Sunday, September 13, 2009

Alignment and innovation: Friends or foes?

Management thinker Gary Hamel says in “Leading the revolution” – alignment is the enemy of business model innovation. Innovation guru A G Lafley says in Game-changerAt P&G, the innovation process is integrated with all the other business strategy, operations and management processes. Is there a contradiction here? One seems to be saying - innovation and alignment are enemies and the other seems to be saying exactly the opposite. Who is right? Let’s explore this question below.

First, let’s understand where Hamel is coming from. At the heart of Hamel’s argument are two assumptions: (1) Strategy is not a monopoly of the top management and good ideas can come from anywhere (e.g. see Google’s AdSense story). In a perfectly aligned world, everybody may be marching to the top management orders and there is no room for dissent which is disastrous. (2) If business is perfectly aligned with customers, then you may be blind to non-customers. And many radical ideas have come from outside the industry. e.g. Jeff Bezos and retailing. Hence, Hamel argues, organizations should be creating “space” for corporate rebels who experiment with ideas wildly different from existing business. Then the question arises – can creation of such a “space” be part of a process – called innovation process? There comes in A G Lafley.

AG has turned these assumptions on their head and created a process out of it. AG’s innovation process dances to a different kind of tune. For example, a global structure called Connect + Develop sources ideas not only from various parts of the organization but also from other sources such as suppliers, customers, technology entrepreneurs and 1.5 million R&D professionals outside of P&G. There is a separate fund for radical ideas and a separate structure (Future Works) for working on cross-business ideas and joint ventures (see structures enabling innovation at P&G). AG mandated that for every two innovations that reach market one should have a partner outside P&G. This process respects failure and a different incentive scheme is used to measure performance (see More open innovation insights from P&G). To address the second assumption, P&G emphasizes “immersive research” which tries to get insights from unarticulated anxieties and aspirations of consumers (customers and non-customers). So, what’s the result? Well, over the last decade P&G has produced 10 new brands, 5 new business models (, Prestige Fine Fragrances, Bella and Birch, Mr. Clear Car Wash and Juvian laundry services) and 1 disruptive innovation (ultra-thin low-cost Pampers diaper released in China) (source: Game-changer).

So, at the end – are innovation and alignment friends or foes? Well, that depends whether your innovation process encourages non-alignment. And by the way, both AG and Hamel are right.

1 comment:

  1. Once the innovation is done, running it successfully requires a high level of alignment - e.g. Amazon itself. So there's also an issue of timing involved here.