9 Different Models in use for Innovation Governance

The first part of this series of three articles defined the scope of innovation governance through a number of important questions that your management team explicitly needs to address if sustaining innovation is an important corporate objective for your company.

Three of these questions deal with substantive “content” issues, i.e.

• Why do you have to innovate in your company? (Innovation mission and objective)
• Where do you need innovation as a priority? (Innovation focus)
• How much innovation should you go for? (Innovation intensity and funding).

The other three questions deal with “process” elements, i.e.

• How can you innovate more effectively? (Innovation process and climate)
• With whom should you innovate? (Innovation alliances and partnerships)
• Who is going to be responsible for what in innovation? (Innovation leadership).

This second article will review the various governance approaches or “models” that companies have put in place to handle all (or some) of the questions above. My research indicates that there are at least nine possible models of innovation governance, some of which are more widely used than others.

Defining “innovation governance model”

An innovation governance model describes how the management team of a particular company has chosen to allocate responsibilities for innovation – overall or for part of it – within the organization. The mission to promote and oversee innovation can indeed be officially entrusted to a particular person – who may or may not be fully dedicated to that task – but it can also be assigned to a group of managers working together within different types of organizational mechanisms. Even though they may not talk about innovation governance in so many words, most companies manage innovation according to an organizational model that senior managers can describe.

…very few companies seem to have adopted a systematic approach to identifying and comparing possible models before choosing one, hence the importance of listing and evaluating the range of possible models.

Experience shows that these models tend to evolve over time, reflecting staffing and structural changes often linked to the appointment of a new CEO or CTO. Some of these changes reflect a management desire for a more effective innovation process or a broader or different innovation focus. Others simply reflect a change in management philosophy or personal commitment at the top. But one thing stands out – very few companies seem to have adopted a systematic approach to identifying and comparing possible models before choosing one, hence the importance of listing and evaluating the range of possible models.

In practice, large companies do not restrict themselves to a single model for steering innovation. Multi-business corporations, for example, may choose not to steer innovation centrally but to let each of their business groups or divisions adopt a model of their choice. But even if they have adopted a corporate approach to innovation, they may opt for several models, i.e. one general model to promote and steer innovation overall and one or several supporting models or mechanisms to leverage the first one and deal with specific missions. The overall model typically deals with the three “content” questions (Why? Where? And how much?) while the supporting models tend to focus on the three “process” questions (How? With whom? And who?).

A typology of governance models

Management has a number of choices to make when allocating responsibilities for innovation within its ranks.

The first choice is related to the type and number of bearers of that responsibility, i.e. should innovation oversight be entrusted to a single manager or leader, fully dedicated to the task or not? Should it be given to a duo of managers or leaders? Should it be assigned to a small group of leaders? Should it be distributed among a larger group of managers?

The second choice deals with the management level of the appointed innovation heads and their reporting relationships. Should the jobs be filled by top managers reporting directly to the CEO or to the executive group? Should they involve less senior or even middle managers reporting to a lower level of management?

When they are combined these two choices determine nine different models of governance, as illustrated in Figure 1 (ten if one includes the option of no one being in charge).

We will review each of these models in decreasing order of apparent popularity based on the results of an online survey conducted with about 110 companies, half of them global multinationals.

Model 1: The top management team (or a subset of that team) as a group

In this model, the top management team – or a subset of it – exercises the overall responsibility for innovation. It seems to be the most widespread form of innovation governance. Model 1 makes sense if one considers that innovation – a cross-functional and multidisciplinary activity – needs to be steered at the top, with each member of the top team contributing his/her specific competence. Companies like Corning, Nestlé Waters, Lego, SKF and IBM, among others, seem to have adopted this model; but the composition of these groups of top managers varies greatly from company to company.

For example, most of the adopters of this model in my research sample have limited the membership of their dedicated innovation group to those senior leaders most directly involved with innovation activities, i.e. typically a mix of technical and commercial or business leaders. Chief human resource officers, chief financial officers and other senior staff functions may not be part of the innovation governance group. CEOs may include themselves in this steering group – at least officially – particularly in innovation-dependent companies or firms that they personally founded. In most large corporations, however, busy CEOs tend to delegate day-to-day responsibilities for innovation to colleagues within the top management team.

The formality of this allocation of innovation responsibilities also varies greatly, and this will have a strong bearing on the level of satisfaction (or dissatisfaction) with the model, as we shall see in the next article. In its weakest form, innovation is included alongside all other items in the top management team’s regular meetings. It is on the agenda, but has no special time allocation. In its strongest form, members of the top management team schedule regular meetings explicitly dedicated to addressing innovation issues, and they share among themselves oversight responsibilities for specific projects – typically the ones with a high risk/high reward profile.

