An Updated Framework for Institutional Innovation

"When we look at the past, we can see many, many world-changing things were possible at the time, which people did not realize. We know this. What we forget to tell ourselves is that this must be true for us in the present as well." - John Armstrong

Institutional Innovation is the term we use to describe an integrated set of people, processes, and frontier technologies that create new value by helping the company consistently do something that outperforms its competitors. Institutional innovation derives from a progressive corporate strategy and naturally involves work integral to the company and its industry. Implemented correctly, innovative initiatives lead to consistent growth in the organization’s competitive advantage over a preordained time period.

In the era of Institutional Innovation, seemingly far-fetched concepts we imagine today may transpire as the new normal for future organizations. Initially, non-proprietary or open-source knowledge flows between business ecosystems will gain momentum as institutions face growing competitive pressure and shrinking returns. Competitive advantage will no longer rely on stocks of knowledge, but rather on having access to flows of knowledge to enable up-to-date information. Success will not be defined by scale but by the ability to learn and innovate iteratively, continuously, and rapidly. Organizations that drive accelerated learning will be more likely to create significant economic value on a sustainable basis. To survive and flourish, leaders will need an agile mindset to innovate systematically, so that their organizations can harness the full potential of the digital infrastructures evolving around them.

Institutional Innovation will unlock the unlimited potential of ourselves and our organizations. It will pave the way for a new leadership paradigm that heralds unprecedented change and guides the workforce towards opportunities to flourish even as technological advances drive seismic shifts across all organizations. At its heart, this movement is about empowering people, rather than the rise of machines.

Figure 1. The Framework for Institutional Innovation

This involves reimagining the organization – how it will be designed and how it will be managed in the evolving business ecology. At a time when AI is transforming how we work, it means focusing on those skills that are uniquely human. Higher-level cognitive tasks that are beyond the scope of machines and can afford workers the opportunity to explore ways of working that challenge the imagination, extract value, and provide a competitive edge.

We must combine four important pillars in the organizational framework to realize institutional innovation. As shown in Figure-1 above, these pillars embrace strategic transformation, operating model evolution, work design modification, and employee experience modeling. While some pillars are familiar business concepts, they must assimilate the new contexts and new ideas in an organizational redesign that are the essential components necessary for companies to compete in the Fourth Industrial Revolution.

This foundational framework forms the basis for institutional innovation and requires every corporate problem-solving initiative to consider the ripple effect across each element and its respective dimensions. For example, the transforming business strategy must focus on an enabling infrastructure that clarifies the organization’s true purpose, aligns company principles, defines reinvention, and reinforces cultural changes. The evolving operating model will optimize efficiency by automating existing processes, instituting streamlined operating rules, designing new protocols, and establishing forward-looking measures.

Work and job design modifications will realize effective value delivery by embracing emerging capabilities, behaviors, upskilling, and novel work practices. Finally, employee experience modeling will organically augment the customer experience by pursuing new value creation, the cultivation of talent, flexibility, and the expansion of the mobile metaverse. These tasks must operate in concert with one another. For example, job or work design modifications should not be considered without the overarching context of the transforming business strategy, the evolving operating model, or the employee experience.