Innovation in a large organization usually is a complex activity. We must accept this premise in order to manage it properly.
What means that it is complex? Fundamentally, that task requires a lot of interconnections among a large group of people that must cope with a lot of options, and the results are highly uncertain.
In terms of complexity management, we can think that innovation is not a good option in a business because of its capability to increase the complexity. There must be something correct in this sentence, as managers are not usually oriented to this process. But this is not true if it is well managed.
The main error of this viewpoint is to suppose that there is a lot of links between production and innovation, and this hypothesis usually is not valid. Imagine the classic innovation model, a research center in an island, isolated completely from production. Innovators would be working in new products and solutions while other people are working in manufacturing facilities producing the old products. The only link between the two activities will be a line of the budget selecting what part of the business benefit must be dedicated to innovation. Although the activity of the innovation was very complex, its effect on the business would not increase the complexity of the business except during the period of substitution of the old products for the new ones. The measured complexity of the business would not be seen very incremented for the management as innovation would be only a constant controlled cost.
Of course, this is not the only scheme for innovation that we can find in a business. There are other business models where innovation is in constant touch with all the company processes, searching and identifying innovative opportunities, analyzing the life cycle of product and technologies, fighting against the forces that are trying to preserve a constant and tedious way to do always the same old things. Here it is where complexity introduced by innovation can become a heavy load for the company it is not properly protected and isolated from those opposition forces.
Putting innovation nearer production and markets we will increase the performance of the activity but complexity increases due to the intrinsic uncertainty of the process. An increase of complexity can produce perverse effects on the business if this complexity is not analyzed and controlled.
In terms of complexity management we can act on two components, uncertainty and structure. As uncertainty is an intrinsic characteristic of the activity, we should focus the problem through the structure. The problem related to the structure is that the intrinsic uncertainty associated to an innovation decision center increases with the number of links and interconnections among different decision centers (remember that the probability of the intersection of two independent events is equal to the product of the single probabilities, not to the addition, then it is not a linear increase). Reducing the structure we are limiting the effect of the uncertainty in the system.
When a manager bets for innovation the business has usually got a portfolio of mature products. In other words, the business is working, probably, near its maximum complexity. If the business is working near its maximum complexity yet, this scheme can drive to a collapse because although the new structure introduced by innovation increases the maximum complexity the uncertainty spreads all over the company.
To solve this problem, I propose you a new conceptual scheme of mine related to this complexity approach that we can name it firewalling innovation.
Firewalling innovation means that we must focus innovation as computer firewalling technology when we are putting innovation near production and markets. Although we develop the capability to fully interconnect all the areas of the company, we need a managing area or “device” that open and close the communication ports as required.
Although this cannot seem a very innovative concept, the innovation of the idea is how we control the opening and closing of the communication ports. This must be done understanding how complexity is affecting the stability of the whole business to preserve a healthy business, instead of other focuses as, for instance, doing it following a higher benefit approach.