Generally, given its composition of people at the top, this governance model tends to put stronger emphasis on the content of innovation, i.e. on projects and new ventures, rather than on the process. Process improvement issues tend to be delegated to various other supporting models, as we shall discuss later.

Model 2: The CEO or group/division president (in multi-business corporations)

The CEO as the ultimate “innovation czar” is the second most frequently mentioned model of innovation governance in my sample. It has to a great extent been promoted by a number of charismatic personalities, often direct founders of their companies. No one at Apple would have questioned who was really in charge of innovation under Steve Jobs. Now, however, the question may be asked since Jobs’s successor as CEO, Tim Cook, may not have the same personality and innovation charisma. As a consequence, Apple may have to rethink and adapt its innovation governance model to the post-Jobs era. A number of senior executives were involved under Jobs and will certainly continue to be involved, but probably more as a group than as individuals reporting to the CEO. As a consequence – and the future will tell– Apple may well move from Model 2 to Model 1.

Besides these large innovative companies founded by charismatic CEOs acting as innovation “supremos”– think of Oracle, Cisco, Amazon, Google, Facebook and the like – CEOs are rarely the people directly in overall charge of innovation in more traditional large companies. But they can be in small and medium-sized technology-based enterprises and family-owned firms. In large decentralized companies with several divisions or business groups, the heads of these organizations – the business group or division presidents – behave like CEOs of their units and, as such, can exercise ultimate responsibility for innovation in their domain, and this is why they are included in this model.

When the CEO is in overall charge of innovation, the message is usually loud and clear for the rest of the organization – innovation is a top priority…

When the CEO is in overall charge of innovation, the message is usually loud and clear for the rest of the organization – innovation is a top priority – because everyone can observe what is at the heart of the CEO’s interest. Will the CEO spend time in design or R&D? Will he/she show a great interest in new products, as Toyota’s Akio Toyoda has done – to the point of putting himself in the role of the ultimate race-track tester of his company’s cars? Will he/she admonish the organization to open up to innovations from outside the company as A.G. Lafley did so strongly at Procter & Gamble? When they take on the ultimate responsibility for innovation in their companies, CEOs focus on content issues, i.e. on new technologies and products, more than on process, which they typically delegate to other supporting mechanisms. They also put a lot of emphasis on attitudes, becoming the evangelists of an “innovation ethic,” as Peter Drucker promoted.

Model 3: The high-level, cross-functional innovation steering group or board

The third model – in terms of frequency of use according to my research sample – can take several forms. Generally, it involves the appointment of several managers, chosen from among various functions and sometimes across different hierarchical levels, to steer innovation as a group. This model, which may be referred to as the “innovation committee,” “innovation steering group” or even “innovation governance board” is different from Model 1, essentially because not all its members are part of the top management team. The chair of such a group is almost always part of the executive committee – it is not infrequent to see the chief technology officer (CTO) or chief research officer (CRO) occupy such a position – but the other members may straddle a couple of levels under the executive committee. The norm for these steering groups or boards seems to be to select members on the basis of their functional responsibilities, of course, but also on their personal interest in and commitment to innovation. It is indeed wise to avoid appointing innovation skeptics to such groups, irrespective of their functional responsibilities. Inversely, some companies make a point of letting some of their younger, most innovative or entrepreneurial managers join the group, possibly on a rotating basis, and this even if those managers remain at a more junior level hierarchically.

A number of companies have chosen the high-level, cross-functional steering group or board as a model. Dutch electronics manufacturer Philips, pharmaceutical giants Eli-Lilly, Roche and Sanofi-Pasteur, oil giant Royal Dutch Shell and packaging specialist Tetra Pak seem to have adopted this model.

The level of empowerment of these steering groups or boards may vary significantly from company to company. Some of them – and this was originally the case with Tetra Pak – called their model the “Innovation Process Board” to stress the fact that the focus of this mechanism was on the process side.¹ One of the key roles of Tetra Pak’s initial Innovation Process Board was the launch of a broad range of innovation process improvements and the supervision of dedicated “process owners.” The content of innovation, these companies argue, should remain the responsibility of the hierarchical line management, which may not be part of this mechanism. Other companies, by referring to an “Innovation Governance Board,” for example, highlight that this body is in charge of both content and process. Clearly, their membership structure – in terms of level in the hierarchy and nature of responsibilities – determines whether or not these mechanisms will deal with content issues or only with process management.

Model 4: The CTO or CRO as the ultimate innovation champion

Although it is probably one of the most traditional forms of innovation governance, particularly for technology-, science- and engineering-based companies, allocating the responsibility for innovation to the CTO or CRO is only in fourth place within our list of preferred models. CTOs are normally found in engineering companies, while CROs turn up more frequently in science-based companies like fine chemicals or pharmaceuticals. Whatever the title, the CTO or CRO is generally viewed as the promoter of new technology-based products. It is therefore natural for the top management team in companies that strongly equate innovation with new technologies and new products to turn to these talented individuals for all sorts of technology-based innovation initiatives.

