When it comes to structuring your firm for innovation there are really three ways which it can be done. Each comes with their own set of advantages or disadvantages and should be closely chosen by upper management based on overall goals and strategy.

Form A New Product Division

This division will be large and completely self-sufficient. It won’t rely on resources from other areas of the firm and as such this is its biggest strength.

Since the new product division (aka venture division) will be completely stand-alone it is guaranteed attention from top management. The fact that coordination and control are centralized is a huge advantage considering that everything will be laid out extraordinarily clearly on a hierarchical basis.

Since resources have to be set aside to build and staff the venture it’s rare that there will be inadequate resources. The complexity of putting together such a division also means that there is a long-term commitment from the firm.

There are negatives however, the division will have difficulties coordinating with other divisions (as all silo entities do) and will be inflexible. It will also allow numerous opportunities for individual’s vested interests to form.

Intel follows this strategy with their Intel Labs which through multiple facilities branches out to nearly every high tech, future application of computing technology. More information is here (http://www.intel.com/content/www/us/en/research/research-areas/intel-labs-research-areas.html).

Form A New Product Department

In this case the department will sit as a subset of a division and will focus on specialization and an integration of efforts.

There really aren’t as many benefits to this as there is with the product division. There are fewer resources, less authority, less attention from top management, and less importance placed on overall innovation.

The departmental model is also difficult to scale. With the division a manager can turn to the CEO and say “we need $15 million more for R&D this is what we’ll get.” It’s extraordinarily difficult to do that when the department is small and considered a subset – it just doesn’t have the focus or attention on it.

Hire A New Product Manager

At the simplest firms can choose to hire a product manager who is then responsible for that project. This is extremely simple but that’s about the only advantage. It’s easy for one person to get overwhelmed and in some ways fairly pointless – they’re really just a project manager.

This person will likely have little authority and in all honesty despite the small size will lack the flexibility to get around red tape in the organization.

That a new product manager would seem like not a great organizational model is perhaps confusing but consider this. The army works in a similar way. Someone up top tells someone lower to do something and it gets done.

In the army though laws have to be followed and then after that there is a strict code of authority. The army equivalent of a product manager (perhaps a sergeant) isn’t going to have to worry about politics, red tape, or any of that. He just has to get the job done and has the resources of his unit below him to make it happen.

Let’s be honest, that is not the case for many managers in an organization. If you put someone in charge of a new product will things really be any different? It’s something to think about carefully because if not there is no point to following this model and that leads me to a closing point.

Be Entrepreneurial In Nature

All of these strategies can work if planned and executed properly but it is critical that the execution is entrepreneurial. Bessant and Tidd in Innovation and Entrepreneurship state that being entrepreneurial is a “powerful mixture of energy, vision, passion, commitment, judgement, and risk taking” as a motive.

This is exactly the way entrepreneurial firms are and I would add one addition to that list: flexible. If something doesn’t seem quite right an entrepreneurial firm will simply adapt and change.

A company that can bring all these concepts together will be successful no matter which of the three systems they build. While yes, certainly there are benefits and negatives to each of them the truth is that they can all work but it will be hard if your firm doesn’t have an entrepreneurial nature about it.

This article was also written in consideration with Morris, Kurtako, and Covin’s Corporate Entrepreneurship and Innovation and is a stellar text on the subject.