Here’s a few key points which stand valid for a large, multi-division company:
- Innovation management pertains to the overall strategy of a company, and it has to be done in an organizational structure, Strategic Innovation, which is staffed and close to the head of the company, at a higher level than company divisions.
- The creation and management of a Strategic Innovation group has to take into account and manage pushback from personnel not directly involved with the innovation process, so to insure buy-in from the entire organization, both at inception time, and as an ongoing concern.
- The approach to innovation has to be very pragmatic and down to earth. Innovation has to be managed with a clear economic focus: the economic impact on the company has to be positive either in terms of increased revenues or in terms of reduced costs. In addition, potential solutions to newly discovered needs have to keep into account the existing products and services.
Up at the Head
In order to be effective, the overall management of Innovation within a company has to be done from a position close to the head and independent from the individual divisions of the company. There are several reasons to it, related to scope, time-frames, and effectiveness.
Innovation can happen within the product scope of a single division, but often real innovation is possible only looking at a broader picture which considers the overlapping space between divisions and possibly also solution spaces adjacent to the existing divisions. Clearly this can be done only from outside the individual divisions. These can and should have their internal innovation teams looking at innovation in their specific products and markets, where they have all the knowledge, experience and interaction with customers. But they would find it extremely challenging to look beyond themselves.
Individual divisions have also clear short term business objectives to attain, so their time frame for any innovation initiative they originate is inherently short-term. Only a structure which is independent of short-term objectives can focus on long-term innovation projects, which is where the future of the company is being built. Long-term Innovation is a strategic activity and as such it has to be managed close to the company head.
Independence is also positive in terms of effectiveness, to avoid being influenced by pushback from the organization (see below) and to be able to change course swiftly in response to early testing in a fail-fast-fail-often perspective. This is possible only with the strong support form top management and the board which should feel comfortable with the inherent unpredictability of innovation and not expect positive return from all innovation investigation projects.
The creation and management of a Strategic Innovation group has to take into account and manage push-back from personnel not directly involved with the innovation process, so to insure buy-in from the entire organization, both at inception time, and as an ongoing concern.
There are several drivers for push-back from employees in the company that can seriously affect the chances of success of an innovation project. Without the buy-in from the people who will have to live day by day with the innovation – e.g. selling the product resulting from the innovation effort – success of any innovation project is at risk, regardless of its business viability.
People in organizations tend to fear the change coming from innovation for several reasons, like established habits in doing things in a certain way, concerns about own position in the future organization, fear of losing money due to product cannibalization.
The latter issue affects also all management of a division in terms of business results. Managers tend to be cautious embracing innovations that could affect an existing and relatively stable revenue flow from existing products.
Push-back is managed by leaving control to the divisions on short term, incremental innovation, which they know how to do and brings immediate value to the division. The Strategic Innovation group should provide support to this type of innovation and help divisions obtain positive results. By doing so the group remains in touch with the individual divisions, needs, and issues, and acquires credibility and recognition that will make it easier to gain acceptance for the long-term innovation projects that are managed centrally.
The approach to innovation has to be very pragmatic and down to earth. Innovation has to be managed with a clear economic focus: the economic impact on the company has to be positive either in terms of increased revenues or in terms of reduced costs. In addition, potential solutions to newly discovered needs have to keep into account the existing products and services.
Innovation should not be done for its own sake, but also considering that it has to bring value to the organization in addition to value for customers. So on one side it must affect positively the bottom line and bring more revenues or reduce costs, on the other side it has to bring value also to the people in the organization, taking into account all the push-back issues mentioned above.
The innovation team should have a broad perspective on innovation and consider technology only as a part of the picture, and include the overall business perspective, including business models and innovation delivery, but always with an eye on how to make the most efficient use of existing resources.