Editor’s Note: Venkatesh Rao is a researcher and social media evangelist at Xerox, where he investigates the “futures of documents and of work.” Venkatesh also maintains Ribbonfarm.com, a blog about innovation and business, and is frequently involved in discussions on the Wikinomics blog.

The juvenile sea squirt wanders through the sea searching for a suitable rock or hunk of coral to cling to and make its home for life. For this task, it has a rudimentary nervous system. When it finds its spot and takes root, it doesn’t need its brain anymore, so it eats it! (It’s rather like getting tenure.)

– Daniel Dennett, in Consciousness Explained

A corporation too, is rather like Dennett’s sea squirt. When young and growing, it is all innovation-everywhere – strategy is an active line function, a brain, through early twists and turns towards fertile markets. Research isn’t a separate function because it is all research. As it matures, the organization may take root in a comfortable market… and eat its own brain. Strategy shrinks and becomes a backroom staff function, and R&D is first localized as a vanity function (“we have a lab with 50 star PhDs!”), and then gradually shrunk. Then one day, the market is threatened and everybody screams, “Who moved my cheese!” The capacity for active strategic steering and innovation everywhere has been lost.

How do you keep it alive in a cost-effective way? How do you prevent the animal from permanently becoming a plant? Succumbing to Luddite researcher screams for more blue-sky funding is dumb – history proves that doesn’t work. Here’s a smarter way:

Reverse Surge Capacity

Look at this picture (all P/L and margin is bundled into “operations,”):

Much of this picture will be obvious to innovation professionals: the traditional 3-bucket R&D investment model of blue-sky research, near-term development, and “spiky” incidents when operating business units call on R&D for surge-capacity to fight fires.

A reverse surge (the leftmost downward spike) happens when R&D spots an opportunity to draw business unit staff into research roles and actually reserves part of its precious budget to fuel such spikes. If it works, the reverse spike may trigger a new business growth spurt. This is anathema to 1.0 innovation theologians (R&D is supposed to preach and beg for money from the business units, not give it away).

Toy Example

Here is a toy example, with some simplified, illustrative tactical/operational detail, based on real examples I’ve known. A line of business has had its main product displaced by a competitor and seen a sharp drop in revenue, leading to some layoffs and serious anxiety. This unit, at the time it most critically needs new ideas to survive, has no spare resources with which to find and develop the new ideas, and is under threat for further cuts unless it immediately redeploys some remaining resources towards a believable option. A frustrated unit employee blogs internally about the situation. An R&D manager spots this, connects some dots to some market developments she’s been watching cheaply through external industry blogs, and some waiting portfolio “seed” ideas, and triggers a reverse surge. R&D steps in and provides short-term funding to support a cross-functional research-led team tasked with seeding a growth opportunity, with constraints that link the effort to innovation priorities. R&D gets the market expertise it needs (hint: here’s why this is crucial to innovation), and operational staff get a chance to step back from quarterly pressures and work on some of their longer-term ideas born of field experience.

This is reverse surge capacity: an operational unit has been drawn into innovation work in a serious way that goes way beyond online brainstorms (which just clog traditional stage-gate pipelines more in the worst case). The recipe is simple, but very unorthodox (which is why the few examples I know of – which unfortunately I can’t talk about – have a ‘maverick’ feel to them, but they are starting to appear with increasing frequency). Note the complexity of the story – it isn’t a chaotic bottom-up Kumbaya storyline where a wiki magically produces a business. It is like a complex, stochastic chess game, where some of the pieces move by themselves, and some are moved deliberately, against a changing board.

The Theory

The key is to recognize that innovation is a partly situational, rather than a purely structural function. Innovation everywhere is not about everybody coming up with and pursuing their own ideas all the time. That is even worse than preachy PhDs trying to come up with all the ideas and throwing them hopelessly over walls. Innovation everywhere (really, innovation anywhere) is about orchestrating innovation in a flexible enough way that whoever is best positioned and motivated to go after an opportunity is able to draw on the resources to innovate. Wikinomics provides the doctrine and social media provide the high-clarity internal and external visibility and social networks to spot and react to ‘reverse surge’ opportunities. What is missing is the hard-nosed operational and tactical management middleware, capable of moving resources around, which the reverse surge model begins to provide.

Remember this formula:

• Some employees must be innovating all of the time
• All employees must be innovating some of the time
• All employees must NOT be innovating all of the time
• Innovation leadership must orchestrate this opportunistically

The Gory Details

Of course, as anybody in a modern innovation role will recognize, I have over-simplified the picture. There are a lot of operational competencies that must be mastered to make this approach routine and effective, and no company operates this way routinely today. You need to understand the intricate interplay of strategy, doctrine, tactics and operations in a modern enterprise, and understand the art of opportunism – a key skill in the 2.0 world. You need to understand and learn to play the changing game of talent management, and the rich variety of roles required for successful innovation. You need to master outsider innovation and open innovation practices, develop a deep appreciation for Coase economics, and develop social media capability maturity.

But then, plants don’t evolve into mammals overnight.

Sea Squirt 2.0

Going back to the original metaphor, imagine instead that the brain shrinks, but not to nothing. When something disturbs the rock, our hypothetical creature’s generalist brain cells recognize a new, promising rock, and generate some hormones that temporarily turn some body cells into specialist brain cells uniquely suited to the task of moving towards the promising new rock. The sea squirt 2.0 uproots some tentacles, moves them gingerly over to the new rock, straddles the two for a while, and then possibly moves the remaining tentacles, before shrinking its brain again.