Innovation – In the Core – or a Separate Business?

Posted on October 12, 2011 by Jeffrey Tobias in Culture of innovation, Innovation

One of the challenges I continually hear from executives is: “How do I reconcile the conflict between wanting to fund innovation as a separate entity, and the drive for performance out of the core? Do I build innovation in the core, or build a separate “Innovation” unit? So it was with interest that I read the recent article in Strategy+Business on just this topic.

Researchers conducted in-depth studies of top management teams at Misys and 11 other companies, including Cray Inc., Hewlett-Packard, IBM, LexisNexis, and Zensar Technologies, looking in particular for the factors that distinguished successful from unsuccessful initiatives undertaken by those teams. Their interviews and observations led the authors to articulate three basic leadership principles. These were all present when firms succeeded in boosting profits and market share.

Principle #1: Develop an overarching identity. A broad sense of identity makes a company more resilient and adaptive.

Principle #2: Hold tension at the top. Successful firms explicitly choose to maintain tension between innovation and core business demands at the highest levels of the company.

Principle #3: Embrace Inconsistency. Finally, successful companies need to handle multiple and often conflicting agendas.

Summary: The most successful leaders encourage their senior teams to move away from protecting the interests of their individual business units and instead embrace the tension of backing new initiatives. The key to high performance over time is pursuing paradoxical objectives, simultaneously exploring new horizons and exploiting already established markets.