Corporate innovation teams haven’t disappeared, but they’ve evolved. Stand-alone innovation departments led by Chief Innovation Officers reached their peak around 2017 to 2019, when nearly 30% of Fortune 500 companies had a senior innovation executive. Many of those teams still exist, but most companies have moved toward embedding innovation across the business, rather than isolating it in a single department.
What hasn’t changed is the importance of thinking intentionally about how innovation is structured. Innovation doesn’t happen by accident. It happens by design. And that design starts with organizational clarity.
Companies often say they want more innovation, yet fail to consider how their structure either fosters or frustrates it. The question isn’t whether innovation should be centralized, decentralized, or cultural—it’s how to design the right model for the organization’s context, scale, and strategy, and how clearly those innovation efforts, results, and expectations are defined and understood across the enterprise.
The Three Faces of Innovation
Before determining how to organize for innovation, leaders must first clarify what kind of innovation their company is pursuing. Broadly, there are three types:
1. Product and Service Innovation
The most visible form—focused on what the company sells or delivers to customers. This includes new products, features, or services designed to meet emerging needs. Apple’s product breakthroughs or Nike’s service-based innovation in digital fitness are familiar examples.
2. Business Process Innovation
Enhancements in how the company operates—through technology, automation, or new ways of working. Examples include supply-chain redesigns, AI-enabled service models, or reimagined go-to-market approaches. Fast-food companies, for instance, continually refine drive-through operations to improve speed, accuracy, and experience.
3. Business Model Innovation
The most transformative type—redefining how a company creates and captures value. Netflix’s pivot from DVDs to streaming or Adobe’s shift to subscription software are classic cases of model reinvention.
Each type of innovation requires different skills, time horizons, and levels of risk tolerance—which means the supporting organizational design must differ as well.
What Organizations Are Actually Doing
A 2022 survey of approximately 100 global organizations, each with revenues exceeding $2 billion, across industries such as automotive, consumer goods, financial services, retail, technology, media, transportation, and energy revealed a telling pattern:
Four Models of Innovation Organization
Each model carries distinct advantages, risks, and conditions where it works best.
1. Discrete (Skunkworks)
Originating with Lockheed’s “Skunk Works,” this model empowers small, autonomous teams to pursue radical innovation independently.
Best for: Greenfield products, stealth projects, or disruptive bets.
Advantages: Freedom from bureaucracy; measurable outputs; speed.
Risks: Reintegration challenges; “Not Invented Here” syndrome; lack of transparency.
2. Centralized Innovation
A single corporate group sets goals, budgets, and strategy, often working across business units.
Best for: Organizations with similar products or brands that can scale ideas broadly.
Advantages: Clear governance; dedicated funding; alignment with leadership priorities.
Risks: May be challenging to integrate; central team may lack the necessary expertise to develop viable solutions.
3. Decentralized Innovation
Innovation occurs within business units or functions, each with its own priorities and funding.
Best for: Diversified conglomerates or multi-brand portfolios.
Advantages: Local relevance; faster decision-making; stronger ownership.
Risks: Potential for duplication of effort, competition between teams, inconsistent metrics.
4. Embedded Innovation
Innovation isn’t a department; it’s a cultural expectation. Budgets are integrated into operating plans, and every team is accountable for continuous improvement and new ideas.
Best for: Agile organizations and technology-driven firms.
Advantages: Broad engagement; low overhead; promotes curiosity and ownership.
Risks: Harder to measure progress; can lose focus without visible leadership.
The Role of the Chief Innovation Officer
Titles such as Chief Innovation Officer, Head of Innovation, or VP of Growth and New Ventures are most effective in centralized or discrete models, where dedicated leadership, governance, and investment are required to guide an innovation portfolio.
However, in decentralized or embedded environments, this role can become symbolic or redundant if accountability for innovation already sits within business units. The issue isn’t whether a company needs a Chief Innovation Officer, it’s whether the role is structurally aligned to where and how innovation needs to occur.
In distributed models, innovation leadership often shifts to executives such as the Chief Digital Officer, Chief Strategy Officer, Chief Technology Officer, or Chief Information Officer, who integrate innovation into broader transformation and execution agendas. Increasingly, senior technology leaders are tracking innovation metrics directly, such as the number of innovations launched or the percentage of team time devoted to innovation.
Choosing the Right Model
There’s no single “right” way to structure for innovation, but should fit the organization’s business model, maturity, and culture.
The Hazards of Innovation Models and Handoffs
Before creating any centralized innovation team, CEOs, Strategy Officers, or CHROs should ask:
Structure also determines how innovation moves from idea to implementation.
Embedded models (or organizations without a formal innovation team) typically manage the entire innovation funnel—from ideation through scaling.
Centralized innovation teams (whether corporate or business unit) should manage ideation, incubation, and early development. However, they must partner closely with business leaders to prioritize ideas and ensure feasibility before handing off to operations or IT for scaling or commercialization.
Without clear ownership and governance across these stages, even the most promising ideas can stall in transition and execution—not because the ideas lack potential, but because the structure does.
The Real Goal: Balance
Innovation thrives at the intersection of freedom and focus. The most successful organizations design clarity into their structures—defining who innovates, what kinds of innovation matter most, and how ideas are funded, measured, and scaled.
Ultimately, innovation is not a department or a title. It’s the result of deliberate organizational design, one that connects creativity, capability, and clarity to make new things possible.
