes necessary for innovation success.