Innovation Needs a Home
An innovation program needs a home. Many believe it should be as close to the business units or revenue source as possible. While occasionally this works, I have found if the innovation program is placed inside the business unit, typically it results in improvements vs. innovation. Innovation based in the individual business units is generally focused on how to make the existing products better, faster, or less expensive. In essence, these programs typically end up looking more like a suggestion plan than an innovation program.
Innovation programs based in the business units are often only incremental on top of the normal line of business. The budgets and resources used for these programs can become coveted by others in the business unit and can be one of the first things to be cut in the event of a budget deficit or other business disruption. This can telegraph to employees – “innovation is not very important.”
A companywide innovation program has a number of advantages. It encourages employees to submit ideas beyond the business unit where they are currently employed. Often employees move between business units, have friends in the other business units, or they are very familiar with other areas of the company beyond their current responsibilities. A companywide innovation program results in ideas which cross functional areas of the business. This cross pollination of ideas from outside of the business units often helps to focus attention on sensitive areas.
Many times business units grow Sacred Business Cows that need to be altered or even slaughtered. Sometimes management of a particular business unit builds impediments to investigating or even discussing things which might damage their Scared Business Cows.
Many times the logic seems to be, if it is not functioning well just ignore it, don’t look at the details, or don’t question your assumptions. Often it takes someone who does not know the issue is a Sacred Business Cow or someone who knows the Sacred Business Cow needs to be slaughtered and is beyond the reach of the particular business unit to address these issues. With an innovation program outside of the business unit you will have the tools to slay these Sacred Business Cows.
An innovation program outside of the business unit should include startup funding for the ideas implemented. The startup funding should be in addition to the normal product development funding for the business unit. If implemented correctly, this can cause the individual business units to compete for this incremental funding. This structure should also cause the business units to want to work with you and support your innovation plan. The business unit may start out doing this for the additional product development dollars, however, it is likely to have a fundamental change in attitude over the longer term.
You may find an attitude that the business units only agree to be part of the innovation effort for the incremental budget. Before this attitude takes root, you need to discuss the long term strategy for providing startup funding. First you build participation and once you have business unit buy-in, you then work on quality. This may be a multiyear process and is likely to change the culture of the organization. Establish that some level of ‘gaming’ the system for additional funding should be tolerated. The goal is to gain recognition and participation first. An overly rigid program in the beginning can actually work against this objective.
The amount of funding available does not, and should not, equal the entire amount needed in order for these projects to be taken to market. The business units need to have some skin in the game. I have seen effective innovation programs which fully funded the investigation stage and then tapered off the funding as the idea gets closer to market. This model allows the business unit to test out the idea and to incrementally increase their commitment and control as the product or service gets closer to reality.
Suggestion Plans vs. Innovation Program
An innovation program located in the business unit over time often tends to look more like a suggestion plan instead of an innovation program. Incremental changes are often easier to implement, faster to market, and many times it can be easier to measure their impact. These changes to the existing processes, products, or services often get the majority of attention and resources when viewed through the perspective of an individual business unit. This tends to drag an innovation program more towards a suggestion plan vs. an innovation program.
The differentiation between an innovation program and a suggestion plan is not intended to indicate a well-functioning suggestion plan is not needed or wanted within an organization. In fact, a suggestion plan can and should be implemented.
The suggestion plan should be set up to deal with incremental changes to existing processes, products, or services while an innovation program should be set up to deal with new processes, products, or services. This view of innovation program vs. suggestion plan will allow the organization to make fundamental changes in order to evolve with market forces (from innovation), in addition to making the current operations as efficient as possible (from suggestions).
The two programs should be coordinated and ideas should flow freely between the two. They should not be set up to be in competition with each other and coordination should be encouraged by upper management. Be particularly careful in how these two plans compete for budget and developmental resources. This is typically the friction areas between these two types of programs. Ideas should be passed between the two if they do not fit within the program which uncovers them.