In just the past five years alone, we can see how much the landscape in which current organizations are operating is changing at a rapid pace. Rodrigo Canales, PhD, an Associate Professor of Organizational Behavior at the Yale School of Management, studies how organizations can build a powerful innovation capacity in response to these market forces.
“We can see how much the landscape is changing when we look at the speed with which the boundaries between sectors have eroded,” explains Canales. “Even 5 or 10 years ago, the boundary between a for profit company and nonprofit company were much clearer than they are now. Today, if you try to track a service that is provided by a company or an organization in any sector, you will find that it's interwoven in very complicated ways with organizations that are in other sectors,” says Canales.
Take for example, if you map out a government service. “You will see the private sector very, very intricately interwoven in it in ways that are almost impossible to discern,” explains Canales. Not only have the boundaries between sectors eroded, but the boundaries across countries and organizations have also blurred dramatically.
“The organizations that we have today were all designed to operate in a world where these boundaries meant something. From a structural perspective, our current organizations were organized for a period in which boundaries meant something, or boundaries played a much more important role than they do today.” Combine these drivers with technology—which accelerates these dynamics even more—and companies are looking for how they can build ongoing innovation capabilities so they can remain a viable organization.
Maintain a Portfolio of Options
Canales asserts that for many large companies, investments in exploratory innovation end up occurring in stages, where small bets are made as these projects continue through the innovation process. This common approach is just one reason why organizations need to shift to an approach that enables them to utilize a suite of innovation projects—both to sustain existing business, but to also to better adapt to a world that’s evolving very rapidly around them.
Operating with excellence, retaining financial control, generating new options and divesting are important for a large company to pursue, all at the same time, when it comes to innovation.
“When you have a portfolio of options in this way, an organization will have the ability to make decisions in the future. The only way in which you can have the ability to make decisions in the future is if you have invested in things that will give you sort of options from which to decide.” Of course to have those options in the future means generating alternatives today.
While operating with excellence may mostly be associated with constant, marginal innovation, companies also need to work to find the ability to shift to an entirely different business model, if and when needed.
Many organizations are already sensing that their business models are being challenged, or they can foresee a world very soon in which their business models are going to be challenged.
“Organizations should be thinking about, what will happen when our business model dies out or changes? What are we going to do next?” explains Canales.
Business model innovation is very different from product and service innovation, he adds. “It's very different from marginal innovations that you're pursuing, or just trying to improve current products and services. Business model innovation is very different from the innovations that you need to help your people work more effectively together,” says Canales, pointing out the need for organizations to also re-examine their own framework or organizational structure.
Canales asserts that companies must look to see that internal stakeholders are productive and content, and that colleagues are interacting well with both internal and external stakeholders.
“Any organization should be spending some time thinking about its [structure] and coming up with innovations to its organizational structure as well,” says Canales.
The Formula for Successful Innovation Teams
Generally speaking, what are the some of the questions we can ask about the mix of innovators that make up a successful, multifaceted innovation engine? Because the people are the drivers of innovation, it is critical to have people who will add value to the innovation programs.
Questions to ask about the people “at the table for innovation” include:
- Are they able to weave innovations or customer-centric ideas into company strategy?
- Are they able to draw insights from multiple domains?
- Are they able to think of the business model now and in the future and how an innovation could fit (or not) with current business model?
- Are they comfortable with running experiments, including experiments that could impact the organization’s current business model?
- Are they able to think of a product or a service in the abstract?
Different types of innovation require different types of internal partners and innovation leaders. And just as important as who is “at the table for innovation” in general, is the structure in place to support these innovators. “You need to put them in a structure that helps them all collaborate in a way where nobody voids, or overwhelms the others.”
Starter questions to ask about the organization’s framework and support structure for innovation include:
- Are there consumer or user advocates?
- Is feedback captured quickly and available to teams for learning?
- Can changes in direction be made quickly?
- Is there a dedicated place for sharing?
- Is a range of ideas tolerated within teams?
- Is there a way for maturing and letting go of ideas or solutions?
- Are cross-organizational interactions supported or encouraged?
Innovation teams today are tasked with connecting and taking advantage of rapidly-changing and very complex information. “They need to be able to [implement a] design thinking process, if you want to call it that, but in a way that also weaves in the organizational dynamics and the organizational structure, and even the business model side. All these people need to be working together in a structure that helps them collaborate effectively,” says Canales.
Take the right mix of collaborators, teams with the right amount of authority to “take on” projects or challenges they’ve been assigned, and apply this to a portfolio approach to innovation efforts, and people will be more invested. The right framework and support structure can result in strategic, incremental innovation, radical new products and services, and business model innovation.
“The point is that when thinking about innovation, you should be thinking about the different, complementary types of innovation that your organization needs. And each of those types needs a different mix of people, organizing structure, resources, timeframe, investment sequence, and success metrics,” says Canales. “If your organization has focused on only one type of innovation, even if you are doing that right, you are probably doing it wrong."
About Rodrigo Canales
Rodrigo Canales, PhD, teaches the Innovator Perspective at Yale School of Management. Canales sits in the advisory board of the Dalai Lama Center for Ethics and Transformative Values at MIT, and he advises several startups in Mexico that seek to improve the financing environment for small firms. Canales researches the role of institutions in entrepreneurship and economic development. Specifically, Canales studies how individuals purposefully change complex organizations or systems. His work explores how individuals’ backgrounds, professional identities, and organizational positions affect how they relate to existing structures and the strategies they pursue to change them.
1) DIY Innovation: Creating an Innovation Capability Within Your Organization. Canales, C. Cannon, C. Fabian, R. Fabricant, E. Kochi, and R. Rabison. Rotman School of Management. 2014.
Ready to accelerate your innovation program?
Use Batterii for research, trend spotting, business model development, product service and design, and concept development. Instead of carrying a backpack and notebook, use Batterii’s mobile app. See how Batterii works, and download this presentation given by John Klick, an innovation leader at Pfizer, and Batterii's CEO Kevin Cummins on how Pfizer scaled its innovation program to more than 70,000 employees.