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Long Live the Innovation Department; Kill the Innovation Department

In the corporate world, there are two primary forces that are getting in the way of innovation: bureaucracy and what I like to call the “tyranny of the served market.”

Organizational bureaucracy prevents the agility and speed that’s crucial for innovation, making the pursuit of new initiatives akin to slogging through mud. At the same time, the demands of markets and customers cause many companies to be too distracted or overwhelmed to explore ideas for new products or services. They’re also often blind to opportunities that fall outside the spectrum of existing lines of business.

Overcoming these limitations is only possible when corporations start thinking like a startup. This requires a two-pronged approach that incorporates two seemingly contradictory ideas: First, corporations need to build a formal innovation department where specific employees are resourced and responsible for driving innovation. Second, they need to foster a culture where venture thinking is adopted across the organization, empowering every employee to make innovation a part of their job.

Most corporations choose one side of this strategy over the other, changing either their organizational structure or culture in the name of innovation. The truth is, you need both to nurture a startup-like environment that gives birth to new ideas. Here’s how I advise corporate leaders to make it work:

Building the innovation department

The goal: Create a formal team or entity that directly reports to the CEO and is staffed by employees who are responsible for creating and driving innovation initiatives within the organization.

The leadership: A senior executive, commonly called a “chief innovation officer.” Give the job to a respected business leader within your internal team who understands the core business yet has a reputation for being an out-of-the-box thinker.

The focus: To build innovation across the company by bringing focus, urgency and dedicated resources to innovation — and ensuring that new initiatives don’t fall through the cracks. This department should incubate ideas and pursue initiatives that don’t neatly fit into existing business units. These initiatives may be disruptive in nature, can’t be achieved through business-as-usual and/or connect multiple businesses on a white-space opportunity that can’t be pursued by a single business unit alone. The team also needs to have capabilities in prototyping and mentoring. Finally, this innovation department needs to reach out to entrepreneurs and startups, both for corporate venturing and learn from them.

The fine print: Equip the team with enough seed funding to bring ideas to life; this funding should be protected and not subjected to business cycles. Don’t measure success using the same performance metrics or KPIs as other business units.

Killing the innovation department

The goal: To change the mindset and culture of the organization so that everyone — regardless of job description or department — is empowered to innovate. Every employee needs to constantly look for new insights from customers and marketers; to reimagine the business; to think about how to challenge the status quo and do things cheaper, better and faster.

The leadership: Leaders need to recognize that innovation is a deviant act that involves taking risks. Walk the talk so your employees can follow your model for risky behavior. As Facebook likes to say, “move fast and break things.”

The focus: Send the message that the organization is a safe place to experiment, take risks and break things. Embrace agility and experimentation; you want to run experiments quickly and cheaply so you’re not making big bets, but are making lots of little bets and iterating quickly.

The fine print: We all know how to celebrate success. Learn how to celebrate failure. Reward not just the outcome, but the process itself.

At the end of the day, you need to build an innovation department and to bring focus to innovation. But you must also kill the notion that innovation is a department — because innovation is, in fact, everybody’s job.

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