What should the best companies be doing in 2024 to make sure they have the right leaders in place, and the right resources and organizational structure, to make innovation a long-term priority that delivers real results?
Those are some of the big questions we’ve been discussing this year, as AI remains center stage as a priority for many large companies — absorbing lots of resources and executive headspace. Meanwhile, we’ve been seeing a lot of churn this year among SVPs of Innovation, Chief Digital Officers, Heads of Transformation — and in one case, a Chief AI Officer hired and a SVP of Innovation let go several months later.
To explore these questions — and serve up some answers — we convened a group of experts for a “panel discussion via email” earlier in July.
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Scott Kirsner, InnoLead: Thanks for agreeing to be part of this panel discussion. Here’s who we have participating.
- Rita McGrath, noted author and Columbia Business School professor. Founder of Valize, an innovation management and learning platform.
- Todd Dunn, Executive in Residence at the Scottsdale Institute, former VP of Enterprise Innovation at Advocate Health and Atrium Health.
- Moisés Noreña, Head of Product and Innovation at MiTek; founding member of the Innovation Academy at Notre Dame; formerly at Allstate, Moen, Whirlpool.
- Sara Kraft, Director of Transformation, AstraZeneca.
Here’s my first question: If you were a CEO leading a large company in 2024, who would you have leading innovation and new growth initiatives? What would their title be? Who would they report to? What would be under their purview?
Todd Dunn: If I were the CEO, I would have a Chief Transformation Officer or a Chief Competitive Officer leading growth and innovation. This person would have a mindset toward rigor, systems, etcetera, as opposed to an over-indexing on partnerships, startups, or even AI. They would report to the CEO with a potential dotted line to the board. Bold move, I realize, and my logic is that transformation needs to be taken a bit more seriously within most organizations.
Under the Chief Transformation Officer’s purview I would include strategy, any design teams, potentially the Chief Experience Officer, and any and all innovation roles. I think we need to move from transformation being seen as a function to being seen as a system led by an expansive leader. Why would I include strategy? It is only part of a system of transformation and needs to have the connectedness and clarity to the overall goal of using innovation as the verb to deliver the strategy. Historically, I have seen strategy be a bit too disconnected from the operators and the goals within each of those divisions/P&Ls. I have also seen strategy happen as more of a document created by a “team over there” than a system that enables leaders to have more effective strategies for the context that each business finds itself.
In other words, I see the organization needing a strategy capability driven by a system, more than just a team that sets strategy when in reality they cannot know all of the elements of an organization. So strategy, innovation, and customer experience would be under this role. At the same time, I see this as a small team with a relentless focus on creating transformation capability, versus a large organization.
Rita McGrath: The perennial question of where to put innovation and who should lead it is quite heavily dependent on where innovation falls in the company, how healthy the core business is, and what the ambitions are for innovation. As Robert Burgelman observes, innovation often has a strange cyclicality, depending on how much cash is sloshing around and how good the prospects of the core business look.
Lots of cash + great core growth = innovation orphans. People are encouraged to go out there and innovate, but if there is no connective tissue back to the core, new projects usually tail off and disappear (Apple HomePod…).
Lots of cash + terrible core prospects = Hail Mary pass. This is a situation in which the board and senior leaders leap on innovations to rescue a sinking ship, with the result that the projects get too big, too fast, with too little learning and eventually drag everyone down with them (Nokia’s burning platform, anyone?).
If there’s very little spare money and the core business is doing well, then nobody has any appetite for innovation anyway (this is kind of where many companies are right now.)
Rita McGrath
If there’s very little spare money and the core business is doing well, then nobody has any appetite for innovation anyway (this is kind of where many companies are right now.) And if there isn’t a lot of money and the core is in trouble, that’s desperation and usually results in the parent merging, splitting up, or otherwise trying to right-size themselves.
As to the specific location for venturing, I’ll offer seven archetypes and a preference. They all have pluses and minuses.
- Stick it in the core business. At least you don’t have to reinvent the company to find a home for it. Of course, the core business has other things to be getting on with, and the venture is likely to be neglected. Venture leaders in this scenario are often fighting the company, lack power, and won’t have the impetus to get anything to really happen.
- Dedicated unit in a core business. Better: at least someone is working full-time on innovation, but this location also runs the risk of the core overrunning it.
- Throw it into R&D. This can work — if you have the right connective tissue between R&D and the core, which implies a really solid governance system. This also risks that the innovators get all obsessed with shiny object syndrome, and forget what the customer needs (Google’s Stadia gaming product would be an example).
