How should we organize for innovation?Clients frequently pose this question as they begin to build momentum on their internal innovation team. There is no universal answer. The design for your organization will be as unique as your culture. However, there are some universal principles.
Form follows function.This workshop presents particiapnts with memorable examples to help you diagnose and design the best organization for your unique company, people and aspirations.
Structure follows strategy.
Designers know that form follows function. Organization designers know that structure follows strategy. Don’t design a function until you’ve agreed what it’s meant to achieve.
The first activity will start by clarifying a few organizing principles. Different principles produce a surprisingly wide array of possible characteristics.
Purpose & MissionWhy does your organization exist? (Why does the world need your company? What’s your “mission”?) What mission demonstrates that purpose?
Growth AgendaWhat goals do you intend to achieve in the next 3 to 5 years. How equipped is the business to achieve those goals? What’s the balance between your push & pull strategies?
Growth RateAre you patient for profits or do you need accretive growth right now?
Growth AmbitionIs the new growth meant to be a minor increment to current revenues, or a huge factor in the near future?
Innovation ProfileIs your innovation meant to improve your core business, extend the current capabilities, or build entirely new sources of growth?
Risk ProfileAre you risk tolerant or averse?
Put your principles into practice.Answers to these questions are just the first step. Before you start jockeying for teams like a schoolyard pickup game, you should build on your principles. Lay out your innovation process. Think through the kind of innovation you’ll need to produce and map out a sample project. Begin with the outputs and risk profile, then the minimum sequence of necessary steps. How long will this kind of project take? Based on your risk tolerance and probable failure rates, how many projects will you need to run simultaneously to meet your growth goals. This will start to inform your thoughts on the talent you’ll need, in what kind of numbers, and how you’ll need to organize them. Now you can explore the different structures that best facilitate your goals.
Put people last.There’s a very important and counter-intuitive point here. You may recoil from a principle that feels coldly disconnected from the human essence of our business. At Ampersand, we have seen too many well-intended organizations mistake the vital importance of their people with the exercise of defining an organization. They believe in putting people first. That’s all well and good in a defined business. When your principles and strategy are embedded in your legacy, when your processes are proven and honed over years, then typically your people have grown up with that shared DNA and have been party to the culture of the business. They are indeed vital and you can and should do the right things to attract, motivate and retain top talent. However, when you are building a new organization, it would be foolish to start with the people who happen to be standing around looking for a seat. That condemns you to design around inheritance. Your design, and your people, should be fit for purpose. It may be a fact of history that these are the people who will populate your new innovation function or start-up. But that does not shackle you to a permanent mismatch – just a starting point. Figure out the optimal combination of organization structure and talent. Then manage through the resources that you’ve inherited. Over time, make your way toward your intended organization goal.
Ask two questions.
How will you lead innovation?Will it be guided by a central corporate growth strategy, or directed closer to the field, in business units or local markets? What leadership culture does your organization practice? Do you lead from the top, or from the rank-and-file?
How will you deliver innovationAgain, will it be a single “Center of Excellence”, or specialists deployed in the field
Design your Organization to InnovateThe workshop next shares comparative examples. The tech and CPG industry sectors offer a useful contrast in their alternate models of innovation. Depending on your sector, Ampersand will work with you to construct a matching framework. Apple practiced a top down model under Steve Jobs that set one direction as a central command, with innovation at the core of the business. In effect, innovation was the business strategy, and Tim Cook’s leadership practices the same method. The diverse business groups under Siemens‘ global organization act on innovation from a top-down business strategy, with top-level direction. GE‘s innovation “greenhouse” by stark contrast, is led by a cross-functional panel of executives who fund and govern innovation on the model of venture capital. They advise innovation project teams as if they were entrepreneur-managers, and commandeer the resources required for success. IBM, original practitioners of the “skunk works” model, frequently cordon off their cross-function innovation teams to shield them from the management priorities of delivering quarterly results. Nestle & Hewlett-Packard practice their own versions of a service center model, with a small team of centralized innovation specialists. These specialist SWAT teams stand by to parachute in as needed. Like tech support, they’re on-call to the sponsoring businesses. Google‘s famous open market approach devotes 20% of each employee’s time to innovation – a day per week invested in creating new offerings at the edge of new technologies. This method has produced some of Google’s most valuable offerings, including Google Mail and Google Maps. (Google has quietly reconsidered this investment model—adopted from 3M.) Procter & Gamble achieved even greater acclaim for spearheading the Open Innovation movement, taking Google one step further by recognizing that the best ideas in the world were unlikely to all reside in the heads of their employees – no matter how numerous or talented they may be.
Reality is seldom as simple as a 2×2.Of course a model this simple is by definition over-simplified. It is meant as an instructive framework to help participants apply management principles to organization design. A broader spectrum you would reveal some major differences.
Craft innovation activities to match your organization designNext, participants learn about the six major functions of innovation. They confront questions representing each column below, with examples to help guide them:
- How should innovation be led and informed?
- How will you price and deploy funds to the overall program and to specific innovation ventures?
- How will you staff for innovation, equip that staff and measure their efforts?
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