Organizing for Innovation and Product Development

As increasing regulations, management systems, business processes and efficiency initiatives become less flexible, new organized spaces need to be created in order facilitate product, service, and experience innovation on a global scale. Any corporation can benefit from a 24-hour open innovation network and the process of innovation can also benefit from this open ideation network – essentially, it would allow for innovation beyond product development functions.

When a product opportunity spans industries and business units, things can become complicated. The line between product development and corporate entrepreneurship will blur and the mission extends beyond conceptualization and prototyping of a product, to new business. Where does product innovation reside and what other critical activities are needed to bring the idea to commercialization, such as marketing feasibility, user research, and process and prototype testing. All of these can be distributed cross-functionally and globally, available faster than it has been before.

The question of who owns innovation does not have an easy answer and where it "sits" regarding the overall organizational structure is also difficult to answer. These are the most commonly asked questions and are the most common unsolved problems facing organizations that are setting up innovation departments or initiatives.

Innovation is different than Research and Development but many companies ask, is there is need for a Chief Innovation Officer? In a large organization, someone needs to lead the system. Someone is needed to identify industry breakpoints and to spot breakthrough opportunities. Take Intel for example, it spends billions of dollars on R&D, most of which goes to projects that execute roadmap technologies. Only a small amount is dedicated to scanning for weak signals and identifying blind spots. This oversight, or lack of ability to read and identify weak signals can put large successful organizations at risk.

Innovation can be institutionalized, but at its core, innovation is about creating novelty or even crazy ideas. Managers need to learn what mechanisms allow them to generate a large amount of ideas, and selecting from those, which have the potential to create the highest value. Why do some companies innovate more successfully than others? There are many questions surrounding innovation. What’s the best way for organization innovation? What should the reporting structure be? What skills are needed for the innovation team?  Does an innovation group need a mandate or is total freedom for exploration allowed? Should they be part of the R&D lab or product marketing group? Should the team be composed of people with industry experience or people from other industries?

Our recent survey of 200 large organizations indicates that currently only 7% have dedicated innovation teams, 21% have innovation related titled people in their marketing department, 22% have innovation functions embedded within R&D departments and 16% have innovation functions as a part of product development. 33% acknowledged that they do not have any innovation function or team. Less than 2% have a senior dedicated executive (VP level or above) as a chief innovation officer.

Many business functions within an organization claim to "own" innovation. Organizations equipped with a research and development group can expect that team to stake a claim to innovation. What about service design? What about social innovation? What about sustainability innovation? Or business model innovation? For most organizations, the ability to deliver innovative solutions on a sustainable basis requires them to look within and to design the structure and system of the business itself. There are three aspects to building an innovation capability:

• Strategic Intent – the organization’s determination to break out of the current competitive model and find ways to create new markets and growth platforms through the development of new mental models.
• Process and Tools – the general business processes, innovation toolkits and next practices that enable different functional groups to participate in purposeful innovation.
• Systems and Structure – the structures and supporting technologies that enable collaboration across functional lines, business units, and different geographic regions.

There are different ways to organize innovation and creating the innovation organizational chart can be tricky. Here we briefly describe several most common organizational models that support innovation, each with different pros and cons, levels of formality, and complexity.

Distributed Innovation Dedicated Team
This is a multi-disciplinary virtual team that is mandated to identify innovation opportunities but not on a specific project. The team is comprised of different functions (e.g., consumer insights, R&D, marketing, brand management, manufacturing etc.), different levels and perspectives (decision makers, subject matter experts, and operations managers), and different personalities for specific roles in innovation undertakings (explorers, navigators, implementers etc). Often there is not enough collaboration and each member is biased towards the innovation needs of their respective country/market or product/market. There is a lack of reporting clarity and integration with the operating units.

Distributed Knowledge Network
This is a set of individuals within an organization with deep functional expertise, vertical knowledge, and technical knowhow who are known as the “Go To” people on a particular topic. Typically, these individuals reside in different offices and even business units and do not interact with each other often. They are called upon independently as needed to be part of a special task force when a project is needed or a problem needs to be solved outside a functional group.  These teams can be assembled in a short period of time and are usually assigned specific tasks. The members of this team do not carry innovation titles and no specific resources are dedicated to supporting innovation.

