Dual Innovation: Future-Proofing Corporate Innovation

A conversation with corporate innovation consultant Dr. Ralph-Christian Ohr

This article was originally published on voltagecontrol.com

“I love running fast. I’m not so much a jogger. I like to sprint.”

In his earlier days, Dr. Ralph-Christian Ohr was a track and field sprinter, a hobby that he still practices today. This mindset of moving fast lends itself perfectly to his work in innovation, where speed can be the name of the game. He is quick to mention that endurance is the other side of the coin when it comes to innovation success.

He has been a student of innovation management for years and has contributed to corporate innovation and strategy through consultation, blogs, and previous roles in diverse companies. Dr. Ohr and his co-author Frank Mattes recently published Scaling-Up Corporate Startups: Turn innovation concepts into business Impact. The book was written along with leading companies in the innovation field and is full of practical advice and case studies on how established companies can grow innovations into sizable businesses. I was pleased to get to talk with him and discuss his ideas about innovation systems.

Failing Forward

Dr. Ohr isn’t a business philosopher but an actual practitioner. The approach of Dual Innovation came together when acorporate innovation unit he was a part of dissolved shortly after launch. Politics and friction arose quickly, as the new unit didn’t have sufficient alignment with the corporate leadership and operational business units. “There needs to be an alignment upfront. Otherwise, everybody starts running, and you try to align and synchronize on the fly, which is very, very difficult.” As things came apart, he noted the dueling nature of an established business and the groups that are trying to make something new. “That was the time when the value of this Dual Innovation approach became really clear to me because that’s actually the set up in the ‘ambidextrous’ relationship.” Dual Innovation builds on the well-known ambidexterity concept but was advanced to address some of the concept’s shortcomings.

Exploration and Exploitation Require Different Systems

“In essence, exploration and exploitation need two disparate operating models or management systems. They are not compatible. They have to be separated. At least at the outset, when you start new ventures, you have to protect them from the core business.”

Dr. Ohr explained that the two systems aren’t in competition, simply complementary yet incompatible. He refers to these two systems in terms of their functions. The exploitive part (typically business units) seeks to “optimize the core” business, while the explorative part (typically innovation units, digital labs, incubators/accelerators etc.) will focus on “creating the new.” The functions of these cores require two separate types of management — in essence, what Steve Blank refers to as ‘Search” and “Execute”. An exploitive system will have hierarchical decision making, a linear process with quantitative, financial metrics. While an explorative system will feature collaborative decision making, freeform/iterative process, and in large part qualitative metrics.

He explained further: “That’s the reason why ‘Scaling-Up’, i.e.growing new ventures or corporate startups into impactful businesses in a corporate setting is so difficult. It’s essentially about transitioning from an explorative to an exploitive system. In our experience, it requires a dedicated phase or dedicated space that really focuses on this integration of the different systems which comes along with inherent tensions.” This idea led to the development of the bridge between these two structures, the middle ground where translation and capability exchange happens.

Translation is key

Systems do not collaborate, Dr. Ohr said. The leaders of these systems must create space for translation between the two systems. In their Dual Innovation approach, Dr. Ohr refers to this translation as “reshaping the core.” Accounting for this translation from the beginning can help set the stage for success.

Translation from Explore to Exploit happens in two phases: separating and integrating. Separating is about establishing alignment between the core business and the explorative unit before a venture begins. The groups must take the time to agree on clear goals and develop a shared vision for the venture. With this in place, the systems can operate without interfering with each other and validation can be carried out properly in a dedicated environment.

Integration then takes the validated ventures and evaluates them for their fit in the core business. Complementary ideas are fit in easily and can be absorbed into the existing core. A more radical or even disruptive venture is going to take longer, he says, as its fit with the existing core won’t be as simple. At times, it takes different pathways to integrate them.

Structured for Success

A fascinating part of our conversation was exploring the practical observations and principles that Dr. Ohr has developed over the years, which are outlined below.

Leadership qualities

Executive leaders in a business unit and the leaders of an innovation unit will have different requirements to achieve the best outcomes. Assigning roles and building teams with these differences in mind will help drive success.

Sustainable support

While separation of systems means the innovation unit will function independently, it’s still tied to the existing business by resources to some extent. Innovation happens over time and isn’t always able to fund itself. Executive leadership that has bought in and supports this innovation process is key to sustainable support.

