Global brain

PraiseforTheGlobalBrain

“TheGlobalBrainprovokesinnovationpractitionerswithfreshconceptualandpracticalinsightsasitexplorestherapidlyevolvinglandscapeofnetwork-centricinnovationthatpromisestoachievehigher

innovationproductivity.Amustreadforglobalcorporationsseekingto

differentiatethemselvesthroughinnovationinahighlycompetitive

marketplace.”

—UmaChowdhry,SeniorVicePresidentand

ChiefScienceandTechnologyOfficer,DuPont

“Youcannotgetcomfortableintoday’sworld.You

continuallyneedtothinkofwhatisnextandhowyoucanimproveuponwhereyouare

today.TheGlobalBrainwillnotgiveyoutheanswers—nobookwill.

Whatthisbookdoes,backedbythoroughresearch,ishelpyoutoopenupthebroadrangeofoptionsandopportunitiesavailabletosuccessfullyinnovatewithin

yourspecificenvironment—thisiswhereIseeTheGlobalBrainasacompetitiveadvantage.”

—JeffJansma,Director,NewProductCommercialization,

HermanMiller

“YouwillfindyourselfreferringoftentoTheGlobalBrainasyouchartyourcourseforwardonnetwork-

centricinnovationapproaches.A

mustreadbookonthistopic.”

—VijayGovindarajan,EarlC.DaumProfessorofInternational

Business,TuckSchool,Dartmouth,Co-author,

TenRulesforStrategic

Innovators

“Innovationinthe21stcenturyrequiresafundamentalshiftinthinkingandapproach.NambisanandSawhneyofferasystematicandinci-

siveanalysisofthediverseopportunitiesavailabletocompaniestotapintotheGlobalBrain.Youwillcomeawaywithaclear

understandingofthebestoptionsforyourcompany,andthemosteffectivemeanstopursuethem.Asuperbbook!”

—DenisBrowne,SeniorVicePresident,Imagineering,SAPLabs

“Thisbookprovidesanengagingandinsightfulaccountofaphenome-

nonthatisofinteresttopractitionersandtheoristsalike.Innovationisnolongerconfinedwithinfirmboundariesandtheincreasinglydistributedmodelofinnovationisamplyevidenttomostobservers.Readerswillfindasuccinctandpowerfulsetofideasonthisnovelphenomenon.Amustreadformanagersandresearchers.”

—RanjayGulati,MichaelL.NemmersDistinguishedProfessor

ofStrategyandOrganizations,KelloggSchoolofManagement

“Successfulinnovationisadifficult,oftenconfusing,wilderness-likejourney.Thisbookgivesyouthemapandthetoolstomasterthechallengesandforgeahigh

speedpathtoinnovativesuccess.”

—TobyRedshaw,CorporateVicePresident,Innovation,DataEnabling

PlatformsandArchitecture,Motorola

“TheGlobalBraincapturesthemindandimaginationinstantly!Itsfocusonprofitablegrowth,lessonon

“howthemightycanstumble,”

insightson“Network-Centricity,”andaroadmapfornavigatingthe

landscapeforinnovation,makeitaverycompellingbooktoread.

Executivesatmiddletoseniorlevels,whowanttogobeyondcompanywallsto

innovate,compete,andgrowmustreadNambisanand

Sawhney’sTheGlobalBrain.”

—HaritTalwar,ExecutiveVicePresident,DiscoverFinancialServices

“Theworldinwhichwedevelopproductsandserviceshasforever

changedandTheGlobalBrainisagreataidinunderstandinghow.

Thisbookhastherightcombinationoftheory,practicalexamplesandframeworkstohelpadvancethewaycompaniesthinkaboutinnovation.Itshouldberequiredreadingformanagersinbothlargeandsmallenterprises.”

—RodNelson,VicePresident,

InnovationandCollaboration,Schlumberger

THE

GLOBAL

BRAIN

Thispageintentionallyleftblank

THE

GLOBAL

BRAIN

YourRoadmapforInnovating

FasterandSmarter

inaNetworkedWorld

SATISHNAMBISAN

MOHANBIRSAWHNEY

VicePresident,Publisher:TimMoore

AssociatePublisherandDirectorofMarketing:AmyNeidlinger

WhartonEditor:Yoram(Jerry)Wind

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©2008byPearsonEducation,Inc.

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WhartonSchoolPublishingoffersexcellentdiscountsonthisbookwhenorderedinquantityforbulkpurchasesorspecialsales.Formoreinformation,pleasecontactU.S.CorporateandGovernmentSales,1-800-382-3419,[email protected].,[email protected].

Companyandproductnamesmentionedhereinarethetrademarksorregisteredtrademarksoftheirrespectiveowners.

Allrightsreserved.Nopartofthisbookmaybereproduced,inanyformorbyanymeans,withoutpermissioninwritingfromthepublisher.

PrintedintheUnitedStates

ofAmerica

FirstPrintingOctober2007

ISBN-100-13-233951-X

ISBN-13978-0-13-233951-3

PearsonEducationLTD.

PearsonEducationAustraliaPTY,Limited.

PearsonEducation

Singapore,Pte.Ltd.

PearsonEducationNorthAsia,Ltd.

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LibraryofCongressCataloging-in-PublicationData

Nambisan,Satish

Theglobalbrain:yourroadmapforinnovatingfasterandsmarterinanetworkedworld/SatishNambisan,MohanbirSawhney.

p.cm.

ISBN0-13-233951-X(hardback:alk.paper)1.Technologicalinnovations—Management.

2.Businessenterprises—Technologicalinnovations.3.Businessnetworks.I.Sawhney,MohanbirS.II.Title.

HD45.S3242008

658.4’063—dc22

2007026100

ToPriyaandParminder


CONTENTS

Foreword...............................xvii

Introduction..............................1

PartIFromFirm-CentrictoNetwork-Centric

Innovation...................................9

Chapter1

ThePowerofNetwork-Centricity..............11

Chapter2

UnderstandingNetwork-CentricInnovation.....29

PartIITheLandscapeofNetwork-CentricInnovation......49

Chapter3

TheFourModelsofNetwork-Centric

Innovation..............................51

Chapter4

InnovationNetworks:ThePlayersand

thePlays...............................67

PartIIITheFourModelsofNetwork-CentricInnovation.....83

Chapter5

TheOrchestraModel.......................85

Chapter6

TheCreativeBazaarModel.................113

Chapter7

TheJamCentralModel....................139

Chapter8

TheMOD(“MODification”)StationModel......157

ix

x

THEGLOBALBRAIN

PartIVExecutingNetwork-CentricInnovation...........175

Chapter9

DecidingWhereandHowtoPlay............177

Chapter10PreparingtheOrganization................197

PartVGlobalizationandNetwork-CentricInnovation.....217

Chapter11Globalizing

Network-CentricInnovation:

TheDragonandtheTiger..................219

Chapter12ConcludingThoughts&Actionsfor

“Monday”Morning…....................237

References............................253

Index..................................267

Acknowledgments

Writingthisbookhasbeenalaborofloveforbothofus,butithasbeenalaborthathasbeengenerouslyencouragedandsupportedbyalargenumberofpeoplewhocontributedtheirtimeandthoughtsandto

whomweacknowledgeourdeepgratitude.

OurinteractionswithUmaChowdhryofDuPont,IrvingWladawsky-

BergerandDanMcGrathofIBM,TomCripeofP&G,andDebraParkofDialCorporationwereinstrumentalinshapingourearlyideasandtheframeworkspresentedinthis

book.Wealsobenefitedtremendously

fromourconversationswiththefollowingpeople,eachofwhomgenerouslygavetheirtimeandsharedtheirinsightsonvarioustopics:DaveBayless,HenryChesbrough,SteveCugine,DavidDuncan,JevinEagle,

GaryEinhaus,RobertFinnochiaro,JohnFunk,

HarveyGideon,Sharon

Grosh,AdamGross,LaurieKien-Kotcher,BillLazaroff,Stephen

Mallenbaum,RichardMarken,StephenMaurer,GreggMcPherson,Kim

Pugliese,ArtiRai,AndrejSali,CatherineStrader,ScottStrode,GingerTaylor,DaveWeaver,BrandonWilliams,

DavidYlitalo,andDavidYuan.

Therearemanyothers—bothinacademiaandintheindustry—who

critiquedourideasandofferedthoughtfulcommentsandsuggestions

andtowhomwearemuchindebted.

Severalpeoplehelpedusinorganizingourinterviewsandmanagingourschedulesrelatedtothisbook.WewouldliketothankJeffHornforassistingusinourresearch,andwewouldalsoliketothankGordonEvans,JeffLeroy,AnnSchmidt,andseveralotherswhohelpedusin

identifyingtheappropriatepersoninthevarious

organizationsand

schedulingourinterviews.RahiGurungprovidedvaluableadministra-

tiveassistanceatKellogg.

SatishwouldliketoacknowledgehisgratitudetotheKelloggSchoolofManagementandtotheCenterforResearchinTechnology&

Innovation(CRTI)atNorthwesternUniversityforgenerouslyhosting

xi

xii

THEGLOBALBRAIN

hissabbaticalandfacilitatingtheinitialresearchworkthatledtothisbook.HewouldliketothankDeanDipakJain

ofKelloggforhisencouragementandinterestinthisproject.HewouldalsoliketothankRanjayGulati,JimConley,MarkJeffrey,RobWolcott,andotherfriendsandcolleaguesatKelloggandCRTIforbeingveryhelpfulandformakinghisstaybothenjoyableandintellectuallystimulating.

SatishalsothanksRobertBaron—hisfriend,mentor,

andcolleagueatRensselaerPolytechnicInstitute(RPI)—forhisintellectualpartnershipandpatienceasaco-authorinhisotherresearchprojectsduringthewritingofthisbook.HewouldalsoliketoexpresshisappreciationtoPresidentShirleyJacksonandotheracademicleadersatRPIforpromotingresearchoninnovationmanagementandforbringingavibrant,inter-

disciplinaryfocustothisimportanttopic.

SatishwouldliketoexpresshisdeepgratitudetohiswifePriyaforherboundlessenthusiasm,constantencouragement,andforbelievingin

thisbookfromthefirstdayonward.Shefoundthetime—amidherownhecticscheduleasafirst-year

assistantprofessor—toreadtheindividualchaptersandgivecommentsandsuggestionsandtoserveatvari-

oustimesasasoundingboard,cheerleader,critic,editor,andadvisor.

Herunwaveringloveandfriendshipandheradventurousmindcontin-

uetobethesourceofjoy,inspiration,andstrengthforSatishinhisworkandlife.

MohanwouldliketothankalltheparticipantsoftheKelloggInnovationNetworkwhohavesupportedourresearchandhaveservedasavaluablesoundingboardforourideas.HewouldparticularlyliketothankBlytheMcGarveyforherincisivecommentsonthe

manuscript,Rob

Wolcottforhisintellectualpartnership,TobyRedshawforhisintellectualprovocation,andMarkKarasekforhisunwaveringsupportoftheKIN.MohanwouldalsoliketothankDeanDipakJainforbelievinginhimandtheCenter’smission,aswellasallhiscolleaguesintheCenter,includingJamesConley,

MarkJeffery,RobWolcott,andBobCooper.

MohanwouldalsoliketoexpresshisprofoundgratitudetohisnewwifeParminderforbeingpatientwithhimashewasworkingonthebook

whilemanagingalong-distancerelationship.Herloveandsupportwastheguidinglightthatkept

Mohangoing.AndMohanwouldliketothankhiskidsAshaandBundevforthejoytheybringtohislife,andforstayingoutofthewaywhileDadworkedonthebook!

ACKNOWLEDGMENTS

xiii

WewouldliketothankJerryWindofWhartonforbelievinginourideasforthis

bookanddrivingustoactuallystartwritingit.WewouldalsoliketothankTimMoore,RussHall,MarthaCooley,ChelseyMarti,andtherestoftheWhartonSchoolPublishingteamfortheircommitment

andenthusiasticsupport.ThanksarealsoduetoTomStewartandPaulHempofHarvardBusinessReviewfortheirsupportand

encouragementofourideas.


AbouttheAuthors

SatishNambisanisaprofessoroftechnologymanagementandstrategyattheLallySchoolofManagement,RensselaerPolytechnicInstituteinTroy,NewYork.Heisaglobally

recognizedresearcherandthought-leaderintheareasofinnovationmanagementandtechnologystrategy,andhisrecentresearchworkhasfocusedoncustomerco-innovation,

network-centricinnovation,andIT-enabledproductdevelopment.His

researchhasbeenpublishedinpremiermanagement

journalssuchas

HarvardBusinessReview,MITSloanManagementReview,ManagementScience,andAcademyofManagementReview.Throughhisconsultingworkandexecutivelectures,Satishhashelpedmany

companiesintheUnitedStates,Singapore,andIndiainmanaginginnovationand

productdevelopment.Priortojoiningtheacademia,Satishheldexecutivepositionsattheconsumer-productsgiantUnileverPlc.

inMumbai,India.Moredetailsabouthisresearchandconsultingare

availableatwww.satish-nambisan.com.

MohanbirSawhneyisthe

http://www.satish-nambisan.com

McCormickTribuneProfessorofTechnology

andtheDirectoroftheCenterforResearchinTechnology&

InnovationattheKelloggSchoolofManagement,Northwestern

University.Heisawidelypublishedexpertintheareasofinnovation,marketing,and

strategy.HehasauthoredseveralinfluentialarticlesinpublicationsliketheHarvardBusinessReviewandtheMITSloanManagementReview.Hiscontributionstotheliteratureoninnovationincludeconceptslikemediatedinnovation,community-centricinnovation,andcollaborativeinnovationwithcustomersinanetworked

world.HeconsultswithandadvisesdozensofGlobal2000companies

aroundtheworld.Thisishisfourthbook.

xv


Foreword

WhenSatishandMohanaskedmetowritetheforewordtothisbook,Icouldhardlycontainmyenthusiasm.NotonlywasIalreadyimmersed

inthesubjectmatterbyvirtueofmyjob,butIsawanopportunitytosummarizesomefouryearsofacuteobservationandlearningona

topicthatisdrivinganew

levelofglobal,socio-economictransformation.Weareinthemidstofoneofthoserareinflectionpointsthatwillforeverchangethewayworkisconducted,thewaynewopportunityiscreated,andhowvalueisextractedfromourendeavors.Ofcourse,wearetalkingabouttheuniquely21stcenturyphenomenaofcollaborativeinnovation.

Certainlyitisoneveryone’sminds.CEOs,governmentofficials,academicandcommunityleadersaroundtheworldareallcountingon“innovation”tobethefundamentaldriverofeconomicopportunity,jobcreation,businesscompetitivenessandadvancesineducation,healthcare,andavastrangeofotherdisciplines.Investingininnovation,theysay,isthe

surestwaytosurviveandthriveintoday’scomplex,connectedworld.

Butwhatdotheyreallymeanwhentheytalkaboutinnovation?Insidetheinformationtechnologyindustry,innovationhasbeendefinedhistoricallybytheprocessofinventionanddiscovery,anddrivenbyinvestmentsinResearchandDevelopment.BellLabs,

XeroxPARCandIBM

Research,alongwithbasicresearchprogramsattheworld’sleadinguniversities,epitomizedtheinnovationenginesofthe20thcentury.

Theyalsooperatedinclassic“ivorytower”mode—highlysecretiveandproprietaryintheirapproaches,sharinglittlewithothersand,asaresult,sometimessuffering

frompain-stakinglyslowpathstomarketfortheirbestideas.

Buttheworldhaschangeddramaticallyoverthepastdecade—and

evenmoreso,thebasicnatureofinnovationitself.Thisshiftfirstbecameevidentearlierthisdecade.

xvii

xviii

THEGLOBALBRAIN

Earlyin2004,Ihadthegreatprivilegeofparticipatingintwomajorinitiativestostudyhowandwhythenatureofinnovationischangingandtheimpactonbusiness,governments,andourglobalsociety.ThefirstwastheNationalInnovationInitiative(NII),aspecial

studygroupsponsoredbytheCouncilonCompetitiveness.TheNIIcomprisedsome200

CEOs,universitypresidentsandlaborleaderswhosecollectivemissionwastohelprestartAmerica’sinnovationengine.

Aroundthesametime,IBMlaunchedauniqueprojectcalledtheGlobalInnovationOutlook(GIO)—avastly

differentwayofidentifyingand

actingonemergingtrends,policymatters,andmarketopportunities,drivenbyinputfromhundredsofbigthinkersinadiverserangeofdisciplinesaroundtheworld.

Wealllearnedagreatdealfromthoseexercises.Itseemsobviousnow,butperhapsthemostvaluable

findingwasdeepnewinsightintothe

sweepingshiftinthewayinnovationiscreated,managedanddelivered.

Sowhyhasthenatureofinnovationchangedsodramatically?There

aremanyfactors,including:thedynamicsofaflatteningworld,themarchof

commoditization,therapidandglobaladoptionofnewtechnologies,andparticularly,theopenmovement.

Innovationhappensmuchfastertoday,anditdiffusesmuchmorerap-

idlyintooureverydaylives.Itnolongeristhedomainofasolitarygeniusseekingtotaketheworldbystorm.

Instead,innovationis

increasingly:

Global.Thewidespreadadoptionsofnetworkedtechnologiesandopenstandardshaveremovedbarriersofgeographyandaccessibility.

Billionsofpeople,eveninthemostremoteregionsoftheworld,haveready,

affordableaccesstoadvancedwirelesstechnologiesandthe

Internet.Hitchinghigh-speedridesontheseplatforms,ideasnowcir-cumnavigatetheglobeinamatterofminutes,ifnotseconds.Asa

result,almostanyonewithagoodideacannowparticipateintheinnovationeconomy.

Multidisciplinary.Becausetheglobalchallengeswefacetodayarefarmorecomplex,innovationnowrequiresadiversemixoftalentand

expertise.

Considerthemappingofthehumangenome.Untilrecently,thattype

ofresearchcouldonlybeconductedinwetlabs,inthe

physicalrealm.

FOREWORD

xix

Butnow,incredibleadvancesininformationtechnologymakeitprac-

ticaltomodelandprocessgeneticinformationinwaysneverbefore

possible.

LifeSciencesjustmayverywellbethedefiningscienceofthe21stcentury.Atitscoreistheapplicationofsiliconchips,databasesoftwareandpowerful,lightningquickcomputers.Tobealeaderinthisemergingfield,youneedtobeasknowledgeableandfacileinthesedomainsasyouareinbiologyand

relatedsciences.That’sadauntingand

unprecedentedchallenge,butalsoafruitfulapproachtounlockingnewideasandapproachestodiscoverythatmightnothaveotherwise

emerged.