In industries where information technology is predominant – think of banks and insurance companies in the finance industry – the equivalent of the CTO is the chief information officer. It is therefore not surprising to see these managers playing a key role in the governance of innovation within their companies.

The CTO or CRO model is widely relied upon for innovation in countries with a strong technology and engineering tradition and sector like Japan, Germany, Sweden and Switzerland. In these countries, the CTO or CRO may be called Senior Vice President R&D and Technology, Research President, Senior Vice President Engineering, Chief Engineer and the like. But whatever their title, they are normally full members of the top management team and their colleagues look to them for guidance with regard to innovative developments. In large companies with a board of management structure – a traditional form of collegial management in countries like Germany and the Netherlands – the board member in charge of technology may not be called the CTO but he/she will often be viewed as the official spokesperson for and promoter of innovation within the top team.

Because of their wide-ranging responsibilities, CTOs and CROs tend to exercise their innovation governance responsibilities with the help of supporting mechanisms. Most have their own “CTO Office,” staffed with a few experts on content and process. In Japan, for example, CTOs often set up a small “technology planning group” to guide them in road-mapping tasks and assessing new business opportunities linked with the adoption of new technologies. In most large companies, CTOs are supported by a more or less formal network of divisional or business unit R&D managers.

CTOs and CROs naturally focus on the content of innovation, i.e. on the development of technology and new products. In some companies – particularly in technology-intensive Japanese companies – they also focus on new ventures and new business creation, but always technology-based. They focus on process issues inasmuch as they affect the company’s technology and R&D effectiveness. For that purpose, they may set up an ideation and knowledge management process, but they rarely intervene in the non-technical parts of the company. The same is true for culture and climate issues, i.e. CTOs and CROs may promote a mindset change in R&D, for example to support cross-disciplinary collaboration, open source innovation or the development of a sense of urgency. But they generally do not feel responsible for spreading the effort to the entire organization and supervising the development of innovative processes, for example in the commercial operations.

Models 5 and 6: The dedicated innovation manager or chief innovation officer

These models are less frequently mentioned than the preceding ones but deserve attention nevertheless, mostly because they stress the fact that overall responsibility for innovation can be entrusted to a single dedicated manager, as opposed to a busy CTO or CRO with operational duties or to a large steering group, committee or board. This can be done by appointing a full-time “innovation manager” – or several in a multi-business corporation – who acts as a catalyst for innovation and as the official supporter of the line organization in its efforts to promote an innovation agenda.

Innovation managers tend to be chosen from the ranks of highly motivated middle to upper-middle executives from a variety of functions, typically marketing or R&D. They frequently report to a member of the top management team and operate mostly by themselves, occasionally with a couple of staff assistants. They are often responsible for tracking and measuring innovation efforts and results, identifying and sharing best practices, and supporting innovation initiatives launched by the line organization. In that sense, they deal with the process side of innovation, much more than the content aspects.

The innovation manager model is more frequently found – and in a broader variety of companies and industries – than its more empowered version, the high-level chief innovation officer (CIO) or Vice President for Innovation. Even though the two functions may look similar in terms of mission, they differ greatly in terms of access to top management – the CIO typically reports to the CEO – and hence influence and resources. Unlike innovation managers, who rarely supervise innovation departments, CIOs often have a staff department to support them in their mission, and they are also frequently responsible for the company’s innovation acceleration mechanisms, i.e. new business incubators or “innovation hubs.” In that sense, they will be responsible for process and content.

This structure – DSM’s CIO claims – conveys a strong message to the organization, namely that innovation goes much beyond technology.

One of the most interesting examples of the empowered CIO model can be found at Dutch life-and materials-science company DSM.² Not only is DSM’s CIO in charge of the company’s Innovation Center, with its incubator and emerging business areas, but he also directly supervises the CTO office, hence all corporate technology development activities. This structure – DSM’s CIO claims – conveys a strong message to the organization, namely that innovation goes much beyond technology. At DSM, the CIO and the Innovation Center are considered as both the guardians and promoters of innovation excellence within the corporation and the unit in charge of new business creation.

Model 7: A group of innovation champions

A number of companies in our survey noted that they have entrusted overall responsibility for innovation to a group of selected champions. In the innovation management literature, “champions” are often defined as self-motivated, upper-middle to senior managers who are not necessarily idea initiators, but who promote the most promising ideas of others in the organization. They secure resources to execute the ideas, often on their personal initiative, i.e. more or less independently of top management mandates. They are often self-appointed enthusiasts about the projects they sponsor and willing to commit personal time and effort in addition to their normal job. They do not hesitate to take career risks. In that sense, they are and act as innovation accelerators. These champions focus mainly on the content of innovation, i.e. on specific projects. However, there are a great variety of champions besides the self-appointed ones described above, i.e. true “intrapreneurs” as they are sometimes called.

