“The search for innovation needs to be organized separately and outside of the ongoing managerial business,” Drucker explained in his 1973 book Management: Tasks, Responsibilities, Practices. “Innovative organizations realize that one cannot simultaneously create the new and take care of what one already has.” In his 1985 book Innovation and Entrepreneurship, Drucker underscored the point: “The entrepreneurial, the new, has to be organized separately from the old and existing,” he asserted. “No matter what has been tried—and we have now been trying every conceivable mechanism for 30 or 40 years—existing units have been found to be capable mainly of extending, modifying and adapting what already is in existence. The new belongs elsewhere.”
The Innovation group works fine, at least initially, when located outside the current business (Configuration c). What it is able to do well is to boldly pursue new ideas that would have been shot down inside the current business. It can identify opportunities that might have been ignored by current business, generate ideas and do a quick and inexpensive POC. So far the idea had a smooth sail as it was not constrained by the current business. The success of this innovation venture is in incubating new ideas till POC stage. Beyond this stage, we need to bring business alignment to the idea to invest more and pursue it further. The innovation group may not have the bandwidth to handle the idea beyond. Organisations cannot afford to delay aligning the idea to the business for too long. When the Business gets to look at these ideas, they outright reject most of the ideas citing poor alignment.
Thus placing the innovation group away from the current business is good for spotting opportunities and generating ideas. However the conversion of such ideas into innovation and the diffusion of such innovations do not happen readily. The idea crosses only one -third of the innovation value chain (refer Innovation Value Chain, Hansen & Birkinshaw, HBR 2007) The resources are wasted on incubating such ideas and the idea owners are baffled and frustrated. Now we know that we cannot place the innovation group inside the current business or outside the current business. Where else do we place the innovation group ?
Here I am reminded of the incident of the demon Hiranyakashipu who got a boon from the Creator god Brahma that he cannot be killed either inside the house or outside, either by man or animal, neither during day or night, neither on the ground nor in the air - very smart of him. With this extraordinary assurance, he started harassing everybody. The protector god Vishnu came to Earth to handle this menace in the form of Narasimha - half human and half lion. He came at dusk time and dragged the demon to the entrance of his mansion, placed him on his lap and killed him exactly at the entrance. Remember this point is technically neither inside nor outside the house.
This gave me a clue. Can we place the innovation group at the interface of the performance and growth engines. What i mean by this is that can we have characteristics of both groups in order to successfully grow ideas into innovation. How do we do this - we know that these two engines think and act so differently that they can never be under the same roof. Can we create a hybrid organisation that will learn new tricks, think fresh, move quickly and act boldly. The hybrid organisation will also have the wisdom and maturity to prioritize the right ideas, exhibit business acumen while evaluating tech ideas and be polite while rejecting the weak ideas. We want the hybrid to combine the best of both worlds. Vijay Govindarajan has a three point formula for the success of such hybrids - learn, borrow and forget - they need to master all the 3 skills (refer Ten Rules for Strategic Innovators, HBR press).
The Hybrid will forget and consciously move away from the things that made the performance engine successful. The Hybrid will learn how to make decisions when very less historical data exists, learn to manage high-risk ideas, dynamically move the resources around to achieve maximum impact with the minimum resources. The Hybrid will also smartly borrow things that can equally work for both the performance and growth engines (without any ego or bias). Large Businesses can be successful in innovation only by acting through such Hybrid Innovation groups. Though the Business is big and is slow in its response to change, the Hybrid Innovation group is lean, dynamic and strategically located at the interface of Performance and Growth engines. The Hybrid group will provide the initial thrust and momentum that will set the wheels of the Business in motion.