How’s this? Nielsen says that organizations following innovation best practices make about 6.5 times the revenue from new products than those who don’t. While that debate is settled, the jury is still out on whether other factors – such as having a formal strategy and structure for innovation – lead to greater innovativeness or innovation success.

We commissioned two research studies recently to understand banking innovation in different parts of the world, and both concluded that there was nothing to suggest that formal innovation departments catalyzed ideas or implementation any better than informal groups. Interestingly, some of the most innovative banks have sought the help of external consultants!

Less than 20% of banks in the Asia-Pacific survey had a separate innovation strategy. Depending on the region, 10 to 20% of respondent banks had a formal structure to support innovation. Not surprisingly, those with a department were also most likely to have a strategy. What could be the reasons behind this majority ad hoc approach? Well, many times, innovation is part of the larger organization strategy, hence not dealt with separately. There’s a feeling that heavy, layered structures could actually drag innovation progress. And sometimes, cultural and resource constraints stand in the way.

So, most make do with informal structures cobbled together for the duration of a project. These are almost always overseen by top management, who rely on a ‘change council’ to drive the agenda. While the flatness of this structure breeds agility and efficiency, it places inordinate pressure on the core group. And that could go either way.

So, there are some circumstances in which a methodical approach makes more sense.

Take the example of an innovative mid-sized bank. How long can it remain in the entrepreneurial mode, and still innovate efficiently enough to beat bigger competition?

The argument is even more compelling in the case of large, geographically spread out banks. A central department entrusted with the responsibility of managing innovation can bring co-ordination and knowledge of best practices to the table, and also prevent duplication of effort across the organization. Citibank Asia Pacific is living proof, having established a uniform architecture and product portfolio in all the 19 countries in the region where it is present. The benefits are obvious – cost, efficiency, economy of scale and uniform customer experience.

That being said, bulging committees will only slow things down and undermine originality with consensus. The key is to have a small, crack team which communicates quickly and drives relentlessly.

In your experience, what works better, a formal or informal approach? Or is there a hybrid model that we haven’t considered?