Innovation Allocation

by | Aug 19, 2008 | Evaluation Ideas, Innovation Method | 2 comments

Who leads innovation in your company: marketing or R&D? It’s a trick question, of course. But it’s a useful question for Fortune 100 companies to consider. Has your company made a conscious choice of how it “allocates” this leadership role?
Allocating innovation to one group over the other will yield a different business result. The approaches to innovation by marketing are dramatically different than approaches to innovation by R&D, so the outputs will be dramatically different. The question becomes: which group will outperform the other? Technical-driven innovation or marketing-driven innovation?
But there is another layer of complexity. Allocating innovation resources to one group over the other will also yield a different kind of innovation. Market-driven innovation speaks to what is salable. Technology-driven innovation speaks to what is technically possible. Which group delivers the type of innovation that is best suited to the company’s growth strategy? Now the decision of who leads innovation becomes even stickier.
This question is a bit like deciding how to allocate your money in an investment portfolio. Which allocation of funds will give you the total return and the type of return (tax advantaged, etc) that you need? The tempting answer here is to assert innovation leadership should be shared between the two. Diversify your innovation allocation just as you would diversify your personal investment allocation. I’m not so sure. Here’s why.
For a company that knows exactly what its customers need, then it’s just a matter of developing it. A technically-led innovation approach makes the most sense. L’Oreal, for example, does virtually no market research with its customers. It gathers no “Voice of the Customer.” Yet it knows exactly what customers need because…..L’Oreal tells them! In that case, innovation is led by the technical team to deliver the beauty compounds and formulas that will thrill their customers. The innovation approach here is described as “Problem-to-Solution. Engineers lead this because they excel at solution matching.
A company in the refrigerator space such as GE or Whirlpool needs a different approach. Breakthrough innovation is more likely to be found in the “Solution-to-Problem” mode, best driven by the commercial marketers who excel at problem matching. The marketer needs to use an approach that relieves them of their preconceived notions about what customers want. They seek to avoid “fixedness” around their current product so they can solution spot more freely. Only then will they be able to envision new concepts of home refrigeration that never would have emerged with a technical approach.
The best companies maximize their innovation investment return by consciously allocating leadership to either marketing or to R&D. In the end, innovation is best driven with a team approach but with clear role accountability and direction depending on market conditions and corporate strategy.