CollaborativeandOpen.Justabouteverystudyoninnovationidentifiesthe

powerofcollaborationandcommunitiesasoneofthemajor

forcesdrivinginnovationintoday’senvironment.OurfirstGIOexercise,forexample,identifiedthe“powerofnetworks”asoneofitstopfindings.Participantstoldusthat,increasingly,theirpowercomeslargelyfromtheirabilitytotapinto—and

sometimestransform—alargernetworkofpeopleandideas.

Similarly,moreandmorebusinessesrecognizethattherearealot

morecapabilitiesforinnovationinthemarketplacethantheycouldtrytocreateontheirown,nomatterhowbigandpowerfulthecompany.

Oneofthekeythemesthatemergedfroma2006CEOstudywecon-

ductedwasthatexternalcollaborationisindispensableforinnovation.

Weinterviewednearly800CEOs,representingawideswathofgeo-

graphicareas,arangeofannualrevenues,and

everythingfromsmallandmediumbusinessestolarge,globalenterprises.Whenaskedwhichsourcestheircompaniesreliedonfortheirinnovativeideas,“businesspartners”wererightnearthetopofthelist,justbehindthegeneralemployeepopulation.

“Customers”roundedoutthetopofthelist,meaningthatthetopthreesignificantsourcesofinnovativeideas

arepredicatedonopen,collaborativeapproaches,includingreachingoutsidetheorganization.Infact,CEOssaidtheyaregettingabouttwiceasmanyinnovationinsightsfromcustomersastheyarefromtheirownsalesandserviceorganizations.

Perhapsmostsurprisingwasthat“InternalR&D”wassecond-to-lastonthelist.As

acareerengineerandscientist-turnedbusinessman,Iwouldxx

THEGLOBALBRAIN

arguethatthosewhodonotseevaluereturningfromtheirR&Dinvestmentsarenotmanagingtheirportfoliostoreflectthechangesunderwayinthemarketplace.Inotherwords,theystillarenotcollaboratingexternally

andworkingdirectlywiththeircustomers.IBMResearchisinthemidstofarenaissanceasaresultofembracingmarketinput.Butthat’sprobablyfodderforanotherbookentirely.

TheCEOsalsotoldusthatpartnering—whethercrossinginternalor

externalboundaries—iseasyinprinciple,butvery

difficultinpractice.

Thisisnotatallsurprising.Workingwithdifferentgroupstoachievecommonobjectivesusuallyrequiresachangeinthecultureofmost

organizations,andculturaltransformationsmaybethehardestofall.

Iamconvincedthattotrulyembraceacultureof

collaborationyou

mustacceptlimitationsinyourabilitytogetthingsdonewithouthelp.

Thisisparticularlyimportantforthosecompanies,likeIBM,whoareaddressingproblemsinbusiness,government,healthcare,technology,andsciencethatareverysophisticatedinnatureandpushingthelimits

ofwhatispossible.Wehavelearnedthatwecannotworkonproblemssuchasinformation-basedmedicine,integratedsupplychainsoradvancedengineeringdesignunlesswehaveestablishedaveryclose

relationshipwithclients,businesspartners,andevenothervendorswhomightverywellbecompetitors.

Insuchanenvironment,toboastaboutbeing“thebest”wouldfranklybeconsideredcrass,asignofcorporateinsecurityratherthanthe

strengthofaconfidentleader.Instead,youwanttobeknownasacompanythathelpsallthevariousmembersoftheteamsucceedinwhat-

everproblemsarebeing

addressed.Ratherthanclaimingthatyouarethemostinnovativeofcompanies,youwanttobeknownasacompanythathelpsthosewithwhomyouworkbecomemoreinnovative

themselves.

Theopenmovementmakesallofthatpossible.Itholdsthepotentialtospark

remarkableinnovation—andalsoturnhistoricalcoststructuresandinvestmentmodelsontheirears.TheLinuxoperatingsystem,forexample,isownedbynoone,yetownedbyeveryoneatthesametime.

Thousandsuponthousandsofprogrammersaroundtheworldcon-

tributetoitandmakeit

better,creatingachecksandbalancessystemthatwouldbeimpossiblewithproprietary,closedsystems.

FOREWORD

xxi

Historically,weknowittakesabout$1billiontobringanenterprise-readyoperatingsystemtothemarketplaceforone

computingplatform.

Byworkingwiththeopencommunity,weatIBMwereabletogetLinuxacrossourentireproductlinewithaboutone-fifththeinvestmentwewouldnormallymakeforjustoneplatform.WediditthroughacombinationofLinuxcodedevelopedbythecommunity,Linuxcodewecon-

tributedtotheopencommunity,andLinuxcodewedevelopedunique-

lytobettersupportitonourproducts.Asaresult,ourofferingsarebettertested,morerobustandaremarket-readymoreimmediately.

Theopenmovementcreatesacommonbaseforinfrastructure,sothat

thewheelneverhastobere-invented.Thebasicsarealreadythereandagreed-uponbytheglobalcommunity.Thatenablescreatorsto

leapfrogoverthemundane,andjumprighttotheinnovative—being

assuredthattheinfrastructureissoundandsecurebecauseithasbeen

refinedandtemperedbygreatthinkersaroundtheworld.

Whenmorepeoplehaveaccesstothebuildingblocksofinnovation,

richnewperspectivesanddiverseinfluencesareinjectedintothecreativeprocess.Peoplebegintothinkinaninterdependent,collaborativeway—across

disciplines,andcollaboratingattheintersectionsbetweenthem.

Trueinnovation,then,isdrivenbytheecosystem;bylisteningtoandlearningfromthevariousconstituentswithwhomyouexchangedialogandwhomayaddvaluetothediscussion.Byembracingyourecosystem,youteardowntheboundariesofculture,geographyand

organizationtorapidlygenerateideasandactonchanges.

Thefirststepismodelingyourorganization’sownecosystem—allthemajorconstituencygroupsthatarevitaltoyourbusinesssuccess.Iofferoneapproachhere(seethefollowingFigure)simplyasaframework.Therereallyisnorightorwrongmodel,unless

youchoosetogoitalone.

Second,youneedtocommittoatwo-waydialoguewitheachofthese

constituencies—andalsofosterinteractionbetweenthem,bothwith

youandwithoutyou.Youcannotcontrolthemanymore,orsimply

pumpone-waymessagesanddemandsouttothem.Theywillgoelse-

whereandcollaboratewithmorereceptivepartners.

xxii

THEGLOBALBRAIN

ISVs

Venture

Business

Capitalists

Partners

Community

Alumni

Leaders

Regulatory

Universities

Innovation

Bodies

Ecosystem

Standards

Policymakers

Bodies

Employees

Competitors

Clients

Investors

Networksarenotanewidea,ofcourse.Thebusinessworldhasalwayscomprisedconstellationsofpeopleworkingtogethertocreatevalue.

Butinthepast,those

relationshipshavegenerallybeenmorelimitedandexclusionaryinnature,boundbystrictlydefinedlegalagreementsandfinancialunderstandings.

Overthepastdecade,however,theproliferationofcommunication

networkshasnotonlyconnectedpeople,placesandideasinunprece-

dentedways,butalsocatalyzedtheevolutionofsocialstructures.Withthefreedomtotranscendphysicalandgeographicbordersmoreeasily,wearemorewillingtopartnerinsideandoutsideourtraditionalboundariesoforganizationsandcountries.

Becauseofthatshift,the20th-centurybusinessenterpriseasweknowit

couldbehistory.Increasingly,themotivatingforcethatbringspeopletogetherforworkisless“abusinessorganization”andmorethecollectiveenterprise—activitiesdrivenbyacommonsetofinterests,goalsorvalues.

Thetrendisaccelerating,anditwillhaveprofoundimplicationsonhowcompaniesthinkabout

everythingfromleadershiptomanaging

andmotivatingglobaltalent.Itwillchangethewaycompanies

approachinnovationitself.

FOREWORD

xxiii

Asboundariesdissolve,as

morefluidrelationshipsform,asecosystemsexpand,andasnetworksgetlarger,theverynatureofdecision-makingforindividuals,businesses,andtheworldtakesonanewshape.Localactionsnowhaveglobalconsequences,andthereverseistrueaswell.

Topursueopen,collaborativeinnovation,enterprisessimplymustfindwaystotap

intothepotentialoftheskill,talent,andcreativityofpeoplefromdifferentteamsindifferentorganizationsacrosstheglobe.Acompanycanonlybeasinnovativeasthecollectivecapacityofthe

peoplewhomakeupitsecosystem.Andtoattractandretaintalentedpeople,acompanymustenablethosepeopletofeelrespected,asindividuals,asprofessionals

andasmembersofateam.Thecompanymusttrustthosepeopleandencouragethemtocollaborateandinnovate

withcolleaguesinsideandoutsidethebusiness,drivenasmuchby

prideofcontributionasbyloyaltytothecompany.

Thesenewmodelsfor

collaborationofferafinancialpayoffaswell.

Studiesshowthatcompaniesthatoutperformtheirpeergroupsare

muchmorelikelytohaveadoptedbusinessmodelsthatfocusoncore

expertiseandcollaborationwithpartners,ratherthanbystrengtheningtheircommand

andcontrolposture.

ConsiderBhartiTele-Ventures,thelargestprivatetelephonecompanyinIndia.Itrecentlyoutsourcedandintegrateditscorefunctions—suchasnetworkandprogrammanagement,helpdesksupport,disasterrecovery,IT,andbilling—whichfreedittofocusexclusivelyonmarketingandcustomerservicestrategies.

Asaresult,Bhartitripleditssubscriberbase—from6millionto18millionsubscribers—injust20months.

Butsuccessstorieslikethatdonotcomeeasy.Asfewercompanies

directlycontrolallaspectsoftheiroperations,itbecomeshardertoensurethatbrandexperienceconsistentlylives

uptobrandpromise.

Howcanacompanyensurethattheindividualsandbusinesspartners

whopoweritsnetworkfullyunderstanditsbrandandaremotivatedtoprotectandupholdit?

DuringtheGlobalInnovationOutlooksessions,severalparticipants

advancedaconceptbuiltaroundtheterm“ReputationCapital.”It

describesakindofcurrencyforbuildingtrustinaprospectiveworker’spersonalandprofessionalqualifications.TheycitedexamplessuchasWikipediaandeBay,bothofwhichbuiltsuccessfulbrandsbasedonthecontributionsofhundredsofthousandsofnon-affiliated

individuals.

xxiv

THEGLOBALBRAIN

Ineachcase,therearestandardsinplaceenablingpeopletoseeandratetheintegrityandcredibilityofcontributors.Themoreacontributorconsistentlydemonstratesahighlevelofaccountabilityandquality,

themorevaluethecontributorgarners.Evenforbusinessesnot

builtaroundthecontributionsofindividuals,reputationcapitalhasintriguingpossibilities—especiallyforemergingglobalplayerswho

haveonlyavirtualpresenceandnovisiblebrandoftheirown.

Iamconvincedthattheartofcollaborationwillbethemostdistinguish-ingleadershipcharacteristicofthe21stcentury.Universitiesneedtoteachit.Governmentpoliciesandregulationsneedtofacilitateit.

ForcollaborativeinnovationtobecomepartofourcollectiveDNA,wemustacceptthenotionthatthesurestwaytomakeprogress

andsolveproblemsistotapintothecollectiveknowledgeoftheteam.Networkedenterprisesarethefuture.Noindividualenterprise,nomatterhow

largeandtalented,canaffordtogoitaloneintoday’shighlycompetitive,globallyintegratedmarketplace.

Successintappingintosuchaglobalmarketplaceof

innovatorsand

experts—the“GlobalBrain”asSatishandMohancallit—requirescom-

paniestofirstdevelopasoundunderstandingofthecollaborativelandscapeandthendecideonanapproachthatsuitsthemthebest.One

sizedoesnotfitallinthisregard.

Inthisbook,SatishandMohanprovidearichdescriptionofthedifferentmodelsofnetworkedinnovationandofferasetofguidelinesforcompaniestoidentifyandprepareforthemostpromisingcollaborativeinnovationopportunities.Astheyemphasize,successalsorequiresustorethinktheverynatureofourrelationshipswithinnovationpartners

–whatweneedtocontrolandwhatweneedtoletgo.

Ithinkwewillfindthatthesacrifices,andthebenefits,arewellworththejourney.

˜NickDonofrio

ExecutiveVicePresidentforInnovationandTechnologyatIBM

Corporation

Introduction

Innovationiscriticalforprofitablegrowth.Intheirsearchforinnovativeideasandtechnologies,companiesarerealizingtheimpor-

tanceofreachingouttocustomers,partners,suppliers,amateur

inventors,academicresearchers,scientists,

innovationbrokers,andahostofotherexternalentitiesthattogetherconstitutetheGlobalBrain—thevastcreativepotentialthatliesbeyondtheboundariesofthefirm.Termssuchascommunitiesofcreation,innovationnetworks,openmarketinnovation,andcrowdsourcingarebeingused

torefertothefutureofinnovationinaconnected

world.Theprom-

iseofsuchnetwork-centricinnovationapproachesisresonatingintheexecutivesuitesoflargecorporations.ArecentsurveyofCEOs

foundthattheneedtoexpandtheinnovationhorizonbylooking

beyondthefourwallsofthecompanyisatthetopofthe

CEO

agenda.1However,mostexecutivesfeelthattheydon’tknowhowto

reachthePromisedLand.Ourconversationswithseniorexecutives

chargedwithinnovationinitiativessuggestthattheystrugglewithaquestionofsingularimportance,“How

shouldwereallygoaboutharnessingthecreativepoweroftheGlobalBraintoenhanceour

growthandperformance?”

RecentexamplesfromcompaniessuchasP&G,IBM,Boeing,and

Appleillustratethatexternallyfocusedinnovationcantakemany

forms.Therearemanydifferententitiesthatcompaniescanreach

1

2

THEGLOBALBRAIN

outtoandmanydifferenttypesofrelationshipsandnetworkstheycancreatetoharnessinnovativeideas.

Questionsabound:Whatarethedifferentapproachestoharnessingexternalnetworksforinnovation?Whichapproachisbestforourfirm?Whatkindsofinnovationprojectslendthemselveswellfortheseapproaches?Whatroleshouldourfirmplayinourinnovationnetwork?

Toanswerthesequestions,managersneedagoodunderstandingofthe

emerginglandscapeofnetwork-centricinnovation.Onlywithagoodviewofthelandscapewilltheybeabletoidentifytheopportunitiesthatnetwork-centricinnovationpresents.

Beyondtheidentificationofopportunitieslieadditionalquestionsmanagersneedtoaskinexploitingtheopportunities.Whatorganizationalcapabilitiesdo

weneed?Howshouldourinnovationnetworkbedesigned?Whatbenefitscanweexpectandhowdowemeasurethesebenefits?Whatarethepotentialrisksofopeningupinnovation?Isthereadangerthatwecouldlosecontroloverourinnovationinitiatives?Howshouldweprotectourintellectualproperty?Howshouldwedefinesuccess?

Wewrotethisbooktoanswerthesetwosetsofquestionsinapracticalanddirectwaysothatcompanies—bothlargeandsmall—canexploreaswellasexploitthepoweroftheGlobalBrain.Wehopetotakeyouonajourneythatbeginswithanawarenessofthenatureandpotentialofnetwork-centricinnovationtoadestinationwhereyouwillbeabletoimplementanetwork-centricinnovation

strategyforyourfirm.

Throughoutthisbookwewilluseboththeseterms:GlobalBraintodescribethediversesetofexternalplayersthatconstitutetheinnovationnetworkforthecompanies;Network-centricinnovationtodescribetheunderlyingprinciplesofcollaborativeinnovationinsuchacontext.

HOWTHISBOOKCAME

ABOUT

Bothoftheauthorshavebeenstudentsofinnovationforseveralyears.EversincetheInternetgainedcriticalmassandfirmsstartedtorealizethepowerofnetworksandcommunities,wehavebeenparticularlyinterestedinunderstandingthenatureandtheimplicationsofdistributedinnovation,community-based

innovation,andinnovationnetworks.

Satishhadstudied“VirtualCustomerEnvironments”andtherolecustomersplayinsupportingandenhancingcompanies’innovationefforts.2Mohanhadwrittenabouttheemergingphenomenonof“CommunitiesofCreation”indifferentcontextsandexaminedtheirpromiseasa

wayoforganizingcommercialINTRODUCTION

3

innovationinitiatives.3Ourworkhadalsofocusedonnewtypesofinnovationintermediaries—or“Innomediaries”asMohancallsthem4—thatlinkcompanieswithexternalnetworksandcommunities.

Acommonthemeinourresearchwasourinterestintheconceptofdistributedinnovation—innovationinitiativesthatarespreadacrossadiversenetworkofpartners.Inthesummerof2005,weparticipatedinaresearchsymposiumondistributedinnovationorganizedaspartoftheAnnualAcademyof

ManagementMeetingheldin

Hawaii.Whileenjoyingthesunandthebeaches,webeganaconversationonthegrowingimportanceofinnovationnetworksandcommunitiesofcreation.Bothofuswereconvincedaboutthepromiseandthepotentialofinnovationinitiativescenteredonsuchnetworksofindividualinventors,customers,andpartners.Webelieved,basedonearlyevidencefromthe

softwareandautomotiveindustries,thatinnovationcouldbemadefarmoreefficient,effective,andspeedyiffirmscouldharnessallthetalentandideasthatlieoutsidetheirboundaries.Butwesuspectedthat,despiteallthehypeabouttheinnovativepowerofexternalnetworks,managershadverylimitedguidanceforimplementingsuchnetwork-centricinnovationinitiatives.

Wedecidedtoexplorethishunchfurther,toseewhetherwecouldmakeacontributioninthisarea.

OurvehicleforthisexplorationwastheKelloggInnovationNetwork(KIN)—aforumforseniorinnovationmanagersoflargecompanies—affiliatedwiththeCenterforResearchinInnovationandTechnologythatMohandirectsattheKelloggSchool

ofManagement.TheKINisanexcellentexampleofthepoweroftheGlobalBraininaction.Itconsistsofseniorexecutivesfromahand-selectedgroupofleadingcompanieswhocometogetherinacollaborativeforumtoexchangeideasandbestpracticesrelatedtoinnovation.TheresearchagendafortheKINemergesfromdialogue,discussion,anddebateamongthe

members.

WeinitiatedconversationswithseniormanagersfromKINmembercompaniessuchasMotorola,DuPont,IBM,Kraft,andCargill.Wepresentedourideasonnetwork-centricinnovationinKINseminars,andourdiscussionsrevealedthatourhunchwasaccurate.Mostmanagersindicatedthattheywereveryexcitedand

enthusiasticabouttheopportunitiesposedbyexternalinnovationnetworksandcommunities,butwerelessconvincedabouttheirowncapabilitiestoimplementsuchinitiativesthatinvolvereachingouttoexternalnetworkssuccessfully.Andallthemediahypeandbuzzaboutopeninnovation,opensourcesoftware,socialnetworking,andInternet-based

innovationwasn’thelping.Therewasalotofheatanddust,butverylittleenlightenmentwhenitcametoexecution-relatedissues.

