Central innovation teams are a model which have been well adopted in many industries. Pharma, for example, is typified by large development budgets which tend to be centralised in teams set up for the purpose of innovating drugs. In banking, as another example, there will regularly be many New Product Development teams who dream up new things for specific business lines. Even in Government, there is an increasing focus on central innovation in the never-ending pursuit of efficiency and cost savings.
Its easy to understand why. Central teams are easy to set up, and much less difficult to measure than diffuse arrangements that rely on an “innovation culture”. It is easy to point at them and say “that’s how we’re doing innovation”. They make executives feel good about their innovation efforts, because when you can nominate specific individuals and assign accountability for actions, you know things are likely to get done.
Now, in this model, the innovation team is the group that decides how and when to innovate. They ordinarily control an investment budget of some kind, and are accountable for making investments that drive forward the innovation agenda. If they are any good at all, they will sign up to some big return numbers that can justify the investments they’re making.
There is, however, a problem with a central innovation team that does everything. The problem is that in order to get more innovation, you are forced to add more people. In other words, central innovation teams do not scale well.
Frankly, for most innovations, the difference in effort required to get an organisation to do something radical, versus the easier incremental kind of innovation, is not all that great. You still have to do the influencing, the management of politics, and of course, find the money in order to get things progressed.
Though incremental innovation tends to be relatively risk free, it usually will not make sizeable returns on case by case basis. This means that innovation teams are forced to do a significant number of things in parallel if they want to make a difference with incremental innovation. Unfortunately, it is a fact of life that with incremental innovations, a single success will be unlikely to pay for the time of the innovators.
By contrast, radical innovation has much better returns, though the risk level is much, much higher. For innovation teams, this makes it seem sensible to spend their time on radical projects. The rationale is easy to justify: do incremental innovations and never break even ever, or at least have the chance to break even if you do radical.
What is really needed, though, is a balanced portfolio approach to innovation coupled with significant inputs from customers and employees. Participatory innovation, as this approach is known when supported by a central team, is usually the best approach to making innovation work in large organisations.