So here is a scenario that is playing out in a number of technology (and non-technology) companies the world over.
You’ve found a bit of success. You want to scale your business. You go from loosely organised, small, and working all hours to something with a bit more structure. You want to become bigger as a business, but you want to keep the good bits of being a start-up (fresh ways of thinking and an innovative zeal). What happens?
The first path is that you try to believe that you are still a start up. Ultimately this is nonsense. I cannot believe the number of people who I worked with in a 100,000-strong workforce who laboured under the misapprehension that they “were really a start up guy”. Having lots of people who are “start up” guys in a massive organisation is a recipe for self-delusion. I don’t believe many tech companies will significantly outlive their founders as a result.
The second path is you emulate the successful existing, aged organisations. As you scale (and this also happens in the first path, regardless), you become more structured and process-centric, you become more hierarchical, and you increasingly become more specialised (if you employ 100 people you’ll find much less multiple-hat wearing staff than if you employ 10. Or 1.)
This increasing structure is great to help your organisation become bigger without becoming less effective and efficient. Hopefully your profitability doesn’t disappear as you suffer dis-economies of scale. But your ability to innovate? Hmm.
Structure and process tends to limit innovation: we can’t do things differently because the cost of “re-tooling” are too high (or process gives us a succour that we dare not challenge).
Hierarchies tend to limit innovation: we can’t do that because we are waiting for someone else to tell us to do it.
Specialisation tends to limit innovation: challenging the prevailing orthodoxy within a group of experts is really difficult, and great step-change innovation in thinking usually comes from outsiders (from Galileo to Copernicus to Bell to Einstein).
Is is possible to grow an organisation without structure, specialisation and hierarchy? Possibly without the latter, but the first two make hierarchy difficult to resist. And that (and as @euan questioned recently) hierarchies might provide comfort as much for those subject to power as those in power. It’s nice to delegate the hard stuff up the chain of command…
I don’t think it’s impossible to square this circle. I’ve started to experiment with some ideas taken from the world of Action Learning as to how supportive, cross-functional, cross-hierarchical groups could be established to provide a counterpoint to the anti-innovative powers of structure, specialisation and hierarchy. All I need now is a laboratory big enough, and some folks crazy enough to allow me to do the testing…
mmitII 
Increasingly, I am seeing courses turn up for Masters in Innovation – interestingly split between an MA and MSc qualification. The MA Innovation at UAL, Central St Martin, is the best I have seen. Run by a philosopher rather than a business manager (although I am sure Dr Brassett is the latter too) it looks at what innovation in the first unit and how to manage it in the second (slightly more complex than that in reality). In chatting with other candidates on their open day it is clear that innovation is the process which grasps creativity attaches it to opportunity, develops a methodology and pulls it through to delivery (again a summary). This is totally manageable and systemizeable (I know I invented a word there) the bit that you can’t manage is that creative element and this is the bit that when controlled tends to get stifled. When recently managing a creative project to design a specific wheelchair it was important to regularly exhort the designer to design the hoverchair and more because on climbing down from those heady heights where possibility and impossibility graze each other the designer was at his brilliant best. My role was to document the process and pull out the product we needed and the 5 other products that he had come up with in the process. It was then to allocate resource to take forward the creativity into productivity. I had no idea at the time that this role had a job title “innovation manager” but it is a role I have adopted in industrial design, management consultancy, policy making and change management. The common theme I have noted is that the creative, the policy maker, the coder, the change instigator needs a one to one relationship with the rest of the business. The one to many of sales, finance, compliance, HR, production, logistics etc kills that creativity – the innovation manager rations their questions; draws them together into a single question that the creative must answer. One to one relationships are the means to retaining creativity in a scaling operation. Innovation managers able to speak both the dialect of the creative and the business administrator are the key to making that work.