Why protecting innovation from the core may solve the wrong problem

Corporate innovation has a stubborn problem.

Despite decades of investment in Design Thinking, Lean Startup, Agile, Stage-Gate, accelerators, innovation labs, venture studios, and corporate venture capital, a central challenge persists: breakthrough innovation is difficult to scale inside large organizations.

A recent Fast Company article by innovation veteran Mark Payne put the problem bluntly. Based on conversations with CEOs and innovation leaders, Payne argues that corporate innovation success rates have remained stuck around 10% for two decades. His conclusion is that the missing link is not process or organizational structure but the shortage of exceptional “black belt innovators” capable of doing the work.

Talent undoubtedly matters. But is talent really the missing key?

Innovation is hardly alone in producing stubbornly poor outcomes. Research across the field has repeatedly found similar success rates for major business transformations. Digital transformation, operating model change, and broader business transformation all confront the same recurring challenge: organizations can define the ambition but struggle to mobilize the enterprise around it and sustain the change at scale.

Different studies. Different definitions of success. Different types of change.

But the pattern is difficult to ignore.

What if innovation failure and transformation failure aren’t separate problems at all? What if both are symptoms of a deeper enterprise capability gap?

We Keep Treating Failure as Discipline-Specific

For years, organizations have responded to weak innovation performance by improving the innovation process. Better ideation. Better discovery. Better experimentation. Better innovation talent.

Transformation leaders have done much the same within their discipline. Digital teams have created their own operating models. PMOs have improved governance. Strategy teams have refined planning.

Each discipline has become more sophisticated, yet the success rates remain consistently low.

That should at least make us question whether the root problem sits entirely within any one discipline, and it makes a shortage of exceptional innovators an even harder explanation to accept.

Protecting Explore Creates a Scaling Problem

There is good reason corporate innovation evolved the way it did.

Michael Tushman and Charles O’Reilly’s work on organizational ambidexterity highlighted a fundamental tension inside established organizations. Every company must simultaneously exploit its existing business by improving efficiency, predictability, and scale while also exploring new opportunities characterized by uncertainty, experimentation, and learning. The capabilities required to exploit a mature business are very different from those required to explore an uncertain one.

The core of the business needs predictability, efficiency, repeatability, and control.

Exploration needs experimentation, speed, learning, and tolerance for failure.

Trying to manage both through the same mechanisms creates obvious problems. An early-stage opportunity cannot produce a five-year forecast with the same accuracy as an established product line. An unproven business model cannot compete for funding using the same ROI expectations as an incremental capacity investment.

So companies created separation: innovation labs, accelerators, skunkworks, venture studios, corporate venture capital, and autonomous growth teams.

The logic is sound. Protect explore from the gravitational pull of exploit long enough for an idea to develop. Andrew Binns, Charles O’Reilly, and Michael Tushman make a compelling version of this argument in Corporate Explorer. Sometimes that is absolutely the right answer.

But it raises another question: What happens when the innovation eventually needs the enterprise?

A protected team may successfully discover a new product, service, or business model. Eventually, however, many of those ideas need something from the core: manufacturing, distribution, technology, data, procurement, regulatory expertise, commercial capabilities, capital, customers, or talent.

The innovation eventually has to cross the organizational boundary created to protect it.

And that is often where the organ rejection begins.

The same governance, incentives, funding processes, functional boundaries, decision rights, and risk tolerance that made exploration difficult are still there, waiting for the idea that exploration produces.

We protected the innovation from the enterprise without necessarily making the enterprise more capable of innovation.

Innovation Itself is Changing

This matters even more because the boundaries between innovation and transformation are disappearing.

Twenty years ago, the dominant corporate innovation question was often: What new product, service, or business should we build?

Increasingly, the question today is: How does the enterprise itself need to change to compete and adapt faster?

AI makes this especially visible.

AI is not simply creating opportunities for new products. It is changing workflows, decision-making, customer experiences, talent strategies, organizational structures, operating models, and potentially entire business models.

You cannot confine business model innovation inside an innovation lab.

Strategy, innovation, digital transformation, operational improvement, and business transformation increasingly compete for the same resources and depend on the same organization to absorb and scale change.

As innovation moves further across the business model itself, the challenge is no longer simply how to generate more ideas. It is how the enterprise continuously chooses, funds, resources, executes, absorbs, and scales change.

Building an Enterprise Capable of Innovation

If the underlying causes point to a broader enterprise capability gap, the response has to reach beyond any one discipline. Leaders can’t solve their innovation challenges solely by hiring better innovators or adopting another methodology. They have to change how the organization decides, funds, and absorbs change. It starts with three key moves.

1. Protect Explore Selectively

Organizational ambidexterity still matters. Explore and exploit require different management systems, different expectations, and sometimes different structures. Some transformational bets genuinely need protection while they are immature.

But there is a risk in over-isolating explore.

