4 paths to structure innovation.
In today's business world, innovation is a must if companies want to remain competitive, and to be successful it needs to be paired with a customer-centric attitude. This post explores four different paths for adding structure to the 'search' function of innovation, for organizations working in the second and third horizons rather than the executional first horizon.
The search innovation paths.
The innovation paths are categorized as internal or external, and centralized or decentralized. Internal innovation happens closer to the core business to evolve and create new value propositions, while external innovation takes place beyond corporate boundaries, bringing in outside capabilities and perspectives. Centralized innovation happens at a broad organizational level with leadership buy-in, whereas decentralized innovation happens at business unit level to address an individual team's future-looking needs.
Centralized external: open innovation hubs.
This path suits organizations that want a team collaborating with external partners or suppliers to develop new business models, usually taking shape as an innovation hub, lab, incubator, or venture fund focused on horizons 2 and 3. Benefits include collaborating with people beyond the scope of your business and accelerating by reducing the time needed to learn new skills. The limitation is that buy-in from the rest of the organization can be difficult since they were not involved; Schiphol Amsterdam Airport's innovation hub, which experiments with partners like the Hardt hyperloop, is an example.
Centralized internal: one innovation department.
Best suited for organizations with a clear focus for whom innovation is a priority, this path uses a single innovation department with visibility across business units, innovating for horizons 2 and 3. The team is easy to manage with consistent standards and processes, and has focused capabilities unimpeded by business unit priorities. However, business units may not get on board with ideas and can see the team as 'juvenile' or 'ineffective'; examples include ING Labs in Amsterdam and Singapore and Walmart's Store No8.
Decentralized external: community of practitioners and partners.
Ideal for business units with small-scale innovation initiatives that lack in-house expertise, this horizon 2-focused path informally outsources innovation projects to local partners, requiring strict governance and enough innovation knowledge to speak the same language as contributors. It offers a lean way to get started and opens the door to a broader network of experts. Downsides are difficulty focusing on key initiatives and failing to develop in-house capabilities; the city of Rotterdam's themed labs, such as BlueCity for circularity, are an example.
Decentralized internal: business unit innovation teams.
Best for large-scale organizations with multiple business units addressing different markets, this path has every business unit organize its own innovation efforts with its own budget, adapting to its specific market conditions. It is a scalable approach that meets each unit's needs and removes barriers around prioritization and resources. The limitation is diffused governance and direction, with possible duplications and inconsistencies across units; Google's product teams and its famous 20% rule are examples.
No silver bullet.
There is no single silver bullet for innovation, and many medium-sized and large organizations adopt multiple innovation strategies depending on the problem they are trying to solve. ING, for example, embraced both external and internal innovation with labs at four central locations: two dedicated to working with scaleups and two serving as incubators for their own initiatives. The strategies you choose come down to your business model and how much you are willing to invest.
Ideas intoaction.
Explore the possibilities with Patrick van der Pijl and the BMI team. Every big shift starts with a conversation.