This document provides guidance on managing innovation in established companies. It discusses the need to 1) develop a clear strategy that allocates resources to both exploiting existing businesses and exploring new opportunities, 2) build an ambidextrous senior team that can manage divergent businesses, and 3) incentivize innovation while balancing individual and company outcomes. The key is developing a leadership approach, organizational structure, incentive system, and culture that together enable an established company to both explore new opportunities and exploit existing businesses.

1. 1
Innovation
Management

2. 2
Make sure you’ve fixed
(or are at least aware of)
the strategic problem

3. 3
What can be done?
 Lead:
– Build the “ambidextrous” senior team:
communicate the strategy, allocate resources
 Structure:
– Explore transitional and intermediate forms
 Incent:
– Explain “just what’s in this for me?”
 Build:
– Lay the foundations for a new culture, new
expectations

4. 4
What can be done?
 Lead:
– Develop a clear strategy
– Generate energy
– Build an “ambidextrous” senior team
– Make decisions

5. 5
Develop a clear strategy
How will we
Create value?
How will we
Capture value?
How will we
Deliver value?

6. 6
And allocate resources to it!
How will we
Create value?
How will we
Deliver value?
How will we
Capture value?
100%
80%
60%
40%
0%
20%
6
5
4
3
1 2

7. 7

8. 8
Generate Energy
 Position the discontinuity as an urgent threat:
– Flirt with bankruptcy
– Make vivid the idea that the firm might flirt with
bankruptcy
 Position the discontinuity as an opportunity
– Generate some small successes: build enthusiasm and
“infect” the organization
– Leap boldly into the future

9. 9
An established company which,
in an age demanding innovation,
is not able to innovate, is doomed
to decline and extinction.
-- Peter Drucker

10. 10
Build ambidextrous organizations:
Differentiation vs. integration
General Manager
Existing business Emerging business
Mfg Sales R&D Mfg Sales R&D

11. 11
The scope of the ambidextrous organization
Alignment of: Exploitative
Business
Exploratory
Business
Strategic intent
Critical tasks
Competencies
Structure
Controls, rewards
Culture
Leadership role
Ambidextrous Leadership

12. 12
Build an Ambidextrous Senior Team
 Ambidextrous senior teams must manage
– both more mature, operationally focused businesses
– and higher growth, emerging businesses
 High performing senior teams show:
– High conflict, high respect decision making capabilities
– High levels of trust and truth telling
– The ability to manage divergent incentive systems and
career paths
 Coupled with processes that support the divergent
management of quite different business units
– E.g. Resource allocation processes that allow for
different time horizons, milestones, rates of return

13. 13
When you innovate, you've got to
be prepared for everyone telling
you you're nuts.
--Larry Ellison

14. 14
If at first the idea is not absurd,
then there is no hope for it.
--Albert Einstein

15. 15
What can be done?
 Lead:
 Structure:
– Implement appropriately
– Choose the right people
– Manage linkages

16. 16
Control & Coordination
Balance entrepreneurial energy and
coordination
Entrepreneurial
Energy Successful disruptive
innovation unites
entrepreneurial insight with
effective coordination
Startups
B as U

17. 17
Control & Coordination
Choose a structure that fits the firm’s
strategic positioning and skills
Joint
venture/
alliance
Entrepreneurial
Energy
Internal
venture
Build inside
existing unit
Acquire

18. 18

19. 19
What can be done?
 Lead
 Structure:
 Incent
– Explain “just what’s in this for me?”
– Manage the balance between:
• Individual outcomes and team/firm outcomes
• “Objective” and “subjective” measures

20. 20
Control & Coordination
The incentive problem is an inherently
difficult one…
Entrepreneurial
Drive,
Freedom from
the “old ways”
Startups
B as U

21. 21
Control & Coordination
Using “high powered” incentives may
reduce coordination
Acquire
Build inside
existing units
Joint
venture/
alliance
Entrepreneurial
Drive,
Freedom from
the “old ways”
Internal
venture
Build inside
existing unit
?

22. 22
Large corporations welcome
innovation and individualism
in the same way the dinosaurs
welcomed large meteors.
--Dilbert

23. 23
What can be done?
 Lead
 Structure
 Incent
 Transform the culture:
– Build on core values
– Practice thinking in new ways
– Manage from the heart

24. 24

25. 25
Case Discussion: IBM
 What was the situation facing Lou Gerstner as he
came in as IBM’s new CEO?
 What did Gerstner do to deal with IBM’s problems? Do
you think Gerstner has really turned around IBM?