- My favorite – have a senior staff person with real clout full-time on the venturing program. Someone like Bruce Harreld at IBM, who reported directly to Lou Gerstner. Senior leaders were also put on the leadership teams of the ventures. This article explains how that worked. I also elaborate on it in this blog, which points out the common pitfalls.
- Create an entirely new venturing division with its own governance and management processes. This worked very well for Nokia during its glory years. The whole operation was taken apart by a penny-pinching CEO who came after the “dream team” leadership there. You can read more about Nokia’s program here.
- Have ventures report directly to the CEO. That solves some problems (resourcing, getting talent, senior level attention) but creates others (jealousy, too much in the way of resources too early). The worst of the problems is that if this is the CEO’s pet baby, there is no way anyone can kill it. Amazon’s disastrous Fire phone is in this category, as is GE’s doomed Predix [industrial IOT] venture.
- Embed what I call “permissionless” structures in innovation groups. These are characterized by slack resources (so one “no” can’t kill someone’s good idea), pots of resources, time to tinker, working in parallel, and most importantly, very few barriers to low-cost innovation. These almost have to be designed from the ground up by a senior leader with a maniacal focus on people self-managing and innovating. Spotify, Morning Star Tomatoes, parts of Amazon, and the Brazilian manufacturer Semco work this way.
Of all, the most enduringly successful pattern that I’ve seen is #4. Your senior leaders need to be willing to cooperate, and you definitely need the senior staff person and other disciplines to make it work.
In terms of titles, those matter a lot less than how much resource and power your innovation leaders (and governance process) actually possess. Bruce Harreld was a Senior Vice President. Hari Nair, who leads a large group at P&G is a VP of those products. I’d try to avoid attaching the word “innovation” to the title, because it often signals to the organization that you don’t really matter.
Sara Kraft: [As CEO,] I would appoint a senior VP of Strategic Planning and Delivery to oversee global strategic projects, reporting directly to me. Below this role, I would establish a comprehensive Global Strategic Planning and Delivery organization with three distinct pillars: innovation management, project management, and change management. The overarching mission of the innovation management pillar would be to analyze new ideas, assess their feasibility, conduct landscape analysis, and develop business cases using the latest innovation methodologies. Subsequently, the project management department would take the approved ideas and initiate projects using standard project management methodologies, while the change management team would handle all change-related activities. Collaboration between these teams would be essential, but each would have established ways of working and ensure smooth hand-offs between each group.
Moisés Noreña: The responsibility for driving growth initiatives in a company depends largely on the type of company and its growth strategy. While innovation is most times focused on growth (sometimes it also focuses on efficiencies or business processes), there are other ways to achieve growth, and it is not always only the job of the innovation function. Innovation typically focuses on introducing new-to-the-world technologies, or tapping into unattended consumer needs or market segments. In such cases, where innovation is key, the role of a Chief Innovation Officer (CINO) or Head of Innovation is crucial — someone with expertise in identification of market opportunities AND new product development (whether tech-oriented or not.)
However, if the strategy aims at growth through category expansion (typically in adjacent markets), while innovation can provide valuable insights, the primary responsibility should lie with someone experienced in strategy, mergers and acquisitions (M&A), management consulting, etc. This requires a different skillset and expertise to effectively identify and leverage opportunities in adjacent markets.
These two approaches may co-exist, but I haven’t seen this in practice, as these are typically different roles. If these were to be put together, most likely the Head of Growth would be more “management consultant like” and have a more junior innovation person under.
What would their title be?
When the growth focus is on innovation:
- Chief Innovation Officer (CINO)
- Head of Innovation
- Director of Innovation
- VP of Product Development
- Chief Technology Officer (CTO)
- VP of New Product Development
When the growth focus is on category expansion in adjacent markets:
- Chief Strategy Officer (CSO)
- Head of Corporate Strategy
- Director of Business Development
- VP of Strategy and Business Development
- Strategic Partnerships Manager
- VP of Corporate Development
- Director of Market Expansion
Who would they report to?
If focused on innovation:
- Chief Technology Officer
- Chief Marketing Officer
- SVP of Strategy
If focused on category expansion:
- SVP of Strategy
- SVP of Corporate Development
- CEO or Division President
The primary goal would be to drive long-term strategic growth and sustain competitive advantage, by leveraging both exploitative and exploratory innovations.
Sara Kraft
Scott Kirsner: What would their mission be?
Sara Kraft: The primary goal would be to drive long-term strategic growth and sustain competitive advantage, by leveraging both exploitative and exploratory innovations. The portfolio would encompass a blend of exploitative and exploratory projects, and I would ensure that these projects could be adaptable based on the economic conditions. For instance, during periods of financial constraint, we would pivot towards exploitative projects and reduce the emphasis on exploratory initiatives.
