the CEO [who is traditionally responsible for business direction and strategy] and [who] can galvanize the whole workforce [to consistently and systematically provide innovation value.]”6
Who is responsible for innovation in your company? Do you have a Chief Innovation Officer? A Director of Innovation? Do you have an “Innovation Council” or group of innovation champions throughout your business?
In Chinese philosophy, the yin and yang describe how apparently opposite or contrary forces are actually complementary.
The answers to these questions vary from company to company and most of the time are dictated by size. In many Fortune 100 companies, you’ll find a Chief Innovation Officer. Sometimes you’ll find this title combined with business strategy like one of my prior positions, Chief Strategy & Innovation Officer. Other times, it is shared responsibly across an Innovation Council or some sort of steering committee rather than a single person. How you centralize or decentralize the roles and responsibilities for innovation leadership can vary, but you have to cover them one way or another. This chapter focuses on what the responsibilities are.
WHAT IS INNOVATION GOVERNANCE?
What is innovation governance? Wouldn’t governance stifle innovation and creativity? Isn’t the problem with big companies that they have too much governance and not enough innovation? On the flip side, maybe you have worked really hard to put appropriate and prudent governance in place, and now someone is telling you to combine innovation with that? That just doesn’t seem to make sense—but keep reading because it makes perfect sense.
In Chinese philosophy, the yin and yang describe how apparently opposite or contrary forces are actually complementary.
This philosophy embodies innovation governance in a single sentence. Innovation and governance feel like, sound like, and show up in business like opposite forces. Governance is about control and measurement. Governance even sounds structured, hierarchical, and slow. But proper governance in just about any business will produce better, sustainable results and value creation. McKinsey noted, “Since innovation is a complex, company-wide endeavor, it requires a set of crosscutting practices and processes to structure, organize, and encourage it.”7 This last part of the statement “…to structure, organize, and encourage…” speaks to innovation governance. Innovation is about creativity and ideas. Innovation is about fighting the status quo and doing things in a better, cheaper, faster way or even doing different things altogether. But innovation is also about discipline and process.
So how is the combination of these two opposing forces helpful? First, let’s consider the term and concept of governance.
Governance has been defined as follows:
The lawful control over the affairs of a unit.8 It is the establishment of policies and continuous monitoring of their proper implementation, by the members of the governing body of an organization. It includes the mechanisms required to balance the powers of the members (with the associated accountability), and their primary duty of enhancing the prosperity and viability of the organization.
Synonyms include: administration, care, charge, control, direction, government, guidance, handling, intendance, management, operation, oversight, presidency, regulation, running, stewardship, superintendence, superintendency, supervision. 9
That sounds like a lot of structure! Process, structure, execution, testing, measuring, and repeat. To some of us, structure is good because it’s predictable, provides boundaries and guidelines, and leads to results. But like a pendulum that swings back and forth, if you swing too far in a governance direction, all those good things can create imbalance and poor results. This is where innovation comes in.
Innovation is defined as:
The process of translating an idea or invention into a good or service that creates value or for which customers will pay. To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need. Innovation involves deliberate application of information, imagination and initiative in deriving greater or different values from resources, and includes all processes by which new ideas are generated and converted into useful products.
In business, innovation often results when ideas are applied by the company in order to further satisfy the needs and expectations of the customers. In a social context, innovation helps create new methods for alliance creation, joint venturing, flexible work hours, and creation of buyers’ purchasing power.
Innovations are sometimes divided into two broad categories of evolutionary innovations, which are brought about by many incremental advances in technology or processes, and revolutionary innovations (also called discontinuous innovations), which are often disruptive and new. 10
From this definition, you can easily see how innovation is an opposing force to governance. Governance is meant to reduce risk in a business, whereas innovation can be seen as synonymous with risk-taking in order to evolve and, in some cases, create a revolution to develop new products, markets, and business value. Innovation is flexing, evolving, failing, and trying again.
When you consider innovation and governance together, now you can start to think in these terms. Innovation governance is vital to organizations that are true innovators or aspiring innovators. Innovation is either a one-hit wonder in some cases or public relations to impress your board, customers, shareholders, and/or the media in other cases. However, innovation governance means, for example, that the oversight body ensures there is internal capacity to deliver on innovation, including funding, roles, incentives, and more. It is about making innovation sustainable as opposed to a one-off that then is exposed to the chopping block when times get tough. This governance should ensure there is a balance of varied innovation efforts in play that are managed holistically as a portfolio. The overall result of this innovation portfolio is about its value creation—allowing for wins and losses of individual projects. Applying the appropriate level of structure within your organization should actually empower and accelerate innovation, not stifle it.
Innovation governance is like setting rules in a soccer game. Tell the participants the rules, and let them execute. Don’t make it burdensome and complicated. Make the boundaries clear and then stand back! When you put these two opposing forces together, you create a value that is greater than the sum of its parts.
Applying structure and discipline to creativity is obviously not a new concept. The bigger issue is not if you should do this, but how you combine these two philosophies to drive value. Additionally, we need to be cognizant as to how the marriage of these two philosophies and approaches will culminate and drive value in our businesses. This is not a one-size-fits-all answer, but an amalgamation that we must arrive at.
HOW DO WE GOVERN INNOVATION?
There are three elements of innovation success:
1 Galvanizing the organization for innovation success;
2 Enabling the organization to solicit, capture, evaluate, and implement innovation projects and ideas; and
3 Measuring innovation value and success.
These elements are discussed in much greater detail in Part II of this book; however, the next sections of this chapter introduce these concepts to show how they fit into the topic of innovation governance.
Skills of an innovation leader include being facilitative and consultative.
Galvanizing
Innovation leaders are responsible for establishing an innovation