In­no­va­tion hap­pens else­where: re­think­ing your busi­ness to grow and com­pete

The Smart Manager - - Innovation - HOWARD H YU IS PRO­FES­SOR, STRATE­GIC MAN­AGE­MENT AND IN­NO­VA­TION, AT IMD. KNUT HAANAES IS PRO­FES­SOR, STRAT­EGY AND IN­TER­NA­TIONAL MAN­AGE­MENT, AT IMD. JAYANTH NARAYANAN IS PRO­FES­SOR, OR­GA­NI­ZA­TIONAL BE­HAV­IOR AND LEAD­ER­SHIP, AT IMD.

Around 70 ex­ec­u­tives re­cently took part in a highly par­tic­i­pa­tive IMD Dis­cov­ery Event to un­der­stand the con­cept of open in­no­va­tion that is cur­rently de­moc­ra­tiz­ing in­ven­tion and prod­uct de­vel­op­ment, by open­ing them to the masses and cre­at­ing more choice for con­sumers than ever be­fore. Busi­nesses that fail to em­brace open in­no­va­tion run the risk of be­ing left be­hind.

Open in­no­va­tion is a way to stay on top of the com­pe­ti­tion, re­duce costs, spread risks, and bring new prod­ucts to the mar­ket more quickly. It takes place in two ways: by tap­ping into the cre­ativ­ity and brain­power of many through crowd­sourc­ing, and by open­ing up a com­pany’s in­ter­nal ideas to the ex­ter­nal com­mu­nity. For tra­di­tional com­pa­nies, the big­gest bar­rier to em­brac­ing the ex­ter­nal com­mu­nity is pride—“we know our cus­tomers best.” To­day, com­pa­nies have to ad­mit, “we don’t know ev­ery­thing.” His­tor­i­cally, LEGO de­pended on its mar­keters to make big bets on the prod­ucts of the fu­ture, but in 2008 it changed its ap­proach and launched LEGO Ideas, a crowd­sourc­ing site on which any­one could sub­mit sug­ges­tions. Fans then voted and LEGO pro­duced lim­ited edi­tions of the best and most pop­u­lar con­cepts with great suc­cess.

Of­ten con­fi­den­tial­ity is cited as a ma­jor bar­rier to open in­no­va­tion, but it does not have to be. DARPA (the US De­fense Ad­vanced Re­search Projects Agency)— re­spon­si­ble for de­vel­op­ing emerg­ing tech­nolo­gies for the mil­i­tary—wanted to make a new am­phibi­ous in­fantry ve­hi­cle from con­cep­tion to man­u­fac­ture in one-fifth of the typ­i­cal time­frame. So in 2013, it is­sued a chal­lenge to all Amer­i­cans to build FANG—Fast, Adap­tive, Nex­tGen­er­a­tion Ground Ve­hi­cle. How did DARPA ef­fec­tively lever­age non-ex­perts to con­trib­ute mean­ing­fully to a highly tech­ni­cal mil­i­tary chal­lenge? It low­ered the bar­ri­ers to par­tic­i­pa­tion and de­moc­ra­tized in­no­va­tion by:

■ Clearly spell­ing out the ob­jec­tives and the spec­i­fi­ca­tions.

Al­low­ing peo­ple to work au­tonomously or to form teams.

Di­vid­ing a com­plex prob­lem into sub-sys­tems. The ve­hi­cle was de­signed through three com­pe­ti­tions for (1) mo­bil­ity and driv­e­train; (2) chas­sis and struc­ture; and (3) the whole ve­hi­cle. Giv­ing reg­is­tered par­tic­i­pants ac­cess to META, DARPA’s li­brary of dig­i­tally ren­dered ve­hi­cle com­po­nents and me­chan­i­cal parts.

Mak­ing de­sign and sim­u­la­tion soft­ware avail­able so that com­po­nents could be ma­nip­u­lated to cre­ate new parts. Col­lab­o­ra­tion tools al­lowed team mem­bers to work to­gether vir­tu­ally on a shared de­sign. The par­tic­i­pants re­ceived feed­back on their de­sign, which they could re­sub­mit.

Of­fer­ing a cash prize of $4 mil­lion. In­trin­sic mo­ti­va­tion stemmed from a sense of con­tribut­ing to na­tion build­ing, mak­ing an im­pact, pres­tige, and recog­ni­tion.

The above ex­am­ple raises a num­ber of ques­tions for man­agers: How are their com­pa­nies po­si­tioned in terms of in­no­va­tion? Where do they need to be? Are they will­ing to make ba­sic in­vest­ments to seed in­no­va­tion in novel ways? How can in­ter­nal em­ploy­ees as well as ex­ter­nal part­ners be mo­ti­vated?

a time for de­con­struc­tion

Five out of the top six com­pa­nies by mar­ket cap­i­tal­iza­tion in 2016 were tech com­pa­nies: Ap­ple, Alphabet (Google’s par­ent), Ama­zon, Mi­crosoft, and Face­book; Exxon Mo­bil was the only non-tech com­pany. Given the ex­plo­sive growth of highly in­no­va­tive, net­worked busi­nesses, Pro­fes­sor Haanaes de­con­structed com­pany types, from tra­di­tional man­u­fac­tur­ers to net­work or­ches­tra­tors, through the lens of busi­ness mod­els to un­der­stand how value is cre­ated.

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