Joint Venture Innovation Team
This is common when two or more organizations want to jointly innovate on a specific market space and create a separate independent company to pursue the innovation. It is jointly funded and usually consists of members from both organizations. The roles of the team include defining the innovation project vision and strategy, recruiting a team to make it happen, and aligning the perspectives, interests, and biases of executives from both organizations. This is most common when both sides bring unique capabilities to the table and both share a similar view of the future of a new market space.

Corporate Level Innovation Team
This is equivalent to establishing corporate-level functional groups to provide specialized services (e.g., Corporate Marketing, Corporate Development, Corporate Strategy) that act as a resource to their counterpart functions in the business unit. These small teams often possess specialized skill sets not available at the business unit level. Their roles include conducting ongoing market intelligence, trend analysis, conducting generative research and identifying outside vendors to support innovation projects. Since they are removed from the business units they are in a better position to take a broader view of what challenges the company faces in order to help identify corporate blind spots.

Business Unit Level Innovation Champion
This is quite common particularly in fast moving consumer product companies. People are usually transferred from brand management, category management or marketing to this new role with the goal of maximizing innovation within a brand, category or product line. Generally the budget comes from the brand and the innovation is around brand extensions and a lot of emphasis is on incremental innovation whether it is on the product, packaging or marketing level. A challenge that may arise is the sphere of influence, as the sales department may assert many constrains and boundaries on innovation.

Cross-unit Innovation Group
This is a dedicated team put together from different business units with the goal of evolving the innovation agenda into new spaces. Through managing the development of new products and services the organization can move into adjacent sectors. Usually headed by a Director level person working with outside consultants to identify and explore options for the company to develop new businesses for the longer term. This is a practical approach as the innovation team is closely aligned with the business units.

Innovation Skunkworks
“Skunkworks” is a loosely organized innovation team that is free to explore any innovative research. Skunkworks aim to innovate and experiment and are not subject to the expectations of short-term profitability. Typically this is where designers and engineers can experiment with ideas and explore wild possibilities. Once in a while there are highly innovative and profitable ideas that come out of this process and other times, they inspire more practical products and services that are more immediately marketable. Often these skunkworks groups do not officially exist – they are usually quiet and informal with many members balancing their daily responsibilities with time spent on exploring new ideas.

Summary
There is no best model fro innovation that fits everyone. When exploring different organizational structures the first step is to understand what kind of organizational structure currently exists within the organization and assess the extent to which these structures are aligned with and support the organization’s strategic innovation goals. When it comes to strategy innovation, organizations often demonstrate a number of biases. One is that closely held strategies are often attached with closely held approaches for resource allocation and risk appetite. But new ideas generated by a dogma-free approach are likely to create discomfort and the organizational design will likely help mitigate some of these concerns.  A good innovation organizational design will help tease out the positive deviants and organizational systems that defy the norms of conventional practice. Before you think about innovating your products, you need to think about innovating the product development organization design.

About the author:

Idris Mootee
An authority on strategic Innovation and a system and design thinker with more than 25 years of strategic management and new product development working with Fortune 500s, Idris partners with clients in all sectors to develop strategic foresights, identify their highest-value innovation opportunities, address their most critical challenges, explore strategic options and develop breakthrough product, service and platform ideas.

Idris is the CEO of Idea Couture, a global strategic innovation and strategic design firm with key offices in San Francisco, Toronto, Washington DC and Shanghai. Idea Couture combines the power of D-School + B-School to solve complex business and product development issues.

A frequent keynote speaker at international conferences around the world and author of several books (in many languages) in strategic innovation and design thinking, Idris received his business education from London Business School (Management Science), Harvard Business School (Marketing Management), Brunel University Graduate School (Technology Management) and Ivey Business School. Currently he is visiting Professor of strategy and innovation and guest lecturer at several graduate programs.