Organizing for innovation

The risks of not organizing for innovation

In nature, the risk of not adapting is to become extinct. Similarly, in business, the speed at which you can move from market leader to extinct is accelerating exponentially.

Not long ago, the companies that made up the Fortune 500 list were considered the bedrock of the business world. Recent research shows that the average life span of an S&P 500 company has decreased from 61 years in 1958 to less than 18 years today.¹ Now, the need for companies to evolve and develop more purposeful, holistic approaches toward organizing innovation has never been greater.

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Organizing for innovation demands adaptability

To avoid the potential extinction faced by all companies, it's necessary for today's business leaders to understand the pitfalls and disruptors that can threaten their futures. They must also actively pursue new solutions and strategies that will enable them to adapt to changing marketplace conditions—and to innovate so that they may thrive where their competitors cannot.

Deloitte and MIT Sloan Management Review recently co-published the results of their eighth annual survey, focusing on accelerating digital innovation. The findings indicate that flexible hierarchies, network-based teams, and loosely coupled governance structures were key aspects found in digital organizations that were identified as highly innovative. Although the findings help us understand the key building blocks for developing an innovative organization, it's not always clear where to start.

According to our 2019 Global Human Capital Trends Report, 90 percent of organizations are looking at redesigning their organizations, yet only 11 percent of today’s executives feel confident in their ability to get it right. Further, just nine percent truly understand how their internal organizations work. Transitioning to an optimal structure, understanding and tapping into informal networks, and breaking down silos and barriers require a thoughtful process that creates an organization where organizing for innovation flourishes.

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Organizing for innovation

To affect change, companies first need an understanding of their organization's current potential and limitations. This includes a willingness to embrace new organizational models when and where the need arises. There isn't a "one size fits all" organizational model for innovation—many innovative companies use a variety of business models.

Organizations looking to become more innovative can start by identifying the area(s) in which increased innovation can most effectively help them succeed. Then, they can determine how to cultivate that innovation using the business model that best fits their needs.

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Tapping the power of networks

Informal networks: Employing the insights of Organizational Network Analysis (ONA), savvy leaders can identify these hidden social networks that often exist below the surface of their organizations. They can then develop a detailed picture of how decisions are made, based on the formal and informal flow of information throughout the business. Understanding who your influencers are and how to relate to them enables you to better control the integration of innovative ideas. Companies that understand their informal networks can architect the design through intentional deployment of these nodes to facilitate better information flow and innovation throughout the organization.

Network-based teams: Highly innovative organizations understand their people and are intentional about creating space for collaboration. They utilize cross-functional, network-based teams to foster new ideas and rely on leaders and governance to drive ways of working effectively. It's each leader's responsibility to develop and support formal networks that help ensure that information flows easily throughout the organization, especially to areas where it is necessary for success. To get started, leaders should build a picture of how innovation is occurring within their organizations, including where it starts and who leads and influences it.

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No more business as usual?

Would-be innovators need to take a critical look at their current organizations and identify areas where traditional siloed business units are stifling the free flow of information and ideas across the organization.

Only by addressing these informational bottlenecks, empowering their workforces, and enabling leaders and teams can businesses become truly innovative and—more importantly—nimble enough to act quickly on new ideas that can drive future growth.

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