Todd Dunn: To develop an ongoing and transient competitive advantage capability. The way to do that is to have a transformation system that renovates, creates, and eliminates business models. Of course they would be in charge of ensuring the organization has a system driven by the customers’ jobs-to-be-done, so that the organization is focused on delivering value to those who return monetary value to the organization.
In addition, the transformation system would require a scalable efficiency innovation system that would engage people in all corners of the organization to find “coins in the couch and dollars in the dryer” to reinvest into the renovation, creation, and elimination of business models. This is uniquely different from Six Sigma or Lean and creates, to a large degree, a permission-less organization by having a system.
To further reinforce this system of transformation, the Chief Transformation Officer and the Chief People Officer would be in lockstep to define the behaviors, knowledge competencies, and outcomes that would be required for people at all levels of the organization. The idea is to have a transformation system that becomes the central nervous system of the organization and is instilled in the DNA of the organization.
This is doable. It is a stark contrast to the chasing of shiny objects or startups and partnerships. Those may be OK, but not if they are not driven by following an evidence-based and assumption testing system. This role’s results would be measured with a corporate dashboard of important company measures, and by a dashboard that measures the progress that the customer/consumer hires the organization to help them make.
Moisés Noreña: If focused on innovation: Fuel the organization with new and unique solutions so the organization can deliver its growth objectives across existing and future product and/or service categories on a sustainable basis . Incubate solutions so they can become independent business units or be incorporated into existing businesses
If focused on category expansion: Identify category expansion or strategic growth opportunities and execute strategic partnerships, joint ventures or acquisitions to deliver on them.
Scott Kirsner: How could we best make sure organizations stay committed to these roles/missions over years or decades — rather than re-orging the person out of a job when things get tough, or de-resourcing the team the first time the company has a bad quarter? What would make it STICK?
Sara Kraft: I believe that being strategic about the types of innovation (exploratory vs. exploitative) in your portfolio could help it become more sustainable. If your department can cover its own costs, or even generate revenue, it becomes more difficult to justify cutting it. Also, if you have a very stringent process on HOW you innovate, I think that would also help with ensuring there isn’t frivolous spend on the next shiny new object.
Rita McGrath: The essence of making a commitment to sustained innovation and ambidexterity comes down to whether the organization is designed to create value or extract it. In what Arie de Geus famously called “living” companies, the entire firm is committed, as a community, to continuously evolve into an uncertain future — to learn and to shift as the environment changes. Such companies are prepared to sacrifice profit maximization to reinvest in their people and their resources, including investing in innovation.
In what William Lazonick calls “value extracting” or “economic” companies, profits are maximized in the near term, the core business dominates everything and innovations really struggle.
The critical tension is to find investors and leaders who realize the need for balanced ambidexterity. There is a metric I’ve used, called the “imagination premium,” which gives you a way to parse out what percentage of market capitalization comes from operations (steady state, today’s business) and what comes from growth. If you take the value of growth and divide it by the value of operations, what you have is a measure of the premium investors are willing to give you because you have both got a great growth story and are telling it well. If the number is low — or negative — that says you don’t have a great growth story, and you’re likely to attract activist investors and see your leadership team being questioned. If more boards and analysts were to incorporate metrics like that in their reviews of management team decisions, that could very effectively push back against pure value extracting decisions.
…To make it stick, I would give it objective outcome expectations that are in sync with and shared with the operators.
Todd Dunn
Todd Dunn: The theme I would like to build on is the importance of innovation…innovation as a verb. The point of view I have is that transformation is the adjective/outcome we want and innovation is the verb…the doing! I believe the transformation role is critical, and the reason I [put] strategy and other functions like that — even “experience” — is to elevate its importance in the organization, and to create a comprehensive system that will allow it to sustain itself. In addition, to make it stick, I would give it objective outcome expectations that are in sync with and shared with the operators. This is a bit trickier of a topic, and yet if the operators start seeing value from it they will no longer see it as a tax, but will view the transformation organization and system as a 401(k)!
Moisés Noreña: Building on what others have mentioned, I believe it’s crucial to recognize innovation as a structured business process and function. Just as organizations have marketing as a function, with promotional plans as a process, or strategy as a function with strategic planning as a process, innovation should be treated with the same consistency and rigor. Often, the importance of innovation fluctuates with changes in leadership, where new leaders tend to emphasize it until short-term pressures take precedence.
