When tomorrow's job involves attempts to create entirely new businesses … entirely new products … entirely new markets … entirely new processes or operating methods of more than trivial dimensions, there develops an inevitable battle between change leaders and preservers of the status quo.The struggles are abrasive. Attempting to superimpose the new and different on an organization geared to carrying out today's tasks is almost always is met with fierce resistance. Drucker and Levitt observed that organizations exist to enable ordinary people to do extraordinary things. To accomplish this end, said Levitt, "they must routinize their work." But routine becomes comfortable. Anything that upsets daily routines creates friction.
"Give Us This Day Our Daily Bread"
Drucker and Levitt showed that the most important task of the existing organization is to get today's job done. Rules, procedures, and standards define what is to be done, and how.
"Allegiance to the daily task remains the predominant and inevitable focus. Within this powerfully constraining context," noted Levitt, "to focus as well on trying to get powerful innovations – to do entirely new and therefore disruptive things – is an especially difficult and fragile undertaking."
Most organizations establish order and discipline; that is, deep routinization of a significant part of the work required to produce today's products and services. Innovation, or doing new and different things, by its very nature destabilizes the organizational structure.
Organizational inertia always pushes for continuing what the organization is already doing. Newness of more than a trivial dimension is typically squashed by the ongoing organization.
Slightly paraphrasing Ted Levitt:
"Anyone who tends to doubt this needs only to examine please his/her organizational experience. Whether in a organization, a government agency,a country club, or church, an intense and usually fierce struggle predictably surrounds efforts to do drastically new or different things …
… One may ponder why the struggles are always so abrasive, and why the leaders of change efforts always pay such a heavy personal price …"
Creating New Organizational Structures for Producing and Managing Innovation
Many innovative activities must be organized separately and outside of the ongoing managerial business. Repeat this five times to yourself. It could save your organization millions of dollars and prevent lost opportunities.
"Innovative companies realize that one cannot simultaneously create the new and take care of what one already has in full operation. The maintenance of the present business is far too big a task for the people in it to have much time for creating the new, different business for tomorrow."
We cannot emphasize this enough: Innovative organizations put the new into separate organizational units concerned with the creation of the new.
Drucker provides this illuminating example:
"… [Setting up separate businesses] was not understood in 1952 when the general electric company embarked on its massive reorganization which then became the prototype for major organization changes in large businesses around the world.
Under the GE plan the general manager a of 'product business' was to have responsibility for both the ongoing business in his charge and the innovative efforts for tomorrow's new and different business.
This seemed plausible enough. Indeed it seemed an inescapable conclusion from the idea that the general manager of a product business should, as much as possible, behave like the chief executive of an independent business."
But it did not work –- the general manager did not innovate. One reason was the press of the ongoing business. General managers had neither the time nor the motivation for abandoning what they were managing.
Creative destruction is a necessity to maintain a successful business; that is, getting rid of yesterday and replacing it with what today's market needs, wants, values, expects and is willing to pay for.
"Another equally important reason was that true innovation is rarely an extension of the already existing business. It rarely fits into the objectives, goals, technologies of the already existing business… "
Drucker demonstrated why innovative opportunities usually fall outside the assigned scope of the existing decentralized product business. And, inevitably get short shrift and swept under the rug.
So GE learned from this experience. After 10 years or so it began to draw the proper conclusions from the frustration and began to organize major innovations separately and outside of existing product departments and product divisions.
In reality, this was very similar to the way innovative efforts had been organized at DuPont, 3M and other organizations for many years; that is, into separate organizational business development units.
Yet many organizations still continue to make the same mistake. They don't learn from business history and the experience of others.
A Lesson from Today's Headlines
Today, many universities and colleges are entering the field of web-based degree granting and certification programs. The savvy schools such as Cornell and Penn State have created completely separate, autonomous units to deliver, market and grow online training. Others are following their example.
If this is not done it is almost guaranteed that "a war of the ancients against the moderns" will erupt and threaten the internal upstart web-based learning organization – and deprive it of the resources needed to innovate successfully.
To repeat: It's been proven time and again that any institution that makes it the responsibility of the general manager to be in charge of both the ongoing business and the innovative efforts for creating tomorrow's new and different business usually ends without significant innovation.
And the traditional blame game inevitably occurs. Everyone becomes frustrated, demoralized, and (many times) embittered.
Senior-level managers like to complain that the existing organization is not creating tomorrow's breadwinners. But they make the same mistake over and over again. They charge the existing group of managers with creating a new in the different. It just doesn't work.
Similarly, experience in public-service organizations also indicates that innovative efforts best be organized separately and outside of the existing managerial organization. If not, it usually ends result-less.
Not all innovations, of course, can be organized as a business. But history has shown that when it can be done, it should be done. Creating the "entrepreneurial equivalent of smallness within the larger organization" produces the needed innovation. (We will discuss this in a future article in great detail).
Summary of Drucker's Best-Kept Secret of Making Innovation Work
The existing business tends to squash newness of any kind. Organizations exist, as Drucker has so effectively argued, to get specific results.
People do not willingly subject themselves to rules, procedures, bosses and deadlines for performance. They do so because the results they seek would otherwise be unattainable.
The organization exists to get today's job done. It's quite difficult, if not impossible, to do tomorrow's job very well. Tomorrow's job, in many instances, needs to create a separate entity for making the new and different happen.
Ernest Daddey – Executive Director
Innovation Central Society
"ICS is the regional organization with resources and professional expertise to develop innovative ideas into successful business ventures. Using targeted programs and services, ICS helps entrepreneurs to drive the innovation to commercialization cycle in a structured manner by adding value at each stage."