Who Should be Responsible for Innovation?

By: New Markets Advisors

As companies increasingly make innovation part of their corporate strategies, managers are grappling with a tricky question, “Exactly who here is responsible for innovation?” There are of course some obvious answers, e.g. marketing and R&D need to collaborate on product enhancements, but the innovation referenced in many strategy statements goes well beyond the everyday sort of line extensions that firms have always delivered.

Companies are seeking disruptive innovations that change the game in their industries, as well as business model innovations that have nothing to do with what the engineers are creating. Who is accountable for delivering these results?

To up their game in innovation, some firms have appointed Chief Innovation Officers to take responsibility for the overall program. Others have devolved responsibility to heads of New Ventures, who may lead incubators devoted to fundamentally new concepts. A.G. Lafley, the extraordinarily innovative Chairman and former CEO of Procter & Gamble, has argued that the CEO has to take direct responsibility for the firm’s innovation efforts.

As is often the case with innovation, there is no single best approach. Rather, a firm’s circumstances should dictate its course. Among the factors to consider are:

• Will improved innovation capabilities mainly complement the core business or disrupt/compete with it? (The greater the degree of complementary innovation, the more the program should be mainstreamed within business units/functions)
• How centralized is decision-making in the company’s culture? (Culture change is a fine thing, but it’s best not to make the innovation program the sole engine of this change. Rather, unless broader changes are afoot, recognize the rules of the road and drive accordingly)
• How cross-functional will teams delivering innovations need to be? (Some industries, such as banking and retail, are inherently cross-functional, and so teams cannot be walled off from the rest of the organization. Software, consumer electronics, and some other sectors can be less matrixed)
• Is there a particular individual who has the right skills and credibility to function as the corporate head of innovation? (The life expectancy of most Chief Innovation Officers is short. This is a very hard job to staff, given the need for both unusual skills and the organizational clout to withstand the political forces resisting most CIOs)

Generally, we are wary of innovation programs that are driven directly by the CEO. While CEO and Executive Committee support is vital, managers at this level are usually looking for big results, fast. They tend to over-fund innovation efforts, expect substantial revenues quickly, and — because they lack the necessary time in their schedules — generate confusion lower down in the ranks about what exactly they want. The result of CEO-driven programs can be frenzied, dot-com-like efforts that ultimately sap organizational enthusiasm, create cynicism, and undermine the long-term capability building that most large companies need.

Sometimes it makes sense to separate responsibility for disruptive and sustaining innovation programs. Incubators can create radical concepts, and in some industries they can even go a substantial distance toward implementing them. The focus and talents required in incubators are quite distinct from what powers successful programs to improve everyday innovation capabilities. In these latter types of programs, it is essential to carefully sequence change, communicate messages broadly and simply, and leverage champions within business units/functions to become the local resources that sustain the program’s momentum.

Story by Steve Wunker.