4

THEGLOBALBRAIN

Asurveyofseniormanagersconductedbythemanagementconsultingcompany,Bain&Co.,in

2005supportsourobservation.Amajority(73%)ofthesurveyrespondentsagreedthatcompanies“candramaticallyboosttheirinnovationbycollaboratingwithoutsiders,”buttheysimultaneouslyexpressed

“deepdissatisfactionwith(their)knowledgeaboutappropriatestrategies,practices,andtools”for

executingsuchnetwork-centricinnovation.5

Forcompaniestobesuccessfulinmakingtheshiftfromfirm-centricinnovationtonetwork-centricinnovation,managersneedtoprogressbeyondabasicawarenessofthepotential.Theyneedtounderstandthelandscapeofnetworkcentricinnovation.Next,theyneedtoknowthestrategiesand

bestpracticesthatarerelevanttotheirbusinesscontext.Wefeltthattherewasaneedforabookthatwouldhelpmanagerstotakethesetwoimportantstepssotheycouldharnesstheunboundedcreativepotentialthatliesoutsidetheirfourwalls.

Afterwedecidedtoembarkonthebookproject,webeganwithanextensive

reviewoftheacademicliteratureaswellaspractitioner-orientedarticlesandbooksintheareaofinnovationmanagementandnetworks.Thisreviewprovidedthebackgroundmaterialfordevelopingourframeworksandconcepts.

Next,weidentifiedanumberofcompaniesthatwereleadersinexternallyfocusedinnovation.Thesecompanies

rangedfromconsumerproductcompaniessuchasDial,P&G,Staples,andUnilevertotechnologycompaniessuchasIBM,DuPont,Boeing,3M,andCisco.Wedecidedtolearnfromtheleadersbyconductingin-depthinterviewswithmanagersleadinginnovationinitiativesatthesefirms.Overaperiodofoneyear,wetalkedwithmorethan50managersfrom

awidevarietyoffirmstodevelopandvalidateourframeworksandconcepts.Wealsotalkedwithandanalyzedthebusinessmodelsofboutiquefirmsthatareplayingspecialistintermediaryrolesinnetwork-centricinnovation.

ThesecompaniesincludedinnovationfacilitatorslikeIgniteIP,EurekaRanch,EvergreenIP,and

InnoCentive.WealsointerviewedseveralindividualswhohaveplayedleadershiprolesintheOpenSourceSoftwaremovementandothernetwork-centricinnovationcontextssuchasonlinecustomercommunities.

Thediverseexperiencesandperspectivesthatwegleanedfromtheseinterviewshelpedustodeveloptheframeworks

andinsightsrelatedtonetwork-centricinnovationthatformthecorecontentofthisbook.

WHOSHOULDREADTHISBOOK

Wehavewrittenthisbookfortwoprimaryaudienceswithadeepinterestininnovationmanagement.

INTRODUCTION

5

ThefirstaudienceisaCEOorseniorbusinessexecutivewhohastheprimaryresponsibilityforgrowthandinnovationofabusinessunitoramajorcorporation.Forthisaudience,weprovideanunderstandingofthenatureofexternallyfocusedinnovationmechanismsthatyoucanexploitforyourfirm,aswellasyourroadmapfor

implementinganetwork-centricinnovationstrategy.

Thesecondaudienceforthebookisamanagertaskedwithleadingtheinnovationinitiativesatalargecorporation.Foryou,webringclaritytothetypeofinnovationnetworksyoushouldbuild;therolesthatyourcompanyshouldplaywithintheseinnovationnetworks,andthe

competenciesthatyouwillneedtodevelopatyourfirmtoexecutetheseroles.

Whatindustriesormarketsisthisbookparticularlyrelevantfor?Clearly,theframeworksandconceptsthatwepresentareapplicabletoabroadarrayofindustries;ourbookisparticularlyrelevantforfirmsinthetechnologysector(computers,software,

telecommunications,chemicals,andsoon)andtheconsumerpackagedgoodssector.Inadditiontothesesectors,theconceptswepresentarealsorelevanttootherindustriesorfieldssuchashealthcareservices,medicaldevices,automobiles,consumerdurables,andtheentertainmentindustry,wherenetwork-centricinnovationopportunitiesare

rapidlyemerging.

HOWTHEBOOKISORGANIZED

Wehaveorganizedthisbook,consistingof12chapters,intofiveparts.Eachpartaddressesasetoffundamentalquestionsrelatedtonetwork-centricinnovation:

PartI:FromFirm-Centricto

Network-CentricInnovation(Chapters1and2)PartII:TheLandscapeofNetwork-CentricInnovation(Chapters3and4)PartIII:TheFourModelsofNetwork-CentricInnovation(Chapters5to8)PartIV:ExecutingNetwork-CentricInnovation(Chapters9and10)

PartV:GlobalizationandNetwork-CentricInnovation(Chapters11and12)We

beginPartIbyansweringsomebasicquestions,suchas,“Whyshouldfirms

‘innovatebeyondboundaries’?”And,“Whatdoyoumeanbyadoptinga‘network-centricinnovation’approach?”Putmoresimply,“WhyshouldIcareaboutthis?”Wedescribetheneedforcompaniestolookoutsideforinnovationandmaketheshiftfromfirm-centricto

network-centricinnovation.Then,wedefinetheconceptof“network-centricity”anddescribetheprinciplesofnetworkcentricinnovation.Usinganumberofexamples,weemphasizethatdifferent6

THEGLOBALBRAIN

“flavors”ofnetwork-centricinnovationexist,andcompaniesneedtocarefullymaptheirindustryand

organizationalcontexttoidentifytheappropriateinnovationapproach.

InPartII,Chapters3and4,weaddressthequestion,“Whatdoesthenetworkcentricinnovationlandscapelooklike?”Wepresentaconceptualframeworktostructuretheemerginglandscapeofnetwork-centricinnovation.Ourframeworkisbasedon

twocentraldimensionsofnetwork-centricinnovation—thenatureoftheinnovationspaceandthestructureofthenetworkleadership.

Basedonthesedimensions,weoutlinefourbasicmodelsofnetwork-centricinnovation.Wealsoidentifyotherkeyelementsofourconceptualframework—

thedifferenttypesofplayers

innetwork-centricinnovation(thatis,ataxon-omyofinnovationroles)andthedifferenttypesofinnovationmanagementactivitiesandnetworkinfrastructure(forexample,governancesystems,IP

rightsmanagementsystems,andsoon).

InPartIII,Chapters5to8,wedescribeindetailthefour

modelsofnetworkcentricinnovation.Ineachchapter,weapplytheconceptualframeworkthatwedevelopinSectionIItoanalyzethenatureoftheinnovationroles,innovationmanagementactivities,andnetworkinfrastructurethatapplytothatparticularmodel.Weuseone“anchor”casestudytogroundourdiscussionoftheimportantissues.

InPartIV,weaddressexecution-relatedissues.Westartwiththequestion,

“Wheredoesmycompanyfitinthislandscape?”InChapter9,wedevelopacontingentframeworkthatmapsthecontextforinnovation—industryandbusinessenvironmentconditions,technologyandmarketfactors,acompany’sinnovationgoalsandinternal

resources—toalternatenetwork-centricopportunities.Thiscontingentframeworkprovidesguidelinesformanagerstoevaluatethedifferenttypesofopportunitiesandtoidentifytheopportunitiesthatwillbestalignwiththefirm’sresources,capabilities,andstrategy.

InChapter10,weaddress

questionssuchas,“NowthatIknowtheopportunitiesformyfirm,howexactlyshouldIpreparemycompanytoexploittheseopportunities?”“Whattypesofcapabilitiesarerequired?”And,“Whattypesofmetricsshouldbeusedtoevaluatemycompany’sperformanceintheseinitiatives?”Wedescribedifferentaspectsrelatedtopreparingtheorganizationfornetwork-

centricinnovation—culturalreadiness,strategicreadiness,operationalreadiness,andsoon.

InPartV,Chapters11and12,webroadenourhorizonandconsidertheimplicationsofnetwork-centricinnovationfortheemergingeconomies.Weask,INTRODUCTION

7

“Whatopportunitiesdothedifferenttypesofnetwork-centricinnovationinitiativespresenttocompaniesincountriessuchasIndia,China,Russia,andBrazil?”Weidentifysomeofthecommontrendsintheemergingeconomiesandanalyzethepotentialforcompaniesinthesecountriestoplugintotheglobalbrain.Weofferourfinalthoughtsinthelastchapterandleave

thereaderwithasetofbestpracticesand“nextpractices”thatwehaveidentifiedfromourstudyofleadersinnetwork-centricinnovationinitiatives.

JoinusaswebeginthisjourneybyfocusingonaquestionthatisonthelipsofeveryCEO:“Howcanwesustainprofitablegrowth,andwhyisinnovationsoimportantfororganic

growth?”


P

A

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T

I

FromFirm-Centricto

Network-CentricInnovation

Chapter1ThePowerofNetwork-Centricity11

Chapter2UnderstandingNetwork-Centric

Innovation29


C

H

A

P

T

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1

ThePowerof

Network-Centricity

“Thekeyistobeabletocollaborate—acrosstown,across

countries,eventothenextcube.…Globalinnovation

networkshelpmakethishappen.”

—TonyAffuso,UGSChairman,CEO,andPresident.1

Innovationusedtobesomethingcompaniesdidwithintheirfour

walls.StoriedorganizationslikeAT&T’sBellLaboratories,IBM’sWatsonResearchCenterandXerox’sPaloAltoResearchCenter

werethetemplesofinnovation.2Thousandsofresearchersandsci-

entiststoileddeepwithinthebowelsoflargecorporationstocreatethenextbigthing.Corporationsviewedtheirinnovationinitiativesasproprietaryandsecret.Andtheyattemptedtohirethebestand

thebrightestresearchersand

managerstodrivebasicresearchand

newproductdevelopment.Infact,anyself-respectingorganization

wasafflictedwiththe“NotInventedHere”(NIH)syndrome—believ-

ingthatithadthebestideasandthebestpeople,soifitdidnotinventacertain

something,thatthingwasn’tworthlookingat.

ThentheInternethappened.WithitcamephenomenaliketheOpen

SourceSoftwaremovement,electronicR&Dmarketplaces,online

communities,andawholenewsetofpossibilitiestoreachoutand

connectwithinnovativeideasandtalentbeyondtheboundariesof

thecorporation.Eventhelexiconassociatedwithinnovationis

changing,withnewadjectivesthatdescribeaverydifferentviewofinnovation—open,democratic,distributed,outside,external,

community-led.Thechangesinvocabularyandmetaphorssuggestthat

theshiftinthenatureandtheprocessofinnovationisbroadand

11

12

THEGLOBALBRAIN

deep.Consultants,academicians,andmainstreambusinessmediahavealljoinedthechorustoliberateinnovationfromorganizationalboundaries.

Specialissuesandarticlesinbusinessmagazineswithtitlessuchas“ThePowerofUs,”“OpenSourceInnovation,”“and“TheInnovationEconomy”imploremanagerstoreorient

andamplifytheirinnovationinitiativesbytappingexternalnetworksandcommunities.

But,inthewordsoftheminersintheCaliforniaGoldRushinthenineteenthcentury,istherereal“goldinthemtharhills”?Or,whatexactlycansuchexternallyfocusedinnovationdeliver?Toanswerthisquestion,wefirstneedtolookatthe

problemscompaniesarefacingincontinuingtogrowtheirrevenuesandprofits.

THEQUESTFORPROFITABLEGROWTH

Howthemightycanstumble.ConsiderDellInc.,theleadingsellerofpersonalcomputersandaccessories.From1995to2005,Dellwasaparagonofprofitablegrowth,fueledbyits

innovativebuild-to-ordermanufacturinganddirect-to-customersalesbusinessmodel.Duringthefive-yearperiodfrom2000to2005,Dell’srevenuesgrewat16%peryearanditsearningsincreased21%peryear.

Thecompanywaswidelyadmiredforitsabilitytodrivegrowthandincreaseitsmarketsharebyexecutingflawlesslyonitsbusiness

model,andstayingfocusedonprocessinnovation.Whenothercompaniesstartedimitatingitsbusinessmodel,Dellmaintaineditsedgebyfurtherrefiningitsbusinessprocessestobecomeevenmoreefficientinitsoperations.However,Dell’sgrowthenginestalledbadlyin2005.In2006,itmissedinvestorexpectationsforseveralquartersinarow,anditsstocklostalmosthalfof

itsvaluefromJuly2005toJune2006.OnereasonbehindthedownfallofDellisthatitbecametoomuchofaone-trickpony—usingthesamedirectbusinessmodelformorethantwodecades,andnotinnovatingenoughintermsofnewproductsandnewmarkets.

Meanwhile,Dell’scompetitors,includingAppleComputerandHewlett-

Packard,whoplacedmoreemphasisoninnovativeproductsandnewbusinessmodels,grewfasterandincreasedtheirmarketshareattheexpenseofDell.Dell’sgrowthwoesarelikelytopersistfortheforeseeablefuture,anditsseniormanagementwillbeunderintensepressuretoreignitethegrowthengine.

Dellisnottheonlylarge

companyfacingsuchgrowthchallenges.CompaniessuchasKraft,3M,Sony,Ford,andIBMareallfindingitdifficulttodrivegrowth.

InvestorscloselymonitortheCEOsandseniormanagementoflargepubliccompaniesontheirabilitytogrowthefirmstheylead.NowonderthenthataCHAPTER1•THEPOWEROFNETWORK-

CENTRICITY

13

majorityoftheCEOsconsidergrowthtobetheirhighestpriority—evenmorethanprofits.AlthoughgrowthhasalwaysbeenontheCEOagenda,theperen-nialquestforgrowthhasbecomemorechallengingintheeraofglobalcompetitionandshrinkingproductlifecycles.

Intheirattempttojumpstartgrowth,companiesoftenturntoinorganicgrowththroughmergersandacquisitions(M&A).M&Adealsareveryappealingtoseniormanagers—theygenerateanimmediateboostinrevenues;thehardsynergies(mostlyfinancial)areveryapparent;andtheinternalstakeholders(thatis,seniormanagers)havealottogainfrommakingthedeals.Asaresult,

M&Aactivityhasincreasedtoafeverpitch.In2005,therewere10,511mergersandacquisitionsinvolvingU.S.companiesalone,withanaggregatevalueofmorethan$1trillion—a28%increaseover2004’s$781billion.3

However,thereistroublein“M&Aland.”Simplyput,mergersandacquisitionsdon’tworkasadvertised.

Moststudiesandsurveyspaintagloomypictureoftheafter-dealscenario.Between70%and80%oftheM&Ainitiativesendupinfailures—mostofthemwithinthefirst18months.4Companiesgenerallydowellatrealizingthehardsynergies;forexample,consolidatingtheborrowing,restructuringthetaxation,poolingtheworkingcapital,purchasingathighervolumes,andsoon.Thesoft

synergies—operationalconsolidation,processimprovement,channelmerging,technologysharing,stafflayoffs,extensionofcustomerbase,andsoon—arewhatrarelymaterialize.AlthoughmostM&Afailuresareblamedon“people”and“cultural”issues,theendresultisthatsuchinitiativesfailtoenhance(and,oftencontributetodeclinein)shareholdervalue.Afterthe

failure,theCEOoftenexitsandanewCEOarriveswhostartsdivestingthosepreviouslyacquireddivisions—andthenpromptlystartacquiringnewones!Likeagerbilinatreadmill,thecycleofacquisitionsanddivesti-turesgoeson,withtheonlysurewinnersbeingtheconsultants,lawyers,andinvestmentbankers.

Giventhehighvisibilityof

manyrecentM&Afailures(rememberTimeWarnerandAOLorChryslerandDaimler-Benz),manyCEOshavechangedtheirtuneandnowproclaiminnovationasthepreferredpathwaytogrowth.InarecentCEOsurvey,86%ofrespondentsindicatedthatinnovationisdefinitelymoreimportantthanM&Asandcost-cuttingstrategiesforlong-termgrowth.Infact,manyCEOs

andseniormanagershavecometoviewinnovationastheironlyalternativetoachievesustainedgrowth.5

AsHowardStringer,ChairmanandCEOofSony,recentlynoted,“Wewillfightourbattlesnotonthelowroadtocommoditization,butonthehighroadofinnovation.”6

14

THEGLOBALBRAIN

However,despitesuchpublicstatementsabouttheimportanceofinnovation,whenitcomestoactualdecisionsandactions,manycompaniesstilltaketheeasywayout—focusingeitheroncost-reductioninitiativesthatpromiseshort-termprofitincreasesoronmergersandacquisitionsthatcreateanillusionofrapidrevenue

growth,eveniftheformerisoftennotsustainableandthelattermostlyturnouttobefailures.Inshort,asignificantgulfseemstoexistbetweenthedesiretoinnovateandtheabilitytoinnovate.

ANINNOVATIONCRISIS?

Theabilityoffirmstoinnovateisstymiedbytwofactors—thepaceof

innovationrequiredtomaintainandgrowprofitsisincreasing,andtheproductivityofinternallydriveninnovationeffortsisdecreasing.Thesetwofactorsarecon-spiringtocreateaninnovationcrisisinlargefirms.

THE“REDQUEEN”EFFECTININNOVATION

“Well,inourcountry,”said

Alice,stillpantingalittle,“you’dgenerallygettosomewhereelse—ifyourunveryfastforalongtime,as

we’vebeendoing.”“Aslowsortofcountry!”saidtheQueen.“Now,

here,yousee,ittakesalltherunningyoucando,tokeepinthesameplace.Ifyouwanttogetsomewhereelse,youmustrunatleasttwiceas

fastasthat!”7

Despitehavinghundredsofin-housescientistsandengineersworkingtirelesslyoninnovationprojects,managersarediscoveringthattheirinnovationpipelinesarenotdeliveringtheresultstheyneedtosustaingrowth.Innovationproductivityisdecliningwhilethecostofnewproductdevelopmentisincreasing

daybyday.InvestingmoredollarsintointernalR&Deffortsdoesnotseemtoproducethedesiredpayoffs.Forexample,Kraftinvestscloseto$400millionannuallyandhas2,100employeesinitsinternalR&Dunit.Despitesuchlargeinvestments,thecompanyhasbeendiscoveringitsR&Dpipelinetobelessandlesseffectiveinfuelingfirmgrowth.8Thestoryisnot

muchdifferentinmanyotherlargefirmsinboththetechnologyandtheconsumerproductsectors.

Ontheotherhand,theindustrycycletimescontinuetoshrinkrapidlyacrosstheboard.Forexample,intheautomobileindustry,48-monthdevelopmentcyclesandsix-yearmodellifecycleswerethenorm.Buttoday,concept-to-production

timesaredowntolessthan24months,andindustryleaderslikeCHAPTER1•THEPOWEROFNETWORK-CENTRICITY

15

Toyotaaretalkingabout12-monthdevelopmentcycles.Inconsumerelectronicsmarkets(forexample,cellphone,digitalaudioplayer,andsoon),productlife

cyclesareoftenmeasuredinweeks,notmonths.

