How do you best organize for radical innovation

Abstract

In an era when so many large companies seek growth through technology-driven new product breakthroughs, some question whether these companies can innovate fast enough to create such growth. Such questioning has led an Industrial Research Institute Research-on-Research subcommittee to study how companies organize to support successful radical innovations (1). The subcommittee began by collecting tacit knowledge possessed by 40 IRI member companies about how to best organize to create breakthrough innovations in medium-to-large companies (2). We share this information here but emphasize that there are many opinions on this topic and we don't claim to have made groundbreaking discoveries. We do, however, believe there is value in summarizing the factors a group of managers feel are most important and in encouraging readers to use this information to spark their thinking about what is most appropriate within their own organizations. What is Radical Innovation Anyway? In the IRI, we have defined a radical project as one with the potential to produce one or more of the following: * An entirely new set of performance features. * Greater than five-fold improvements in known performance features. * A significant reduction in cost (>30 percent). Others use different terms, such as step-out innovation or break-out results. The exact term is not critical-the key point is that we focus here on significant changes, not incremental innovation. Key Themes Several themes emerged repeatedly in the many discussions we have had with R&D directors and managers who possess many years of collective experience. Below, we highlight the most striking ones and comment on what further research might be undertaken. 1. Senior management must be passionate. The support, involvement, commitment, and championing of the CEO and senior management is perhaps the most critical success factor. The role of radical in accomplishing the company's long-term strategies and objectives must be clearly stated and reinforced at all levels. Adequate funding should be provided and sustained, even in difficult economic times. This funding should not be discretionary for the business units in the early stages of projects. Patience and a long-term perspective are key. Corporate Courage: Breaking the Barrier to Innovation, by Mel Perel (RTM, May-June 2002, pp. 9-13) addresses this issue very appropriately. Potential research topic: How can technology managers engage the CEO and senior managers as champions of radical innovation? 2. Set extraordinary goals, with close enough fit. Challenge the organization to do more than it thinks it can. A key challenge for management is to find the right level of challenge: enough to stimulate extraordinary results, yet not too much to paralyze or break the organization. Avoid incrementalism. Goals should be consistent with and enable the accomplishment of the organization's business objectives and strategies. Recognize, however, that many radical projects will not be successful. Financial goals or expectations should therefore be based upon a portfolio and not individual projects. Real options methodology may be helpful here. Potential research topic: Stretching but not breaking the organization: motivating for radical results. 3. Create the right environment. There are several ways to create the right environment for radical innovation: Physical Protection.-Groups can be protected so that concepts can incubate and develop. Protection can be in the form of physical isolation, or insulating the organization to minimize distractions and pressures. When possible, it is recommended to spin the groups out from the conventional internal organization. Psychological Support.-A spirit of persistence and patience is critical. …