Do you work for - or maybe even run - a company that aims to become an innovation leader, but has achieved only modest results?

The reason might lie in the dilemma of innovation management, which can be best described with the following metaphor: Organising a company for both high efficiency and high creativity is like trying to be at the North Pole and South Pole at the same time. High organisational efficiency and high organisational creativity are the extremes on a continuum of different organisational models to structure the economic activities of a company.

Organising for high efficiency (the North Pole) means minimising variances in your business processes, people, product and service offerings, and so on. In other words, you aim to make everything as standardised as possible by means of rigid, clear guidelines, optimised processes, a uniform workforce with similar educational background, and so on. Most manufacturing operations, as well as companies in conservative industries such as banking, are organised for high efficiency, and they are not known for producing an awful lot of innovation.

On the other side of the globe at the South Pole, the situation is completely reversed. Innovation is the result of taking action on meaningful ideas - and ideas thrive in an unrestricted, flexible and loose environment that encourages diversity, variances and differences.

Companies such as Apple or Nike are global innovation leaders in their product and marketing strategies and are exclusively organised for high creativity. These extreme "South Pole companies" have outsourced efficiency as all their production is done by external manufacturing partners that are mostly located in Asia.

Many companies that blindly embraced the Six Sigma and TQM cults a few years ago have noticed that innovation suffered severely as efficiency rose. 3M, a broadly acknowledged longterm innovation leader, was probably the most prominent victim of Six Sigma. After taking over the CEO position from Six Sigma devotee Jim McNerney, a former top manager of GE, in 2005, 3M's new leader, George Buckley, stopped the five-year Six Sigma experiment to reverse the very negative implications on 3M's innovation culture and innovation pipeline.

Of course, there are some organisational models in between the extreme poles, and each approach tries to solve the dilemma of innovation management in a different way:

- Right below the North Pole is the traditional model of organising for innovation: the old-fashioned R&D department is isolated from the efficiency-geared rest of the operation and could thus develop an innovation-friendly culture within its R&D ivory towers.

- Further down South but still well above the equator, we have companies that have set up innovation units within each division or - even better - cross-divisional project teams that work relatively independently from the rest of the organisation. While the culture in the divisions still leans toward an efficiency-centred organisation, in the innovation project teams the work environment is less rigid and tolerates difference and variance.

- A few companies apply an organisation model that is based on the anthropological small village theory, which suggests that traditional human communities have split up when their populations surpass 150 people. Gore-Tex is the most prominent company that aims to balance the need for innovation and efficiency by having many "small village" companies within the group, where the small size allows both for flexibility and control.

- Further south, a popular approach in the pharmaceutical and biotechnology industry is to spin off promising internal R&D initiatives from the core company by setting up creativityfriendly ventures and retaining control of these entrepreneurial startups by holding the majority of shares.

- Another interesting shift in the innovation paradigm is the trend for open innovation. This means that companies start to complement their internal R&D and innovation efforts with ideas and scientific solutions from external partners or individuals.

For example, Eli Lilly has set up the website InnoCentive to "crowd-source" solutions to specified scientific problems over the Internet from a global virtual scientist community. Other pharmaceutical companies as well as IBM have set up similar platforms.

Another interesting open-innovation initiative is Procter & Gamble's "Connect & Develop" programme that aims for a 50-50 split between ideas that are developed within the organisation and those that are provided by outside partners and virtual networks.

Where on the "innovation globe" can we find the average Asian company? What are the best strategies for Asian companies to solve the dilemma of innovation management? Many bigger traditional Asian companies can be described as steep hierarchies with many management layers and autocratic leadership structures. In connection with the outsourcing of production to Asia in the last two decades, most Asian manufacturing companies are organised for high organisational efficiency, too. I argue that the average Asian enterprise is very close to the North Pole and will face massive management challenges to transform to an innovation culture.

While some companies such as the Siam Cement Group have already started to innovate, most traditional Asian companies will be better off insourcing expertise or even completely outsourcing the innovation process.

The industrial design powerhouse IDEO has already set up an office in Shanghai for industrial design-related innovation projects. The author of this article is also ready to bet on this and plans to set up the THINKERGY Idea Factory in Thailand within the next two years, thus becoming another centre of competence for ideation services for strategy innovation, service innovation and experience design.

© 2007 Dr Detlef Reis