Corporate innovation teams have had tough sledding in recent years.
Many have been shuttered, often due to unrealistic expectations from leadership and/or board members. Others have been disempowered by having their budget stripped from them and/or team members reassigned or let go.
Case in point:
Half of corporate leaders polled for InnoLead's 2024 "Making Innovation an Enduring Capability" report said resource constraints, including limited budget, caused "interruptions" or "fluctuations" with their recent innovation efforts.
Even the innovation functions who manage to maintain (or even increase) buy-in and budget often find themselves engaging in an illusion of innovation. This is usually due to poor internal infrastructure (e.g., ineffective program processes, little or no strategic alignment with their C-suite, not using a problem-led ideation approach).
Thankfully, corporations that have balanced (and seen tangible results from) core, adjacent, and transformative innovation offer a blueprint that enterprises can replicate to set their innovation functions up for success.
3 ways to empower your corporate innovation team to thrive
Your innovation function is no different than any other business unit. They need a top-down management approach to ensure the proper team structure and innovation processes are in place. But that's just the start.
There are three focus areas executive leaders must address when building (or rebuilding) their innovation teams before they begin working on a single project to ensure they're put in the best position to succeed.
1) Defining their purpose, goals, and structure
One corporation's innovation approach will obviously differ from the next. This is no secret. But all scaled enterprises aspire to foster a culture of innovation that leads to innovation success in the near and long term. What's more, all corporations understand they need to uniformly agree on what they want to get out of their innovation work:
- For some corporations, this is driving innovation solely tied to their core products and services so they can better serve current customers and strategic partners and prioritize near-term revenue growth.
- For others, it's about replicating success stories of other companies who gained a competitive advantage by entering adjacent markets and taking advantage of new segments and distribution channels.
- And for many, this means creating innovation programs away from core operations to identify new business models to develop (i.e., those with strong product-market fit that address unmet audience needs).
Corporate executive teams in the latter category are certainly forward-thinking. (That is, they're not just laser-focused on their quarterly P&L.) But, all too often, these corporate C-suites fall into the same trap:
They think they can copy-paste the framework and formula used for efficiency innovations tied to the core for empowering innovation initiatives outside it.
"The mistake most corporations make in pursuing empowering innovation is that they try to repurpose their existing operating system — designed for efficient, scaled execution — to do something it was never designed to do: operate with a degree of inefficiency to create learning," High Alpha Innovation CEO Elliott Parker wrote for Fast Company.
Regardless of the exact innovation approach, using the agile methodology can keep programs on track and on schedule. The problem is too few companies apply the system for their ongoing innovation work.
This results in slow, unstructured, and uncoordinated work that lacks the necessary rigor and guardrails today's innovation teams need to research, evaluate, test, and validate ideas and concepts quickly.
Without an agile innovation approach, scaled enterprises "pursue mediocre ideas for too long, misallocate resources, and are unable to see (and therefore fund) the good ideas that could actually scale," Boston Consulting Group's Johann Harnoss and FTI Consulting's Ramón Baeza recently wrote.
2) Giving them resources, autonomy, and guidance
Where the modern innovation team differs from marketing, sales, and other departments is the type of support they need to flourish. Empowering your innovation function to realize the desired ROI from their efforts means:
- Giving them the proper personnel to fill key roles and ample budget that allows for fast, cheap, 'weird' experimentation at scale. That said, innovation teams also need access to R&D market analyses, customer data, and executive-level insights to inform the direction of their initiatives.
- Ensuring an organized innovation management approach is established so that day-to-day innovators get the space and freedom they need to experiment, execute, and analyze their activities. In other words? These teams need psychological safety to operate effectively.
- Knowing the priority levels for each program leadership wants them to take on. Innovators need program champions to be readily available to answer questions and address concerns and requests they have to keep projects moving along rapidly, ensure they meet target deadlines and milestones, and keep their eye on the prize by accounting for their strategic business objectives.
This third bullet point is especially important.
Corporate innovation teams often have their own aspirations for what they want to achieve with their efforts. But laddering their work up to the key audiences they want to help and problems they need to solve is essential to prevent programs from veering off-course (and ensure they achieve innovation strategy goals).
"I can name many, many examples of innovation teams creating meaningful impact in the form of core or even adjacent innovations, but not one example of a wholesale transformation led by an innovation team," said Elliott.
To get the guidance they need to carry out their efforts and ensure they always factor in the company mission and vision in their programs, innovation teams must collaborate with their CEO and strategy leader(s) to identify the stakeholders and challenges that are at the heart of their work. This could mean:
- Factoring in recent feedback from high-CLV customers to improve core products
- Working with partners via open innovation to tackle issues for shared customers
- Leveraging research and development findings to pinpoint market opportunities
- Filling a big tech gap no other organization has solved for in a given space/vertical
"Making innovation holistic makes perpetual progress toward the company’s purpose achievable and valuable for the entire stakeholder system," Bain & Company Partner Darrell Rigby wrote for Harvard Business Review.
3) Providing a dedicated 'home' and clear metrics
What enterprises want to achieve ultimately dictates the direction they take their innovation work. But it also determines the ideal location within the corporation where innovation teams should operate.
Traditionally, innovation teams can live in the:
- Chief Technology Office. The CTO office uses tech to play the ultimate disrupter role. Always willing to experiment and try new things, the CTO views tech as the great equalizer. However, they must convince business units of its near- and long-term value.
- Chief Marketing Office. The CMO office represents the voice of the customer and the markets it serves. They believe customers are the pathway to new innovative products and services. But they’re often caught in a vicious attribution debate.
- Chief Strategy Office. The CSO office is the air-traffic controller, with a pulse on each business unit attempting to create, influence, and support the execution of a cohesive company strategy. A vision with clear outcomes provides a pathway to an enduring business.
- Chief Product Office. The CPO office consumes customer insights and data to translate them into product features and enhancements to support the needs of existing and future customers. For the CPO, innovation means delivering on the needs of the customer.
There is no 'right' or 'wrong' place for innovation functions to live. Similarly, corporate innovation teams can be split up to operate in two or more of these offices. The point is the high-level innovation goals will ultimately prescribe the ideal location for innovation to use as their home base.
Once their internal positioning is decided on and program theses are crafted, precise success metrics need to be selected. A critical caveat to deciding on qualitative and quantitative ROI metrics is that it can't solely fall on the shoulders of innovation directors. Executive stakeholders need to drive this decision-making.
“Projection models built by innovation teams operating in a realm of assumptions, not knowledge, are always wrong because prediction is not possible," Elliott wrote in his book, "The Illusion of Innovation."
Agreeing upon specific metrics and establishing SLAs around what corporate leadership can expect results-wise from each innovation endeavor can ensure all innovation stakeholders are on the same page before a single initiative gets off the ground (and money and time are potentially wasted).
"Organizations need executives to pursue a balanced approach to all kinds of innovation, but incentive misalignment and application of incorrect metrics drive behavior that is ultimately destructive to the organization," Elliott noted.