Addedtothisaccelerationistheimpactofglobalization—globalmarketsbreedglobalcompetitors.CompaniessuchasSamsungfromKorea(inmobilephonesandtelevisions),TatafromIndia(inautomotive),andLenovofromChina(incomputers)haveuppedtheantebyproducinginnovative

productsatsignificantlylowercosts,drivingtherapidcommoditizationinmanyproductcategories.

Theseforces—rapidlydecreasingproductlifecycles,decreasinginternalinnovationproductivity,andglobalcompetition—togetherarecreatingaRedQueeneffect9ininnovation:Companieshavetoinvestmoreandmorejustto

maintaintheirmarketposition.

ConsiderasimplesimulationdonebyDaveBayless,anentrepreneurandourfriend,tounderstandthecripplingeffectofshrinkingproductlifecyclesongrowth.Assumingacompanyhasbaserevenuesof$500millionperyear,thesimulationillustrateshowa10%annualincreasein

industryclockspeedwouldnecessitateanimmediateandsustainedincreaseintherateofnewproductintroductionsof50%justtomaintainthataveragelevelofrevenueovertenyears.10Andthissimulationdidnotevenconsiderthepotentialnegativeimpactofreducedinnovationproductivityortheincreasingmarketriskofnewproductsandservices—bothclearlyevidentinmany

industries.Thus,justonefactoralone,shrinkingproductlifecycle,posesacriticalinnovationchallenge.

Ontopofthat,ifthecompanywantstogrowevenatamodest4%or5%annualrate,theinnovationchallengebecomesalmostinsurmountable.

THELIMITSOFINTERNALLYFOCUSED

INNOVATION

ItisnotjusttheRedQueeneffectthatdefinesthelimitsofinternallyfocusedinnovationinitiatives.Thereisalsothepotentiallydebilitatingeffectofamyopic

“world-view”thatcompaniesoftencometopossess—particularlywhentheir

“successful”innovationandgrowthstrategieshavebeenaroundforawhile.

Dell’sdirect-to-consumerbusinessmodelisagoodexampleinthiscontext.Asmarketpressurescontinuetoclimbinthepersonalcomputermarket,Dell’sinabilitytocomeupwithnewbusinessmodelsiswhatcontinuestodragdownitsgrowth.Dell,toitscredit,has

startedconsideringnewwaysofdoingbusinessandenteringintonewproductcategoriesandmarkets—buttheseeffortshaven’tbeenmetwithmuchsuccess.Granted,businessmodelinnovationis16

THEGLOBALBRAIN

noteasy.ButitisDell’singrainedperspectivesderivedfromoperatingits

currentbusinessmodelforalongtimethatmakessuchbusinessmodelinnovationdoublydifficult.Overtime,organizationsbecomeprisonersofwhattheyknow,especiallywhentheyhavemetwithsustainedsuccess.Theyfailtoseebeyondtheirlimitedviewoftheworld.

Thislimitedworld-viewisbecomingmoredangerousintheturbulentanddynamic

businessenvironmentthatwefindourselvesin.Inmanyindustriessuchasconsumerelectronics,automobilesandsoftware,productshavebecomemorecomplexintermsoftheirfeatures,theirunderlyingtechnologies,andtheirdesign.Therefore,theknowledgeandskillsrequiredtodesignanddevelopnewproductsandserviceshavebecomemuchmorediverseandmore

demanding.Innovatingsuchnewproductsandservicesthuscallsfornotonlyacommandofdiversesetsofknowledgeandexpertisebutalsotheabilitytomakenon-obviousconnectionsbetweensuchdiverseknowledgebases.Thisfeatisverydifficulttopulloffinsidethefourwallsofanyfirm,nomatterhowlarge.

Clearly,throwingmoreand

moremoneyattheinternalinnovationengineisnotthemostefficientwaytoaddresstheinnovationcrisis.Doingmoreofthesamecanonlyresultinincrementalimprovementininnovativeoutput.Whatisreallyneededtoovercomethiscrisisisasignificantincreaseinthecompany’sinnovationreachandproductivity—onlysuchanincreasewilltranslateintoadramaticshiftininnovation

outputofoneormoreordersofmagnitude.

Andtogainsuchincreasesinreachandrangeofinnovativeideas,companiesneedtobroadentheirinnovationhorizonsbylookingoutsideforinnovativeideasandtechnologies.

ConsiderthecaseofKraft.Profitsfell24%inthetimeperiodfrom2003to2005.

Top-linegrowthstalled,andnetincomein2005was$2.63billion,downfrom$3.48billionin2003.ThecompanythatcameupwithblockbusterproductssuchasOreocookies,MiracleWhipdressing,andDiGiornopizzaishungryforideas.ItisnotlackinganyinternalR&Dinfrastructure.KrafthasanextensiveinternalR&Dsetup,withthousandsoftalentedresearchersonstaff.

However,internallyfocusedinnovationeffortsarenotdeliveringthegoods.SoKrafthasturnedoutwardsinitsquestforideas:ThecompanyisinvitingunsolicitedideasfromitscustomersorforthatmatterfromanybodywhovisitsitsWebsiteandsubmitsideas.WhetherputtingsuchaninvitationforideasonthecompanyWebsiteistherightapproachisdebatable,

butwhatislessarguableistheneedtostartlookingoutside.Indeed,thelimitsofinternallyfocusedinnovationarewellillustratedbyKraft’sradicaldeparturefrompastpractice.AsMaryKayHaben,seniorvicepresidentatKraft,noted,“Inthepastwewouldhavesaid,

‘Thankyou,butwearenotacceptingideas.’”11

CHAPTER1•THEPOWEROFNETWORK-CENTRICITY

17

Theimperativetolookoutsideisnotlimitedtotheconsumerproductsector.

ConsiderMerck,agiantinthepharmaceuticalindustry.Merckhastraditionallybeenaninternallyfocused

innovationorganization.However,afterastringoffailuresandaverylacklusterR&Dpipeline,itmadeastrategicshifttowardlookingoutsideforinnovation—specifically,topartnerwithsmallerfirmswithinnovativeideas.Merck’sR&Dchief,PeterKim,madeitclearthatthecompany’sownlabsareinsufficienttoreplenishitspipelineforthefuture,andthreeyearsorsoback

embarkeduponamorecollaborativeandopeninnovationagenda.Althoughtheresultsofthisapproachwilllikelytakeyearstobecomeevident,theinitiativeiswellunderway.Comparedto10outsidealliancesin1999,Merckhasenteredinto141suchdealsbetweentheyears2002and2004—anaverageof47eachyear.Andin2005,Merckreviewedmorethan5,000such

externalcollaborationopportunities.12

OVERCOMINGTHECRISIS:“LOOKINGOUTSIDE”

Theopportunitiesforcompaniesto“lookoutside”forinnovationareincreasingdaybyday.Aswenotedpreviously,theGlobalBrainisrichanddiverse—alargenumberofinnovativefirms

aswellasalargepoolofinnovativepeopleexistindifferentpartsoftheworldwhoseknowledgeandcreativitycanbeleveragedbycompanies.Moreover,newtypesofinnovationintermediariesandnewtechnologicalinfrastructure(forexample,theInternet)havemadetappingintosuchglobalnetworksofinventors,scientists,andinnovativefirmseasierthaneverbefore.

Thus,theimperativeforsourcingexternalinnovationismatchedbytherapidlyexpandinghorizonofinnovationopportunities.

FormerSunChiefScientist,BillJoy,notedseveralyearsbackthat“mostofthesmartpeopleintheworlddon’tworkforyourcompany.”Trueenough,butincreasinglythosesmartpeopleinotherpartsofthe

worldrepresentaglobalinnovationopportunitywaitingtobetapped.

Thisismirroredincompanies,suchasbyP&G’srecentinnovationinitiatives.

AsTomCripe,AssociateDirectorofP&G’sExternalBusinessDevelopmentgroup,recentlynoted:

“Wewanttogrow

efficiently.Andatthesizeweare,it’sjustnotpossibletodoitallyourself.Andevenifitwasit’dbelunacytoattemptit.Therearejusttoomanysmartpeopleoutthere.Ifwehavetogrowattheratewewantto,wehavetoaddincrementalbusinessofbillionsofdollars…Ittookus100yearstogethereandwenowhaveto18

THEGLOBALBRAIN

doinafewyearswhatwedidin100years.Evenifwecould,itwouldbeexpensive.Andsowe’vebeenabletoincreaseourinnovativeoutputwhilereducingourspendingasapercentofsalesbecausewe’re

multiplyingitbyallthepeoplewe’repartneringwith.Sothereasonfor‘lookingoutside’istogrowmosteffectivelybydrawingonthe

verybestideasoutthere,ratherthantryingtocompetewitheverybody.”13

Thismessagehascomethroughinseveralotherforums,too.Forexample,theCouncilofCompetitivenesspublishedtheNationalInnovationInitiativereportin2004.Thisreportfocusedontheimplicationsofglobalizationforthenationalinnovationagendaforthe

UnitedStates.Amongothertrends,thecommitteeidentifiedtheeffectivepursuitofhighlycollaborativeinnovationasofutmostimportancefortheU.S.economy.Asthereportnotes,“Innovationitself—whereitcomesfromandhowitcreatesvalue—ischanging:

■

Itisdiffusingatever

increasingrates.

■

Itismultidisciplinaryandtechnologicallycomplexandwillarisefromtheintersectionofdifferentfields.

■

Itiscollaborative,requiringactivecooperationand

communication

amongthescientistsandengineeringandbetweencreatorsandusers.

■

Workersandconsumersareembracingnewideas,technologies,and

content,anddemandingmorecreativityfromtheircreators.

■

Itisbecomingglobalinscope—withadvancescomingfromcentersof

excellencearoundtheworldandthedemandsofbillionsofnewcon-

sumers.”14

Thekeyfindingsofthecommitteealsoreflectedhow

theglobalconnectednessandthescaleofcollaborativeinnovationwilldemandthedevelopmentofamorediverseworkforcethatisabletocommunicateandcoordinateinnovationactivitiesacrossorganizationalandgeographicboundaries.

Similarly,IBMhasbeenconductingaglobalconversationoninnovation

thatitcallstheGlobalInnovationOutlook(GIO).ThemostimportantfindingfromIBM’sGIOconductedin2005and2006wasthatinnovationismoreglobal(anyoneandeveryonecanparticipatewithoutgeographicalbarriers),moremultidisciplinary(innovationrequiresadiversemixofexpertise),andmorecollaborative(innovationresultsfromentitiesworking

togetherinnewways).15

Toenjoythebenefitsofsucharapidlyexpandinghorizonofinnovationopportunities,companieswouldneedtomakeagradualshiftfrominnovationinitiativesthatarecenteredoninternalresourcestothosethatarecenteredonCHAPTER1•THEPOWEROFNETWORK-CENTRICITY

19

externalnetworksandcommunities—thatis,ashiftfromfirm-centricinnovationtonetwork-centricinnovation.However,thequestionremains:Willsuchashiftaddresstheinnovationcrisisoutlinedearlier?Inotherwords,willanetwork-centeredinnovationstrategydelivergainsthatareordersofmagnitudehigherin

innovationreach,range,andeffectiveness?

Tounderstandthepromiseofnetwork-centricinnovation,weneedtoconsideritsfoundationalthemeorpremise—namely,theconceptofnetwork-centricity.

Theconceptofnetwork-centricityhasverydeeprootsandverybroadapplicability.

Beforewediscusshownetworkscanenhanceinnovation,letusexaminehownetwork-centriccapabilitiesaretransformingseveralotherdomains.

THEPOWEROFNETWORK-CENTRICITY

Theuniversitythatoneofusworksathasalibrarywithcloseto500,000booksonitsshelves.Consideringthe

numberofstudents—around7,500—itisnotalargeacquisition.However,thelibraryispartofanetworkof13otheruniversitylibrariesinthearea—asystemcalledConnectNY.ThetotalnumberofbooksintheConnectNYnetworkis10million.EachmemberoftheConnectNY

networkcanrequestbooksfromanyothermember

library,andifthebookisavailable,itisdeliveredbyaprivatecourier(whotravelsbetweenthedifferentmemberlibraries)withinthreetofourbusinessdays.Thus,ineffect,bybecomingamemberoftheConnectNYnetwork,thelibraryhasincreaseditsacquisitionbytwentyfold—from0.5millionto10million.

Consideranothersimple

example—thetaskofreplenishingavendingmachine.

Aservicetruckcanvisiteachandeveryvendingmachineandthenfindoutwhetheritneedsanyservicingornot.Thismethodcreatesinefficiencybecausethereisnowayforthepersonmakingtheroundstoknowwhetherheneedstoreplenishaspecificmachineandwhat

exactlythemachineisshortof.Imagineifthevendingmachinecould“talk”totheservicepersonoveraninformationnetworkandinformhiminadvanceifitwasrunningoutofaspecificfoodorbeverageitem.ThisiswhatVendlinkLLP,aN.J.-basedvendingservicecompany,hasdoneinPhiladelphia.Itcreatedawirelessnetworkthatintegratesinformationfrom

allthevendingmachinesintheareaandproducesaservicingplanthatoptimizesthelogisticsinvolved.

Eventoyscanbemadesmarteraftertheyareconnectedtoanetwork.In1997,FisherPriceandMicrosoftcreatedtheActiMatesInteractiveBarney.Byitself,ActiMatesInteractiveBarneyisacute,purplestuffedanimal.But

therealfun20

THEGLOBALBRAIN

beginswhenthetoyisusedwitheitheroftwoadd-ondevices:aTVPack,whichaddsaradiotransmittertotheuser’sTV/VCR;andaPCPack,whichdoesthesametoacomputer.Thetoyenableschildrentoimprovetheirvocabularyorlanguageskills.Thecompanyalso

createdanetworkfromwhichthe“lessons”

canbedownloadedintothetoy.Asthechildgetsolder,parentscanconnectthetoytothenetwork,downloadtheappropriatecomponents,andtherebyextenditsuse.

Thesesimpleexamplesreflecttheessenceofnetwork-centricity:theemphasisonthenetworkas

thefocalpointandtheassociatedopportunitytoextend,optimize,and/orenhancethevalueofastand-aloneentityoractivitybymakingitmoreintelligent,adaptive,andpersonalized.Itshouldbenosurprise,therefore,thattheconceptofnetwork-centricityhaspermeatedmanyaspectsofourcontemporaryworldanddaily-life—rangingfromwarfareandmilitary

operationstosocialadvocacymovements.Letusstartwithnetwork-centriccomputing.

Network-CentricComputing

Inthefieldofcomputerscience,theshiftfromhost-centriccomputingtodistributedornetwork-centriccomputinghasrelativelyoldroots.Theconceptofdistributedcomputing,pioneeredby

DavidFarberinthe1970sattheUniversityofCalifornia,16evolvedintowhatisnowcallednetwork-centriccomputingorgridcomputing.

Gridcomputingrelatestotheabilitytopursuelarge-scalecomputationalproblemsbyleveragingthepowerandunusedresourcesofalargenumberofdisparatecomputers(includingdesktop

computers)belongingtodifferentadministrativedomainsbutconnectedthroughanetworkinfrastructure.17Theessentialideabehindgridcomputingistosolvecomputing-intensiveproblemsbybreakingthemdownintomanysmallerproblemsandsolvingthesesmallerproblemssimultaneouslyonasetofconnectedcomputers.The

paralleldivisionoflaborapproachcanresultinveryhighcomputingthroughput,oftenmorethanasupercomputer.Further,thisthroughputcanbeachievedatacostthatissignificantlylowerbyexploitingtherelativelyinexpensivecomputingresourcesavailableatremotelocations.Andthenetwork-centriccomputingarchitecturealsoisfarmoreflexible,because

remoteuserscandecidemoment-to-momenthowmuchcomputingpowertheyneed.Thepromiseofgridcomputing—highcomputingpowercombinedwithlowcostandhighoperationalCHAPTER1•THEPOWEROFNETWORK-CENTRICITY

21

flexibility—isspurringmany

applicationsincommercialaswellasnon-commercialcontexts,includingfinancialmodeling,weathermodeling,proteinfolding,andspaceexploration.18

Network-CentricWarfare

Network-centricwarfare(NCW)isarelativelynewtheoryordoctrineofwardevelopedprimarilybytheUnitedStatesDepartmentof

Defense.19Thisemergingtheoryindicatesaradicalshiftfromaplatform-centricapproachtoanetwork-centricapproachtowarfare.

ThebasicpremiseofNCWisthatrobustnetworkingofgeographicallydispersedmilitaryforcesmakesitpossibletotranslateinformationaladvantageintowarfareadvantage.20Higherlevelsofinformationsharing

amongtheunitsenhancetheextentof“sharedsituationalawareness.”Inotherwords,throughinformationsharing,everyunit—frominfantryunitstoaircrafttonavalvesselstocommandcenters—“sees”thesumofwhatallotherunits“see.”Thissharedawarenessfacilitatesself-synchronizingforces,virtualcollaboration,andotherformsofflexibleoperations.Thevaluepropositionforthe

militaryisasignificantreductionofcombatrisks,higherordercombateffectiveness,andlow-costoperations.21AlthoughthereisstillsignificantdebateabouthowsoonandtowhatextentthebenefitsofNCWcanberealized,severalcountries,includingAustraliaandtheUK,haveembracedthebasictenetsofnetwork-centricwarfare.

Network-CentricOperations

Thetermnetwork-centricoperations(NCO)wasoriginallyappliedtothefieldoflogisticsandsupplychainmanagementinbusinessenterprises.Theterm

“valuenets”or“valuenetworks”hasalsobeenusedinthiscontext.However,morerecently,NCOhasgainedabroader

interpretationandisoftenusedinter-changeablywithNCWinthedefenseandmilitaryareas.

Inthesupplychainmanagementcontext,NCOsignifiesestablishingdynamicconnectionsbetweentheenterprise,suppliers,customers,andotherpartnerstodelivermaximumvaluetoalltheentitiesconcerned.22It

involvesintegratingenterpriseinformationsystems(forexample,ERPandCRMsystems)withexternalpartners’systemsandprocessestoenhancetheinformationflowand22

THEGLOBALBRAIN

“senseandrespond”capabilities.Whereastraditionalsupplychainsemphasizelinearandoften

inflexibleconnections,network-centricoperationsorvaluenetsfocusonestablishingvaried,dynamicconnectionsthatdeliverbothefficiencyandagilitytotheenterprise.Supplychain–focusedsoftwarecompaniessuchasSAP,i2Technologies,andIBMhaveadaptedtheseconceptstocreateapplicationsthatsupportsuchnetwork-centricsupplychainoperations.

