Innovation Governance

10 April 06

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Who is responsible for innovation in your company?

 

IBM researchers recently asked this question of 765 CEOs.  They published their results in March, as part of IBM’s second CEO survey.  The survey itself was a pretty intensive undertaking – most of the interviews, for example, were conducted face-to-face.  Here is what the CEOs told them:

 

 

Src: IBM CEO Survey, 2006

 

Who is responsible for Innovation?

 

35 percent of the CEOs interviewed by IBM said that they personally held responsibility for innovation leadership in their companies.  The next largest group of CEOs, 27 percent, said that their company had no owner of innovation.  Functional managers (like heads of R&D or Marketing) headed innovation efforts at about a quarter of all the companies, while division managers had innovation responsibility in 14 percent of the companies interviewed.

 

These findings are notable for a number of reasons:

 

The wide range in response.  We’d expect that the choices that companies make regarding innovation leadership have been well-considered, since improving innovation performance is a major initiative for around 80 percent of companies surveyed across a wide range of industries.  Yet different companies arrive at very different answers when determining how best to manage and lead innovation.

 

The high proportion of CEOs who claim responsibility for their company’s innovation efforts.  As Babson Professor Tom Davenport pointed out to me recently, this is not encouraging news for innovation performance.   The CEO does, after all, have many other responsibilities, and these will tend to take his or her attention away from innovation.

 

The high proportion of companies where no one is tasked with innovation leadership.  We’ve come across quite a few of these in our work at the ICE Center.  This often occurs by design in divisionalized companies, where each division pursues its innovation goals independently.

 

Innovation within a function

 

Some companies see innovation as a discipline or an approach, similar to quality.  These kinds of companies are represented by the 24 percent of CEOs in the IBM survey who say that functional managers lead their innovation efforts.   

 

Even within this group, however, companies have made many different choices regarding which functions handle innovation.  Some organizations, for example, have appointed Chief Innovation Officers as stewards of the company’s innovation efforts.   Since innovation is often cross-functional in nature, we might expect to see a wide range of activities going on in the office of this new CIO that are shared with functions such as marketing, research, or operations.

 

Other companies embed responsibility for innovation within an existing functional organization.  This can help with continuity in innovation leadership.  General Electric, for example, gave innovation responsibility to a newly created Chief Marketing Officer.   When GE’s first Chief Marketing Officer, Beth Comstock, moved to a new position, the newly appointed CMO, Dan Henson, took on responsibility for innovation leadership as a defined part of the position. 

 

At the ICE Research Center, we often speak with the individuals who have responsibility for their company’s innovation performance.  As the IBM survey results would suggest, these folks exist in different parts of different  organizations.  Here are a few of the potential functional homes for innovation leaders:

 

	Marketing (like GE);
	Business Development (especially true for those companies focused on business model innovation);
	R & D (especially when innovation entails technical advances);
	Human Resources (to develop innovative thinking throughout the organization);
	I.T. (Harvard Professor Jim Cash suggested in 1998 that the Chief Information Officer should be renamed the Chief Innovation Officer, and a number of companies followed his suggestion).

 

Should innovation have a corporate owner at all?

 

For more than a quarter of all the companies surveyed in the IBM study, there was no one who had responsibility for innovation efforts.  One reason for this may be the difficulty that companies have in defining and bounding innovation efforts in such a way that they can be managed by an individual, a group, or a function.  Consider this statement by an executive at a large technology conglomerate:

 

“Innovation is a subject in which I immediately get lost.  It is an abused term in itself.  Are you talking about new products, process improvement, intellectual property, new business models, change management, fortuitous perversions, the era of the underdogs, all of the above, something else? …  

 

To me ‘innovation’ has become as fruitless conversation as the words ‘organizational spirit’.  And then asking the question ‘who owns it?”  Or what are the metrics of it…You lose me right there.” 

Technology Conglomerate Executive

 

Executives in companies concerned with innovation think long and hard about where responsibility lies for their innovation initiatives.  The fact that they emerge with such a variety of answers indicates the opportunity for a productive dialogue about the right structure for innovation governance within an organization.  We’re looking forward to beginning this conversation at our upcoming Idea-to-Profit Summit on May 11^th and 12^th.

 

More Information:

 

1. The press release highlighting the main findings of the 2006 IBM Survey is here.
2. Jim Cash’s suggestion about the Chief Innovation Officer is here.
3. Tom Davenport is Director of Research at Babson Executive Education. 
4. Innovation surveys are becoming increasingly popular.  Other recent surveys highlighting the importance of innovation come from BCG, Booz Allen, and the US Council on Competitiveness.
5. Here’s a link to an invitation for Babson’s next Idea-to-Profit Summit, on May 11^th and 12^th, at the Babson Executive Conference Center in Wellesley, Massachusetts.