The future of innovation will be more rigorous. Innovation is evolving into a business function. Just as marketing was considered an ad hoc expenditure prior to the 1950’s, but has become a highly sophisticated business function, spawning multiple departments (market research, sales, marketing communications, public relations..) and covering many responsibilities, so too is innovation emerging. Companies will develop entire management systems to support the innovation mandate, incorporating organizational structures, processes that leverage the high degree of uncertainty that breakthrough innovation generates, and even developing career paths for innovation experts. Currently innovation relies on strong-willed individuals who fight against organizational norms that are tuned to the objective of operational excellence. These project champions make progress based on the protection of a senior leader who allows them to break traditional rules. But as organizations grow increasingly sophisticated about innovation, we find that they can develop parallel management systems that can be managed together. The recent surge of senior executives with the label “Chief Innovation Officer” or “VP Strategic Growth” or “VP of Innovation” is indicative of this trend. While invention, in and of itself, is no less important than it ever was, inventions are being sourced from places other than internal R&D units. The work of innovation is truly disciplined work. Creating new markets, operating with uncertain business models, developing partnerships to access critical competencies, and continuous consideration of the firm’s strategic intent are all part of the discipline.
Within this structure, three critical requirements exist. First is that the innovation management system must incorporate all of the following. If any single one is ignored, the system can break down:
Leadership and Culture that support innovation
Organizational Structure and Interface Mechanisms
Appropriate Processes and tools (that work under conditions of ambiguity)
Appropriate skills and talent development
Effective decision making and governance systems
Each of these elements of the management system is typically set to meet the objective of operational excellence in established firms. But they can also be structured to meet innovation objectives.
Second, within the innovation function, there are three major competencies:
A discovery competency: the competency necessary for conceptualizing, elaborating, developing and articulating big, breakthrough opportunities.
An incubation competency: the ability to experiment. This means experimenting with technology, market, organizational strategy to develop business proposals out of the concepts generated in Discovery. Incubation is not just a process. There will be entire portfolios of incubating opportunities, so managing those portfolios will also be part of the incubation competency.
Acceleration: the ability to scale an exciting business proposal to the point where it can stand on its own relative to the other ongoing business platforms in the organization.
Third, the company must be able to orchestrate the innovation mandate in accordance with the company’s capacity, or appetite for innovation, which varies with changes in internal and external conditions. However, if innovation is viewed as a business function, rather than a temporary program reliant on a few individuals, then budgets may be trimmed during difficult times, but, just like marketing budgets, never drawn down to zero. The organization/group/department will remain, and continue to build the capabilities and oversee the health of the innovation management system and its portfolio of breakthrough businesses.