The Idea in Brief
Your company is continuously creating new generations of products, services, and business processes. These innovations require seamless collaboration across your firm's different parts. But in most large corporations, innovation and integration are unnatural acts. Resistance stifles new ideas, and silos block cross-functional cooperation.
Yet as Cash, Earl, and Morison explain, some companies are overcoming these boundaries by establishing two new types of cross-organizational teams.
Distributed innovation groups (DIGs) foster innovation throughout the company. For example, they deploy intranet-based forums and wikis to scout for promising ideas.
Enterprise integration groups (EIGs) establish the architecture and management practices essential for business integration. For instance, they identify integration opportunities, channel resources to them, and reconfigure ERP systems to support ever-tighter cross-business collaboration.
To establish each of these groups, select a small number of talented people who combine broad business knowledge, technology expertise, and the social skills needed to build relationships both within and outside your company.
The Idea in Practice
How Distributed Innovation Groups Work
DIGs foster innovation by:
Scouting for high-potential ideas. Group members take part in brainstorming and problem-solving sessions, identify customer needs that could lead to new offerings or business models, and consider how to use existing technologies in new ways.
Scanning the environment for emerging technologies and their applications. DIGs research technology trends and monitor early adopters' experiences for insights into new applications.
Facilitating online idea marketplaces. They use information dissemination and collaboration technologies, including groupware, social-networking systems, and Web 2.0 tools such as wikis and blogs.
Advising business units. They counsel unit leaders on how to manage innovation initiative portfolios and how to conduct rapid prototyping.
Publicizing promising innovations and their progress throughout the enterprise. This sparks creativity by example.
Serving as a home for developing pilot projects and prototypes. If a business unit comes up with a promising idea but lacks the resources and skills to develop it, the DIG can provide the extra push needed for the idea to gain early traction.
Royal Dutch/Shell's "GameChanger" teams provide seed funding for radical or long-term innovations that would otherwise be orphaned. GameChanger coaches organize idea-generation workshops and help idea originators prove the concept (in a lab or in the field). Resulting innovations have included a new biofuel and a process for extracting hard-to-access gas reserves.
How Enterprise Integration Groups Work
EIGs foster business integration by:
Providing expertise in process management and improvement. Groups oversee activities such as Six Sigma and disseminate best practices across the enterprise.
Providing staff to major business-integration initiatives. EIGs provide whatever skills may be lacking in terms of process thinking and design, organizational change, job retraining, and new performance metrics.
Managing enterprise architecture. They configure and manage the evolution of the company's business processes, information, and technology.
Anticipating a more integrated future. EIGs help managers envision and prepare for the ramifications of horizontal integration.
General Electric's "Corporate Initiatives Group" is responsible for horizontal integration within and across GE's six major business units. Benefits include reduced cycle time for key business processes. One GE company that provided private-label financing for retailers used to take 63 days from contract signing until a customer was allowed to finance a purchase. With the Group's help, that time was reduced to one day, speeding revenues to the company. The Group also shares best practices across the corporation, especially those involving accelerating growth, reducing waste, and improving customer-facing processes.
Harvard Business Review
by Vijay Govindarajan and Chris Trimble
Many companies assume that once they've launched a major innovation, growth will soon follow. It's not that simple. High-potential new businesses within established companies face three specific challenges — forgetting, borrowing, and learning — that a new enterprise must meet to survive and grow. It must first forget some of what made the core company successful. The new enterprise must also borrow some of the core company's assets — usually in one or two key areas that will give the new enterprise a crucial competitive advantage. Incremental cost reductions, for example, are never a sufficient justification for borrowing. Finally, the new enterprise must be prepared to learn some things from scratch. Because strategic experiments are highly uncertain endeavors, the new enterprise will face several critical unknowns. The more rapidly it can resolve those unknowns — that is, the faster it can learn — the sooner it will zero in on a winning business model or exit a hopeless situation.
Harvard Business Review
by Geoffrey A. Moore
There are many types of innovation, from the ballyhooed disruptive innovation to more mundane forms such as process and experiential, which might involve, respectively, doing such things as streamlining the supply chain and delighting customers with small product modifications. Many executives find it hard to decide which kind to focus on. The best way to choose is to consider the phases of a market's life span. In a market's earliest phase, a new technology attracts enthusiasts and visionaries. Eventually, the market reaches the Main Street section of its life, when growth slows, flattens, and finally subsides. Different types of innovation produce more bang for the buck at different points in the life cycle. Disruptive innovation, for example, is rewarded most during the earliest phase. Once the life cycle advances to Main Street, however, the marketplace is no longer willing to yield the revenue or margin gains necessary to fund that type of innovation, so other forms, including process and experiential, yield better returns. But attempts to change the company's direction are often thwarted by the inertia that success creates. To overcome the inertia demon, managers must introduce new types of innovation while aggressively extracting resources from legacy processes and organizations.
Harvard Business Review
by Michael L. Tushman and Charles A. O'Reilly III
Corporate executives must constantly look backward, attending to the products and processes of the past, while also gazing forward, preparing for the innovations that will define the future. This mental balancing act is one of the toughest of all managerial challenges and only a few companies succeed. What's their secret? These organizations separate their new, exploratory units from their traditional, exploitative ones, allowing them to have different processes, structures, and cultures; at the same time, they maintain tight links across units at the senior executive level. Such "ambidextrous organizations," allow executives to pioneer radical or disruptive innovations while also pursuing incremental gains. Of utmost importance to the ambidextrous organization are ambidextrous managers — executives with the ability to understand and be sensitive to the needs of very different kinds of businesses. They possess the attributes of rigorous cost cutters and free-thinking entrepreneurs while also maintaining the objectivity required to make difficult trade-offs.
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