Network-CentricEnterprise

Theconceptofnetwork-centricenterprise(NCE)owesitsorigintotheconceptofbusinessecosystemsandvirtualorganizations.Itinvolvesestablishingan

“infostructure”thatconnectsthedifferentpartnersinacompany’sbusinessecosystemandsupportsthedifferentvaluecreation

processes.Assuch,theconceptofNCEisalsocloselyrelatedtoNCO.

CompaniessuchasWal-Mart,Cisco,andToyotahaveconsiderableexperienceindeployingandoperatingsuchanetwork-centricenterprise.Forexample,Ciscohasevolveditsorganizationintowhatitcallsthe“NetworkedVirtualOrganization”(NVO)initsmanufacturing

operations.23Similarly,ToyotahasusedtheNCEmodeltoimproveitsjust-in-timeinventorymanagement.TheNCE(orNVO)modelhasthreecoretenets.24First,itputsthecustomeratthecenterofthevaluechainandemphasizestheneedtorespondrapidlytocustomers’needs.Second,itcallsfortheenterprisetofocusonthosecoreoperationsorprocesses

whereitaddsmostvalueandtooutsourceorturnoverallotheroperationstomultiplepartners.Finally,themodelrequiressignificantprocess,data,andtechnologystandardizationtoenablereal-timecommunicationandsynchronizationacrossorganizationalboundaries.Overall,thenetwork-centricenterprisemodelimpliessignificantstrategicandoperationalagilityforan

enterprise,therebyenhancingitsabilitytothriveinhighlydynamicmarkets.

Network-CentricAdvocacy

Theconceptofnetwork-centricityisalsobecomingevidentinthedomainofsocialadvocacymovements.Socialadvocacygroupshaverealizedthatthebasictenetsofnetwork-centricitycanbeadoptedtoenhancethereach,

speed,andoveralleffectivenessofsocialmovements.25

Network-centricadvocacy(NCA)signifiesacriticalshiftfromthedirectengagementandthegrassrootsengagementmodelsofsocialadvocacytoaCHAPTER1•THEPOWEROFNETWORK-CENTRICITY

23

morenetwork-centeredmodelwhereintheindividualparticipatesaspartofacoordinatednetwork.26InNCA,individualsandgroupsthatarepartofthenetworkrapidlyshareinformationonemergingtopicsandidentify“ripecampaignopportunities.”Theabilityofthenetworktoscaleupintermsofresources,expertise,

andoveralllevelofpublicsupportbringssharpenedfocusandenhancedvisibilitytothecampaign.Network-centricadvocacyprovidesseveraladvantages:speedofcampaign,abilitytopursuemultiplecampaignswithfewresources,andabilitytorapidlyabandonlosingefforts.Allthisbringsanelementofunpredictabilitythatlowerstheabilitytocountersuchsocial

campaignseffectively.

Wesummarizethepromiseofnetwork-centricconceptsinTable1.1.Theseexamplessuggestthat,althoughtheconceptofnetwork-centricityhasfoundconsiderableapplicationindiversedomains,alltheseapplicationshaveacommonthreadintermsofoutcomes—greaterpower,speed,flexibility,andoperational

capabilitiesdeliveredatalowercostusingdiverseresourcesthatarespreadoutgeographically.Thesebenefitsaretheveryonesweseekasweexaminetheappealofnetwork-centricityinthedomainofinnovation.

Table1.1EvidenceofNetwork-CentricityinDifferentDomainsDomain

From

To

Implications

Computing

Host-centric

Distributedorgrid

Morecomputingthroughputat

computing

lowercost

Warfare

Platform-centricNetwork-centric

Morecombatpowerwithfewer,

lower-costunits

Supplychain

Linearchains

Valuenets

Higher“sense-and-respond”

mgmt.

capabilities

Business

Stand-alone

Virtualornetworked

Morestrategicandoperational

enterprise

organization

organization

agility

Social

Direct

Network-coordinatedMoreeffectivecampaigns

advocacy

engagement

engagement

withfewerresources

NETWORK-CENTRICITY

ANDINNOVATION

Toapplyanetwork-centricperspectivetoinnovation,weformallydefinenetwork-centricinnovation(NCI)asanexternallyfocusedapproachtoinnovationthatreliesonharnessingtheresourcesandcapabilitiesofexternalnetworksandcommunitiestoamplifyorenhanceinnovationreach,innovationspeed,andthe

qualityofinnovationoutcomes.

24

THEGLOBALBRAIN

Network-centricinnovationfeaturesprinciplesthatareanalogoustotheexampleswementionfromotherdomains.Wedefinetheseprinciplesinthenextchapter.Butfirst,letuslookatthe

evidenceofthepowerofnetworkstoenhanceinnovationinavarietyofindustriesandmarkets.

PerhapsthemostcelebratedexampleofnetworkedinnovationistheOpenSourceSoftware(OSS)movement,anditsmostfamousproductisLinux,thefast-growingopensourceoperatingsystemthatwasdevelopedandiscontinually

enhancedbyanetworkedcommunityofsoftwaredevelopers.ThefirstreleaseofLinuxKernel,version0.01,wasinSeptember1991,anditconsistedof10,239linesofcode.ByApril2006,version2.6.16.11hadbeenreleasedwithawhopping6,981,110linesofcode.Inthis15-yearperiod,thousandsofprogrammersspreadacrosstheworldcontributedtothe

developmentandreleaseofmorethanahundredversionsoftheLinuxKernel.Infact,withinoneyear—

fromearly1993toearly1994—15developmentversionsoftheLinuxKernelwerereleased.Sucharapidreleasescheduleisunheardofinthecommercialsoftwareworld,anditreflectstheinnovativepoweroftheglobalLinux

community.

AmoreformalcomparisonofthedevelopmenteffortbetweenRedHatLinuxversion7.1(adistributionversion)andasimilarproprietaryproductwasdonein2001.27RedHatLinux7.1containedmorethan30millionsourcelinesofcodeandreflectsapproximately8,000person-yearsofdevelopmenttime.Ifthis

versionweredevelopedinaproprietarymanner(thatis,insideanorganizationsuchasMicrosoftorOracle)intheUnitedStates,itwouldhavecostapproximately$1.08billion(inyear2000U.S.dollars).

Toprovidefurtherevidenceoftheawesomepowerofsuchinnovativecommunities,considerRedHatLinuxversion6.2,which

wasreleasedjustayearearlierin2000—ithadonly17millionlinesofcodeandrepresents4,500person-yearsofdevelopmenteffort($600millionincomparativecost).Thus,version7.1wasapproximately60%moreintermsofsizeanddevelopmenteffort.

Inoneyear,theopensourcecommunity’sinnovativecontributionsincreasedtwo

ordersofmagnitude—animpossiblefeatinaconventionalproprietarysoftwaredevelopmentinitiative.

Thecreativepowerofnetworksandcommunitiesisbeingfeltinotherdomains,too.Considerthecommunity-basedencyclopediacalledWikipedia.Thisonlineencyclopediawaslaunchedin

January2001,andthroughthecollaborativeeffortsoftensofthousandsofcontributors,itswiftlybecamethelargestreferencesiteontheInternet.AsofJuly2007,Wikipediahadmorethan75,000

activecontributorsworkingonmorethan7,704,000articlesinmorethanCHAPTER1•THEPOWEROFNETWORK-

CENTRICITY

25

250languages.DebateisongoingregardingthereliabilityandaccuracyofWikipedia(forexample,apeer-reviewedstudypublishedbytheprestigiousjournalNaturefoundthatWikipediaiscomparabletothehallowedEncyclopediaBritannicaintermsof

accuracy,28whileotherstudieshaveshownjusttheopposite).Whatisundeniable,however,isthecreativepowerofthecommunitythatfeedsWikipedia’sexponentialgrowth.

Anotherexampleistheworldofopensourceorcitizenjournalism.ThefirstopensourcenewspaperisOhmyNews—aSouthKorean

onlinenewspaper

establishedinFebruary2000.Themajorityofthearticlesinthenewspaperarewrittenbyitsreaders—acommunityofapproximately41,000citizenreporters.

Asacitizennewspaper,OhmyNewsexercisedconsiderableinfluenceduringtheSouthKoreanpresidentialelectionsin2002.29An

Internationaledition(inEnglish)ofOhmyNewswaslaunchedinFebruary2004with1,500citizenreportersfrommorethan100countries.

Globalnetworksarealsoturbo-chargingscientificresearchinthelifesciencesandmaterialscienceindustries.Awell-knownexampleofanelectronicR&D

networkisInnoCentive,aglobalcommunityofscientiststhathelpslargecompaniesseeksolutionstotheirR&Dproblemsbysourcingsolutionsfromscientistsaroundtheworld.InnoCentivemaintainsacommunityofscientists,infieldsasdiverseaspetrochemicalsandplasticstobiotechnologyandagribusi-ness,fromapproximately170countries.

Tounderstandthepowerofthisnetwork,considerthecaseofEliLilly,whichhadanR&DproblemintheareaofsmallmoleculesthatitsinternalR&Dorganizationhadspentmorethan12person-monthsofworkandfailedtosolve.EliLillyposedtheproblemontheInnoCentiveWebsiteinJune2003.InlessthanfivemonthsafterpostingitonInnoCentive,EliLillyhada

solutioninhand—aretiredscientistbasedinGermanyhadfoundasolutionthathadeludedEliLilly’sinternalteamofresearchers.30ThroughInnoCentive,EliLillyhadeffectivelyincreaseditsreachtoapproximately30,000scientistsandresearcherswhoweremembersoftheInnoCentiveforum.OtherexamplesfromInnoCentiveandsimilar

“Innomediaries”suggestthattheinnovativepowerofcommunitiescantranslateintoordersofmagnitudeimprovementsininnovationspeed,cost,andquality.

Perhapsnoothercompanyillustratesthepowerofnetwork-centricityaswellasP&G.Thecompany’saggressivepartnershipwithexternalinnovationnetworkshastranslatedintohighly

commendableresults.R&Dproductivityhasincreasedbynearly60%,innovationsuccessratehasmorethandoubled,andthecostofinnovationhasfallensignificantly.31

26

THEGLOBALBRAIN

Theseandotherscatteredexamplesofthecreative

poweroftheGlobalBrainhaveencouragedmoreandmorecompaniestoreorienttheirinnovationinitiativestoamorecollaborative,network-centeredapproach.However,asmostCEOsandseniormanagerswouldreadilyadmit,harnessingthisinnovativepowerissomethingthatis“theoreticallyeasy”but“practicallyhardtodo.”32

Letusbrieflyexaminethesebroadchallengesnow.

CHALLENGESIN“LOOKINGOUTSIDE”

Organizationsembarkingonanetwork-centeredinnovationstrategyarelikelytobefacedwithdifferenttypesofnetworksandcommunitieswithdifferenttypesofinnovationopportunities.Thethree

broadsetsofchallengesthatcompanieswilllikelyfacearemindsetandculturalchallenges,contextualizationchallenges,andexecutionchallenges.

MINDSETANDCULTURALCHALLENGES

Mostlargecompanieshaveconsiderableexperienceinpartneringwitharelativelysmallsetofcarefully

identifiedfirms—jointventures,technologicalagreements,licensingagreements,andsoon.However,whenitcomestoinnovationcollaborationonagreaterscale—forexample,alargernumberandgeographicallymorewidelydispersedsetofpartners—mostcompanieshavelimitedexperience.Thefirstcriticalissuethatseniormanagerswillneedtoaddressrelatesto

thebroaderimplicationsofadoptingsuchanetwork-centeredapproachtoinnovation.Howshouldtheorganizationviewsuchcollaborationopportunities?Howcanseniormanagersensureacoherentsetofinnovationstrategiesthatcapturebothexternalopportunitiesandinternalcapabilities?

Whattypeofbroad

frameworkormindsetshouldbedevelopedthatreflectstheorganization’sintenttocollaboratewithoutsidersanddefinesthebroadparametersforsuchcollaboration?Andhowshouldseniormanagerscommunicateandencourageothermembersoftheorganizationtoadoptsuchamindset?

Forcompaniessuchas3M,

DuPont,andKodakwithahistoryofsignificantinternalachievementsandwithavastarrayofresidentscientistsandtechnicalspecialists,thedominantthreatisthefeelingof“Weknoweverythingandeveryone.”This“NotInventedHere”(NIH)syndromeisaseriousbarriertoacceptanceofnewideasfromoutsidethecompany.TheculturalshiftneededtoovercometheNIHsyndrome

andtoadoptacollaborativemindsetissignificant.

CHAPTER1•THEPOWEROFNETWORK-CENTRICITY

27

IBMhasacknowledgedthesimplefactthattopartnerwithopensourcecommunitiesandothersuchcommunitiesofcreation,it

needstoletgoofsomeofthecontrolithastraditionallyexercisedinallofitsinnovationinitiatives.

Indeed,arecentbookbyLindaSanford,oneofIBM’sseniorexecutives,succinctlycapturesthisspiritthroughitstitle,LetGotoGrow.33Althoughsuchaculturalshiftmightbeeasytoidentify,achievingitinanorganization—especiallya

largeorganizationwithalonghistoryofsuccess—isverychallenging.

CONTEXTUALIZATIONCHALLENGES

Thesecondsetofissuesinvolvesunderstandingthelandscapeofnetwork-centricinnovationandrelatingittothefirm’sownuniqueinnovationcontext.

ItisevidentthatcompaniessuchasIBMandP&Ghavesucceededtodifferentextentsinleveraginginnovationnetworks.Forexample,IBMhassubscribedtotheopensourcemodelandhasinvestedsignificantresourcestoalignitsinnovationinitiativesinmanyofitsproductandserviceareaswiththeopensourcemodel.Similarly,P&Ghasgarneredsignificant

visibilitythroughitsConnect+DevelopinitiativetopartnerwithexternalinnovationnetworkssuchasthoseofferedbyInnoCentiveandNineSigma.

Althoughtheseexamplesindicatespecificapproachestoanetwork-centeredinnovation,theyarenottheonlyapproaches.Themultiplicityofapproachesraisesmanyquestions:Is

thereasystematicwaytoidentifyandanalyzethedifferentapproaches(ormodels)ofnetwork-centricinnovation?Whatarethesedifferentapproaches?Howshouldanorganizationevaluateandselectthemostappropriateapproachvis-à-visitsparticularcontext?Further,shouldanorganizationassumealeadroleoranon-leadroleinsuchacollaborative

arrangement?Whattypesofinternalprojectswouldberipeforsuchacollaborativeapproach?Alltheseissuesrelatetocontextualizingtheopportunityofferedbytheexternalinnovationnetworkorsituatingtheopportunityinthecompany’sparticularmarketandorganizationalcontext.

EXECUTIONCHALLENGES

Finally,thethirdsetofissuesrelatestotheactualimplementationofcollaborativeinnovationprojects.Whenanappropriatenetwork-centricinnovationopportunityhasbeenidentified,howshouldtheorganizationgoaboutexecutingit?Howshouldtheorganizationprepareitselffornetwork-centricinnovation?Whatarethetypesofcapabilitiesand

competenciesthattheorganization28

THEGLOBALBRAIN

wouldrequire?Howshouldtheorganizationintegrateitsinternalandexternalinnovationprocesses?Whattypesoflicensingandothervalueappropriationsystemsshoulditemploy?Whatistheappropriatesetofmetricsthatitshouldusetoevaluate

itsperformanceinsuchcollaborativeinnovationprojects?

Theprecedingthreesetsofissues—mindsetandcultural,contextualization,andexecution—representthetypeofpracticalissuesthatmostCEOsandseniormanagersneedtoaddressinordertobesuccessfulinchampioningandexecutingtheirexternalnetwork-

centeredinnovationinitiatives.Becausethesechallengesoriginatefromtherichnessandvariationthatispresentinthenetwork-centricinnovationlandscape,wecontinueourdiscussionbyexaminingthedifferent“flavors”ofnetwork-centricinnovation.

C

H

A

P

T

E

R

2

UnderstandingNetwork-

CentricInnovation

TheHumanGenomeproject(HGP)isaclassicexampleoftheawe-

someinnovativepowerofnetworkedcommunities.TheHGPwasan

internationalresearchinitiativethataimedtoidentifyandsequencetheapproximately20,000to25,000genesthatmakeup

thehuman

DNA.Theprojectwasuniqueinthatitbroughttogetheralargenum-

berofresearchandscientificorganizationsacrosstheglobeinacollaborativeinitiative.TheHGP,begunin1990,wascompletedin

2003,atleastthreeyearsaheadofschedule.1

TheHGPisremarkablenotonlyfromascientificpointofview,in

thatitproducedamapofthehumanDNA,itisalsoremarkablein

termsofhowtheinnovationeffortwasorganized.HGPshowcased

twodistinctthemesthatunderpinnetwork-centric

innovation.First,anetworkofcontributorswhopoolresourcesandcapabilitiescan

produceextraordinaryresults.Second,thesociologicalperspective

ofknowledgecreation—thatis,thenotionof“buildingoneach

other’sideas”through

interactions—isfundamentaltocontempo-

raryinnovationcontexts,whichofteninvolvehighlycomplexand

diversesetsofknowledge.2

Theconfluenceofthesetwothemesistransformingthenatureof

innovation.Ontheonehand,

businessesarebecomingmorenet-

workedintheiroperations.Ontheotherhand,OpenSource

29

30

THEGLOBALBRAIN

Softwareandothersimilar

initiativesexemplifythebenefitsof“social”knowledgecreation.Inthischapter,wetakeadeeperlookatthesethemesandtracethephilosophicalandhistoricalrootsofnetwork-centricinnovation.

Likeanyothernewandemergingphenomenon,theevolutionofnetworkcentricinnovationisalsocharacterizedbyrapid

speciation.Companiesexperimentbyadoptingdifferenttypesofnetwork-centricinnovationmodels.Asaresult,weareseeingawiderangeofapproachestonetwork-centricinnovation.

Weexaminethesevarying“flavors”ofnetwork-centricinnovationtohighlighttherichnessanddiversityoftheemerginglandscape.Thislandscape,whilepresenting

manyopportunities,alsoposesadifficultquestionforcompanies—

whichamongtheseisthebestapproach?Toanswerthisquestion,westructurethenetwork-centricinnovationlandscapeintoasystematicframeworkinthechaptersthatfollow.

THEHISTORICALANDPHILOSOPHICALROOTS

OF

NETWORK-CENTRICINNOVATION

MODESOFPRODUCTION(OFIDEAS)

Atitsheart,network-centricinnovationisanapproachtoorganizingfortheproductionofnewideas.Assuch,thephilosophicalrootsofnetwork-centricinnovation

canbetracedtotheliteratureonthealternatemodesofproductionofgoods.

