Type I vs Type II Innovation Programs

March 30, 2020

In my decade-plus years working with corporate innovation leaders, I’ve seen a variety of frameworks to explain what we mean by “innovation.” The most enduring of these has been McKinsey’s Three Horizons model – although there are plenty of others.

These models – powerful though they are – have always left me wanting more. Based on recent conversations with a number of corporate R&D and Innovation leaders, there’s another lens I’ve begun using. Think of it as a companion to the more “strategic” innovation frameworks that already exist.

On the surface, corporate innovation programs often appear to have similar missions. But under the hood, there can be radically different success drivers:

  • Type I innovation programs are mission extensions from an existing corporate unit or function – most commonly R&D, Marketing, Technology, or Strategy.
  • Type II innovation programs are new departments without a direct antecedent or parent – typically christened by the Board, CEO, or other C-level leader or committee.

I’ve seen plenty of meetings that begin with “our portfolio is focused mainly on H2, with a little H3 on the side” – or something similar. This is great information, but it doesn’t address some of the most crucial pieces of context.

Who’s really calling the shots? How does the innovation group interact with the rest of the organization? And how does its mission contribute to overall enterprise success? The best answers start by looking at the innovation group’s provenance.

It is rare to get true breakthrough innovations (H3) from a Type I organization – no matter how hard you try. You must operate within the logic of pre-existing unit, and thus you are bound by an invisible force-field that avoids high-leverage, high-uncertainty bets at all costs. Your mission is unavoidably couched in the business-as-usual parlance of the parent function.

The reverse is true as well. As a Type II innovation group, you must write your mission statement from scratch. Focusing the innovation portfolio on incremental wins (H1) brings you into direct conflict with existing business units and functions. This quickly leads to an unsavory reputation as “shadow R&D” or “shadow IT.”

Every time I’ve used the Type I / Type II concept in a meeting, it works like a charm – opening fertile new ground for discussion and analysis. Granted, there’s plenty of nuance along the spectrum. But I suspect that, for most innovation leaders, playing the Type I game just feels so different than Type II – in a visceral, in-the-trenches way.

If you’re Type I, you likely think in terms of Stage Gates and KPIs. By building a steady base of near-in successes, you earn the credibility to take (a few) bigger risks. Whereas if you’re Type II leader, you probably operate on more of a “laying siege” mentality – essentially a mashup of VC and co-founder. Swinging for the fences may be your best (perhaps only) lever for adding unique value to the firm. As a result, Type I and Type II groups tend to hire different types of people, and indeed they tend to have very different team cultures.

If you’re skeptical, I suggest a short exercise. Write down, in a series of bullets, the history of how your innovation program has developed. Make sure to include changes in org structure, pivots to your mission, and prominent victories along the way. Then re-read the list and think about whether you’re more of a Type I or Type II innovation program.

If you complete the exercise, I’d love to hear about it – especially if I’m proven wrong. More likely, I bet you’ll come away with some interesting insights to inform your work going forward.



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