#496  from Innovative Leader Volume 9, Number 10          October 2000

Institutionalizing Innovation
by Michael F. Latimer

Mr. Latimer is president of The Truth Squad LLC, a consulting firm (truthsquad@prodigy.net , phone 817-421-9054) specializing in organizational strategy and innovation. He is author of Why Do They Call It Business If It’s Mostly Politics? (Universal Publishers, Parkland, FL, 1999) and The Breakthrough Budget – Incorporating Innovation into the Orthodox Organization (in press).

Today, the most important question that a business must answer is the same one that Gary Hamel posed in Competing for the Future (Harvard Business School Press, Cambridge, MA, 1996). "Are you building a legacy or living off of one?"

The question is especially relevant given the lack of innovation in established business institutions. While technology has advanced the information and communications capabilities of these enterprises, the philosophy of business has changed very little. The absence of innovative initiative is still evident in management systems and structures that are obsolete, employees who are disgruntled, and customers who are dissatisfied.

As the nature and pace of change become more rapid and unpredictable, stragglers in the area of innovation will forfeit their futures to companies that welcome and initiate change. As business priorities shift from beating the competition to benefiting the customer, the role and responsibility for innovation must change dramatically if organizations are to restore their lost momentum.

The role of innovation can no longer be limited to organizational problem solving. Strategic innovation is about creating, expanding and preserving wealth. Management’s preoccupation with problem solving is too often focused on wealth preservation. To sustain competitive advantage, equal time and attention must be given to wealth creation and expansion.

The responsibility for innovation can no longer be relegated to isolated pockets of specialists in R&D, business development, strategic planning and other brain trusts. Genuine insight into the organization’s realm of opportunity is embedded throughout the extended workforce. Tapping into, and harnessing, this collective intelligence must become the primary mission of top management.

I designed the Breakthrough Budget with that purpose in mind.

Breakthrough Budget

The basic premise underlying the Breakthrough Budget is the organizational need for established roles, routines, systems and structures to achieve prescribed outcomes. When innovation is prescribed, the right combination of people and process must be on hand to administer it. The Breakthrough Budget arranges that combination by marrying together the abstract attributes of strategic management and the methodical disciplines of business administration. The resulting synergies allow a company to institute innovation into its daily business regimen.

The Breakthrough Budget institutionalizes innovation by assigning four key players the responsibility for four major steps in the process.

        Four Key Players                                          F-O-U-R Major Steps

Innovation Steering Committee                                Fostering creative input

Project Task Forces                                               Orchestrating activity

Operating Department Heads                                   Underwriting project costs   

Selection & Evaluation Committee                            Rewarding efforts and outcomes

The Innovation Steering Committee consists of the company’s Chairman of the Board, Chief Executive Officer and Chief Operating Officer. Joining them are the company’s strategy executive and an outside advisor. As the caretakers of the company’s vision and values, this group is responsible for shaping strategic agenda of the organization. They are responsible for fostering an innovative climate that regularly communicates the organization’s strategic imperatives in a way that employees can understand and respond to with ideas that are relevant, viable and actionable.

The Project Task Force is a team of employees that takes the ideas and transforms them into concepts, proposals and, eventually, completed projects. It orchestrates the innovation process by following prescribed procedures and protocols to acquire the necessary talent, authorizations and budget approvals for project proposals. Directed by the Task Force leader, this self-guided unit is responsible for delivering the innovative solutions that satisfy the company’s strategic objectives.

Assisting the Task Forces with their deliverables are the Operating Department Heads. This group is comprised of executives responsible for the company’s operating units and functions, e.g. marketing, sales, customer service, billing, etc. Collectively, they control virtually all of the organization’s resources and resourcefulness. Motivated by a variety of personal, professional and financial incentives, this group takes responsibility for underwriting innovation by contributing advice, personnel, funding and other resources to support initiatives throughout the organization.

Reinforcing the efforts of the other players is the Selection & Evaluation Committee. Comprised of the company’s Chief Financial Officer, Chief Information Officer and Chief Administrative Officer, this group provides the Task Forces and Department Heads with the financial, technological and human resource expertise that they need to handle project budgeting, tracking and staffing issues. It administers the contributions and disbursements from the Innovation Fund used to subsidize project costs. The Selection & Evaluation Committee also functions as the clearinghouse for innovation project proposals. It evaluates their potential, prioritizes them, and monitors their progress. It then evaluates outcomes and recommends appropriate rewards and recognition.

Together, the Breakthrough Budget players and processes stimulate the ideas and activity that elevate an organization’s behavior to levels where long-term wealth is created, expanded and preserved on a routine basis.