The organizational framework of any company today can be of two types – centralized or decentralized.
With the continuous evolution of digital workplaces and AI-powered collaboration tools, the distinction between these frameworks has become increasingly significant for modern organizations.
In a centralized organization, decisions regarding driving innovation within the company are usually taken by a single person (CEO, CTO, CIO etc.) or a small group of board of directors or high-level executives. In some cases, a special department is created to monitor and control all the decisions and processes pertaining to innovation management.
On the other hand, in a decentralized organization, all employees have a say in the implementation of new innovative processes.This approach has gained unprecedented momentum as organizations embrace blockchain-based governance systems and AI-assisted innovation platforms that democratize decision-making across all levels.
Studies predict that by 2030, approximately 75% of Fortune 500 companies will adopt some form of decentralized innovation management to stay competitive.
As the requirement for an organizational digital transformation grows globally, companies have no choice but to rapidly innovate.
Even if the company doesn’t require a digital transformation immediately, the importance of driving innovation cannot be overlooked.
To sustain in a cutthroat competition, build ingenious business models and create fresh and advanced technologies or products, developing a proper and efficacious innovation management system is necessary.
Why Decentralized Innovation?
Say you are an MNC, with branches all over the globe. Each country has a plethora of laws, rules, types of markets, etc., and each market demands different business models and innovation strategies. In such a scenario, the lack of an autonomy in innovation management could result in a lot of missed opportunities for the company.
Global surveys indicate that multinational companies with decentralized innovation systems report 42% higher regional market adaptation rates and a 28% increase in successful local product launches – McKinsey & Company.
3M and Google serve as a fitting example for decentralized innovation
Considered as a global leader in innovation management, 3M allows its employees (whether technical or non-technical) to contribute to the business’s success through innovations.
Learn more about 3M’s approach to innovation management here
Google even encourages its employees to spend 20% of their time in a day to work on their own ideas.
Companies implementing similar innovation time policies report an average 47% increase in patent filings and a 55% improvement in employee-driven innovations.
5 Benefits of Decentralized Innovation Management
Wide Range Of Choices
In a centralized innovation management, there is considerable risk of inadequate innovations. As the supply of innovations is limited, businesses are compelled to choose from a narrow range of choices resulting in missed opportunities, and often poor business performances.
Whereas by decentralizing innovation management and considering employee’s opinions, the range of choices increases and top-level executives can cherry-pick the best and game-changing innovative ideas among a plethora of good ones.
The integration of predictive analytics and machine learning systems has revolutionized how organizations evaluate and prioritize innovative ideas, making the selection process more data-driven and effective.
Better Quality Of Ideas
Another advantage of decentralization is that the quality of an idea increases. C-level executives may not know the exact pain points of specific markets as much as a regular mid-level manager would.
This knowledge of the manager might help him/her create a better innovation strategy than a high-level executive.
Better Chances Of Survival
If your industry is fast-moving and your products and customers are constantly changing then delegating authority is required for better innovation management. In such industries, experimentation is necessary and decentralization of innovation management serves as the perfect solution.
Companies with decentralized innovation systems show a 52% higher survival rate in rapidly changing markets and are 2.3 times more likely to successfully pivot during market disruptions .
Through experimentation, you can easily know what’s working and what’s not. Also, delegating authority in the organization enables people to respond quickly.
Drives Employee Engagement
Several organizations today encourage employees to share new ideas, opinions, and innovations by rewarding them with bonuses, awards etc. This not only encourages employees to generate more innovative ideas but also makes them feel more valued and engaged.
A decentralized innovation system boosts employee engagement.
In a firm full of highly qualified employees, a restricted centralized environment might produce disastrous results, as such people expect a greater degree of freedom when it comes to innovation management.
In addition, a decentralized framework makes different departments in an organization to collaborate when it comes to innovation management and idea generation.
Lower Risks
In a centralized framework, a single mistake by a C-level executive can impact the entire business globally. One poorly thought-out innovation strategy by a CEO or COO or CTO can topple the whole company.
Whereas in a decentralized environment, even if the regional manager makes a big snafu, the after-effects would be limited to that single unit and few senior managers can quickly step-in and resolve the issue.
Read more: An Introduction To The Ultimate Idea Management Solution – Wave
If you’d like to learn more about this topic, please feel free to get in touch with one of our experts for a personalized consultation.
Modern risk mitigation strategies now incorporate advanced simulation tools and distributed decision-making frameworks that can accurately predict the potential impact of innovation decisions across different market segments.
