Want to build a successful innovation function? Here are four ways.

Digital and innovation practices are established in almost all companies today, it’s old news. So why is everyone doing it differently?
Luke McKinney

Luke McKinney

Luke leads Nile's strategic design practice, and shapes much of our financial services work. He's an expert at helping teams get to grips with strategy and make better decisions for their customers and their business.

(It takes much more than Post-its and Lego)

“So what I really want to know is, what ways have other companies done this right?”

I was hit by this question from a client as we discussed setting-up a fledgeling digital innovation function.

As I quickly tried to recall every large organisation and design innovation team I’d worked with over the last few years, it struck me that I’ve seen this ‘done right’ in countless different ways.

Digital and innovation practices are established in almost all companies today, it’s old news. So why is everyone doing it differently? What’s more, why are these very different approaches delivering successful outcomes?

After a number of conversations with the Nile team, we’ve come to the conclusion that nearly all innovation delivery in large organisations fits one of four shapes. They’ve all got different strengths and weaknesses, and we’ve seen each of them succeed or fail depending on the context and challenges of the company they’re implemented in.

So you want to build an innovation function…

…but how do you do it right? What shape function do you need?

The first step is to really think about your context. We like to use these key criteria to help clients work through what they need:

  • Leadership – is your leadership team and strategy invested in the success of innovation or digital?
  • Culture – do you need to change the mass behaviour of your organisation?
  • Capability – do you have the existing skills and knowledge in your organisation to deliver innovation or digital initiatives?
  • Capacity – do your teams have the remit and resources to tackle innovative challenges outside of business-as-usual?

Once you’ve got a good understanding of the landscape you’re working in, you can start making informed decisions about the kind of innovation function.

Here’s our quick guide to the four models, and our tips on finding the one that’s most likely to succeed in your organisation.

1. The “Siloed Faithful” model

This is where you create a ‘traditional’ organisational silo of innovation. Digital or innovation areas are centralised and separated from core business functions.

This model is going to work for you if…
  • You have an existing strong culture of innovation and teams feel empowered to act to solve problems as they identify them.
  • There’s a clear (and implemented) strategy to guide innovation and digital pipelines.
  • You have defined ‘rules of engagement’ on how innovation or digital teams collaborate with core business areas, and a decent track record of this type of engagement actually happening.
  • You need to operationalise new concepts or initiatives at scale.
But don’t use this model if…
  • Your organisation’s existing culture or governance is likely to create internal competition rather than collaboration. This will blur boundaries, create multiple owners and duplication of effort and inevitably waste money.
  • Teams are at capacity with business-as-usual activities or initiatives focused on solving the immediate (or easier) problems in front of them. If you’re going to solve the wicked challenges that really matter teams are going to need the time and headspace to think – and think differently.
  • Current ways of working or multi-site geography prevent the crossover of disciplines, skill sets and knowledge between business areas. This is going to suppress good innovation. Good cross-pollination is essential if you’re trying to produce something truly innovativ

2. The “Going Native” model

This is the ambitious model of embedding innovation and digital capability in every business area guided by a clear culture & strategy.

Use this model if…
  • You’ve got deep, complex challenges where your innovation and digital capabilities need to have a unique specialist knowledge of the challenges within their business functions.
  • There’s a clear (and implemented) strategy to guide innovation and digital pipelines, which also makes sure teams have time and space to engage in solving those complex challenges which centralised functions may struggle to consider in depth.
  • You need to operationalise new concepts or initiatives at scale.
But think twice if…
  • You’ve got a history of ‘BAU creep’. If innovation or digital experts aren’t shielded properly, you risk wasting money and resource when they’re sucked into purely business-as-usual tasks. Creating internal forums or events focused around innovation or digital can help prevent specialists from losing their edge.
  • You’re planning to ‘rebrand’ existing business staff as digital or innovation experts. What’s in a name? Not much, to be honest: without decent training or tested expertise in your embedded team, the only thing that’s going to change is the cost of reprinting everyone’s business cards.

3. The “Speedboat” model

A.k.a. the innovation professional’s dream: building a fully capable, self-governing micro-organisation, separate from the mothership, where key innovation takes place.

This one’s good if…
  • Your current culture or governance is failing to deliver innovation or design in any shape or form.
  • You need to significantly increase your speed-to-market for new products and services, unhindered by legacy processes or systems.
  • Your organisation is struggling to collaborate across current business areas.
  • Teams are at capacity with business-as-usual activities or initiatives focused on solving the immediate (or easier) problems in front of them. This model creates a new remit to focus on future challenges.
  • You have – or are invested in developing – a strong executive network with proactive communication skills that can defend the interests of the Speedboat and avoid dilution by the corporate governance of the mothership.
But this model is never going to work if…
  • You’re unable to adequately invest in the right skills and technology. There’s no point in building an under-resourced micro-organisation that moves no faster than the mothership. That’s a dinghy, not a speedboat.
  • You still need a strong culture of innovation across your entire estate to keep it afloat. Creating a small unit to own innovation and digital can lead to an overdependence in this one area and stagnate innovation in the organisation at large. It’s hard to live on a speedboat.
  • There is no clear governance or intent to embed larger initiatives back into the mothership. You risk a kind of innovation ‘organ rejection’, or badly designed innovations which fail to consider operational requirements in full. This can result in the Speedboat going off on its own, focusing on small independent innovation initiatives that fail to engage with the real or big problems the business faces.

4. The “Artificial Limb” model

Go for this model if…
  • You’re working in a highly risk-averse organisation or industry. Artificial limbs are a low-risk way of kicking off a new digital or innovation practice and build up a head of steam.
  • You want to re-train or build up capabilities within existing teams. Hiring experts means you can run on-the-job shadow training and experimentation with proven tools, templates, ways of working to determine what works for you.
  • You need a fresh perspective to challenge institutionalised thinking and approaches.
But don’t use this if…
  • You need to own a sustainable innovation practice. Reliance on a third-party without proper strategic direction and management can lead to a dependency that is hard to resolve later.
  • You need your innovation or digital team to have detailed specialist knowledge of specific business areas, problems or subject matter.
  • There are no organisational executives who specialise in innovation or digital. Leaders without experience don’t know what good looks like, and may lean on externals as the ‘experts’ while failing to understand or engage with the process in order to transfer it to their organisation.