Economistshavelongmaintainedthattherearetwoprimarymodesofproducingnewideasornewproducts:marketsandhierarchies.RonaldCoase,inhisclassicwork,TheNatureoftheFirm,setouttherationalefortheexistenceofthefirm(the“hierarchy”modeof

production)usingtheconceptoftransactioncosts.Transactioncostsarecostsassociatedwithconductingamarkettransaction.Theyincludethecostofidentifyingamarketpartnerandthecostofdefiningandenforcingpropertyandcontractrights.Coase(andlater,inamorerigorousfashion,OliverWilliamson)arguedwhenthetransactioncostsincreasebeyonda

certainlevel,itbecomesmoreprofitabletoconductandcoordinatetheproductionactivitiesinsideafirminsteadofusingamarket-basedmodeofproduction.Inotherwords,byconsideringtheoverallcostofCHAPTER2•UNDERSTANDINGNETWORK-CENTRICINNOVATION

31

production,whichincludesthemarketexchangecostortheorganizationcost,onecandecidewhetheramarketorafirmwouldbemostappropriate.UntiltheOpenSourceSoftwarecommunitiescamealong,marketsandfirmswerethetwodominantmodesofproduction.

However,thesuccessfuldevelopmentofLinuxand

otherOpenSourceSoftwareproductsinthe1990simpliedtheexistenceofathirdmodeofproductionfornewideasornewproducts—onethatwasnotjustahybridofmarketsandfirms.YochaiBenkler,alawprofessoratYaleUniversity,wroteaseriesofarticlessuggestingthatOpenSourceSoftware(andothersimilaropensourcecommunities)presentathirdmodelofproduction

thathetermedthecommons-basedpeerproductionmodel.Usingthesametransactioncostlogic,Benklerarguedthatwhenthe“costoforganizinganactivityonapeeredbasisislowerthanthecostofusingthemarket,andthecostofpeeringislowerthanthecostofhierarchicalorganization”thecommons-basedpeermodelofproductionwillemerge,asitdidinthecase

ofsoftware.3

Thecommons-basedpeerproductionmodelisparticularlyrelevantincontextswheretheobjectofproductionisinformation-based(suchassoftware,music,movies,andsoon),andwhenthephysicalcapitalnecessaryforthatproduction(forexample,computers)iswidelydistributed,andthecostofpeeringislowered

throughinexpensivecommunicationfacilities(forexample,theInternet).

Onesuchcontextisbookpublishing.Forexample,thepublisherofthisbook,WhartonSchoolPublishing,embarkedonaninnovativeprojectthatemploystheprinciplesofthecommons-basedpeerproductionmodeltocreateanewbookonbusinessmanagement.The

book,WeAreSmarterThanMe,involvescollaborationamongthousandsofbusinessprofessionalsandscholars,includingfaculty,students,andalumnioftheMITSloanSchoolofManagementandtheWhartonSchool.4Theoutputfromthiscollaborativeeffortwillbepublishedinbookforminthefallof2007byWhartonSchoolPublishing,withallcontributorsgettingequal

credit.

WesummarizethekeydifferencesamongthethreemodesofproductioninTable2.1.

32

THEGLOBALBRAIN

Table2.1TheThreeModesofProductionofIdeas

Hierarchy-Based

Market-Based

Commons-Based

Production

Production

PeerProduction

Producersorganizedas



employeesinfirms

individualentitiesinmarkets

membersofacommunity

Flowofmaterialsand

Marketscoordinatetheflow

Collaborativeactivitiesare

activitiescoordinatedby

throughsupplyanddemand

coordinatedfollowinga

controllinganddirecting

forcesandpricesignals

diverseclusterofmotiva-

itatahigherlevelinthe

tiondriversandsocial

managerialhierarchy

signals

Example:Ford’sfamous

Example:Marketsinfinancial

Example:OpenSource

RougeRiverPlant

instrumentsandother

Softwaredevelopment

intangibles

Itisclearthatmarkets,hierarchies,andcommonsformthreealternatemodesofproductionofinnovation,too.ThedevelopmentofWindowsbyMicrosoftisanexampleofinnovationorganizedinsideafirm(that

is,usingmanagerialhierarchies).Similarly,innovationcanalsobeorganizedthroughopenmarkets—companiesroutinelybuyinnovativestartupfirmstoaccessinnovativeideasandtechnologies.Andfinally,thedevelopmentofLinux,Apache,andotherOpenSourceSoftwareproductsareexamplesofthecommonsmodeloforganizing

innovation.

Theemergingmodelsinthenetwork-centricinnovationlandscape,however,reflectnotjustthemarketorthecommonsapproachtoinnovationbutinsteadthemixortheintersectionsofthesethreemodesofproduction—forexample,themixofthecommons-basedmodelwiththemanagerialhierarchy-basedmodel,or

themarket-basedmodelintersectingwiththecommons-basedmodel.Tounderstandtheoriginsofsuchhybridmodesofproduction,weneedtounderstandthehistoryofnetwork-centricinnovation.

THEHISTORYOFNETWORK-CENTRICINNOVATION

Thereal-worldmanifestation

ofnetwork-centricinnovationcanbetracedbacktotwodistinctmovementsthattookrootinthe1990s:theOpenSourcemovement(socialknowledgecreation)andtheconceptofbusinessnetworksorecosystems.

CHAPTER2•UNDERSTANDINGNETWORK-CENTRICINNOVATION

33

TheOpenSourceMovement

TheOpenSourceconcept,ingeneral,relatestothedevelopmentandproductionofideas,artifacts,andsystemsinamannerthatprovidesfreeaccesstotheendproduct’ssourcesandenablesfreedistributionthroughappropriatelicenses.5Itisbasedonthe

fundamentalprinciplethatuserscanbeco-developersandthatknowledgeiscreatedthrough“asynergisticinterplaybetweenindividualcontributionsandsocialinteractions.”6Whiletheessentialphilosophybehindopensourceexistedinsomeformortheotherinthe1980s(forexample,theFreeSoftwareFoundation),theemergenceoftheInternetandthewayitenables

communitiestocometogetherandpursuecollaborativedevelopmentandproductionprovidedtheOpenSourcemovementitsmomentumintheearly1990s.

ThesoftwareindustryisthemostprominentamongthedifferentfieldsanddomainsthattheOpenSourcemovementisevident.OpenSourceSoftware(OSS)can

bedefinedsimplyascomputersoftwarewhosesourcecodeisavailabletoeverybodyforuse,enhancementandmodification,anddistribution.7

SeveraltypesofOSScopyrightlicensesexistthatvaryinthetypeandextentofrightsgrantedforusing,altering,and/ordistributingthesoftwareproduct.

TheOpenSourceInitiative(anon-profitentityformedin1998byOSSvision-ariesEricRaymondandBrucePerens)hasassumedtheroleofpromotingtheOpenSourceSoftwaremovementbycertifyingproductsasopensourceproductsbasedonwhethertheyaredistributedunderanyofthealternatelicensingschemeslistedwiththeOSI.8ThenumberofsuchOSI-certified

productshasincreasedconsiderablyoverthepastfewyearsandrunsintoseveralhundredsnow.9ThesteadyincreaseinthenumberofOSproductsindicatestheoverallhealthofthismovementanditswideracceptancebythesoftwarebusinesscommunity.

Theopensourcemovementisnowvisibleinseveralotherdomains,too.For

example,theconceptofopensourceintelligence(OSINT)—whichrelatestogatheringinformationfromopenorpublicsources(suchas,blogs,Websites,andsoon)andanalyzingittoproduceusableintelligence—hasgainedmuchprominenceinrecentyears.Opensourcejournalism(alsoreferredtoascitizenjournalism)isanotherprimeexample.Otherareaswherethe

principlesoftheOpenSourcemovementhavestartedtotakeholdincludepharmaceuticalsorresearchanddiscoveryofdrugs(forexample,theTropicalDiseaseInitiative),computerhardware(opensourcehardware),education(opensourcecurriculum),andopensourcefilmmaking.10

34

THEGLOBALBRAIN

BusinessEcosystems

Theconceptofbusinessecosystemsderivesitsrootsfromthefieldsofbiologyandsocialsystems.InanarticlepublishedintheHarvardBusinessReviewin1993,JamesMooredescribedabusinessecosystemas“aneconomiccommunitysupportedbyafoundationof

interactingorganizations…the‘organisms’

ofthebusinessworld.Thememberorganizationsalsoincludesuppliers,leadproducers,competitors,andotherstakeholders.Overtime,theyco-evolvetheircapabilitiesandroles,andtendtoalignthemselveswiththedirectionssetbyoneormorecentralcompanies.”11

Acloselyrelatedconceptistheallianceconstellation.Itdescribesafirm’ssetofalliancepartnerswhocometogethertoformanetworkorconstellation.Insuchanallianceconstellation,membercompaniesjointlypursueanumberofstrategicgoalsincludinglinkingmarkets,reducingoperationalcosts,sharingrisk,andcombiningcomplementaryskills.12A

goodexampleofanallianceconstellationistheStarAllianceintheairlineindustry.Suchgroupsenablemembercompaniestocompeteandwinintheirmarketsbydrawingonthe

resourcesandcapabilitiesoftheirnetworkofpartners.

Thekeycontributionofthebusinessecosystemandallianceconstellation

conceptshasbeentoforcecompaniestobroadentheirperspectiveswhiledevisingtheircorporateandbusinessstrategies.Morespecifically,theapplicationoftheecologyperspectivehelpedlargecompaniessuchasWal-Mart,Intel,Microsoft,andSAPtorealizetheimportanceofbuildingrobustbusinessecosystemstofurthertheirownfutureprospects.Theecosystemperspectivealso

highlightedthechangednatureofcompetition—fromcompetitionamongindividualcompaniestocompetitionamongbusinessecosystemsorallianceconstellations.13

Althoughbusinessecosystemsandallianceconstellationsarenowfamiliartermstomostmanagers,theseconceptshavemostlybeenappliedto

analyzeanddevisemarketandoperationalstrategies.However,theseconceptsalsoservetoillustratehowcompaniescanchampionandorchestrateinnovationactivitiesintheirindustriesbyestablishingandleadinganetworkofpartners.

Forexample,Intel’sdominanceinthesemiconductorindustryinthe1980sand1990scanbe

explainedtoagreatextentbyitsabilitytoestablish,nurture,andleadanetworkofpartnerswhocollectivelycontributetoandenhancethevalueofIntel’stechnologyplatform.14Morerecently,thebattleforHigh-DefinitionDVDplayersbetweentheSony-ledBlu-RayconsortiumandtheToshiba-ledHD-DVDconsortiumwillalsobewonorlostbasedontheshareoftheGlobalBrain

thatSonyorToshibacanattracttotheirecosystem,includingcontentproviders,hardwaremanufacturers,andretailers.


35

TheConfluenceofOpen

SourceInnovationandBusinessEcosystems

Inrecentyears,theboundariesbetweenthesetwomovements—opensourcecommunitiesandbusinessnetworks(orecosystems)—havebeguntoblur.Ontheonehand,companiesareseekingoutopensourcecommunitiesandothercommunitiesofcreation(forexample,

customercommunitiesandinventorcommunities)aspartnersininnovation.Ontheotherhand,innovationsthathaveemergedfromtheopensourcecommunitiesaretransitioningintothecommercialworld(forexample,commercialopensource).Sotheneatdistinctionbetween“purelyopen”and“purelyproprietary”formsoforganizingforinnovationis

givingwaytoamorecomplexandnuancedlandscape.Awidevarietyofnetworks,players,androlesareemerging:businessecosystems,allianceconstellations,opensourcecommunities,inventorcommunities,customercommunities,expertcommunities,andothersuchcommunitiesofcreation.

Theconceptofnetwork-

centricinnovationembracesthesedifferenttypesofinnovationnetworksandplayers.Butitdoesmore.Italsocapturestheuniqueapproachestoorganizinginnovationthatarisefromthecombinationsofdifferenttypesofnetworksandtheinteractionsofcompanieswithdifferenttypesofinnovationnetworks.

Thesenewapproachesto

organizinginnovationarealsocharacterizedbythehybridmodesofproductionmentionedearlier.Inotherwords,markets,hierarchies,andcommonscollideinthenetwork-centricinnovationlandscapeandgiverisetohybridmodesofproductionofinnovationthatunderliethealternateapproachestonetwork-centricinnovation.Wedescribethesehybridmodesofproductioninmore

detailinsubsequentchaptersintermsofarchetypesormodelsofnetwork-centricinnovation.

Withthisunderstandingofthehistoricalandphilosophicalrootsofnetworkcentricinnovation,wenowturntothecoreprinciplesthatunderliethedifferentapproachestonetwork-centricinnovation.

PRINCIPLESOFNETWORK-CENTRICINNOVATION

Theconceptofnetwork-centricinnovationhasfourdefiningprinciples:sharedgoals,shared“world-view,”socialknowledgecreation,andanarchitectureofparticipation.Theseprinciplesareconsistentwiththehistoricalrootsofnetwork-centricinnovationin

theOpenSourcemovementandbusinessecosystems.WebrieflydescribethesefourprinciplesandsummarizetheminTable2.2.Laterinthebook,wereturntotheseprinciplesaswedescribethedifferentmodelsofnetwork-centricinnovation.

36

THEGLOBALBRAIN

Table2.2PrinciplesofNetwork-CentricInnovation

Principlesof

Network-Centric

Innovation

Description

Examples

Sharedgoalsand

Oneormoregoalsthathelp

Customercommunity:Identify

objectives

bringthenetworkmembers

productflawsandcontributeto

togetherandchanneltheir

productenhancement

diverseresourcesand

activities

Shared“world

Commonassumptions,and

Opensourcecommunity:Shared

view”

mentalmodelsrelated

understandingaboutthesoftware

totheinnovationandits

product’stieswithothertech-

externalenvironment

nologiesandproducts

“Social”knowledge

Placestheemphasisoninter-

Inventornetworks:Interactions

creation

actionsamongthenetwork

amongindividualinventor,

membersasthebasisfor

innomediary,andlargefirmforthe

valuecreationandonthe

developmentofnewproduct

cumulativenatureof

concepts

knowledgecreation

Architectureof

Definesasetofsystems,

Opensourcesoftwarecommunity:

participation

mechanisms,andprocesses

Modularproductarchitectureand

tofacilitateparticipationin

GNUGeneralPublicLicense

valuecreationandvalue

scheme

appropriation

SHAREDGOALSANDOBJECTIVES

Forasetofplayerstocometogethertocontributetoaninnovationinitiative,itis

essentialthattheyhaveacommonsetofgoalsandobjectives.Thesesharedgoalsandobjectivesactasthegluethatkeepsthecommunitytogether—givingdirection,enablingcoordinationofactivities,andfacilitatingthedevelopmentofacommonsetofnormsandvalues.Forexample,thesharedgoalofacommunityofcustomersmightrelatetoproviding

innovativeideasandinputstotheproductdeveloper(vendor)toimprovethequalityandvalueoftheproductfeatures.Thesesharedgoalsandobjectivesmightdevelopindifferentways—insomenetworks,acentralentitymightdeviseandpromotethosegoals,whereasinothernetworks,thesharedgoalsmightemergethroughinteractionsamongtheplayers.


37

SHAREDAWARENESSAND“WORLDVIEW”

Thenetworkmembersalsoneedtoshareacommon“world-view”orsharedawarenessoftheexternal

environment.Thesemightincludebusinessassumptions,evaluationmethods,andframeworks.Asharedawarenessiscriticalforthenetworktocapitalizeonthesynergiesamongthediversesetofexpertiseandcapabilitiesinthenetwork.Forexample,inthecaseofanOpenSourceSoftwaredevelopmentcommunity,thesharedworld-viewmightincludeknowledgeabout

competingandcomplementaryproductsandtechnologies,andhowtheproductsbeingdevelopedshouldrelatetoorintegratewithexistingproductsandtechnologies.

Theworld-viewinaninnovationnetworkisdynamic.Itcontinuallyevolvesinresponsetochangesintheenvironment.Theconnectednessofthe

networkfacilitatesrapidinformationsharingthatinturnfacilitatesthemaintenanceofasharedawarenessoftheenvironmentinwhichthenetworkoperates.

“SOCIAL”KNOWLEDGECREATION

Newknowledgeisincreasinglycreatedthroughinteractionsamongthe

differenttypesofplayersormembersinanetwork.Forexample,opensourcecommunitiesrelyonthethemethatalluserscanbeco-developersandthatinnovativeconceptsevolvefrombuildingononeanother’sideasorcontributions.Suchaconceptof“social”knowledgecreationisevidentincustomercommunities,too,wheredialoguesamongpeer

customersbecomethecontextforproductimprovementideasandnewproductconcepts.

Althoughweusetheterm“social”here,itisnotnecessarilylimitedtoopensourcecommunities.Instead,thisprinciplereflectsthecollaborativeandcumulativeaspectofknowledgecreationthatisevidentinmanyothertypesofinnovationnetworks.

Eveninamarket-basedmodel,innovativeideasevolvethroughinteractionsamongthenetworkmembers.Forexample,evenininventornetworks,interactionsamongtheindividualinventor,theinnovationintermediary,andthelargerfirmprovidethecontextfornewproductideastobubbleupandgettransformedintocommerciallyfeasible

productconcepts.

Thekeyideaissimple—knowledgeiscreatedandenhancedsociallyaspeoplebuildoneachothers’contributions,andasocialornetworkinfrastructureneedstobeinplacetofacilitatesocialknowledgecreation.

38

THEGLOBALBRAIN

ARCHITECTUREOFPARTICIPATION

Thefourthprincipleofnetwork-centricinnovationrelatestothewayinnovationworkisdistributedamongthenetworkparticipantsandtheway“rights”

fromtheinnovationaresharedbytheparticipants.Thisprinciplegoesbeyondjustidentifyingthecoreand

non-coretasksasinoutsourcinginnovation.

Instead,itrelatestothedevelopmentofanarchitectureofparticipation—atermcoinedbyTimO’Reilly15—thatprovidesaroadmapforthedifferentplayerstocometogethertoinnovate.Thearchitectureofparticipationprovidesthemechanismsandmethodsforthecontributions

ofparticipantstobecoordinated,integrated,andsynchronizedinacoherentmanner.

Twokeyaspectsofsucharchitectureofparticipationarethemodularityoftheinnovationsystemandthegranularity(sizeorscale)oftheinnovationtasks.

Whereasmodularityenablesdistributingandcoordinating

theinnovationprocesses,granularityassuresthatadiversesetofmembers(thatis,memberswithdiversetypesofresources,capabilities,andtimecommitments)cancontributetotheinnovation.Thearchitectureofparticipationalsohastodefinethemeansbywhichtheparticipantswillbe“rewarded”fortheircontributions.Thisrewardcouldrangefrom

establishingdifferenttypesofincentivesthatdriveparticipationincertainnetworks(forexample,customercommunities)tonewvalueappropriationmethodsforsharingtheinnovationproceedsamongtheparticipants(forexample,patentpools,CreativeCommonslicense,andsoon).

