The Organizational Strategist

October 21, 2010

The requisite organizational needs that supersede innovation success


-Introduction-

Recently, I have been reading a new management book The Other Side of Innovation by Vijay Govindarajan and Chris Trimble. Innovation is always an interesting topic for organizations. Innovation is interesting because it is often what spurs on growth and change. Without frequently innovating, the organizational risk of obsolescence increases dramatically. As a result of that, organizations should always be innovating both in their core and future business efforts.

-Design the organization for innovation-

The Other Side of Innovation makes the foundational points that the performance engine should be separated from the dedicated team in order for the innovation effort to be a success. The performance engine is defined as the core business while the dedicated team is the team that is tasked with innovating. Core business efforts are focused to continually improve efficiency and effectiveness. Innovation efforts, on the other hand, can be oriented to sustain or amplify aspects of the core business or create entirely new possible business efforts. Brand new business efforts are often disruptive to existing businesses. Innovation, by its very nature, means a change to the existing operations either by adding to, removing from, or modifying the current efforts. That means that the core business efforts of continual improvement and innovation can be in conflict. As a result, the separation from the core business’ drive for continual improvement is needed for innovation efforts to succeed. Beyond that, the more an organization needs or wants to innovate, the further separated the innovation effort should be from the core business.

To set up an innovation effort within the bounds of the core business, the output of the effort will not be as novel or extraordinary as it could be. This is because of the constraints imposed by the core business. With any innovation venture, the change that the innovation brings will be a result of the ideas cultivated during the effort churns in its own development cycles. Thus, if everyone in an innovation venture is from the same business group, then the potential for the innovation is contained to that realm of thinking. That containment from the business group can be the normal demands of the job, operating rhythm of the group, culture of the organization, available time, and resistance to change among other factors. The more diverse the group that is driving the innovation effort is and the less assumptions, constraints and boundaries that are imposed on the innovation effort, the more possibilities the innovation effort can undertake or become.

Innovation should be intentionally designed to thrive in its own organizational scope. By that, it should have its own strategy to change and inspire the core organization after the innovation effort itself matures. In that manner, it’s like a merger or acquisition since it is initially separated and then needs to be assimilated into the greater organization once it is a viable business initiative. While the innovation itself is developing, the innovating mini-organization should operate with its own unique processes, and function in its own cadence, with its accompanying reinforcement and policies. Since the innovation may become an entirely different business, it does not make sense to align it or measure it in the same manner of a core business. Core business is measured on operational performance while entrepreneurial operations, like innovation efforts, are often gauging market potential. Innovation, like entrepreneurism, should be measured on an entirely different set of standards than operational performance. Similarly, the rewards or incentives for innovators should not be the same as core business employees because they should be encouraged to do different activities.

-Summary-

Innovation is needed to continually renew an organization. The phrase “innovate or die” comes to mind because innovation is so crucial to the sustainability of an organization. Innovation is needed across all organizations to ensure they remain relevant and up to their market environment’s needs. The faster the pace of the industry or market environment, the more diversity, freedom to experiment and openness to new circumstances and possibilities are needed for innovation pursuits. The more innovation that is needed, the stronger the case is to have an independently functioning team or mini-organization. That is why an organization or team must undergo the change to be independent and embracing diverse ideas to then promote successful innovation.

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2 Comments »

  1. Hey Whit,

    great topic – I wrote my entire master thesis about this type of problem. what you’re describing is similar or perhaps the same as skunkworks.

    The dilemma which I see with skunkworks and in general with innovation is this:

    A. Big company, shareholder money, risk averse —> Innovation must happen within the boundaries of proving with as much facts and details as possible the potential of the new business so decision makers won’t be put on the row for throwing money off window (obviously tough job for radical innovation). On top of that, resources alloted to innovation have limits and interests and politics in big companies run high. However, innovation still happens (of both types radical and incremental).

    B. Small company (maybe even startup), single ownership (if lucky owner is a true risk taker), innovation is their reason for living. It’s what makes their living. However, resources for developing innovation (particularly disruptive one)are low, politics are none, company is quite flat and bonded. But some of the worlds greatest, world changing happened like this. These factors (opposed to the ones above), including lack of resources (which might just be the greatest opportunity yet that simply forces innvoative thinking) make disruptive innovation happen more often than in the case above.

    Now, to the mini organization/or skunkwork you describe above: I think even if you isolate such a SW from the main organisation (physically and cut their ties to core business) recreating the environment of (B) above just isn’t possible. There will always be (A) lurking in the shadows. And even if they do come up with something great as (B) often do what guarantees C level execs will buy into it? C level execs are rarely risk takers on other people’s money including their own. that’s why they aren’t entrepreneurs.

    Now willingly cutting ties of such a mini org. from the rest just to get them back with the folks is sensitive: the group will always be outkast and different from the rest plus they will have to work together at some point to get basic stuff down like marketing, finance etc. And then at this point it might be too late to let the operational folks what the innovation is all about. They just get something on their plate and expected to come up with solutions stat. Perhaps if they had been on the train from the go, they would have been more invested and they could have made all the operational things surrounding the idea>market process better and easier.

    Cheers

    Comment by Livia — October 26, 2010 @ 2:17 am

    • Thanks for the very thoughtful response Livia! You do bring up good points about the larger organizational/business system and how it is difficult to have complete separation. Buy in from high-ups is a crucial element for the innovation effort’s results to be integrated once it matures.

      My general point was that the further separated, unique, and otherwise safegarded against the larger organization’s work flow, thinking, culture, responsibilities, etc. the more open the innovation’s outcome can become. In essence, if there is more freedom to explore and less constraints imposed, the opportunities grow.

      Comment by Whit — October 30, 2010 @ 7:52 pm


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