The landscape of corporate growth is ever-changing, and as companies strive to stay competitive, the balancing act between maintaining operational efficiency and pursuing long-term innovation becomes increasingly complex. To uncover this apparent dichotomy, we conducted a series of interviews with executives and adjacent roles across various industries.  

Key hypotheses and conclusions

Before conducting our research, we formulated several hypotheses based on our observations and experience. The first hypothesis was that innovation efforts lack clear executive ownership, which often leads to a lack of accountability. Our findings partially verified this, revealing that while executives typically hold ownership, the role is often diffuse, with responsibilities spread across multiple individuals, making it harder to prioritize innovation. We also hypothesized that exploratory growth initiatives receive insufficient executive attention. This was also partially verified—while growth initiatives are discussed, they are often only prioritized when they reach a certain financial threshold, leading to bloated projects. Finally, we suspected that exploratory initiatives are governed using the same metrics as exploitative initiatives, which can cause inefficiencies and premature project closures. This hypothesis was fully verified, as we found that many companies apply the same appraisal standards to exploratory projects, which leads to mismanagement and missed opportunities.

Strategic Recommendations

Drawing on the insights from both our interviews and industry research, as well as McKinsey’s findings on “growth outperformers,” we offer the following recommendations to help companies better manage their innovation efforts:

1. Establish a Meeting Cadence Focused on Tomorrow’s Business

To ensure innovation receives the executive focus it needs, we recommend setting up dedicated meetings that focus exclusively on “tomorrow’s business”; the future-focused initiatives that drive long-term growth and innovation. These meetings should be scheduled on a regular cadence and should involve reviewing emerging trends, assessing the company’s innovation pipeline, and determining which exploratory projects warrant further investment. Creating this separation between “today’s business” and “tomorrow’s business” fosters the right focus and prepares the organization for the future.

2. Develop and Manage an “Explore” Portfolio

Exploratory projects are fundamentally different from exploitative ones, and they need to be managed differently. Companies should create a clear “explore portfolio” that tracks innovation projects from ideation through scaling. This portfolio should include:

• A funnel overview of projects by stage (ideation, shaping, incubation, scaling).
• Resource allocation and expected returns.
• A light project-level reporting system that tracks learnings and validation efforts,  progress and resources.

By distinguishing exploratory projects from exploitative ones, companies can ensure these initiatives receive the right level of attention without burdening them with the same performance expectations or comparing them to initiatives which are more liniar and have track records and data.

3. Create an Incubation Zone for Exploratory Projects

As early-stage ideas often struggle to secure resources, we recommend creating a dedicated “incubation zone” (term from Geoffrey Moore’s book, “Zone to Win”, 2015). This flexible space, distinct from core business operations, would allow innovative projects to develop without competing for attention with mature business units. The incubation zone should have its own budget, resources, and a quarterly evaluation process to assess whether the project is moving toward viable market demand and technological feasibility.

4. Establish a Central Innovation Unit with Decentralized Execution

A central innovation unit should be set up to provide guidance on methods, processes, and best practices, supporting innovation activities across the organization. However, innovation should happen where it is closest to customers. Thus, decentralized business units should lead their own innovation efforts with support from the central unit. Using a digital infrastructure, the central unit should be responsible for transparency, ensuring that the same problem is not being addressed in multiple places. This allows for analysis of the combined pipeline across the organization, maximizing the value of efforts and the collective knowledge of the company. This model enables faster decision-making and ensures that innovation stays aligned with customer needs.

5. Enable the Organization to Manage and Evaluate Exploratory Projects

To create a culture of innovation, organizations need to enable their leaders to manage both incremental and transformative innovations. This can be achieved by running internal venture competitions, sponsoring incubation projects, and providing training programs (such as a “License to Innovate”) to help managers and project teams develop the necessary skills to handle exploratory projects effectively. These initiatives should also be supported by frameworks and tools to manage the uncertainties inherent in new ventures.

Final Thoughts

In conclusion, managing growth through innovation requires both structural and cultural shifts within the organization. By separating the focus of “today’s business” from “tomorrow’s business,” establishing clear ownership of innovation, and creating tailored governance structures for exploratory initiatives, companies can better navigate the tension between short-term financial imperatives and long-term strategic goals.

Success lies in creating a dedicated space for innovation, empowering executives and teams to prioritize future growth, and fostering a culture where both incremental and transformative innovations are seen as vital to long-term success. Companies that implement these recommendations will be better positioned to capture new revenue streams, adapt to market shifts, and maintain a competitive edge in an ever-evolving marketplace.

Get the White Paper

For more information and the detailed report on our findings, request the full white paper via morten@nos.co