Four Ways to Get Your Innovation Unit to Work

Considering how deeply companies rely on innovation, it is astonishing how bad most of them are at finding, developing, and implementing new ideas. Global companies pour roughly $1 trillion yearly into innovation; we estimate at least 10% of that sum — $100 billion — is completely wasted.

This means that across the business world, would-be pacesetters are enviously studying and imitating the innovation methods of Amazon, Google, SpaceX, and the like. But in our experience working with major companies in industries ranging from manufacturing to financial services, we have found that imitation rarely works. There is no single best way to structure and operate an innovation unit. The innovation toolbox is large and varied, containing dozens of techniques: startup competitions, investments in corporate or external startups, academic partnerships, dedicated internal units, acquisitions, and spin-offs. The real key to success is to find the tools and structure that fit your company’s needs, strategies, and culture.

This typically becomes much easier conceptually if you focus on four key steps within your organization:

1. Identify the kind of innovation you need. Companies use innovation to achieve a variety of goals, from cutting costs and building value for customers to fending off disruptive attacks by competitors and creating new business models for the future. The innovations they need cover a lot of ground: new products, improved back-office processes, new technology platforms, new customer experiences — all the way to the kind of full-fledged industry disruption created by companies like Amazon or Uber.

Different types of innovation generally require different approaches. For example, if your most urgent challenges are primarily technical and internal — for example, automating processes or building apps — the best approach might combine focused internal development and selective use of made-elsewhere tech tools. Prioritization, control, and implementation would be key, which suggests that the best solution might be an internal unit, adhering tightly to a strategic plan and with substantial support from corporate leadership.

On the other hand, market-facing innovations — which include new products, new ways of relating to customers, and new potentially disrupting businesses — are often trickier. This type of innovation requires a strong sense of the customer and relative freedom from the parent company’s core assumptions.