The difference between buying innovation and becoming innovative
How to implement Innovation into your governance model
The time of top down approaches and rigid “Know-it-all” mindsets of CEOs when it comes to efficient and effective innovation practices has finally come to an end. We see that in our daily work, as more and more corporates start to seek outside support from startups — the experts of innovation by definition — or form dedicated Innovation Units to secure their market position and achieve revenue growth. In order to succeed, it is absolutely necessary to adapt the governance model accordingly. This blogpost will give you a quick overview of different ways to put innovation governance into practice.
Yes, a fault confessed is half redressed — but only half. It’s remarkable when corporates and multinational companies realize they need to change or seek for outside help in order to stay ahead of technological advancements. However, it is the actual implementation of innovation that determines success or failure of a company. So how can the idea of becoming more innovative be translated into reality? Five popular models are described in more detail below.
1. External Innovation Unit
Corporates can create an external unit which legally belongs to the company but works independently and is therefore often technically structured as a research subsidiary, an external incubator or an investment group but not as an integral part of the organizational structure.
An example of such a model is BMW’s own VC “BMW i Ventures”. BMW delegated all responsibilities for startup sourcing and selection to an independent unit with independent specialists who are now responsible for creating and selecting innovation opportunities for the whole corporation. Such unit has an independent decision-making process that makes it less prone to corporate hierarchy and slowness.
Great for… Everyone who needs a dedicated research team that can work on finding innovative technologies and solutions without corporate restrains for specific challenges a company is facing.
Not advisable if… There is no substantial financial support for the external Innovation Unit and the implementation process in Business Units is uncertain.
2. Innovation “As-a-Service”
The seemingly “easiest” way to embed innovation into the corporate structure is to create an external innovation unit which offers innovation “as-a-service” to other departments. In this model, all efforts of a company to innovate are centralized into one Business Unit or “Center of Excellence”. Such unit has the objective to coordinate and select partnerships with startups, investments or other innovation initiatives for the whole corporation.
An example of this model can be found at the United Nations Children’s Fund (UNICEF). Here, an “Office of Innovation” is responsible for creating partnerships with external stakeholders and introducing technological advancements to the different divisions of the organization. The Office of Innovation also administers UNICEF’s Venture Fund to invest in promising startups which can be offered “as a service” to the different divisions.
Great for… Organizations which do not yet have much experience with innovation and want to carefully and slowly explore options in order to find the best solution and optimal investment appraisal.
Not advisable if… Business Units are too distinct and specialized in order for an external team to understand their needs.
3. Centralized Innovation Unit
In this case, the Innovation Unit works collaboratively across different groups within the corporation. The Business Units themselves are then responsible for the implementation and commercialization of those ideas generated by the cross-functional innovation team. In contrast to offering “innovation as a service”, innovation efforts here are not bundled in one unit, but coordinated across the different units.
A famous example of this kind of innovation practice can be found at Apple. Steve Jobs himself famously handpicked 100 employees for brainstorming sessions and innovation workshops in order to drive idea generation across the different divisions and thereby create, promote and empower innovation initiatives on a company level.
Great for… Companies whose Business Units have gone beyond “silo thinking” and also defined and aligned their innovation mission on a company level.
Not advisable if… Different departments are not familiar with each other and centralization may result in standardization.
4. Innovation Embedded in Corporate Culture on a Business Unit Level
This option is probably the most demanding and requires a very high degree of personal responsibility from every employee and leader. Accordingly, it only works if innovation is actually deeply anchored in the corporate philosophy. The idea is that innovation efforts are once again dispersed throughout the organization and become core to strategy, execution and capabilities within and across functions.
The pioneer in this field is Tesla. Tesla is organized around small, agile and empowered teams that are cross-functional and completely self-organized. This leads to each team’s being responsible for driving innovation into their projects themselves. Thereby Tesla eliminated any possible constraints that may arise due to legacy structures and organized itself for innovation. Every team is given the freedom to engage with startups individually. Tesla can be certain that different teams are always at the cutting edge of technological advancements in their field. The management ensures that innovation in all areas takes place simultaneously. However, once again, this model only works if the mindset of every team member is clearly focused on innovation.
Great for… Innovation experts who want to drive innovation in multiple areas simultaneously and have established innovation as a core value.
Not advisable if… Not every key member of the organization has a mindset that is clearly focused on innovation or is highly committed to achieving growth by “going the extra mile”.
The way innovation is injected into the organizational structure varies very much according to the innovation maturity of a corporation. Whereas many centralize their innovation efforts in an external unit when they first start to deal with the topic (displayed in models 1 and 2), there are many companies that develop a more decentralized approach to innovation practices with time (model 3). Embedding innovation into the corporate culture and thereby fostering intrapreneurship (model 4) seems to be the ultimate goal (Read more about this here).
What is the Right Model for Your Organization?
As different as the models discussed above may be, they do have one thing in common: Innovation efforts are driven from within the company in order to gain competitive advantage. However, challenges can also be approached from a different angle. In order to develop a novel solution to complex challenges, an organization may be required to work with external partners, sharing each other’s knowledge and abilities. The collaboration of competitors can unlock innovative power and creativity that everyone — competitors as well as customers — could benefit from. Translating this idea into a governance model is widely known as “Coopetition”. Since we are deeply convinced that there is a lot of potential in this model, we will soon dedicate a blogpost to the potential and advantages of “coopetition”.
Overall, in order to implement innovation successfully, it is crucial for any organizationto be very clear about its goals and aware of the current culture and innovation philosophy. There is no “one-size-fits-all” solution that transforms anyone into an innovation expert from one day to the next. Go step by step and always be aware of not losing your people somewhere along the way. As Bob Iger (CEO of Disney) stated, “the heart and soul of the company is creativity and innovation”. Be sure to keep this in mind while defining your strategy and encourage everyone in your organization to act accordingly.
NB: Graphics adapted from PwC analysis
