posted 17 Dec 2007 in Volume 11 Issue 4
Masterclass - Part one
Broadcasting innovation: organising to connect intelligence
Innovative organisations are evolving new management models to capitalise on the exponential power of computer-enabled people networks that create value through connecting intelligence in and beyond their traditional boundaries. ‘Open source’ software development, using many minds to develop code, is a popular benchmark for having generated a variety of ‘open’ methods.
This masterclass discusses several approaches to opening wide organisational doors to tap external talent for specific needs using what we call ‘broadcasting innovation’. Each organisation cited adopted an open design depicted in Figure one. We close with specific recommendations on how to begin a broadcast innovation approach to meet your organisation’s needs.
Part two will describe how organisations are creatively using prediction markets to enhance innovation and business forecasting.
Deep roots of connected network value
Writing in a Forbes special report on Networks1, Robert Metcalfe, renowned computer industry pioneer and inventor of the Ethernet protocol and Metcalfe’s Law, noted that a quarter-billion Ethernet switch ports (wall sockets) were installed in 2006. It is now more than three decades since Metcalfe’s Ethernet card solved his 1973 challenge of how to connect multiple personal computers in a Xerox PARC laboratory to allow file sharing. Card cost has declined from $1,000 a piece to about $5 and become standard in most personal computers.
Everyday individuals experience the impact of reduced connection cost as they confront overflowing email boxes with messages from around the globe and 24/7 time stamps. Their Internet access provides an over-abundant array of information sources from which to find answers for every business question.
Technicians installing Ethernet cable and wall sockets to enable computers and people to connect and share information are visible. Not so apparent but more significant is how that connectedness impacts organisations. As open source software thought leader Simon Wardley explains: “Ubiquitous and distributed networks have created low cost commoditised communication which has allowed for greater collaboration.”
While individual employees struggle to sift what is valuable from information streams, their organisations are challenged to implement more dynamic and effective management models to leverage the complex intersections of people networks to compete in a connected world. Broadcasting innovation is one such approach.
What is broadcasting innovation? Why do it? And how does it work? A close look at InnoCentive (www.innocentive.com) provides answers.
In 2001 pharmaceuticals company Eli Lilly realised the limits to their internal research and development capability and decided on a bold initiative. They would reach beyond the walls of their internal laboratories and ‘crowd source’ or broadcast their research needs. InnoCentive, a new Eli Lilly division, operates as a marketplace by connecting commercial, academic, and nonprofit organisations that post challenges spanning a wide spectrum of industries and disciplines to solvers.
The solver who submits the solution best meeting the seeker’s challenge requirements receives a cash award ranging from $5,000 to $1,000,000. Challenges span the physical, computer and life sciences, engineering/design, chemistry, math and business/entrepreneurship. One hundred twenty-five thousand plus engineers, scientists, inventors, business people, and research organisations in more than 175 countries are reached.
While InnoCentive started as an initiative to extend Eli Lilly’s own research capabilities by reaching outside its own laboratories, it now serves as a design for other companies to do likewise. Stories abound of InnoCentive network members solving problems that have eluded inhouse researchers.
Scott Pegau, Oil Spill Recovery Institute,
Research findings into the dynamics of problem resolution through InnoCentive reveal why broadcasting research and development problems makes business sense with a range of innovation marketplaces emerging to support the process. Investigating 166 discrete scientific problems from the research laboratories of 26 companies between June 2001 to January 2005 Harvard Business School researcher Lakhani and colleagues found this open approach resulted in “a 29.5 per cent resolution rate for scientific problems unsolved by R & D laboratories of well known science-driven firms.”2
The researchers also shed light on why accessing a larger pool of external talent works and on other factors in problem resolution. Success was associated with the ability to “attract specialised scientists with diverse scientific interests.” In addition, “successful solvers created solutions to problems that were on the boundary or outside of their fields of expertise.” Openness worked to “trigger the transfer and transformation of knowledge from one scientific field to another. Efficiencies were gained as solver drew on information from previously developed solutions.”3
Given InnoCentive’s high profile success as an open idea marketplace, the rise of other specific industry focused open innovation marketplaces is no surprise. Yet2com brings technology buyers and sellers together to maximise investment returns. Eureka Medical links medical professionals and talented independent inventors with medical device and health care product ideas to innovation seeking companies. Topcoder allows custom software developers to compete for opportunities.
