What structures do companies use to drive innovation?

Let me very quickly mention some of the structures I’ve seen used by different organizations, as well as some of the challenges:

Description Challenges Companies using  that mechanism
80/20 rule Employees are allowed to spend 20% of their time working on their own initiatives.
  • The next version is always around the corner and requires 120% of employees’ time.
  • Those initiatives rarely have a business case/validation. They are “cool” projects but no business validation.
Internal labs Groups dedicated to research & development I met with the head of such a group recently. He proudly showed me one of their projects. “Very cool project”, I said, ”but I’ve seen that technology deployed 10 years ago while working for Cisco”. He then admitted that the main challenge for him is that most of their projects will not see a day of light given that they lack business or competitive validation. Yahoo, Yandex, Telefonica
Incubation groups A small team of evangelists whose role is to drive experimentation Works well in some organizations than others. The main reasons for the limited success revolves around:

  • Those evangelists have limited incentives to succeed.
  • They are bounded by the environment they are in (e.g  politics, re-organizations). All 3 incubation groups that I spoke to recently were subject to e-organization that cast a question mark around their future existence.
Microsoft, eBay, HP (until recently), SAP
Innovation Centers Centers that tap into external innovation and serve as a channel between the corporations and potential partners (mainly startups). Personally I’m a great fan of external innovation and I’ll discuss that further in Part III. The main challenges that I’ve seen with regards to this structure are:

  • Perception – If you are Google or Apple, many startups want to work with you. If you aren’t, lack of deal flow impacts quality.
  • Incentives misalignment – Startups are looking for capital and distribution. Most innovation centers don’t provide that.
AT&T, Verizon, Vodafone, Ford, Renault

Some of these structures are technology and R&D driven. As Steve Jobs once said :

“You’ve got to start with the customer experience and work backwards to the technology. You can’t start with the technology and try to figure out where you’re going to try and sell it…..we have tried to come up with a strategy and a vision for Apple, it started with “What incredible benefits can we give to the customer? Where can we take the customer?” Not starting with “Let’s sit down with the engineers and figure out what awesome technology we have and then how are we going to market that?” And I think that’s the right path to take.”  

                                            — Steve Jobs


About shanishoham

Shani is an entrepreneur, investor and business leader with technical background and deep understanding of dev tools. He is currently the President and COO of Testim.io. He built the business from inception to over 100 customers, increasing ARR x4 YoY, ACV x7 YoY, growing its lead base to over 50K/year, hiring over 20 team members and leading 2 round of financing. Prior background: scaling 5 B2B technology ventures and one VC fund to signifiant size. I’m an alumnus of the Stanford Graduate School of business - Sloan Master in Management program, a 10 months intensive program for 57 carefully selected experienced Executives and leaders from all around the world.


  1. Pingback: What’s Wrong With Corporate Innovation ? « Shani's Business Review (SBR)

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