Companies grow nonlinearly and respond to disruption primarily through innovative efforts. Innovative efforts require diverse resources--primarily talent and various types of funding. An innovative effort lacking any one required resource will fail. When companies divide management of those required resources among various managers, any one manager can stop any particular innovative effort. And if all innovative efforts receive all but one necessary resource, even if each effort fails to obtain something different, no innovation will take place. The Innovation Framework terms this concept Balkanization of Resources.
Organizations sensibly place each type of resource under the control of an organization they think best suited to protect and allocate it. Operations managers (Sales, IT, HR, Finance, etc.) own operational expenditures (OpEx), product managers own capitalized costs (CapEx), research organizations own Research and Development (R&D), and people managers control talent. Under normal (nondisruptive) operations, owning managers reduce resource expenditure to the minimum necessary to meet business goals.
So what's the problem? When businesses need to change business models rather than sustain them, ad hoc innovation teams need access to the resources that owning managers are incentivized not to give them.
Consider an organization developing a disruptive new product. At first, its product team needs R&D funding, prototype-focused technical talent, and management comfortable with new markets. Even if executive support exists, several management functions may stop the effort: an R&D board might withhold funding, engineering management might protect valuable talent for nearer-term projects, or product management might not assign someone to lead the effort. What's worse, product team resource needs change over time. As the product concept proves sound, other talents and funding types are required to develop and market the product at scale. If Balkanized, those new resources are controlled by still different managers, each incentivized to hold expenditures low, and each with his own priorities (which typically do not include innovation).
A shortfall in any one resource is worse than deferring the innovative effort entirely. Absent one resource, assigned innovators will expend allocated resources advocating for the resource they lack. For example, a product team with an insufficient budget will spend time pursuing funding rather than developing its product. In this situation, companies pay opportunity costs--those team members might have spent their time developing something else rather than advocating for funding. When multiple innovation teams each lack one resource, they all spend time advocating rather than developing, and no innovation occurs.
Under normal operations, Balkanization of Resources drives lowest cost delivery of a company's existing products and services. But it can bring a company's innovative efforts to a halt.
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