Most organization use multiple structural models to drive innovation efforts.

Innovation Functions

Companies that chose creation of new products and services as their primary focus usually use separate innovation functions. Modern innovation functions take responsibility for new ideas through to prototyping while reporting in-market successes  and profits as well.  >>>

Innovation incubators are used to develop new products and technologies.

An innovation function that focuses on new business opportunities is colocated at company headquarters and reports directly to the CEO.

 

 

Financial objectives of an innovation function are optional.

Some innovation functions exist to turn a profit, some functions have no financial targets at all. According to a McKinsey Global Survey results, new-business development functions, emerging-business-opportunities groups, and emerging-technologies groups are usually guided by profit, while innovation  incubators, innovation centers, and advanced-technologies institutes tend to have no financial targets. Innovation functions with profit targets are likelier to carry their innovations through market launch and scaling. Those without profit targets have less responsibility across the innovation value chain and tend to focus on idea generation through proof of concept or prototype.

Innovation-specific performance metrics is also optional. while 32 percent report the use of innovation-specific metrics.

Corporate and Divisional Innovation Structures

Corporate Structure
Dominant core organizational entities are divisions, which are aggregated into strategic business units. Divisions are defined as units having a clear set of customers and competitors.

Divisional Structures
Divisions have profit and loss responsibility. They may be (a) organized as a stand-alone divisions that have effective control over every function required to complete; or (b) focused on a subset of tasks, such as development or marketing.

Challenges

The most significant challenges innovation functions face are

competition with the business’ short-term priorities and

integrating strategic objectives with those of the core business.

Keys To Success of an Innovation Function

❶ Clear strategic focus is highly important to success of an innovation functions. The new product vision and innovation strategy must be aligned with the strategic intent of the company, well developed, integrated into the broad corporate strategy, and clearly articulated. Companies with integrated strategies share organizational elements across the innovation portfolio.

❷ Enthusiastic and effective C-level and leadership support is a critical key driver of success of an innovation function. The Top Management Team must lead innovation in an inspiring, entrepreneurial and supporting way.  >>>

❸ Innovation functions that have more responsibility for their value chains ideas, proof of concept, beta-testing, launch, and scaling ‒ are more effective at meeting objectives and achieving in-market successes.

 

 

❹ Innovation functions located near talent or target markets have more market success and meet objectives more effectively.