I nnovations fuel the growth of many companies, ensuring their sustainability. But innovation isn’t just about introducing groundbreaking products or technologies. Like a car that requires an engine to utilize fuel, companies need the right organizational structure to harness the power of innovation.
Delving into this intricate dance between structure and innovation, insights from renowned authors like Clayton M. Christensen and Safi Bahcall shed light on the nuances that often remain unnoticed. Drawing from their wisdom (and many others), as well as my own experiences, I’ll explore the topic of innovation in depth in subsequent posts. But for now, here’s a brief introduction.
Two types of innovations
While we often associate innovation with spectacular breakthroughs, it sometimes manifests (just?) as a fresh perspective on the familiar.
Safi Bahcall categorizes innovations into two types: P-type and S-type. P-type innovations focus on new products that often utilize cutting-edge technologies. A great example is ChatGPT –advanced AI model (LLM to be precise). Conversely, S-type innovations are strategic improvements that significantly impact a company’s operations, such as a loyalty system implemented by an airline.
Companies that concentrate solely on P-type innovations can find themselves overshadowed by competitors who adeptly implement S-type innovations. A classic case is the downfall of PANAM airlines, defeated by American Airlines and their strategic innovations. This is evidence not to underestimate the cumulative power of S-type innovations.
Apple is also a notable “disruptor”. While we primarily recognize them as a P-type innovator, having created entirely new markets with products like the iPhone and iPad, another move arguably had an even more significant impact on their success. I’m referring to Apple’s decision to close their ecosystem, following a brief period of openness. The outcome of this decision (the common practice of purchasing additional products from the company due to their compatibility) underscores the importance of strategic innovations, especially from a business standpoint.
Innovation, while crucial for growth, comes with its set of risks and costs. P-type innovations inherently carry higher risks and costs compared to S-type innovations.
Independent entities for disruptive innovations
Christensen emphasizes the significance of establishing independent units within companies (or even creating new companies). This perspective is rooted in his understanding of disruptive innovation, which have a potential to revolutionize industries and markets. Considering the two types of innovations mentioned above, I would assume that he was thinking mostly on P-type.
These independent units should designed to be agile, free from the constraints of the main organization, and are better positioned to explore and develop disruptive technologies. Operating autonomously, they can tackle the unique challenges of innovation without being hindered by the larger organization’s processes and priorities. Xerox’s PARC, though ultimately unsuccessful for various reasons, is a case in point.
Everyday innovations and the role of the leader
Innovation isn’t solely about monumental shifts. Sometimes, it takes the for of incremental steps, especially when we have very limited resources. Leading teams that birthed new solutions, to some extent I’ve witnessed the P-type innovations. It was possible only because we had projects that provided the initial budget. So I can say, that these innovations were project-driven and from the beginning they have their clearly stated goal.
S-type innovations have been foundational in my career. These strategic and operational changes focused on refining processes, enhancing collaboration, and optimizing work. They have enabled me get clearer business requirements, improve the quality of deliverables, and get better insights through improved reporting. Such innovations might not always grab headlines, but their impact on an organization’s efficiency and productivity is undeniable.
But what was (and is) the most important role I had (and have) to play? To create the environment to make innovations happen and to facilitate the transformation from inventing to implementing. In the future I want to share my lessons, including those learned from failures.
”Innovation is an evolutionary process, so it's not necessary to be radical all the time.
Marc Jacobs
In essence, the dance of innovation is a blend of leaps and steps. While the big leaps might ignite the imagination, it’s the consistent, strategic steps that ensure steady progress. Let’s not just focus on products and technologies but also on strategy and operational enhancement.
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