THEDIFFERENT

“FLAVORS”OFNETWORK-CENTRIC

INNOVATION

Ifwelookatthehistoryofautomobiles,itbecomesclearthattheperiodfromthemid-to-late1800swasthe“eraofferment”intheindustry—thestagebeforeoneormoredominantdesignsemerge.16Suchaneraoffermentis

characterizedbyprolificexperimentation.Intheautomobileindustry,inventorsexperimentedwithdifferenttypesoffuels(wood,alcohol,gasoline,andelectricity),differenttypesofengines,differenttypesofbodystructure,andsoon.Someoftheseinventionsworked,othersdidnot.Butallofthemcontributedtotheevolutionofthedesignthatbecamethedominantmodel

intheearly1900s.

Similarly,considerableexperimentationisgoingoninthenetwork-centricinnovationlandscape.Thenewmodelsandapproachesthatareemergingarecharacterizedbyawiderangeofstructuralarrangements,innovationactivities,andoutcomes.Let’slookatsomeoftheseformsofnetwork-centricinnovation,withan

exampleofacompanythatispursuingeachform.


39

OPENSOURCESOFTWARECOMMUNITIESANDIBM

Intheearly1990s,atatimewhentheopensourcephenomenonwasstillinitsinfancy,IBMmadekeychangestoalignitselfmorecloselywiththeemergingOpenSourceSoftwaremovement.Anexcellentexampleofthatshiftwasthe1996AtlantaOlympicswhereIBMwasresponsibleforbuildinganddeployingthefirstOlympicsWebsite—theresultsfromallthe

competitionswereavailableinreal-timeontheIBM-designedWebsite.WhenitcametochoosingtheserverplatformfortheWebsite,IBMchoseApache,anopensourcesolution,despitethefactthatIBMhadacompetingproprietaryproductforservingWebsites.Inrecentyears,IBMhasmadeconsciousdecisionstopromoteandalignitsownstrategiestoleveragethe

poweroftheOpenSourceSoftwarecommunities—inmarketsrangingfromWebserversandoperatingsystemstoscriptinglanguagesanddevelopmenttools.

IBM’sapproachtoopensourceisnotaphilanthropicapproach;instead,itisaconsideredbusinessdecision.InthewordsofIrvingWladawsky-Berger,IBM’s

formerTechnicalVice-President,itisadecisionmade“afterconsiderableanalysisofthetechnologyandmarkettrends,theoverallqualityandcommitmentofthecommunity…andthequalityofitsofferings.”17

Inworkingwiththeopensourcecommunities,IBMispursuinganetworkcentricinnovationstrategythat

involvesitselfwithavastglobalnetworkofsoftwaredeveloperswhomakedifferenttypesofinnovativecontributions.IBM

doesnotsetouttheinnovationagendafortheopensourcecommunitynordoesitdirectlybenefitfromtheproductsdevelopedbythecommunity.Instead,IBM

playstheroleofasponsoror

patron,whoseinterestistosustaintheoverallenergyandhealthoftheopensourcemovement.Ofcourse,asDr.Wladawsky-Bergernotes,itisa“businessdecision”—IBMdoesindirectlybenefitfromtheofferingsoftheopensourcecommunities.Forexample,IBM’srevenuesfromLinux-relatedserviceshaveincreasedexponentiallyfrom2001whenitstartedinvestinginanopensource–

basedbusinessmodel.By2004,IBMrealizedmorethan$2billioninrevenuesfromOpenSource–relatedbusinesses.18

CUSTOMERCOMMUNITIESANDDUCATI

Ducati’sinvolvementandrelationshipwithitsinnovativecustomercommunityprovidesanother

flavorofnetwork-centricinnovationstrategy.DucatiMotorisaworld-renownedmotorcyclecompanybasedinItaly.Themotorcycleisalifestyle-intensiveproductandassuchmostsuccessfulmotorcyclecompaniesfocusonbuildingextensiverelationshipswiththeircustomerstofosterasenseofcommunitythatcomplementstheactualproduct.

40

THEGLOBALBRAIN

However,Ducativiewsitsrelationshipwithitscustomercommunitynotjustasacustomerrelationshipmanagementinitiativebutaspartofitsinnovationstrategy—Ducaticonsidersitscustomersaspartnersininnovation.Inearly2000,itsetupaseparateWeb

divisiontocoordinateitsInternet-basedcustomercollaborationinitiatives.19Ducatiemploysdifferenttypesofvirtualcustomerenvironments(allpartofitsWebsite)toinvolvecustomersinboththefront-endandtheback-endoftheinnovationprocess(seeFigure2.1).Ducati’scustomershavedeeptechnicalknowledgeandsomeofthecustomerseven

comeupwithcomplextechnicalandmechanicaldesignimprovementideas—

ideasthatcanbe(andhavebeen)translatedintorealproductfeatures.Inaddition,attheback-endofproductdevelopment,customersalsoparticipateinproducttestingthroughthevirtualcustomerenvironment.

ApplicabilitytoStageof

NewProductDevelopmentProcess

Front-end

Back-end

(IdeationandConcept)

(ProductDesignandTesting)

TechCafé

DesignYourDreamDucati

AdvisoryProgramsSupported

FocalizedContest

byProductEngineers

DucatiGarageChallenge

Deep/

ation

DucatiService

HighRichness

VirtualTeams

TechnicalForumandChat

OnlineSurveytoImprovethe

MassCustomizationofthe

Website

Product

PollsandFeedbackSessions

Web-BasedProductTesting

NatureofCollabor

Broad/

MyDucati

HighReach

VirtualScenarios

FromMohanbirSawhney,

GianmarioVerona,EmanuelaPrandelli,“COLLABORATINGTOCREATE:THEINTERNETASAPLATFORM

FORCUSTOMERENGAGEMENTINPRODUCTINNOVATION”;TheJournalofInteractiveMarketing,p.8,Vol.19,No.4,Autumn2005.©2005WileyPeriodicals,Inc.andDirectMarketing

EducationalFoundation,Inc.Reprintedbypermission.

Figure2.1Ducati’sCustomerCommunityInitiative

Ducatithuspursuesanetwork-centricinnovationstrategywhereinithosts,facilitates,andpromotesanactivecustomercommunity,andcoordinatestheinnovationactivitiesand

resources(customerideasandexpertise)toenhanceitsinnovationagenda.


41

INVENTORNETWORKSANDSTAPLES

StaplesInc.,theleadingofficesuppliescompany,hasmarketedprivate-label,low-pricegenericproductswithStaple’snameonthepackagefromthe1990sonwards.Thisstrategyhasservedthemwellinthepast—revenuecontributionsfromStaples-brandedproductsaccountedfor18%ofitstotalsalesof$16billionin2005.20However,withmorecompetitionintheoffice

suppliesmarket,Stapleshasstartedchangingitsstrategyinthelastfewyears.ButStaplesdoesnotwanttolimititselftolow-cost,me-tooproducts.Instead,itwantstopursuethedevelopmentofmoreinnovativeproducts—productsthatwillpositionthefirmasaninnovatorwithnationalbrandrecognition.

Howcanacompanywithoutavastinternalproduct

developmentgrouppursuesuchanambitiousinnovationagenda?Staplesbelievesthatinnovativeideasareoutthereinthemarketplace.AsJevinEagle,theSeniorVicePresidentofStaplesbrands,notes,“Ourjobistoscourtheworldforideas.”21Tohuntforthoseideas,Staplesholdsan“idea”contestcalledInventionQuest—individualinventorsareinvitedtosubmittheirideastoStaples,

andwinningideasarecommercializedbyStaplesunderStaplesbrandnamewiththeinventorreceiv-ing8%ofrevenuesofroyalty(seeFigure2.2).StaplesalsoemploysthirdpartiessuchasPDGLLC.,toreachoutintotheinventorcommunityandbringbackpromisingideastoStaplesforpotentialcommercialization.

Inpursuingthisformof

network-centricinnovation,Staplessourcesideasfromthelargeinventorcommunity,significantlyincreasingitspotentialtogeneratevaluableideas.Inarecentcontest,about10,000individualinventorssubmittedideas.RonSargent,Staples’CEO,believesthatthisinnovationstrategy—

centeredonexternalinventor

networks—willformitsmainweapontofuelStaples’revenuegrowthinthefuture.IthasalreadyenabledStaplestosurpassitsmaincompetitor,OfficeDepot,inrevenuesandbecomethetopretailerintheofficesuperstoremarket.

42

THEGLOBALBRAIN

©Staples,Inc.Reprintedbypermission.

Figure2.2Staplesandtheinventornetwork(fromTheWallStreetJournalOnline,July13,2006)DEVELOPERNETWORKSANDSALESFORCE.COM

Yetanotherflavorofnetwork-centricinnovationis

thecreationofanecosystemofdeveloperswhocaninnovateonacommonplatform.ConsiderhowSalesforce.com,aleadingvendorofcustomerrelationshipmanagement(CRM)solutions,hasleveragedthepowerofindependentsoftwaredevelopers.

Foundedin1999byformerOracleexecutive,Marc

Benoiff,Salesforce.comoffersCRMsoftwarethatenablesbusinessestotrackandanalyzealloftheirCHAPTER2•UNDERSTANDINGNETWORK-CENTRICINNOVATION

43

interactionswithcustomersinreal-time.TheuniqueaspectofSalesforce.comis

thatitprovidesthissolutionexclusively“ondemand”—inotherwords,clientfirmsaccesstheapplicationsoftwareasaservicethroughaWebbrowserovertheInternet.

Morerecently,Salesforce.comhascreatedauniqueapproachtotapintothecreativityofindependentsoftwaredeveloperstoenhanceitssoftware

offerings.In2005,itlaunchedAppExchange,aforumforexternaldeveloperstocreateadd-onapplicationsthatcanlinkintoorintegratewiththemainSalesforce.comsystem.Morethan600suchadd-onapplicationsareavailable,rangingfrome-mailmarketingtoolstosalesanalysistoolstofinancetools.

UnlikeotherlargesoftwarefirmssuchasMicrosoftandOracle,Salesforce.comdoesnotjustprovideaforumforexternaldeveloperstodevelopapplicationsontheplatform.Instead,itactivelyparticipatesinitbymarketingthetoolsofferedontheAppExchangetoitsclientsandevenconductsthesalestransactionsandappropriatestheproceedsbacktotheexternal

developers.Inmanyinstances,italsoprovidesguidanceanddirectionforinnovationeffortsofitssoftwarepartnersbychannelingpotentialapplicationideasfromclientstotheexternaldevelopers.Thecompanyalsoplaystheroleofacommunitysponsorandpromoterbyfacilitatinginteractionsamongthedevelopersaswellasbyprovidingtheinfrastructure

forwritingandsharingcustomizedsolutions.

Thus,inestablishingAppExchange,Salesforce.compursuedanetwork-centricinnovationstrategywhereinitsprimaryrolewastoprovidethebroadvisionandthebasis(thatis,thetechnologyplatform)fortheinnovationandtoorchestratetheactivitiesandinteractionsamongitsglobal

partners.WhatdoesSalesforce.comgainfromdoingthis?Twothings—first,thetoolsandsolutionsofferedthroughtheAppExchangeclearlyaddvaluetothebasicsoftwareapplicationthatSalesforce.comofferstoitsclients.Secondandmoreimportantly,thecommunityofdevelopersinAppExchangeenhancestheoverallinnovationreachand

rangeofSalesforce.com.ThecompanydoesnotofferthefullandintegratedrangeofenterprisesolutionsthatfirmssuchasOracleandSAPoffer.

ButthroughAppExchange,Salesforce.comcannowextenditsservicestootherandmoreprofitableapplicationsareas,suchashumanresourcesandfinance,aswellastomarketssuchas

thehealthcareindustry.Byfollowinganetworkcentricinnovationstrategy,Salesforce.comisabletoderiveinnovationgainsthatareordersofmagnitudehigherthanwouldbepossiblewithitslimitedresources.

44

THEGLOBALBRAIN

ELECTRONICR&DMARKETPLACESAND3M

Inrecentyears,anumberofelectronicR&DnetworkslikeInnoCentive

(www.innocentive.com)andNineSigma(www.ninesigma.com)havesprungup

asanotherinterestingflavorofanetwork-centric

http://www.innocentive.com

http://www.ninesigma.com

innovationmechanism.Thesenetworksplayamatchmakingrolebetween“seekers”ofsolutionstoscientificproblems(typicallylargeR&D-intensivecorporations)and“solvers”oftheseproblems(typicallyindividualscientistsorsmallresearchlaboratoriesspreadacrosstheworld).LargecompaniesoftenhaveveryspecifictechnicalissuesandR&Dproblemsthattheyare

unabletosolveinternallyatanacceptablecostortimeframe.Whenpotentialsolutionsfrominsidethecompanydryup,theyuseelectronicR&Dnetworksasavehicletolookoutsideforthoseanswersbytappingintotheglobaltalentpoolofscientistsandengineers.

ConsidertheR&Dproblemthatthelargeindustrialmanufacturer3Mrecently

faced—itwantedanadhesivesystemthatwouldbecapableofdurablyadher-ingapolyesterfilmtoanoil-ladennaturalstoneorfiredclaysurface.22Theadhesiveneededtoberesistanttooils,cleaningchemicals,highpHdetergents,andstandingwater.Theadhesivesystemalsoneededtoremainbondedtotheoil-soakedsurfaceforatleast18months.Unabletofindanappropriateinternal

solutiontothisproblem,3MturnedtoNineSigma,anelectronicR&Dmarketplace.NineSigmahostsaglobalcommunityofscientistsandtechnologistswithdeepexpertiseindifferentfields.NineSigmapreparedaRequestforProposal(RFP)basedon3M’srequirements.ThousandsofrelevantscientistsviewedtheRFPandfivepotentialsolutionswereofferedthroughthe

NineSigmaWebsite.3Mevaluatedthesolutionsandselectedoneasthemostappropriate.

Inthisnetwork-centricinnovationscenario,therelevantpartoftheGlobalBrainconsistsofaglobalpoolofscientistsandtechnologistswith3MplayingtheroleofasolutionseekerandNineSigmaplayingtheroleofa

marketplaceoperator.

DIFFERENTNETWORKS,DIFFERENTAPPROACHES,

DIFFERENTOUTCOMES

Theearlierexamplesportraythedifferentformsthatnetwork-centricinnovationcanassume—differenttypesofnetworksordifferenttypesoftheGlobalBraininvolved,

differenttypesofrolesforcompaniestoplay,differenttypesofrelationshipsamongnetworkmembers,anddifferenttypesofinnovationoutcomesorreturns(seeTable2.3).


45

Table2.3TheDifferentFlavorsofNetwork-CentricInnovationExampleof

Natureof

Network-Centric

Natureof

Firm’sRolein

InnovationReturns

Innovation

Network

theNetwork

fortheFirm

Opensourcesoftware

Globalnetwork

SponsorandpromoteSynergiesfromthe

communityandIBM

ofsoftware

theopensource

opensourceofferings

developers

movement

Customercommunity

Communityof

Facilitateand

Innovativeideas

andDucati

customerco-

coordinatecustomer

forproduct

innovators

participationin

enhancement

productinnovation

Inventornetwork

Networkof

Seekoutand

Newproductor

andStaples

individual

commercialize

serviceideas

inventors

promisingnew

productconcepts

AppExchange

Globalnetworkof

Orchestrateand

Extendthereachand

communityand

externalsoftware

marketexternal

rangeoftheinnova-

Salesforce.com

developers

developers’add-on

tion(software)

offerings

platform

NineSigmaand

Globalnetworkof

Buyerofsolutionsto

Solutionsto

3M

scientists

R&Dproblems

clearlydefined

technicalproblems

Thesedifferenceshold

importantimplicationsforcompaniespursingthenetwork-centricinnovationstrategy.Letusconsidersomeoftheseimplications.

IMPLICATIONSFORREACHANDRANGEOFINNOVATION

Thedifferentflavorsofnetwork-centricinnovationofferverydifferentlevelsofthefirm’sreachintothe

GlobalBrainandtherangeofinnovativeideasitcansourcefromit.Forexample,Ducatihasdirecttieswithitsnetworkofcustomerco-innovatorswhereasboth3MandStaplesinteractwithmuchlargernetworks(comprisedofscientistsandindividualinventors,respectively)throughintermediaryorganizations.

Similarly,therangeof

innovativeideasalsodiffersintheprecedingexamples.

Inthecaseof3M,thefocuswasonanichetechnicalproblemthatneededtobesolved.Thenatureoftheproblemspacewasclearlydefinedby3M—inotherwords,therewerefewuncertaintiesregardingwhatthesolutionshouldachieve.

46

THEGLOBALBRAIN

InthecaseofStaples,itwasamuchmoreambiguousinnovationspace.AllthatStapleshadinviewwasinnovativeproductconceptsthatwouldalignwellwithitsexistingbrandandchannel.Ontheotherhand,Salesforce.comhaddefinedthebasicinnovationplatformandthebroaddesignparameters(thatis,itsmain

CRMsoftwareapplication)andthenetworkpartnerswereresponsibleforcomingupwithinnovativeproductdesignsoradd-onsthatadheredtothesebroadparametersandextendedthevalueoftheplatform.

Thus,severalimportantquestionscanbeposed:Wherearetheinnovativeideassituated?Whattypeofnetworkshouldthefirm

“connectto”?Whatisthecompany’sreachintothatnetwork?And,whatistherangeofinnovationthatcanbesourcedandpursuedcollaboratively?

IMPLICATIONSFORORGANIZATIONALCAPABILITIES

Itisalsoevidentthatcompaniesplaydifferentrolesorparticipatein

differenttypesofinnovationactivitiesinnetwork-centricinnovation.Theyalsohavedifferenttypesofrelationshipswiththemembersofthenetwork.Thesedifferentrolesandrelationshipsimplytheneedfordifferenttypesoforganizationalcapabilities.

Forexample,whereasSalesforce.comhastoprovideleadershipforits

networkofglobalpartners,3Mplaystheroleofaninnovationseekerandleveragestheexpertiseavailableinthenetworkofscientists.Incontrast,IBMseekstopromoteandchampiontheopensourcesoftwaremovementandnotovertlycoordinatethesoftwaredevelopmentactivities.Similarly,considertherelationalcapabilities.Thecapabilitiesneededby

Salesforce.comtointeractwithasetofglobalpartnersaredifferentfromthoseneededbyStaplesorDucatitointeractwithalargernetworkofinventors(orcustomers,asthecasemaybe).

Insum,differenttypesofplayersinnetwork-centricinnovationrequiredifferenttypesofcapabilities.Understandingthenatureof

theroleyourcompanyplanstoplayinnetwork-centricinnovationisimportanttofigureoutthenatureoforganizationalcapabilitiesandcompetenciesthatneedtobedeveloped.

