The Role of the Chief Innovation Officer

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A primary task then, of the chief innovation officer, is to oversee someone who is responsible for executive training and can make sure that the company's language of innovation and the principles it embodies are widely disseminated and practiced.

A shared language can help sort out the seemingly conflicting imperatives of operating (and innovating) in the core while also planting seeds for future growth. Innovation in the core business is often largely a matter of executing processes in a traditional team structure through the company's traditional channels and partners. People working on that side of the house can expect their performance to be judged in traditional ways. New-business innovation, however, needs to be managed and measured in an entirely different way because it involves testing assumptions, adjusting when assumptions prove unwarranted, and changing course quickly and creatively as new knowledge is gained. That is uncomfortable territory for many people, unless they know that these distinctions—and dual management systems—are understood and underwritten at the highest levels of the company.

Testing Assumptions With Prototypes

Managing the learning process when innovating for new-business growth is the second critical area of responsibility for the chief innovation officer. Core-business innovation proceeds largely on established knowledge about markets, customers, competition, and capabilities, which can be extended to bring something new to market at scale. New-business innovation proceeds in small-scale, controlled experiments conducted in a foothold market—a small geographic region or customer group that will serve as a low-cost laboratory. Top innovation officers need to keep such incubation efforts free of interference from the core business and allow the innovation team the autonomy to determine quickly if the idea is viable, needs to be modified, or should be abandoned.

These demonstration projects, overseen by the chief innovation officer, are designed to convert assumptions into knowledge of what works and what doesn't. For example, a prototype might help determine customers' willingness to pay for a product or service, along with how they use it, their frequency of purchase, and their willingness to make certain trade-offs among features, price, and convenience. Such experiments might be supplemented with focus groups, secondary research, and the involvement of potential customers in the design of a product or a business. The knowledge that emerges can then be transferred across the company, which requires the chief innovation officer to work closely with the organization's chief knowledge officer or the equivalent.

Because the goal is learning, progress should be measured accordingly. Just as the chief financial officer uses financial metrics, the chief innovation officer uses learning metrics: What did the organization learn, how did it learn, how much, and how fast? When is the ratio of knowledge to assumptions high enough that we know we have a viable new business? It is in devising these measures that the top innovation executive makes explicit the connections between learning and the shared language of innovation. Each reinforces the other.

Using Structure to Unlock Creativity

The failure rate, a critical learning metric, is likely to be high. Generally, in the absence of a structured approach to new-business innovation, about 1 in 10 new ideas works out. By taking the test-and-learn approach, the chief innovation officer can increase the hit rate to as much as 3 out of 10—a batting average that might be unacceptable in core-business innovation but can get you into the Hall of Fame in new-business innovation.

Long-term structure, the third critical area of a top innovation officer's responsibility, translates the language of innovation and its focus on learning into a repeatable process, using structure to unlock creativity. With a budget, a clear charter, and distinct governance measures and milestones, new-business innovation moves from the ad hoc to the institutional.

That structure depends not just on processes, but also on people. The top innovation officer has to cultivate the right talent—identifying people who can deal with ambiguity, learn from failure, and are comfortable working in an area where expectations and measures of success may differ sharply from those of the core business. That executive must make sure that the careers of these uniquely talented people won't be tainted by the frequent failure associated with new-business innovation.

A chief innovation officer who assembles and presides over innovators of all stripes with a common language and approach to learning—succeeding together in a structured environment of highly productive and appropriate rules and norms—will create a culture in which both the ongoing business and new growth can flourish.

Mark W. Johnson is Chairman and Co-Founder of innovation consulting and research firm, Innosight. He is the author of Seizing the White Space: Business Model Innovation for Transformative Growth and Renewal, (Harvard Business Press, February 2010) and a co-author of The Innovator's Guide to Growth (Harvard Business Press, July 2008).

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