The One Must-Have For Innovative Organizations

Innovation. It seems to be all the rage these days!

I work with many organizations who are trying to cultivate a work environment that fosters innovation. Market demands are changing so quickly, and companies need those game-changing ideas to give them an edge on their competitors.

Loonshots, by Safi Bahcall, is the latest book I’ve read from The Next Big Idea Club. It serves as a guidebook on how to best establish the right environment for innovation and big ideas to flourish.

The author defines loonshots as big ideas that have changed the world. An example of a loonshot is when Robert Goddard described the principles that could put a man on the moon by jet propulsion and rocket flight.

He also describes two types of loonshots:

  1. Product-type or P-Type = a technology that everybody says will never work OR be terribly important, (e.g., telephone, personal computer, jet engine).
  2. Small change or S-Type = a small change in strategy that people don’t think will make any money or do much good, (e.g., Sam Walton deciding to open a retail store in rural communities vs. big cities — Walmart). No new technology, just a small change to strategy.

Whether it’s a P-Type or S-Type of innovation you’re seeking, one thing that must exist in organizations has to do with structure. Small changes in organization structure, rather than culture, is one key element in finding innovation success.

I learned about the important role organization design plays in creating the right environment for innovation.

What’s the secret sauce?

Create a separate organizational structure for those responsible for developing high-risk, early-stage ideas, (a.k.a., the “artists”) from those who are responsible for the already-successful, steady-growth part of the business, (a.k.a., the “soldiers”).

What should be separate?

Distinct reporting relationships with a smaller span of control, career paths, performance evaluation approach/forms, work arrangement policies, compensation, incentive structure, and maybe house them on a different floor or in a different building.

While these distinct groups are organizationally separate, there must be a process and expectation for the two groups to have on-going interaction. The purpose of that interaction is to share ideas, have the “soldiers” test concepts/products in the marketplace and give the “artists” honest feedback to continue to enhance the idea to meet the needs of the market.

So what’s the big deal? Why create separate org structures?

  • Operational freedom for Artists – large companies often have standard processes and programs, like Six Sigma or TQM. Those help the franchise projects but will stifle the artists.
  • Differing desired behaviors of the Artists and Soldiers – traditional structures incent behaviors to gain promotion – bigger office, higher salary, more staff. When you have a smaller group, just focused on developing ingenious ideas, they can behave differently. They can be less concerned with internal politics, group-think, and other actions to win favor and approval to achieve that promotion.  With the right incentives in place, team members can focus energies on working toward their shared creative vision. Different incentives for Artists could include:
    • Visibility, autonomy, and peer recognition
    • External partnerships – impartial judges who don’t care about politics
    • Team bonuses for innovation results
    • No set career ladder – project assignments are used instead. The teams remain small, so the span of control is small, supports peer-to-peer problem solving, and focused strictly on project outcomes.

In the book, the author offers an example of the unintended effects of well-intentioned incentives with the Dead Sea Scrolls. The Bedouin shepherds first discovered them, archaeologists offered to pay the shepherds for each new scrap they found. That encouraged the shepherds to rip any scrolls found into tiny scraps…not exactly the behavior the archaeologists wanted to incent.

Same can be said for what we see in companies. Incentives are not all about cash. Examine the desired behaviors for each group within the company to understand the subtleties of incentives for that group of people, like the ones listed above. One size does NOT fit all!

Martha Duesterhoft is a Partner with PeopleResults. Follow her on Twitter @mduesterhoft or connect by email at