Structures for innovation

This week I got this question: "I wondered if you know, or have seen on your travels any great examples of specific organization structures for Innovation Labs?" The writer goes on, "In our view this is a specific environment where people are brought in to innovate the way in which we produce and sell our products and services. This will be separate to the business and will involve some new hires and some employees rotated out of the business. Have you seen any principles on structures to facilitate innovation?"

What's interesting about this is that current thinking appears to converge around the notion that innovation is best developed through business ecosystems. That is a form of intentional development of communities of economic co-ordination where multiple parties join forces to "coordinate innovation across complementary contributions arising within multiple markets and hierarchies," from this, if things go well, the business ecosystems co-evolve and adapt to continuously changing contexts. You can read more about this aspect in James F. Moore's paper Business ecosystems and the view from the firm.

One company that is clear about the value of innovation through collaboration is P & G which has established a program 'Connect + Develop' to foster innovation:

In 2001, P&G was in a period of declining growth. A company where the solution is always innovation, P&G knew it needed to accelerate its innovation development and increase its rate of innovation success. And leadership predicted, with the world continually getting smaller and moving faster, sustaining solutions would be found in collaboration, not in isolation. P&G launched Connect+Develop, a systemic, company-wide open innovation program charged with bringing the outside in, and taking the inside out.

There is a lot of information on the value of the business ecosystem for driving innovation, and there is some information on ecosystem business models, but further exploration yields very little in the way of how you structure them for success. This example is fairly typical of the findings in the field.

In fact, inclusive business ecosystems have been critical enablers in some, if not all, of the inclusive business models that have reached scale. One of the most famous cases is Aravind Eye Care in southern India. Aravind treats 2.5 million patients and performs 300,000 eye operations every year. Even though many of its patients are unable to pay, the hospital has a solid profit margin. That margin could only be achieved by strengthening the ecosystem around the core business to enable extreme efficiency and overcome barriers to scale. That ecosystem includes a lens manufacturing joint venture, research and training institutes, and civil society groups that organize patient screening events in rural areas.

So far, most practical guidance for companies has focused on inclusive business models. Relatively little is known so far about the concrete strategies and structures companies can use to build better-performing inclusive business ecosystems. Each member of the ecosystem has its own perspective, capabilities, goals, and incentives. How can they be encouraged and enabled to act in ways that pave the way for inclusive business models to succeed?

The downloadable report Tackling Barriers to Scale: From Inclusive Business Models to Inclusive Business Ecosystems from the Harvard Kennedy Business School develops the ideas in this extract, and has an excellent listing of relevant articles to follow up on.

What can we take from the business ecosystems discussions that might be relevant to structuring for R & D lab innovation? Well clues and possibilities that center around four aspects of the organization: space, people, process, and technology.

Space: design maximum room for collaboration – small meeting spaces, coffee areas, casual contact possibilities, and ability to reconfigure the space on an as needed basis allowing for what the urban theorist Jane Jacobs calls 'knowledge spillovers'.

People: whilst designing space for collaboration simultaneously recognize that much innovation is drawn from individuals thinking in isolation about a problem and solving it themselves. (Think Archimedes and 'Eureka'). Two recent popular articles Groupthink the brainstorming myth, by Jonah Lehrer and The rise of the new groupthink by Susan Cain, have come out strongly critical of putting team innovation interventions like brainstorming, and open plan offices above an individual's ability to innovate.

But as Reckitt Benckiser, developer of household products, has found structuring around teams and networks with diverse member enables strong innovation:

'We work in groups all the time, so team spirit is also very much part of our culture. We firmly believe that by having people from different backgrounds we get new ideas on the table much quicker than other companies. We have a very strong multi-national team and what we have accomplished is a team effort. If I have ten people with different backgrounds in a room they're not going to agree. As long as I have constructive conflict, by the end of the discussion they're going to come up with a perspective which is very different. That's what I want.'

Process: Structuring around work processes makes sense in an R & D setting (and most other settings).
See the work by Henry Chesbrough who argues that open innovation in products and services is the way forward. In Open Services Innovation: Rethinking Your Business to Grow and Compete in a New Era he explaings that by open innovation he means moving outside an organization's boundaries to innovate – for example by involving customers in innovation requires processes that support this kind of initiative, with the surrounding structures acting as support. See too the writings of Clayton Christensen of Harvard Business School including The Innovator's Dilemma.

Technology: Keeping up to date with evolving technology is both an innovation enabler and an innovation requirement. Netflix, with known as a great innovator, (albeit with a recent mis-step on their business model) continues to evolve their business model by staying on top of the technology wave and using new technologies to enable their future success. In the past they successfully embarked on an experiment to show streaming movies via electronic devices, like their Roku digital player. Now they are experimenting with Webkit in your living room. See their tech blog if you are technically minded. Their organizational structures allow for the ongoing adoption of technology advances.

So while there may not be much specific information on structures for R & D labs there is a lot to draw on from the fields of innovation, collaboration, and business ecosystems. If you know of anything more specific please let me know.

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