When innovation becomes the responsibility of a dedicated function, lab, or venture team, the rest of the organization can see innovation as someone else’s job. That may protect individual innovations, but it does little to build the broader organizational capability required for continuous reinvention.

The objective is not to eliminate separation. It is to use it deliberately.

Some transformational bets should leave the building.

Some should be protected inside it. 

Others will require changing the building itself.

As innovation increasingly becomes business transformation, innovation cannot remain the responsibility of a specialist function alone.

2. Rewire the Interfaces Between Explore and Exploit

So what does a more innovation-capable enterprise look like?

In a recent conversation about this article, Thinkers50-ranked global management thinker Kaihan Krippendorff offered an analogy that stuck with me: APIs.

In software, an API is a defined interface that allows different systems to work together without requiring either one to understand everything happening inside the other. Large organizations may need something similar between the parts of the enterprise designed to run the business and the people trying to change the business.

Running the business rewards efficiency, predictability, standardization, and scale. Changing the business requires and rewards experimentation, faster learning, dynamic allocation of resources, and greater tolerance for uncertainty.

The answer is not to duplicate finance, IT, legal, supply chain, HR, or operations inside an innovation unit. It is to create better interfaces into those capabilities.

Finance can provide staged funding mechanisms. Legal and regulatory can apply risk-based guardrails that protect what matters without imposing full-scale business controls on early-stage experimentation. IT and data can provide reusable platforms, sandboxes, or embedded technical teams. Operations can create pathways for pilots and scale-up. Talent systems can make it easier to assemble cross-functional teams around emerging opportunities.

The core retains the advantages of specialization and scale. Innovators gain faster, more predictable access to those capabilities without having to fight through the machinery every time.

That idea is consistent with Krippendorff’s broader work in Driving Innovation from Within, which focuses on creating the culture, structure, and organizational environment needed to enable employee-driven innovation inside established organizations.

The next evolution of organizational ambidexterity is not simply separating explore from exploit, but deliberately designing the interfaces between them.

3. Build an Integrated Operating System for Change

Better interfaces are necessary, but they are not enough. Large organizations also need a common way to make choices across the full portfolio of change. Leaders need clear answers to questions like:

• Which opportunities matter most?
• Where should scarce talent and capital go?
• What should receive more investment as evidence builds?
• What should be slowed, redirected, or stopped when conditions change?

This also connects directly to recent conversations I’ve been having with Project Management Institute (PMI) around enterprise agility.

PMI’s Manifesto for Enterprise Agility defines enterprise agility as the capacity to adapt at scale without losing coherence. Its guiding principles emphasize governing through guardrails rather than gatekeepers, funding purpose and intent rather than execution activity, moving decision authority closer to where value is created, and designing operating models for adaptability rather than efficiency alone. 

The companion Closing the Change-Readiness Gap research shows why that matters. Only 41% of executives believe their operating model supports rapid reallocation of capital and talent. PMI also identifies structural barriers, unclear decision rights, signal loss, and lack of trust as recurring obstacles to enterprise adaptability. 

Those are not innovation methodologies.

They are characteristics of the enterprise operating system.

In my previous article, The Missing Operating System for Strategy, Innovation, and Transformation, I argued for one connected operating system with multiple execution pathways. Innovation, transformation, technology, operational improvement, and major capital investments should not all be executed the same way. But they should connect to a common view of strategic priorities, resource constraints, dependencies, investment decisions, and expected value.

That means moving beyond separate innovation pipelines, transformation portfolios, digital roadmaps, and annual budgeting processes that each make decisions in isolation.

The operating system creates the connective tissue.

Early-stage innovation can still use progressive investment and experimentation. A major transformation can have a different governance rhythm. A capital project can apply greater engineering rigor. But leaders can see them together, make explicit trade-offs, and move resources as priorities and evidence change.

This is the capability organizations increasingly need: to run the business and change the business at the same time without allowing strategic intent to fragment across functions, priorities, and execution pathways as it moves from strategy to execution.

From Isolated Innovation to Enterprise Capability

When these pieces work together, organizations become better at three things:

1. Exploring faster. Teams can experiment under conditions of uncertainty without forcing immature opportunities prematurely into core-business governance.
2. Scaling what works. Successful ideas have defined interfaces into the capabilities, assets, people, and resources of the enterprise instead of encountering organizational organ rejection.
3. Adapting continuously. Leaders can reprioritize initiatives, redirect talent and capital, and change course as evidence and business conditions evolve without launching another disconnected transformation program.

For the past two decades, corporate innovation has become increasingly sophisticated at protecting innovation from the enterprise. The next competitive advantage will come from organizations that can adapt, absorb, and scale change more effectively than their competitors. In other words, those that can make the enterprise itself more capable of innovation.

If innovation and transformation continue producing similarly stubborn failure rates, a better innovation process, a better transformation methodology, or finding the next innovation unicorn capable of overcoming the system will not fix it. The enterprise capability and operating system underneath them both is the real issue.