Centralize vs decentralize

Deciding whether or not to keep facets of your organization centralized versus decentralized is a very difficult decision. No matter the reason driving the potential change, something to remember is that this is always situational. When it comes to innovation, deciding whether to keep it fully centralized, fully decentralized, or a hybrid operation model, the resulting structure should ultimately help you “think” better and create value.

If centralizing:

  • Ideas oftentimes will be a bit too disconnected from reality as they may not be focused on core competencies of the business
  • Ideas will turn into projects and projects will turn into products or services, but will this trigger a positive return for the business? That is a question that is often overlooked (which actually works well when considering larger, multinational companies)
  • You may not leverage current competitive advantages as there are degrees of separation when the team is centralized

If decentralizing:

  • Idea generation is closer to the execution, though it may require folks to wear multiple hats and therefore not be focused solely on innovation
  • Your ideas will likely be rooted to your core competencies
  • You may not think radically or see the growth you expect as the ideas and teams are less likely to think “outside the box”

So, we’ve really just played Ping-Pong with the idea of which is better and that’s because it does really depend on the company, the product or services portfolio, and what your expectations are from the innovation team. Either way, when thinking about innovation, try not to think about centralized vs. decentralized. Both can be executed well to help your business grow and both can also potentially create catastrophic failures. Instead, bridge the gap on the reasons they don’t work and consider the following:

  • If centralized, how can we connect with the business to ensure that our ideas can not only become a reality, but align with the long-term business objectives of the company, thus creating value?
  • If decentralized, how will we establish a culture where we can connect with the outside world and think “outside the box”?

And on a final note, don’t just change your structure because “everyone else is doing it”, change your structure because it’s the best choice for your specific organization.