A few companies have appointed “idea advocates” – usually senior managers towards the end of their careers, who are well respected in the organization. They are generally volunteers but are assigned by the CEO to make themselves available to help idea submitters prepare and defend their proposals in front of top management.

Some of the less-empowered champions may be chosen by their leaders among middle or upper-middle managers on the basis of their communicable interest in innovation, their energy and their drive to stimulate and support management colleagues. They typically focus on the process side of innovation and network internally and sometimes even across other companies to share experience and benchmarks – such a cross-company network apparently exists in France and Belgium under the name Innov-Actors.

A number of companies, mostly in the US, reported that they rely on a group of champions to promote and steer innovation. FMC technologies, Sikorsky Aircraft, Hallmark Cards, Bank of America and Abott Laboratories are among them. But a company that stands out for having forcefully empowered a group of champions is PepsiCo, particularly under the leadership of its former CEO Roger A. Enrico, who was recognized as a charismatic business builder and marketing wizard. Enrico prided himself on not doing things “by the book,” and he strongly believed that employees are seldom given a chance to fully contribute and show what they can do. So, he selected a group of promising young executives to deploy as business development and innovation champions. He personally coached them and handled their management development at his own ranch (which is why he referred to them as his “studs”).

Groups of champions are more frequently found as a supporting model rather than as a primary innovation governance model.

Model 8: No one in charge

It may be strange to include the absence of a model in our list of innovation governance models. But it does reflect a reality. In some companies, there is just no one officially in charge of innovation. In our experience, there may be three reasons for this.

This is based on a management belief that innovation is everyone’s task and that the company can therefore count on each function to play their usual role in the process…

The first reason – by far the most positive and the first one given in our survey – is that innovation is so much part of the company’s DNA that everyone feels responsible and acts to support it. This is based on a management belief that innovation is everyone’s task and that the company can therefore count on each function to play their usual role in the process… hence the lack of need for an official mechanism for allocating innovation responsibilities! This type of reasoning may be common in a range of very innovative new companies, for example in the internet area. Some will argue that a bottom-up organization like Google fits in this category because ideas are supposed to come from everywhere in the organization and everyone is empowered to experiment with them. However, this is debatable, given the visionary leadership at play within Google’s top management team. Google’s founders were clearly in charge of innovation, at least at the beginning.

The second reason for the absence of a governance model may be due to temporary circumstances, such as a restructuring drive or the reorganization of a company. Some companies change their governance models so often – typically at each change of CEO or CTO – that managers may feel that no one is permanently in charge of innovation.

The third reason, which no one in our survey cited, although it exists in real life, is the fact that innovation may not be perceived as really critical by management, and therefore it becomes unnecessary to allocate specific responsibilities for it. I have personally come across a few companies in that category. They were typically active in domains requiring strong management emphasis on operational excellence, for example in the shipping industry. There are indeed management teams who are blissfully unaware that innovation will not happen on its own and that it requires some sort of governance.

Models 9 and 10: The “duo” or the complementary two-person team

The last two governance models on our list are also the least frequently used in practice, at least based on responses to our online survey. However, these models do exist; I have seen them in action, in a more or less formal way.

In technology-based companies, the duo may consist of a CTO sharing overall responsibility for innovation with a business unit manager or another functional manager or CXO – for example a chief marketing officer (CMO) or the company’s CFO. In other companies, the duo may bring together a CXO – for example the CIO – and a commercial or business executive.

The idea behind these models is that since innovation is a truly cross-functional activity, it cannot be fully embraced by a representative of a single function – for example the CTO. The technical and business elements of innovation are therefore entrusted respectively to senior representatives from these functions working together as a team. That last phrase element is obviously critical and may be difficult to achieve in reality life, as we will mention in our third article on factors of governance effectiveness.

Primary and supporting models

The nine models (plus one) listed above for the overall allocation of management responsibilities for innovation can also be used as supporting models. For example, the CEO could be the person in overall charge of innovation in the company, but he/she could also be acting as a supporter of whoever has been entrusted with overall responsibility. Interestingly, our survey results indicate that almost all combinations of the models exist. For example, if the primary model is the top management team or a subset of it, then some companies state that the CEO is a supporter of that top team. Other companies may rely on a cross-functional steering group to support that top team. Yet others again may consider that it is the role of the CTO to act as supporter, and so forth. Figure 2 illustrates these multiple combinations.

Our next article in this series on innovation governance will indicate how companies evaluate their level of satisfaction or dissatisfaction with their chosen governance model. It will also highlight some of the factors that affect the effectiveness of each of these models.

By Jean-Philippe Deschamps