Dr. Ralph Christian Ohr is an expert for Corporate Innovation and consults organizations in various industries about Dual Innovation, ambidexterity, and Scaling-Up. He has a long-year expertise in leading innovation programs and co-authored the book „Scaling-Up Corporate Startups: Turn Innovation Concepts Into Business Impact.“
Hello Ralph, you consult companies about their innovation programs and how to scale them into the organization. What problems are your clients struggling with?
Most companies have a core business with an established system of structures, processes, and metrics. They struggle with Implementing new business models and technologies, because they affect the configuration of this system.
In some industries, this is not a serious issue, though, because ongoing change is part of their core business. In fashion retail, the supply chain has to be rearranged up to the online shop after every fashion show. Also, in Gaming and Software development, innovations derive from the daily business.
Other industries, like chemical processing or industrial goods, for example, tend to be resistant to disruption with hardly any changes in their core business. That’s why innovations have to be developed in isolated teams without contact to the core business. The challenge here is to scale these ‚Corporate Startups‘ into the day-to-day business.
Many companies try to bring together innovation and daily business with the concept of ambidexterity. Can you explain this approach?
Ambidexterity describes the effort to optimize the existing practices as much as possible (Exploitation), but drive innovation and new business ideas (Exploration) at the same time. Exploitation means employees develop incremental innovation (like version X of a certain product) and optimize the structures of the core business. Exploration, on the other hand, means thinking about new technologies and business models.
Exploration and Exploitation are usually incompatible and cannot be pursued in the same environment because of their different requirements. That’s why the Exploration-part takes place in a sandbox-environment which is detached from the daily business. This is called Innovation Unit, Innovation Lab, or Accelerator Unit and creates a safe space to develop and grow new ideas without them getting absorbed by the core business. This environment needs their own processes, governance and success metrics to thrive.
How do you bring Innovations from these units into the daily business?
That’s the big challenge, because innovations can’t simply be integrated into the core business. There are conflicts because the Innovation is usually not mature enough and lacks the evidence for profitability. That’s why Product Managers want to avoid the risk of falling behind their personal and financial goals.
The main problem is the lack of a systemic end-to-end-approach for the Scaling-Up-process. The plan usually only contains the development of innovations but not the integration into the business portfolio. That’s why many innovation projects get absorbed into the core business without unfolding their full potential because its output cannot be integrated into a running system.
Successful scaling therefore requires some adaptations. This especially includes governance aspects to assign the necessary resources and determine the right metrics to measure progress. These metrics can’t be too quantitative or finance-based, because the projects lack maturity and profitability becomes important at a later stage. At the same time, they can’t solely be qualitative to classify their maturity and progress.
Above all, it is crucial to have someone in a leadership-position to make decisions against the daily business and let the innovation project unfold. There will always be tensions and frictions when new projects have to be integrated into a running system. That’s why you need a well-defined goal and the right people to moderate, drive and protect such projects within an organization.
You have developed a dual innovation approach to address these problems. How does that differ from Ambidexterity?
Dual Innovation builds on Ambidextry and adds an additional layer ("Reshape the Core") to Explore ("Create the New") and Exploit ("Optimize the Core") to bring the capabilities of both areas together. This creates an interface in which competencies and aspects from both areas can be combined.
For example, if an organization wants to adapt a business model in important aspects, it can be pulled into this interface and leverage on the exploratory competencies and technologies that normally belong to a different system and work with different priorities and ways of thinking. Conversely, in this area, you can link the innovations from the separate unit to the day-to-day business, drawing on the necessary resources and people to bring the project further into the organization and let it mature.
The design of this interface depends on the individual characteristics of the company as well as the orientation of the innovation unit and the innovation maturity of the business units.
What are the success factors for successfully implementing dual innovation?
End-to-end planning: An exploratory innovation unit must be thought through to the end from the outset, aligned with the corporate strategy and brought to life with the necessary structures. This includes clear objectives, alignment with the core business as well as appropriate governance, metrics and processes. This makes it easier to merge the two areas later on.
Leadership support: Innovation projects are lengthy and there are always tensions with day-to-day business. Therefore, they need the necessary support from the top to avoid being neglected or even abandoned in favor of the core business, even in difficult times.
The right people: Particularly at the interface between day-to-day business and innovations, employees are needed who are well-versed in both areas. On the one hand, these 'hybrids' must be entrepreneurial and agile enough to drive an innovation project forward. On the other hand, they need to know the core business well enough to be able to moderate internal resistance and concerns. This is the hardest area to find the right people and usually requires building them up internally first.
Depending on the organization, these points vary in complexity to implement, but experience shows that these are the three cornerstones for successful implementation. But in most companies today, not even one of these aspects is systematically addressed.