Executive to executive networks
Innovation marketplaces like InnoCentive are one emerging management model for transforming innovation in organisations. Others are realising the benefits of facilitated human networks to tap expertise among their stakeholders, especially partners and customers.
Avaya, a $4bn Fortune 500 company formed as a spin off from Lucent in 2000 designs, builds, deploys and manages voice based applications including call centers for other major corporations worldwide. In a highly competitive and rapidly changing industry, Avaya found they were unable to meet the sophisticated needs of their customers through their traditional sales force.
Their response to the challenge was creating Avaya’s Customer Councils to support executive to executive relationships to generate partnered solutions. Mark Bonchek with Tapestry Networks (that coined the term the ‘power to convene’) designed the networks. Now CEO of the Truman Company, Bonchek says for a twenty-first century CEO or senior leader, the power to convene is job one - in particular, recognising the power to convene those who have both a stake in the challenge and the knowledge to contribute.
Senior executives have a unique capability to draw peers together to address challenges to their industries that one alone might not be able to do, or to form new networks where none had existed in the past to benefit all. It is a new network which Sean Maloney, EVP and chief sales and marketing officer of Intel, created demonstrating the power to convene. Starting in 2002, Maloney began an arduous task of bringing together the industry players to lay the basis for WiMAX, what will soon eclipse WiFi.
Each of the key players he convened over five years, including Intel, has a unique business stake in seeing WiMAX come to fruition.
“Intel was looking for something that would prompt consumers to buy new computers running its chips. Sprint needed an edge to set it apart from larger rivals Verizon and AT&T. Mobile handset maker Nokia wanted to expand into providing communications services. And Samsung Group wanted to get into the networking equipment business. The interests of these four companies resulted in a pooling of patents and money to create the WiMAX phenomenon.”4
Large global brand enterprises are not alone in adopting executive-to-executive networks to tap the best talent and expertise to address business problems. The Bordeaux Energy Colloquium was created specifically to assemble the voices of various industry constituents in dialogues regarding the deregulated marketplace. Hosted annually, the Colloquium addresses the current issues and obstacles facing the creation of competitive energy markets by tapping expertise on both side of the
As an invitation-only organisation, invitations are sent to high-level representatives of each sector involved in deregulating the energy market including utilities, grid operators, generators, industrials, financers, regulators, legal experts and environmental specialists. The Colloquium operates in the spirit of “action research.” It offers industry experts an opportunity to step back from day to day issues and focus on the changing dynamics of the deregulating energy market place. Kimberly Samaha, director, explains the mindset changes required and network value:
“Embracing a new paradigm shift in the energy industry towards sustainability requires fundamental realignments of business philosophies and practices. Reaching into the diversity of global energy executives allows the Bordeaux Energy Colloquium to harness the power of social networks in what we call our Energy Plexus. In essence, executives nominate other executives to join us in projects and discussions in our on-line communities and at our annual Colloquiums. This intersection of people and purposeful action enables us to have a collective and powerful voice in shaping the creation of our energy future.”
Truman Company’s Mark Bonchek outlines the essentials for creating effective executive-to-executive networks beginning with structure that is “critical to a successful network or community on multiple levels because they establish the conditions for trust, candor, collaboration and action.”
1. Criteria for determining who is in the network;
2. The set of formal obligations among the participants;
3. Informal norms of behaviour that help generate a sense of identity and culture within the network;
4. Explicit purpose for the network with mutual accountabilities.
Distributed leadership mindset
Leaders seeking innovative management models must look beyond the well-lit cases. Two recent books Mobilizing Minds by Lowell Bryan and Claudia Joyce5 and Gary Hamel’s The Future of Management,6 reinforce the need to connect the intelligence of highly talented creative individuals where value and competitive advantage will be created in the future. Enabling human networks has already provided enormous ‘profit per employee’ gains for the most successful companies, yet innovative management is not yet in the DNA of most companies. Strategy is still a top down process, and as Hamel points out, “the top can hold the organisations capacity to change hostage to their own personal willingness to adapt and change.”7
Neither Hamel nor Bryan takes on the issues of wealth redistribution which needs to occur if we are to adopt their performance metric – return on capital (ROC) or profit per employee (PPE). Compensation and reward are two of the last sacred cows of the twentieth century that must be addressed to achieve innovative management and adoption of peer-to-peer networks.
