Wednesday, September 24, 2008

The difference between corporate and business unit innovation

In a famous children's book, Dr. Dolittle encounters the rare pushmi-pullyu, an antelope with two heads, one on the front of its body and one on the rear. The animal has a hard time getting anywhere because both heads want to go in different directions. What I've discovered in working with a lot of organizations is that the corporate team and business unit teams are a lot like a pushmi-pullyu - both want to innovate, for different reasons and purposes and have different motivations and concerns.

The corporate or staff team want to innovate because they understand how important innovation is to the CEO, and how necessary innovation is to the organization for growth and differentiation. They see themselves as the keepers of the strategy, and believe innovation can be important and disruptive. The challenge that the corporate innovation team has is that it is rarely if ever responsible for actually producing a product or service. This means that its great ideas often struggle to be considered or implemented by the business units. The corporate teams understand the need for innovation and how it should align to strategic goals and direction, but have a hard time institutionalizing innovation or doing the tactical, day to day tasks of innovation.

People in the lines of business understand that innovation is important. After all, they compete against other firms and their offerings, and are reminded constantly about the need for new products and services. However, the business lines aren't compensated on spending time thinking about products, services or business models that won't materialize for two or three years - they've got to make the quarter happen. So, while they have the means to conceive, build and deliver new products and services, they don't have the bandwidth, time or means to focus on those issues. And all the while, corporate is giving them great new ideas which are simply added to the long list of tasks on their plate.

There should be an easy answer to this - a corporate team focused on longer term disruptions that are suggested by the business units that simply don't have the time or bandwidth to focus on what's next, and a corporate team that provides trends and strategy insights to business unit teams to extend their visibility. A corporate team can provide resources and funding to assist the business units with their mid and longer term innovation needs and take on the creation of new markets or "blue oceans". What the business units often struggle with is the knowledge that they need to innovate, but simply don't have the people, time or resources to innovate consistently. That seems like an obvious answer - so why isn't this being engaged more effectively?

Most likely there are a couple of reasons. First, while CEOs and executives talk about innovation, they aren't measuring it. So everyone understands that as long as we appear interested in innovation, and achieve the quarterly numbers, that's acceptable. Once the senior executives get serious about measuring innovation - what ideas have been created? what new products or services conceived and developed? What impact on the bottom line once they are launched? Who is innovating and who isn't? - then the demand for innovation resources and dollars will exist within the business units. Where will that capability come from? Let's hope it comes from a team aligned with core strategy who has the bandwidth to look out three to five years, not 45 to 60 days. Let's hope that team has a method that can be applied across the organization as a relatively standard approach, so we aren't reinventing the wheel each time. In other words, let's build a small corporate team and outfit them with the processes necessary and the tools to enable innovation at corporate, and in the business units.
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posted by Jeffrey Phillips at 12:21 PM


Anonymous Anonymous said...

Measuring innovation and incentivizing innovators is consistently difficult. Especially in a down economy when revenue numbers are so important. We just cut NPD for 2009 due to budget cuts. I'm challenged with communicating to my GM the long term consequences of such a move when his main concern is saving our people's jobs.
What do you suggest?

1:12 PM  
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