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Organizing Innovation Projects

A perennial question that comes up with respect to organizing innovation is whether ventures should be set up far apart from core business or within it? Unfortunately, both approaches to organization are problematic. While so-called skunkworks and separate structures have been popular as a way of helping those working on innovation projects to avoid being smothered by the rules, politics and processes of the more established lines of business, their track record is spotty. Among the downsides are that essential connections are missing that would permit the venture to be re-integrated with the rest of the corporation if it is successful. At the same time, the struggles venture teams experience when within a larger entity that doesn?t understand them are terribly real.What seems to work in resolving this dilemma? We would support the notion that a separate structure for managing ventures is necessary, one that is appropriate for the often-quirky path of their development. It is deadly to apply the same organizing, staffing, budgeting and planning practices to the new businesses that you do for the core. What we have found, however, is that it is a big mistake to set up a ventures organization with so many resources and managerial clout that it is possible for it to become an empire unto itself. Huge flops often share in common this organizational structure. Samsung?s ill-fated entry into the automobile business, Kodak?s efforts to enter pharmaceuticals, Federal Expresses? $600 million lost pursuing its ?Zapmail? venture, and Exxon?s $4 billion oil shale venture are examples.

Instead, think of the ventures organization itself as a group in transition. Its job is to incubate ideas, develop people and capabilities and explore new terrain. At Nokia, for instance, the NVO (for Nokia ventures organization) was established as something of a service business, explicitly intended to pursue innovations with either market objectives or technical objectives beyond the remit of its more established businesses. This has the effect of creating natural interdependence between core businesses and ventures, because ventures do not have access to the resources they would need for growth without working with the core businesses.

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