Innovation isn’t an assembly line. It doesn’t move in predictable, linear increments toward immediate output. But many organizations try to manage it as if it does, measuring activity instead of outcomes, focusing on hand-offs instead of lifecycle impact. The result is a structural divide between innovation and revenue stream management that quietly limits growth.
There is a fundamental disconnect in how enterprises manage innovation. All too often, it ends up relegated to a service function. Sometimes it's an internal consulting agency tasked with generating ideas. Sometimes it's a production company creating products and services for marketing and sales to spin into profit.
But limiting the scope of innovation’s role and influence cuts it off from the organization’s strategies and objectives, and it limits innovation’s ability to speak into the enterprise’s key functions.
This reduction of innovation’s impact leads to two critical problems:
The growth problem
As McKinsey research demonstrates, achieving consistent corporate growth is incredibly difficult. In the decade before 2020, a typical company achieved only a meager 2.8 percent annual growth, and only one in eight sustained double-digit growth. The solution to this insufficient corporate growth is innovation, but when we perceive innovation as a service function, it’s only valued for its initial contribution to production. We completely miss out on its relationship to growth-related outcomes.
The black box problem
Since the innovation function is segregated from the core business, its processes are a mystery to the rest of the organization. Money flows into innovation’s black box, but senior leadership cannot easily connect that input to predictable future outputs. This opaqueness leads to skepticism about budget investments and difficulty calculating ROI. And when innovation is perceived as a speculative endeavor, it becomes an easy place to make budget cuts (usually at a time when the company needs the kind of growth investment innovation provides). And it becomes easy for executives to reallocate resources away from innovation to invest it in perceived revenue levers like marketing.
Innovation has to be considered a growth function, but too often innovation is sequestered away from the places where revenue-stream management conversations take place. However, innovation is the origin of every revenue stream, and it’s time to start treating it that way.
Signs you’ve separated innovation from revenue stream management
If you suspect that your innovation efforts aren’t translating into the revenue your enterprise needs, you’re probably right. But the problem probably isn’t about the quality of your ideas. You might be suffering from a structure that isolates innovation from the organization’s core functions.
Here are four signs that might confirm there’s a disconnect between your innovation teams and the business units responsible for managing revenue streams:
- Innovation is treated like a cost center
When your innovation budget isn’t directly contributing to a P&L line, it gets viewed as a place where the enterprise spends money, but doesn’t make money. This is a critical indicator of a problem because it signifies that innovation is being viewed as a potential drain on resources rather than an investment in future revenue.
- Innovation directives are order-based
Too often, innovation is treated as a service to the organization, and the focus shifts to generating ideas or delivering on orders dictated by existing business units. Once this shift is made, the inevitable outcome is a focus on satisfying the internal “client” rather than meeting enterprise objectives and filling revenue gaps.
- Accountability is focused on activities, not outcomes
A key sign of this separation is that innovation is primarily accountable for activity-based metrics, like projects completed, ideas generated, IPs filed, and budget adherence. But it’s completely removed from the strategic outcomes of those activities. This reinforces the cost-center mentality in which the team is successful for hitting process milestones, rather than whether their activities helped it hit targets and achieve its OKRs.
- Commitment ends at the hand-off
The ultimate sign of the demarcation between innovation and the core business is that innovation’s commitment abruptly ends once the order has been completed. At that point, innovation turns its attention to the next urgent project. The relationship between innovation and the products and services it creates is completely isolated from its performance in the market.
Recognizing these signs is the first step toward properly aligning your business functions. The goal is to think of innovation as a growth function of the business. And the minute you commit to seeing innovation as a legitimate part of the revenue cycle, it will be reflected in the way innovation operates.
Seeing innovation as the first stage of the revenue stream lifecycle
To fully harness innovation’s potential requires embracing a growth innovation mindset. This is a management philosophy that sets growth as the single most important innovation outcome and manages every step of the innovation process accordingly. Growth innovation views innovation as the essential first stage of the revenue stream lifecycle. It’s not a cost center that supports the business; it’s the engine that keeps the business growing.
If innovation is isolated from your revenue-specific business functions, here are four steps to help turn that around:
1. Attach projects to growth objectives from inception
The moment an innovation project is conceived, it should be linked to specific enterprise targets and OKRs. This shouldn’t be optional. It should be a foundational requirement for funding. Instead of pursuing interesting ideas, the portfolio should focus on filling defined gaps identified in the long-term strategy. This not only ensures that every resource assigned to a project contributes to revenue targets, but also that innovation teams are invested in project outcomes from the jump.
2. Set KPIs and reporting practices that track contributions to OKRs
You get what you measure. If you want to change your innovation organization’s outlook and behavior, you have to change the metrics. This means setting KPIs and reporting practices for innovation projects that track actual progress against their contribution to OKRs, shifting the focus from simply reporting on process milestones to reporting on their confidence in hitting targets. This further solidifies innovation’s investment in the outcome, while also helping leadership solve the black-box problem, enabling resource decisions to be made based on future value.
3. Give innovation a seat at the table
Giving innovation a voice in the room where decisions are made should be a non-negotiable. This shift gives innovation leaders a better understanding of non–innovation–related activities, interdependencies, and enterprise-wide resource capacity. It enables them to weigh in on core business projects and potential growth opportunities. And all of this helps them draw a clear line between project management and the strategic portfolio projects support.
4. Extend the boundaries of responsibility beyond prototype hand-off
The innovation team should retain a certain level of ownership and accountability for a project until it reaches a predetermined level of viability, tied to the OKRs the project was linked to from the beginning. This ensures the team is incentivized to address operational hurdles and downstream challenges proactively. This commitment transforms innovation from a short-term development service into a long-term growth engine.
Tear down the boundaries between innovation and revenue
The unspoken dividing line between innovation activities and the revenue streams they contribute to negatively impacts innovation’s effectiveness. It ends up relegated to a service function whose inner workings and potential outcomes become a mystery to the enterprise. The fix is to approach innovation from a growth innovation perspective where innovation is seen as the first stage of the revenue stream lifecycle. This ensures that every project is linked to OKRs and the innovation team remains invested until those targets are achieved.
If you’re ready to stop managing innovation as a cost center and want to see it function as a core growth function, it’s time to learn more about growth innovation. Discover some practical first steps to reframing innovation’s place in your organization by downloading a free copy of Building a Growth Innovation Culture.