Org Setup and Innovation

7/31/2019 Org Setup and Innovation

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Organizational setup and

Innovation



Can the organizational structure of a company

contribute to the acceleration of the

innovation management in the spirit of Fast

Innovation?



- The innovation machines Toyota, Procter &

Gamble, GE, 3M, IBM, Google, Microsoft, Sony,

Hewlett-Packard, and Whirlpool answer this

question in the affirmative.

- In addition to an effective and efficient

innovation process they have adopted anorganizational structure of innovation that

enables them to launch innovations faster.



- The innovation machine Toyota as well as

Procter & Gamble , GE, 3M, IBM, Google,

Microsoft, Sony, Hewlett-Packard, and

Whirlpool have adopted an organizational

structure of innovation that significantly

facilitates Fast Innovation.



- They have taken the following seven keyactions in order to structure their innovation

management and organization for FastInnovation:

1. Delegation of Decisions to Innovation Teams

2. Integration of R&D into the Business Units3. Co-Location of Teams and Departments

4. Central Innovation Teams

5. Central Innovation Funds6. External Interface for Open Innovation

7. Merger & Acquisition Department



1. Delegation of Decisions to Innovation Teams

- Despite best intentions, if all important decisions in theinnovation process are made dependent on (top)

management´s agreement a time delay will result.

- Therefore decisions need to be delegated to theinnovation team in order to avoid these delays andenable Fast Innovation.

- The consent of (top) management is in this case onlyrequired at the milestones or gates of the innovationprocess.

- The members of the innovation team should be

available to the team with 100% of their time in order toget the innovations to market as quickly as possible.



- Nowadays most companies use innovation

teams for innovation management.- The degree to which decisions are delegated to

the teams and the degree of availability of the

members for the innovation teams differ,however.

- Big companies such as Toyota, P&G, IBM,

Sony, Whirlpool and others typically have fully

dedicated innovation teams with 100%

availability of their members..



2. Integration of R&D into the Business Units

- The organizational integration of the majority of

R&D into the business units makes innovationmanagement more effective.

- It fosters the collaboration with the other

departments of the business unit and theorientation towards the customer (customerpull) in lieu of an exclusive focus on thetechnology (technology push).

- Furthermore it improves the preconditions forFast Innovation.



3. Co-Location of Teams and Departments

- Although we are living in a time of powerful

electronic communication, the organizationstructure of co-located teams and co-locateddivisional departments maintains at least thesame relevance as formerly.

- Co-Location fosters the integration of teams anddepartments and a free-flowing communication.By locating all innovation team members andrelevant departments of a division in the same

place, companies can make sure that everybodyhears the same thing at the same time.



- This way information does not get distorted.

- Spontaneous communication and exchange of

ideas are facilitated.

- Co-location raises the probability that in the

management of an innovation the necessities

of the market-place and of the technology are

simultaneously taken into consideration, and

that the innovation gets to market faster.



- Procter & Gamble is a fervent supporter of FastInnovation and of organizing for innovation via co-location.

- So is Google.

- And IBM and Sony as well, even for globallycomposed teams.

- Under IBM´s leadership e.g. the IBM-Sony-Toshiba „Cell Chip“ Team, which comprised 400team members and was charged with developing,amongst others, the high-performance chip for

Sony´s Playstation 3, was located in one place, atIBM´s Sony-Toshiba-IBM (STI) Design Centre inAustin, Texas







- For a successful innovation management it is,

however, important that the innovation project

from its very beginning has a division, category,product group or brand assigned as its sponsor

and “home” for future commercialization.

- Procter & Gamble has an organization of central innovation teams at the corporate level

which goes by the name Future Works.

- At the business unit level its central innovationteams belong to the New Business

Development Organization.



5. Central Innovation Funds

- The innovation projects which later will be led

by central innovation teams in most casesneed a special budget to get funded becausethe divisions shy away from making funds

available given the typically high risk of suchprojects.

- Without a central innovation fund theseinnovations would not be launched fast, if

they would get to market at all.- Fast Innovation would be impossible.



- P&G has established the P&G CorporateInnovation Fund (CIF) for such purposes which

provides financing for the development of disruptive innovations and of new businesses.

- P&G´s innovative Crest Whitestrips were, for

instance, seed funded by the CIF.- Also GE´s CEO disposes of a central Venture

Fund that is to finance so-called „Imagination

Breakthroughs“, i.e. innovations with expected

incremental annual sales of at least 100million US$.



- When Whirlpool´s CEO decided around the turn of thecentury to transform his company into an innovation

champion he as a first step established a central seedfund and, additionally, seed funds for each of Whirlpool´s regions in order to quickly test new ideasby means of prototypes in the spirit of Fast Innovation.

- Hewlett-Packard´s innovation management possesses acentral innovation fund called Innovation ProgramOffice (IPO) which has a mission similar to P&G´sCorporate Innovation Fund.

- Honeywell´s innovation management, too, has acentral innovation fund which they name HoneywellGrowth Board. At the divisional level Honeywell fundsits central innovation teams via its Venture Funds.









- The role model for this M&A strategy of

innovation management is Cisco.

- Since its first acquisition in 1993, Cisco up tonow has acquired 126 mostly young

companies.

- Most high-tech companies own strong M&Adepartments in order to accelerate their

innovation activities in the spirit of Fast

Innovation.- So do e.g. Google, Microsoft and IBM.

Documents

Org Setup and Innovation