Organising for open innovation
Open innovation marketplaces and stakeholder networks reveal the benefits of sharing business problems for successful resolution. They also indicate the common elements needed to successfully implement these new models for connecting intelligence in organisations. Throwing open organisational doors does not happen overnight, but it does require leaders who recognise the value of tapping external and divergent views. Figure one indicates that organisations whose cultures have high control needs are less likely to embrace open or broadcast innovation approaches.
Creating value through connection and openness
Look no further than Procter & Gamble’s Connect and Develop initiative for evidence of the potential value and what it takes to operate broadcast innovation. It is a human networks ecosystem inspired by new CEO A.G. Lafley’s 2000 challenge to reinvent P&G’s business innovation model and achieve 50 percent of innovations from outside the organisation.
Connect and Develop leverages an internal team of globally distributed technology entrepreneurs weaving links between potential outside solution providers (suppliers and researchers) to the development needs within P&G business units. It includes collaboratively working with suppliers and co-creating new technologies and products. It taps external networks including NineSigma, and YourEncore for solutions to specific challenges and uses Yet2Com as an intellectual property exchange.
Larry Huston, managing director, 4iNNO, then vice president of Innovation, describes the positive business impact of reaching beyond P&G’s internal research and development facilities for innovation:
“Using this programme, along with improvements in product cost, design and marketing, R&D productivity increased by nearly 60 percent. Innovation success rate more than doubled while the cost of innovation fell.”
Whether your initiative to connect intelligence and broadcast innovation uses an ideas marketplace, executive-to-executive network, or other initiatives as elements in an innovation ecosystem, pay close attention to the following:
1. Business Driver – Begin with a clearly understood business issue or challenge tied to strategic direction with high-level executive support.
2. Success and Measurements Defined – Be clear on what success will look like in the organisation and the metrics gathering to demonstrate.
3. Structure – Define the process through which open innovation will be conducted.
4. Ground Rules – Ensure consensus on agreed collaboration protocols to enable trusted exchange among participants.
5. Co-Create – Admit that all the answers do not lie within the established organisation and solutions can emerge through collaboration and sharing.
6. Diversity – Engage diverse talent and experiences, especially from fields far from the traditional disciplines for addressing a particular issue.
7. Incentives – Adopt relevant rewards and understand the potential of non-monetary incentives such as recognition and satisfaction from success.
8. Architect Participation – Ensure the best minds are engaged, paid attention and respected to ensure ongoing active involvement.
9. Idea Circulation – Include an infrastructure that supports dynamically capturing and sharing insights and knowledge created through collaboration to serve as business fuel.
Openness, sharing, and actively engaging outsiders in problem solving requires significant mindset and practice changes for traditional organisations. Leaders have a sanctioned right to convene. However, a growing body of experience indicates an impact of the interactive Web is potentially empowering each individual, in every enterprise, with the power to convene. A connected world leaves organisations no option but to explore open models or be left behind.
For Part 2, see the February issue of Inside Knowledge. For additional information contact Jenny Ambrozek at firstname.lastname@example.org.
Jenny Ambrozek is founder of SageNet LLC, US, a consulting practice. Victoria Axelrod is a recognised leader in organisational strategy and implementation.
1. Metcalfe, Robert, “It’s All in Your Head” Forbes Special Report, May 7, 2007, http://www.forbes.com/free_forbes/2007/0507/052.html
2. Lakhani, Karim R., Lars Bo Jeppesen, Peter A. Lohse, and Jill A. Panetta, “The Value of Openness in Scientific Problem Solving,” Harvard Business School Working Paper, No. 07-050, 2007, http://www.hbs.edu/research/facpubs/workingpapers/papers0607.html#07-050.
5.Bryan, Lowell and Joyce, Claudia, Moblizing Minds: Creating Wealth From Talent in the 21st Century Organization,
6. Hamel, Gary and Breen, Bill, ěThe Future of Management,î Harvard Business School Press, 2007.