Two Questions to Ask Before You Set Up an Innovation Unit2 August, 2018 / Articles
Despite good intentions—and widespread acceptance of the importance of innovation—efforts to innovate at large companies often lack a clear mission and framework, and as a result, they go off the rails.
At one large European energy company we consulted with, no less than four separate corporate functions were supposed to be working on innovation—yet none of them was supporting critical needs at the business unit level. To make matters worse, the various functions involved were competing internally for space and resources, while duplicating each other’s work.
Without realizing it, even well-managed businesses versed in modern management practices can generate an environment that is hostile to innovation. For all of these reasons, large companies need to have a distinct Innovation Unit headed up by a senior executive who ideally reports to the CEO.
In our work at the European Center for Strategic Innovation (ECSI), we have extensively researched the role of successful Innovation Units. Drawing on our findings, we have developed a framework that breaks the Corporate Innovation Unit’s (CIU) role into seven distinct tasks. The seven roles for CIUs are: designing shelter for innovation; supporting best practices and methods; developing skills; supporting business unit initiatives; identifying new market spaces; facilitating ideas generation; and directing seed funding.
The framework provides methodological guidance to help in decision making about what to do or not to do to raise the innovation performance of the overall company.
For example, when we looked at Samsung’s Corporate VIP Center, we saw that the company focused particularly on identifying best practices, developing skills, and supporting business unit initiatives so that radical ideas didn’t get lost. At Samsung, the other aspects of the innovation process are relatively well managed at the operating level. What the company wanted to do was to create a kind of “top-gun” center that could train business unit-level team members and support the most innovative and critical initiatives of the company.
Since then we have used the 7-Roles framework with clients to clear the corporate fog of ambiguity and unrealistic expectations which frequently surrounds the mission and scope of their innovation units. We also found that converting the seven roles into a coherent organizational structure for their innovation unit is a significant challenge for innovation leaders. To help them successfully face this challenge, we have complemented our framework with a simple matrix. By answering two simple questions, companies can visualize the most appropriate organizational template consistent with their chosen positioning on the 7-Roles spiderweb.
Is the Corporate Innovation Unit a “facilitator” within the company or is the “owner” of innovation initiatives? This question explores the support model of the Innovation Unit. In the first case, the Innovation Unit consults/facilitates/accelerates initiatives, while business units maintain ownership. In the second case, the Innovation Unit directly initiates, funds, develops and experiments new ideas (typically focusing on discontinuous innovation) with a dedicated budget, staff and its own targets.
How centralized is the Innovation Unit? Taken to an extreme, the Innovation Unit can simply be a flagship building (typically located close to the corporate headquarters). Alternatively, they can be organized using a network model with people and actions geographically dispersed.
Combining these two dimensions — Type of Support and Level of Centralization – leads to a 2×2 matrix with four quadrants, each representing a different archetype (although hybrid models are possible).
Let’s examine each archetype separately.
The central Support Unit is typically a low budget, low staff corporate function in charge of developing guidelines and procedures to govern the innovation funnel (i.e. following a traditional stage-gate process). Sometimes it also has responsibility for training others in innovation methods and providing consulting-like support to the innovation initiatives of the business units. In this archetype, accountability for innovation projects stays at business unit level. This model can often be seen in corporations with multiple business units with strong autonomy and with strong legacy/conservative culture.
A more modern model is the Community of Practitioners where a core team at corporate level acts as a center of excellence orchestrating a scalable community of innovation experts in the business units. The experts have a job in the business unit but are formally trained and certified on innovation methods and tools and can coach or run innovation projects in the organization. Intuit is a case in point. To support the dissemination of its ‘Design for Delight’ program, Intuit trained 200 Innovation Catalysts on design thinking methodology to support employees and teams applying the methods, experimenting and learning faster. Self-managed as a community, Innovation Catalysts played a key role in applying new innovation methods consistently throughout the organization and raised the performance of innovation across the whole organization.
The One Innovation Center model has gained traction recently as some companies started investing in flagship architectural buildings at their headquarters. In these buildings, companies host spaces for idea generation, acceleration and incubation of innovation projects, think tanks, and innovation academies. In 2018, Merck opened its new Innovation Center at the company’s Darmstadt headquarters. Bringing together people, technologies and skills from within and outside the company under the same roof, the Merck Innovation Center is a building made to inspire. Merck explains the question which led to the Innovation Center’s creation in this way: “What if curious minds from all business sectors joined forces with external innovators to develop innovations beyond current boundaries? Wouldn’t it be ideal to have a place to complement our existing research and development where we could help ideas grow into viable new business outside our current scope?”
The Hub and Spoke Network is a more decentralized model in which the center coordinates a network of innovation centers and outposts in multiple hot-spot locations around the world. One remarkable example is Johnson & Johnson’s Innovation Unit. It orchestrates several satellite elements — four regional Innovation Centers (based in global hubs like Silicon Valley) to provide scientists, entrepreneurs and emerging companies with one-stop access to the broad resources of the J&J innovation ecosystem; and eleven JLabs which act as business accelerators and incubators. Another case is AT&T which has established several “foundries” to explore emerging hot topics (like cybersecurity and connected healthcare) in related geographical hot spots.
The selection of the right archetype for any organization depends on their defined mission and positioning on the 7-Roles framework. If a unit’s mission has a clear focus on capability building, coaching, and facilitation, then a community of practice model fits well and it is also easily scalable in terms of investment. On the contrary, if the unit’s focus is more on the exploration of external ecosystems, proximity to hot spots, start-up incubation, then a hub and spoke network of outposts can fit better than a centralized One-building model. Although there’s no best model as different archetypes can apply to goals and contexts, we recommend to always start by applying the 7-Roles framework first. After, you can take your To-Be spiderweb on the 7-Roles and ask, “What is the organizational archetype that best fit the targeted mission and roles of the Innovation Unit?”.
These two simple tools used together will help to clear the fog around the newly constituted Corporate Innovation Unit, which being a new organizational entity placed into a traditional structure needs to find rapidly its reason why to exist generate value.