The 2004 US National Innovation Initiative succinctly pointed out that "[Innovation] is multidisciplinary and technologically complex. It arises from the intersections of different fields or spheres of activity." Similarly, a report issued last April by the Council of Graduate Schools argued, "Interdisciplinary research preparation and education are central to future competitiveness, because knowledge creation and innovation frequently occur at the interface of disciplines." Just about every such study has reached a similar conclusion regarding the multidisciplinary nature of innovation in the 21st Century.
This is not surprising. It is also much more difficult than it may appear at first glance. Creating effective multidisciplinary groups poses serious organizational challenges for companies, universities and just about any institution that is struggling with how best to embrace new, disruptive innovation ideas.
Why is it so difficult? Beyond a certain size, institutions generally organize their activities into departments, divisions, lines of businesses and similar hierarchic units. The more operational the unit - e.g., manufacturing, finance, customer support - the more hierarchic its organization, since it is imperative that everyone understands his or her specific job and the unit's lines of responsibility.
But many, perhaps most, of the exciting opportunities for innovation are increasingly found out there, in the real world, helping business and societal institutions take advantage of the advances in technology to address problems that are significantly broader, more diverse and more complex than ever before. Solutions to these new problems, arising in the marketplace as opposed to the lab, do not typically lend themselves to any kind of structured organization, at least initially. They cut across divisions and lines of business, requiring talent, products and services from different parts of the company. In particular, the ability to analyze problems quickly, especially ones you have never seen before, and to bring to market new kinds of products, services and integrated solutions to address these new problems is crucial in today’s fast-changing, globally integrated world. You need to do this to stay competitive, regardless of how well this work may fit your company’s structure.
A mismatch thus exists between the way companies are organized for the effective operations of their current offerings, and the emerging needs of their customers and the marketplace in general. The situation is not much different in universities, where a similar mismatch exists between legacy disciplines and organizational structure, on the one hand, and the changing nature of knowledge and the talent required to address the world’s emerging, multidisciplinary infrastructure, economic and societal problems.
Should companies and universities re-organize to meet these challenges? Clearly, every so often institutions need to change their organization to be more responsive to current requirements. But since different kinds of market problems will draw on different parts of the institution, there is generally no one organization structure that will work well for all - perhaps even for most – problems and opportunities. There are no easy solutions.
Perhaps the very notion of a hierarchic organization is an outmoded concept, a remnant of the industrial economy of the past hundred years. Perhaps it’s not the way to organize work in the emerging knowledge economy. Why do we need a business or university organized into departments, divisions and the like?
It is all a matter of achieving the proper balance. The very nature of the enterprise is evolving. Enterprises are becoming more open, networked, dynamic and collaborative, so they can better address the requirement of a fast changing and unpredictable marketplace. At the same time, the hierarchic model will continue to play a major role in most institutions for a number of reasons.
First of all, while people work for an institution, - their home base will be the group or department of which they are a part. The department is usually the unit into which people are hired, evaluated and promoted. Generally, people work closest with others in their department. They attend department meetings and similar functions for management, information or even social purposes. Their local group becomes a kind of work family, and thus requires a certain degree of stability.
Departments and divisions are also the key units for the financial management of an organization. They have budgets, headcount and business targets - revenue, profit, market share, customer sat, etc. While hierarchic organizations might be disaggregating and becoming more distributed and dynamic, some form of hierarchy will continue to exist as a way to help manage a complex business and its products and services, as well as to provide a stable base for its people.
How do you then respond to the increasing requirements for collaboration across departments and disciplines that are necessary in order to address new market problems? There is no one answer. This is a relatively new area that still requires considerable research to understand what works best. Let me give a couple of examples from my personal experiences.
Several years ago, IBM established its Emerging Business Opportunities (EBO) program to identify and incubate promising new businesses that did not naturally fit into one of the existing operating units. Generally, an EBO focuses on white space opportunities that have the potential to become a sizeable profitable business within five years or so. An experienced executive is appointed to lead the EBO during its startup phase – one with more seniority than you would expect based on the revenues and headcount of the new business in its early years. Once the EBO reaches a certain size and maturity, its functions are absorbed into the appropriate operational business units, since it is then viewed as strong enough to stand on its own without the need for special nurturing.
This is how we organized efforts like the Internet Division, Linux, and On Demand Business, in which I was personally involved, as well as a number of other such efforts. In each case, the initiative was virtual and company-wide, involving people with a variety of talents from across the business. Success for an EBO means that after a few years, typically three to five, it is no longer needed and quietly goes away.
Universities follow a similar pattern. They generally address new opportunities that do not fit well within any of the existing departments by establishing interdisciplinary laboratories and centers. MIT's Engineering Systems Division, for example, spans most departments within the School of Engineering, as well as having members from the Sloan School of Management, Social Sciences and other parts of MIT. MIT has quite a number of such interdisciplinary research programs across its various schools, such as these ones in the School of Engineering, and these ones in the Sloan School of Management. To a greater or lesser degree, all research universities are establishing similar interdisciplinary labs and centers.
In business and academia, these horizontal overlays cutting across the institution's formal organization are fraught with tensions if not properly managed. In a business, there will a natural competition for resources between the new units, and the existing lines of business. Human nature being what it is, managers in the existing businesses will often feel that they are working hard to bring in the revenue and profit of the company, only to see the fruits of their labors given to someone else to go explore some new, unproven area. If only the extra funds were given to them, they will think, not only could they grow their existing businesses, but they could also go after the new opportunities better than anyone else.
That is why it is so important to appoint experienced, senior executives to lead the new opportunities, not only so they can put together the new organization and bring to market the new offerings, but also to navigate the inevitable cultural and political – that is, human – issues that will arise and that will kill the new business if not skillfully managed. It is also why it is so critical that the top management of the company support the new venture, so they can protect it from being done in by the rest of the company.
Similarly, there will be a natural tension in universities between the existing departments and the new interdisciplinary programs established to go after new educational and research opportunities. This is a fight for both resources and prestige - which is another way to say that it can be a bloody battle indeed if the issues are not properly handled by all involved.
Managing innovation is very hard, and one of the toughest problems is how to organize the new efforts effectively, especially if they are disruptive in nature and do not naturally fit into the existing structures. If not properly handled, the innovation intended to disrupt competitors in the marketplace will end up turning against you and disrupting your own people and organization, with all kinds of negative consequences. But if handled well, the innovation will prove to be a very effective way to bring the whole institution into the future, and to help evolve its organization along the way in as smooth a manner as possible.