We sponsored the 2012 Industrial Research Institute (IRI) Annual Meeting this month, and the primary topic was how to drive innovation in large organizations. These organizations have become large because they’re very good at some “thing”, which for the sake of simplicity we’ll call a core competency. This core competency is typically focused on a particular type of execution: flow manufacturing, deep-water oil extraction, packaged goods marketing, etc. The company’s processes, systems, and people are finely tuned around its core competency, and as a result the company culture has evolved to support it as well.
This evolved culture allows the company to execute on its core competency (hopefully) better than anyone else, with a focus on consistency. Consistency requires control (be it financial, supply chain, quality, etc.), particularly within a global organization. A culture of control is a complete anathema to innovation. Innovation requires creativity, open-mindedness, and the freedom to fail. When a company’s standard management practices are applied to people or departments tasked with innovation, the results are stifling at best and disastrous at worst.
The general consensus at the conference was that the solution is to separate the innovative part of the organization from the rest, precisely to enable it to develop different practices and a different culture. In one of the first talks of the conference, Dave Edwards from Avery Dennison spoke about how his company achieved far better results by separating out the early-stage R&D function and bringing in external managers to run it. His experience was echoed by many others at the conference, and there was a distinct lack of success stories from companies who tried to foster innovation without this separation.