Five things to consider before allocating responsibility for innovation in your company

November 11, 2016 Chris Sandilands

We have had a steady stream of work this year helping clients do “innovative” things.  One of the questions that often arises is how to lead or organise innovation in an organisation.

There is no right answer to this question. It depends on what your company is trying to achieve and what its characteristics and culture are.

Here are five things to consider before building your innovation capability.

1. What are you trying to achieve?

We don’t think that innovation exists as a separate concept.  Instead, we see innovation as a term that describes the rather more mundane process of having and implementing ideas in the business.  As a result, companies described as “innovative” range from Apple which creates genuinely revolutionary products to Toyota, which builds fairly normal cars but with traditionally cutting-edge methodology.

But in companies, innovation is often put on a pedestal.  Young stars are nominated the innovation champion because innovation is sexy.

We think this is poor resource allocation.  Before building innovation capability, it is important to work out what exactly your blend of innovation will be and what kind of skills you need to implement these ideas.

Which leads us nicely to the second point.

2. Where in the “value chain” does your innovation process fall down?

If you agree with us that innovation is a business process at heart, then you might, like us, find the “innovation value chain” a helpful framework.  (Chris Coleridge, a member of the Oxbow Partners Expert Network and lecturer in innovation and entrepreneurship at LBS, UCL and the Judge Business School in Cambridge, brought this to our attention.)

The framework breaks innovation into three phases:

• Idea generation – having ideas
• Idea conversion – turning selected ideas into sensible concepts
• Idea diffusion – implementing concepts in real life

If your organisation is weak at any one of these steps, it is going to be poor at innovation – because innovation is not just about telling your young stars to have amazing ideas.

We therefore believe that step 2 is to run a diagnostic of your organisation to identify where, for the kinds of initiatives you have identified in step 1, you have skills gaps.  You might find you need creative thinkers, doers or politicians – which may or may not be the profile of the young star you had in mind before reading this post.

3. How are skills gaps in the “innovation value chain” best plugged?

Step 3 is to work out how best to serve the capabilities you require for your innovation process.  There are three basic models:

• Identify innovation “champions”: Identifying individuals who are responsible for innovation alongside the day job works well when you are focusing on incremental innovation, in other words, when you need a few people to spot and act on opportunities to do their existing jobs better. A “champion” structure rarely works when you want to do anything radical because people lose focus.
• Build an innovation team: This can work well when your innovation objectives require significant cultural change in your organisation. The innovation team has two jobs.  First it must continuously cheerlead innovation initiatives; second it must plug gaps in the innovation value chain.  The skills required by this team vary between companies (e.g. idea-poor, conversion-poor, diffusion-poor).
• Outsource: Sometimes companies know that they have skills gaps, but these gaps do not need to be filled permanently. For example, idea generation can be a periodic exercise, or conversion resources with very specialised skills might be required on a project basis.  Innovation almost by definition calls for flexible staffing models, and temporary resources (or, dare I say it, consultancies like Oxbow Partners) are often the right way to go here.

4. Flexible staffing models

I recently had dinner with Louis Carbonnier, Head of Innovation and Digital Agency at Euler Hermes, the Allianz-owned credit insurer.  (As an aside, what he and his team have built at Euler Hermes is without doubt the most impressive innovation set-up of any insurer we’ve seen.)

Louis had two interesting observations.  First, his “Digital Agency” has around 15 permanent staff, but generally has a further 50 freelance contributors engaged at any one time. Work is distributed around a global network of highly specialised resources as and when they are required for specific projects.  Second, he notes that hierarchies are a thing of the past: in innovative companies, people sometimes lead and are sometimes led depending on the project, their specific skills etc.  (Gore, incidentally, are fascinating in this respect.  They have a famously self-organising workforce  – see HBR.)

For insurers, who have a tendency towards rigid organisational structures, this means not building legacy into their model before you start.

5. How far can management focus go to solve the problem?

Finally, the role of management should be reviewed.  Before building fancy organisational structures, managers should ask themselves to what extent they can generate more “innovation” through a different style of leadership.  Louis notes that innovative structures often have more decentralised decision-making – fewer committees, empowered people, and the ability to make “mistakes” in test-and-learn processes.  More prosaically, changes to some established mechanisms like financial (dis)incentives or performance objectives are required.

Furthermore, management need to rationalise project portfolios: all too often we see companies with dozens of live projects which leads to considerable business but little impact – and an inability to innovate.

Companies that take a sober look at innovation and see it as a mundane process might find that they innovate most effectively.