Creating a culture of innovation: The future of organizational design

What does it mean to be an innovative company right now?

This is a fundamental question I’ve been contemplating. Modus is a global digital transformation and product development provider approaching its 15th year. We’ve grown from three employees to over 400, spread across 65 countries, with enterprise clients spanning multiple industries from manufacturing to retail to healthcare.

Like our clients, we’ve responded to a head-spinning array of changes these past several years. These changes affect us both as a company and personally – from global crises to advances in generative AI.

We’ve strived to scale our business to the next phase of growth. And we’ve been reexamining our organizational design and mission.

What’s working? What needs to evolve to keep attracting the right digital talent? What have we learned in our journey and from our clients that others might find useful? How can we incorporate AI to advance and augment our digital transformation without becoming a distraction?

From experience and observing the best practices of our most successful clients and other leading innovators, let me share a few takeaways. They will help you design an organization that drives competitive differentiation through innovation, no matter your industry.

Create an innovation greenhouse

Ideally, novel ideas can come from anywhere in your organization. But it helps to be intentional about it – and design an in-house hotbed for incubating and implementing innovative projects.

A great example is Audi Business Innovation GmbH, founded in 2013, a full subsidiary of AUDI AG. As an innovation incubator, Audi Business Innovation is a driving force behind the development of additional digital offerings around the vehicle and beyond. The vehicle is evolving from a means of transportation to an experience device. Concurrently, Audi drivers are increasingly becoming users. Audi Business Innovation is driving this process with digital services and experiences that are novel and support and inspire Audi users in their everyday lives.

Large enterprises tend to embrace innovation labs to accelerate digital transformation, but 90% of them fail. The key to transforming innovation labs from cost centers to revenue generators is aligning them with strategic goals.

We’ve partnered with the innovation labs at large enterprises to produce cutting-edge new technologies and found that they are most successful when organizations don’t use traditional departments but have more clusters of employees taking on roles. This innovative way to organize work supports the short development cycles demanded for digital products.

Innovation labs that have a clear impact on ROI, prioritize the customer experience, and boost employee engagement have a greater chance of succeeding.

Cultivate an open source, remote-first culture

To drive innovation in a virtual organization, rip a page or two from the playbook for running distributed open source software projects. Establishing a formal, centralized open source program office sets companies up to innovate more quickly. It also creates a favorable developer experience to help retain quality talent.

An open source culture of transparency gives knowledge workers more career freedom and flexibility to innovate. At Modus, we empower teams and individuals to make decisions within their domains. Our firm attracts talented open source contributors predisposed to sharing best practices from previous projects. This shows their colleagues how to tackle a new technical hurdle.

Resourcing innovation in the form of an open source program office leads to greater accountability across your company, and keeps knowledge workers stimulated by the projects they’re working on, ensuring they’ll make a greater impact on the industry as a whole.

Establishing a formal, centralized open source program office sets companies up to innovate more quickly. It also creates a favorable developer experience to help retain quality talent.

Foster remote-first collaboration

Like many cloud-native digital start-ups with roots in the open source community, Modus Create embraced remote work before it was fashionable. Today, it remains almost exclusively a virtual firm with no offices. This makes sense for us even as we enter our next stage of maturation.

We’ve learned that remote work doesn’t have to hinder innovation – it can fuel it. But human connection and interaction are key to making remote-first scalable and sustainable.

Innovation is not just building cutting-edge technology; it is how companies build a team and systems to enable new technology and innovation in their industries.

I’ve been skeptical of RTO mandates coming from larger companies, as I don’t believe they’re required for innovation and collaboration. Part of our success is attracting a diverse global network of digital talent.

We use technology tools and platforms to facilitate clear and timely communication with each other and our clients. We employ agile methodologies to manage work in iterations, prioritize tasks, and adapt to changing requirements. We also invest in in-person team building and strive to create a sense of belonging for colleagues in need.

Our value proposition for potential employees? Come here for meaningful work, to build your skills in leading technologies, to make yourself more marketable, and to do this from wherever you want. For knowledge workers, remote work is here to stay. I say, embrace it. The right tools and workflow design can enhance individual productivity and work-life balance.

Understand what AI means for your business

The importance of an AI strategy

AI can turbo-charge innovation and productivity. But not without an effective strategy for AI adoption.

AI reached an inflection point faster than most of us anticipated, and many enterprises are struggling with how to deploy it.

But this is starting to change.

Nearly two-thirds of respondents in the latest McKinsey “State of AI” in early 2024 survey reported that their organizations are regularly using GenAI. This is nearly double what the previous survey found just ten months earlier. In addition, four out of 10 business leaders said they are using GenAI in more than two business functions.

Still, there’s uncertainty about where to deploy this disruptive technology to derive game-changing business outcomes.

Clients are asking, should I deploy AI in one area – customer care, for example – or pepper it in across my organization?

Like any technology, we advise our clients to understand the opportunities and prioritize what makes sense for their business. Just like software development and many aspects of digital transformation, it makes sense to get a reliable partner to help. Many innovative businesses like EVERSANA are piloting AI today – and the success of those pilots correlates directly with the team’s expertise.

How AI consultants can help

Smart CIOs know this, and that’s why they are bringing in outside consultants. Companies with mature software development functions aren’t necessarily equipped to develop AI. Even if you want to leverage AI, you need help setting up that infrastructure and knowing where to begin. We have hired people with PhDs in AI and data science. But it can be difficult and expensive for every company to bring AI talent in-house.

Many businesses are looking at how to use existing AI tools to increase productivity rather than build their own models. For example, they’ll use AI pair programmers like GitHub Copilot, AI workflow experts like Atlassian Intelligence, and roll out guidelines for using language models. However, some enterprises in highly regulated industries like healthcare and finance will invest in their own private AI models to prevent instances like leaking enterprise secrets via ChatGPT.

It’s important not to jump on the hype train and adopt a new technology just for the sake of it. Instead, focus on how AI can help solve specific challenges for your business, create a new market niche in your industry, or deliver a better customer experience.

There’s no doubt that AI is essential for all enterprises in the next chapter of digital transformation. It can enable significant advances in productivity and innovation. Still, it’s important not to jump on the hype train and adopt a new technology just for the sake of it. Instead, focus on how AI can help solve specific challenges for your business, create a new market niche in your industry, or deliver a better customer experience.

Organizations designed to innovate

For all of us charged with leading ongoing digital transformations, it’s important to bear in mind that any strategy for deploying technology should go hand-in-hand with a thoughtful approach to organizational design.

The most successful companies will structure work to cultivate innovation, enable their people to work at their creative best, and be intentional about applying AI so it delivers tangible business outcomes.