Economists have estimated that approximately 50% of U.S. annual GDP growth can be attributed to product and service innovation,1 and more than 90% of executives claim that long-term organizational success depends on developing and implementing new ideas.2 Research shows that growth fueled through organic innovation is more profitable than growth driven by acquisition,3 in part because the organizational capability required is vastly different.4 Yet organic, or emergent, innovation typically does not occur without heroic effort in many large organizations. While technology giants such as Alphabet, Apple, and Facebook are lionized for their innovative cultures, other industries struggle with hierarchal organizations that make consistent organic innovation very difficult.
Companies try to address this by formalizing innovation processes. However, such programs, when they succeed, often produce only a portion of the growth that most large organizations require.5 Many innovation programs fail to meet expectations, in part because they separate the innovation process from the informal networks needed to adapt and support an innovation.6 For example, “skunk works” programs have some lauded successes but also many failures because their innovations have been developed outside the social ecosystem of the organization. Similarly, acquisition strategies that attempt to bring in new expertise and creative ideas make logical sense but far too often underperform due to integration challenges.7 Of course, these stories of failure often don’t make it to press, so those less effective approaches persist.
Leaders need to better support emergent innovation to supplement planned new product or service development activities. Our research suggests that, rather than leaving emergent innovation to serendipity, executives should create collaborative contexts where innovation is likely to emerge from unpredictable pockets of creativity. Importantly, managers need to stimulate these kinds of environments in a thoughtful way that does not simply overload employees with new collaborative demands from formal matrix structures, multiple “part-time” team assignments, or collaborative technologies that overtax people and that too often kill creativity and innovation.8
Emergent innovation occurs when entrepreneurial individuals within an organization incubate and advance new ideas for addressing customer needs and dynamically changing market conditions.
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