One of my friends, who leads a reputable not-for-profit organization, recently talked to me about her intentions to start an innovation team and all things it’d take to set-it up for success. This conversation inspired this post.
Most organizations either have an innovation department or are in the process of building one. In the past few years, there is an increase in the number of organizations formalizing their innovation departments. What used to be thought of as an R&D function is no longer just that. There is a focus on business model innovation, marketing, supply chain and operations in addition to product innovation. A few thought leaders have further turned up the heat to innovate bigger and have picked-up the mantle to transform the entire market landscape. Most of this transformation has been good for the economy. There is a new sense of urgency, desire to be different and constantly explore what’s next.
- Before setting up an innovation department, ask yourself WHY.
Creating a new department is not easy but may not be difficult either. It sends a strong signal internally and externally. On the face of it, it feels like there is no harm in creating a new department, but it all comes down to why. Top reasons why an innovation department is formalized are:
- Systematize idea flow management and new opportunity development
- Send a strong signal to the market and build thought leadership
- Accelerate functional innovation: Product development, Marketing, Supply Chain, Technology, Operations etc.
- Manage cross-functional or intra-business unit collaboration
- Pursue partnerships and build new capabilities
- CEO or a board member said so
- Marketing strategy to attract and retain new customers
Only three of the above warrant developing an innovation department. The other needs are all valid but creating a new department might not solve the problem. The primary goal of an innovation department is to accelerate product development, this begs the question why and how this new department can achieve results that the existing department could not. The proposal to alter the new team’s composition or provide greater degree of freedom has to be replete with reasons why the current team cannot be altered to deliver similar results. Otherwise, the new department will breed resentment, increase turnover and decrease the its effectiveness even before it is built. On the other hand, if you are missing a distinct capability to build and test business models then having a separate team makes great sense but if the intention to turn-around more projects, then adding more resources to an existing team might generate better results.
2. Develop vision, objectives and appoint advisory board
Once you have made a case for why the company needs an innovation department, articulate a vision. Establish objectives to guide the work. As it is only human to digress, appoint a guardian of the holy grail, usually the Chief-Innovation Officer or the CEO or the Strategy Officer. This role is a hands on one, especially early on. His/Her role is to be the PR agent for the department, secure resources, present a budget and actively champion the department.
Does Strategy direct Innovation or Innovation direct strategy? Most innovation teams constantly face the trade-offs between conducting agile experiments with tangible short-term results and creating disruptive long- term growth. These teams must also balance the mix of exploratory experiments and the ones with known business impact in their pipeline. Therefore, it is good to have established focus areas.
Next appoint a board of directors. These members can be business unit leaders, outside subject matter experts (draw from the capabilities you are looking to build) or board members to guide and ground. Vision and the objectives should give clear insight into the role of the innovation department within the company and how it will help the company with the mission and vision.
3. Publish rules of engagement with the rest of the organization
Anyone can innovate. Any team can innovate. No one team can call dibs on innovation.
Once you have defined focus areas, goals and objectives make sure that you can publish rules of engagement for this department to not only co-exist but thrive within the rest of the organization. If your innovation team is designing and piloting new business models, then who would scale the models? How will you create their buy-in?
Conduct a workshop for all the relevant stakeholders and a map the customer journey (the customer here being the teams that the innovation department serves) and develop blueprints for how these interactions would work. Including other teams in this process, will create buy-in and signal collaboration. Here other teams are the clients, so listening to their pain points understanding their journey is crucial to coming up with an executable blueprint.
4. Decide on the organizational structure and physical location of the team
There are different models for how innovation teams operate.
- A global Matrix: In this model, everyone at the company has innovation related responsibilities and might report to another leader in addition to the current leader. This model would require a great performance and talent management systems in place.
- Team within a team: A new team is created within the department to focus on innovation. A digital innovation team within marketing, is a great example. The pros are these teams tend to have great focus and alignment though the focus could be more near-term. There are perks and prestige associated with being a part of an elite team and this structure allows for developing high potential specialized talent.
- A SWAT Team: This is a team with next-gen capabilities to innovate products and processes. There is a danger that this team can soon become continuous improvement team working on incremental wins, so the leaders must ensure that the SWAT team remains proactive.
- Subsidiary: This is usually the choice when there could be a conflict of interest or the focus is more exploratory in nature. Another reason for developing a new subsidiary is to instill discipline, have clearly defined projects, timelines and outcomes as there is a financial transaction involved at the end of the project.
- A new team: Whether it is at the same location as the rest of the organization or on its separate island, it is good to create connection and healthy distance.
5. Assess required capabilities and assemble the dream team
When I think about capability maps, I like The Moment’s Innovation Designer capability map. Using this map as a framework, individual vectors could be modified to build a capability map for a department. For e.g.: you’d want your team members to be bold, scrappy, strategic and analytical. You’d also want your team to have experience in market research, relationship building and design. In addition, you’d also need couple of subject matter experts based on your focus area. Once you have listed out the capabilities, start thinking creatively about building your dream team.
6. Set-up a performance scorecard
One of the top three reasons for innovation teams to fail is lack of relevant KPIs. The other two being lack of resources and unclear direction.
To set-up the department for success, develop a balanced scorecard not just for the department, but also for individual team members. More about the balanced scorecard in a separate blog. Stay Tuned!