“One of the first things you have to do is you need to create an alignment between the upper leadership or the senior leadership. So not just one person buys into the thinking, but that the others do too. So, if one or two leave the company, there are still some left who have adopted this kind of thinking and then will proceed. But of course, there is no silver bullet to make this executive support sustainable.”

Able to manage tensions

Executive leaders also need to be able to handle the politics and tensions that inevitably pop up. Knowing it’s a matter of when, not if, can make navigating these unavoidable hiccups easier. By using a holistic approach, executive leaders can ease tensions by pointing back to the shared vision and goals. That’s easy to say, Dr. Ohr says, but takes great ‘dual leadership’ to actually do it when the pressures build between competing forces.

Dual Thinking

The leaders of the innovation unit have a unique set of requirements as well. “(The leader) needs to be capable of dual thinking as well because he or she has to have one foot in the core business, one foot in the explorative type, in the startup part.” Leading discovery and validation processes with an eye on how things fit into the higher business is a tricky proposition. The leader must be able to guide those processes without hindering them but also without allowing them to get off the tracks and run wild.

“I strongly suggest that scale-up leaders in a corporate setting need to be familiar with the core business. So if you have pure entrepreneurs, just start-up guys who have never been in a corporate, they usually have a hard time navigating this process.”

In some sense, innovation is building towards a product with no home. There are scenarios where innovation fills a hole in an organization, but quite often innovation ventures into uncharted territory. The leader needs to be prepared and navigate this tension.

Company Mindset

Innovation should be a part of the company mindset and not a side project.

“I think what I’m experiencing in companies is that they have a lot of organically grown activities like, I don’t know, incubators, accelerators because it’s hip because you need to do something in the explorative part. It’s also a good story to the outside world. But I think it’s important. If you really want to go for innovation success, you need to start with the end in mind. So you really need to ask yourself what is my purpose, what is my eventual goal for this innovation activity, program, venture.”

“Most approaches to corporate innovation present a set of unconnected activities and point solutions. To make innovation truly happen, companies need to take end-to-end thinking from idea to impact and implement appropriate structures and responsibilities.” Are we trying to strengthen the core business? Are we trying to disrupt the core business? Are we creating a new business to run alongside the existing one? Dr. Ohr has observed many companies that have “lots of innovation activities,” but they aren’t aligned with their existing strategy. “So there is no surprise that they, at some point, end up going nowhere. This is then usually what we call innovation theater. “

Process quick hitters

The following are some of Dr. Ohr’s key practices to implement a Dual Innovation process.

Focus on the highest learning potential

There is a need to set out and get some quick wins to build trust and support, he says. The focus should be on the highest learning potential. “So it’s really about identifying the best suited ‘early adopters’, so to speak. Then, to address their issues in first initiatives, and share success stories. Then the organization sees, ‘Okay, we are doing much better if we fix things accordingly.’”

Know when to involve the core business

Timing the transition of an idea into the core business isn’t a one-size-fits-all problem. The key metric is the amount of cohesion the scaled idea has with the core. If it is a highly compatible idea; it can be incorporated much sooner. Care should be taken so that the core doesn’t overshadow and crowd out the innovation as well, Dr. Ohr says. If the idea is disruptive, much more time should be given to establishing and defining the idea on its own. It may be that the core needs to be reshaped to allow for this new idea to be included, or the idea needs to be launched on its own. Those things can’t be known right away, and sufficient time is necessary to explore those possibilities.

Identify appropriate funding

Funding needs to fuel focus and to be tied to venture goals. While it might be counterintuitive, too much funding can be more of a problem than a resource. “I think there is also a body of research seeing that ventures usually do better or more successfully if they have a limited amount of funding. I mean, they clearly have to have enough funding. But if you have too much funding, you are not focused anymore. You can do everything. It often then ends up in innovation theater.”

Dr. Ralph-Christian Ohr’s work now has a two-fold focus on proposing the Dual Innovation management system for use in companies as a future-proof approach and on Scaling-Up to help companies systematically translate explorative activities into actual businesses, which is at the core of Dual Innovation and has been largely disregarded up to now. Check out Frank Mattes’ and his book Scaling-Up Corporate Startups: Turn innovation concepts into business impact for a deep dive into the practical aspects of Scaling-Up.