IMPLICATIONSFORINNOVATIONRISKSANDRETURNS

Thedifferentexamplesalsoimplydifferenttypesofrisks

andreturnsfromtheresultinginnovation.Forexample,certainapproachesseemtobedesignedtoreducethebusiness,market,ortechnologicalriskassumedbyacompany.

ConsiderSalesforce.com’sinitiative.BygettingexternalsoftwaredeveloperstoCHAPTER2•UNDERSTANDINGNETWORK-CENTRIC

INNOVATION

47

investcapitalintodevelopingcomplementaryproductsandcommittingtothebasicsoftwareplatform,thecompanyisabletosharesomeoftheinnovationriskwithitspartners.Ontheotherhand,someotherapproachesaredesignedtoseekoutreallycreativeand

newconcepts—forexample,Staplestakesrelatively“raw”ideasfromtheinventornetworktocommercializeandindoingsoittrades-offthehighermarketriskforamoreinnovativeproductportfolio.

Thus,clearly,differentformsofnetwork-centricinnovationimplydifferenttypesofinnovationrisksandreturnsandposesome

interestingquestionsforacompany.Whattypesofreturnsisitexpectingfromcollaborativeinnovation?

Whatisitsriskthreshold?Or,whattypesofrisksisthecompanywillingtoassume?

BRINGINGAMETHODTOTHEMADNESS

Asevidentfromourdiscussioninthischapter,the

variedapproachestonetwork-centricinnovationimplydifferentopportunitieswithdifferentimplications.Naturally,thequestionthenis,howshouldacompanygoaboutdecidingwhatisthemostappropriatenetwork-centricinnovationopportunity?

Toanswerthisquestion,firmsneedtogobeyondsimplytryingoutdifferent

approachesandseeingwhatworks,orcopyingwhatworksforothercompanies.

Instead,werecommendamoresystematicapproachthatstartswithagoodunderstandingofthebroadstructureofnetwork-centricinnovationopportunities.Withthisknowledgeinhand,managerscanthennarrowtheirfocustoselectaplaceinthelandscapethatismost

relevantforthefirm’sinnovationcontext.

Whatdowemeanbyacompany’s“innovationcontext”?Thecontextincludestheindustry,technology,market,andinternalorganizationalcharacteristicsthattogetherdefinetheframewithinwhichfirmsdefineandpursuetheirinnovationagenda.

Forexample,considertechnologyandmarket-relatedattributes.Howdynamicarethecompany’scoreproducttechnologies?Howdiversearetheproductandtechnologyknowledgebase?Whatisthenatureofthecustomerbase?Arecomplexandexpensiveinfrastructurerequiredforideationintheindustry?Howcapital-intensiveis(product)commercialization?

Similarly,considerorganizationalattributes.Whatisthenatureofinnovationthattheorganizationishop-ingtopursuecollaboratively?Whatistheexistinginnovationinfrastructureofthecompany?Whatisthecollaborationexperienceofthecompany?Whattypeofrelationalskillshasitdeveloped?Whattypeofinnovativecontributionsis

48

THEGLOBALBRAIN

thecompanyexpectingfromoutside?Whattypeofvalueappropriationmechanismsand“propertyrights”systemsisitcomfortablewith?

Theanswerstotheseandothersimilarcontextualquestionswillindicatewhat

typeofinnovationnetworkwouldbemostappropriateforthecompanytoparticipatein,whattypesofrolesthecompanycanplayinit,whattypesofcapabilitiesitshoulddevelopforthoseroles,andmoreimportantly,howthereturnsfromthosecollaborativeinnovationactivitieswillcontributetowardthecompany’sgoalsandobjectives.

However,beforewestartlookingatthecompany’sinnovationcontext,weneedtodevelopadeeperunderstandingofthebroadstructureofthenetwork-centricinnovationlandscape.Inthenextchapter,wedojustthatbydefiningthefourfundamentalmodelsorarchetypesofnetwork-centricinnovation.

P

A

R

T

II

TheLandscapeof


Chapter3TheFourModelsofNetwork-Centric

Innovation51

Chapter4InnovationNetworks:ThePlayers

andthePlays67


C

H

A

P

T

E

R

3

TheFourModelsof


WhenyoulastsawamovieoradocumentaryonyourTV,didyou

wonderhowitwasmade?Probablynot—becauseweassumethatall

moviesareproducedinmoreorlessthesameway.Hereisthetyp-

icalproductionprocess:A

filmproductionstudiolikeMiramaxFilmsacquirestherightstoamoviescriptanddecidestoproducethe

movie.Thenthestudiolooksforadirectorforthemovieaswellastheleadcastmembers.Afterthesekeypeoplearelinedup,other

castmembersareselected.Inparallel,thestudiosignsupotherspecialists,including

peoplewhodothelighting,catering,selectlocations,andsoon.Whentheproductionstarts,thesespecialistserviceprovidersarecalleduponasneeded.Thestudio’sroleistocoordinatetheactivitiesofalltheparticipants.Althoughthestudiousesthemoviescripttobroadlydefinethethemeandthebudgetofthe

film,ittendstoleavesufficientleewayforcreative

inputfromthemovieteam,includingthedirector,theactors,thecinematographer,themake-upartists,thespecialeffectsteam,andthefilmeditor.

Afterthemovieiscompleted,thestudiocontractswiththedistributor(forexample,SonyPictures)whointurnworkswithexhibitors

(forexample,AMCTheaters)todistributeandmarketthefilm.The

studioalsoensuresthatrevenuesthatthemovieproducesfromthe

theatrical,video,international,cable,andotherchannelsareshared51

52

THEGLOBALBRAIN

amongtheparticipantsintheproductionanddistribution,basedoncontrac-tualterms.

That’stheconventionalmodelformovieproduction—whereacentralplayer(thestudio)definesthecontextforthemovieandorchestratestheproductionactivities.However,thisisn’ttheonlymodelformovie

production.Inrecentyears,severalinterestingnewmovieproductionapproacheshavepoppedup.

Oneapproachistheantithesisofthetraditionalstudioproduction—amodeloffilmmakinginwhichthereisnosingle,dominantplayerlikeamoviestudio.

Instead,alltheparticipantsintheproductioncometogether

toprovidethedirectionandthecoordinationforproducingthemovie.Thescriptforthismodelcouldbe“OpenSourceMeetsHollywood!”ConsiderthecaseofaBritishfilmprojectcalledASwarmofAngels,whichhastheobjectiveofattracting50,000peopletocollaborativelycreatea£1millionfilm.1Apreliminarymoviescriptorastorysketchispostedonanonlineforum.

Allthemembersoftheonlineforumaretheninvitedtocontributetothefurtherscriptdevelopment,production,anddistribution.TheprojectdirectorisaBrighton-baseddigitalfilmpioneer,MattHanson,whoconceivedtheidea.Theprojecthasthreestages:Fund(collectinitialfundingfrommembers);Film(developthescriptandexecutepre-production/production/post-

production);andFlow(marketanddistributethefilm;createspin-offmaterials,andsoon).Throughadedicatedonlineforum(calledNineOrders),membersareinvitedtocontribute£25

eachandofficiallybecomecollaboratorsontheproject.Whyshouldanybodycontributemoneytosuchan“open”project?A

collaboratorcanbecomeinvolvedinthecreativeprocessofmakingthefeaturefilm—rightfromwritingthescripttomakingthemovietomarketinganddistribution.ThemovieismadeusingdigitaltechniquesandthefinishedfilmissharedordistributedworldwideonaCreativeCommonslicensethatallowsfreedownloadingandviewing,freesharing,andfreeremixing.Currently,

twosci-fi-basedscripts,titledUnfoldandGlitch,areunderproduction.

Yetanothermodelformovieproductionfeaturesacentralplayerlikeamoviestudio,butthecreativecontributionscomefromacommunityofcontributors.

Inthismodel,thecentralentitymarketsanddistributesthecontent,butthecontent

itselfemergesorganicallyfromthecommunity.Unlikethetraditionalmoviestudioproductionmodel,thereisnopredefinedtheme,script,ordirector.Infact,productionoccursinreverse—theaudienceproducesthemoviecontent,ratherthanthestudioproducingthemovieandmarketingittotheaudience.

CHAPTER3•THEFOUR

MODELSOFNETWORK-CENTRICINNOVATION

53

Anexcellentexampleofthis“reverse”productionmodelisamediastartupfirm

calledCurrentTV(www.current.tv)thatisthebrainchildofformerU.S.VicePresidentAlGore.GoreandhisbusinesspartnerJoel

http://www.current.tv

HyattfoundedamediacompanycalledINdTVwiththeobjectiveofofferinganindependentvoiceforatargetaudienceofpeoplebetween18and34—ahighlyprizedtargetaudienceintheentertainmentindustry.Theoriginalintentwastoprovidethisaudiencewithaforumto“learnabouttheworldinavoicetheyrecognizeandaviewtheyrecognizeastheirown.”2INdTVacquireda

channelfromtheCanadiannetworkNewsWorldInternational(apartofVivendiUniversal)forareported$70

million.3InApril2005,GoreandHyattchangedthenameofthenetworkfromINdTVtoCurrentTV.ProgrammingonCurrentTVwaslaunchedonAugust1,2005intheU.S.(asofJuly2007,itwasavailableinapproximately

30millionhomesnationwide)andonMarch12,2007inUKandIreland.

MostofCurrentTV’sprogrammingfeaturesshort-durationvideosor“pods”

thatareanywherefromthreetosevenminutes.Thevideosaresubmittedbytheviewersthemselves—CurrentTVcallsthisprogrammingViewerCreatedContentor

VC2.Viewersareinvitedtosubmittheirvideosforpotentialbroadcastandthecompanydecideswhichvideositwillbroadcastonitscablechannel.Afteravideoisselectedforbroadcast,CurrentTVbuysexclusiverightsforthevideousingatieredpricingstructure(paymentsrangefrom$500–$1,000).

CurrentTVengagesviewers

intheselectionprocessbyaskingthemtovoteonthevideos.Theseviewerratingsdecidewhetheravideoisshownagainornot.

Morerecently,CurrentTVextendeditsstrategytogetitsviewersinvolvedincreatingadvertisementsfortheCurrentTVprogramsponsorcompanies.Theseviewer-createdadsalsocarrycompensationupto$1,000.

Iftheadsaregoodenoughforuseelsewhere,creatorscangetupto$50,000fromthesponsorcompany.

IntheCurrentTVmodelofproduction,thecreativeoutput(pods)ofindependentcontributorsisacquiredandcommercialized(broadcast)usingaproprietaryinfrastructure(theCurrentTVnetworkchannel),andthecompanyownstherightsto

thecontent.Theincentivesforcontributors,accordingtothecompany,arethree-fold—cash,fame,andcreativefreedom.4

Yetanothermodeloffilmmakingtakesadifferentapproachtoboththeproductionprocessaswellastotheownershipoftheoutput.Inthismodel,theparticipantsaregiventhebuildingblockstomakea

movie,andarethenallowedtocreate,distribute,andviewtheresultingmoviesastheyseefit.

Toseehowthisinnovativemodelworksinpractice,considertheexampleofMODFilms,anew-generationfilmcompany.MODFilmswasfoundedby

54

THEGLOBALBRAIN

MichelaLedwidge,aBritish-basedmediaproducer,in2004.ThebusinessmodelofthecompanyinvolvesproducingaregularmovieandthenofferingittotheglobalaudienceovertheInternetinaformmalleableenoughtoallowthemtoedit,modify,orremixittosuittheirtaste.AsWiredmagazinenoted,MODFilms

offers“amassivelymultiplayeronlinemovie.”5ThefirstsuchfilmisSanctuary—aten-minutevirtualrealitysci-fifilmshotinAustraliain2005.

Thefilmisaboutagirl,hercomputer,andamysteriousmurder.Theoriginalfilm,releasedundertheCreativeCommonslicense,providesastoryframeworkthattheaudiencecanplaywith—they

candisassembleandreassemblematerialsthemselvestocreatetheirowninterpretationofthestory.6And,theresultingoutputwillalsobeavailableundertheCreativeCommonslicense.

SanctuaryisdistributedasDVD-VideoaswellasintheHDVideoformatalongwithavastlibrarymaterial.Specifically,morethannine

hoursofproductionfootageand90minutesofsoundeffectsanddialogalongwithstoryboards,stillphotos,andsoonareavailableforviewerswhohavesubscribedtotheonlineforummaintainedbyMODFilms.7Viewerscanplayaroundwiththesecine-maticelementsusingadownloadablesoftwaretoolcalledSwitchthatthecompanyprovides.Morefilmsareontheanvil

includingTheWatch(adrama)andExtraFox(acomedy).

Thesefourmodelsformovieproductionareverydifferentintermsofhowtheyareorganized,howtheprocessworks,andwhoownstheoutput.Buttheyhavesomethingincommon—collaborationamonganetworkofcontributorstocreateaninnovativeproduct.

Moreimportantly,thesemodelsfromtheentertainmentindustryareexamplesofemerginginnovationmodelsthatlieattheconfluenceofsocialorcommons-basedproductionmethodsandhierarchical/market-basedproductionmethods.Assuch,theyareharbingersofthenetwork-centricinnovationapproachesthatwearelikelytoseeinthemainstream

businessworld.

Indeed,theentertainmentindustryhasalwaysbeenatrendsetterinmanagingandorganizingcreativity.Inaclassicarticlepublishedin1977intheHarvardBusinessReview,EileenMorleyandAndrewSilverdescribedafilmdirector’sapproachtomanagingcreativityanddistilledasetofwonderfulinsightsforbusiness

managers.8Overthenextthreedecadesorso,severalofthoseconceptsandpracticesbasedonsuccessfulfilmprojectsfromHollywoodhavefoundtheirwayintothebusinessworld.9And,astheprecedingexamplesindicate,thefilmandtheTVindustrycontinuetopavethepathinmanaginginnovationandcreativity.

CHAPTER3•THEFOUR


55

FRAMINGTHELANDSCAPEOFNETWORK-CENTRICINNOVATION

Takinginspirationfromtheentertainmentindustry,letusconsidersomeofthecommonthemesthatemerge

fromthedifferentmodelsofmovieproduction,andhowthesethemeshelpustoframethelandscapeofnetwork-centricinnovationinthemovieindustryandbeyond.

WhenwecomparethetraditionalmodeloffilmmakingwiththeonefollowedbyCurrentTV,wenotethatthereisnopredefinedthemeorscriptforthemovie.Eventhough

thestudiostillcallstheshotsintermsofwhatgetsaired,thecontentofthemovieisnotcontrolledbythestudio.Instead,itemergesasaresultofthecollaborationamongthecontributors.Althoughscript-drivenmoviesanddocumentariesstillformthemajorityoftheoutputfromtheindustry,exampleslikeCurrentTVsuggesttheriseofaudience-definedcontent,whereconsumerstakeonthe

roleofproducers.

InitiativesliketheSwarmofAngelsgoevenfurther,inthatthestudioplaysanevenlesserrole—thatofanenablerandthefacilitatorofcollaborationamongindividualcontributors.Inthismodel,individualcontributorsexercisegreaterinfluenceonallorsomeaspectsoffilmmaking.Anotherexampleofthistype

ofinitiativeistheEchoChamberProject,anexperimentindocumentaryproduction.TheEchoChamberProjectisaninvestigativedocumentaryabout“howthetelevisionnewsmediabecameanuncriticalechochambertotheexecutivebranchleadinguptothewarinIraq.”10Theproject,ledbyKentBye,adocumentaryfilmmakerbasedinWinterport,Maine,

involvesacollaborativeeditingprocesswhereintheleadcreatorprovidesapreliminarysetofvideosegmentsandothercollaboratorshelpincategorizingthevideosegmentsintodifferentthematicclustersandcreatingthesequence(storyline).Theeditedsequencesarethenexportedforfinalproduction.

Theemergingmodelsandtrendsinthemovieindustryillustratetwokeydimensionsofcreativeendeavoralongwhichweseechangehappening.Thefirstdimensionrelatestothenatureofthemovieitself—thatis,howtheoverallstorylineandcontentofthemovieisdefinedandhowitevolves.Theseconddimensionrelatestothestructureofthenetworkof

contributorstotheproject;thatis,howthetalentcomestogetherandsharesinactivitiesrelatedtoproducing,marketing,anddistributingthemovie.

Generalizingthesedimensionstothebroaderinnovationcontext,wecanthinkoftwokeydimensionsinorganizinginnovativeefforts—thenatureoftheinnovationandthenatureof

thenetworkleadership.Thesetwodimensionshelp56

THEGLOBALBRAIN

ustostructurethelandscapeofnetwork-centricinnovation.Wenowexplorethesetwodimensionsinmoredetail.

THEDIMENSIONSOFNETWORK-CENTRIC

INNOVATION

StructureoftheInnovationSpace

Differenttypesofprojectscanbepursuedcollaborativelyininnovationnetworks.AsyousawinChapter2,“UnderstandingNetwork-CentricInnovation,”

someoftheprojectsinvolve

makingwell-definedmodificationsorenhance-mentstoexistingproducts,services,ortechnologyplatforms.Inotherprojects,theinnovationspacetendstobelessdefinedandtheoutcomesoftheinnovativeeffortarenotwellunderstoodattheoutset.

Basedonthis,wecanthinkabouttheinnovationspaceasacontinuumrangingfrom

“defined”ononeendto“emergent”attheotherend(seeFigure3.1).

Onthedefinedendofthecontinuum,thedefinitionmightoccuraroundatechnologyplatformoratechnologystandard.SuchisthecaseofAppExchange,thedevelopmentplatformcreatedbySalesforce.comtoharnessthecreativeeffortsofindependentsoftware

developers.Theinnovationspacecanalsobedefinedbydependenciescreatedbyexistingproductsorprocesses.Forexample,Ducatiengagesitscustomersininnovationprimarilytogenerateproductimprovementideasforitsexistingproducts.Similarly,3M’sengagementwithNineSigma.comwasdefinedintermsofthepropertiesoftheadhesivematerialthatthe

companywasseeking.Inalltheseexamples,theinnovativeeffortsaredefinedandlimitedbyexistingproducts,processes,ortechnologyplatforms.

Attheotherendofthecontinuum,thestructureoftheinnovationspacecanbelessdefinedandmoreuncertain.Althoughthebroadcontoursoftheinnovativespacemightbe

specifiedorknown—forexample,thetargetmarketforanewproductorserviceortheexistingcommercializationinfrastructure—theremightbefewerrestrictionsonthenatureorprocessoftheinnovation.Forexample,whenStapleslooksaroundforinnovativeideas,itisseekingnewproductconceptsfortheofficesuppliesmarket.Similarly,in

theOpenSourceSoftwarearena,manyoftheprojectsrelatetodevelopingtotallynewsoftwareapplications—whetheritbedevelopinganewdevelopmenttoolordevelopinganewoperatingsystem.

CHAPTER3•THEFOURMODELSOFNETWORK-CENTRICINNOVATION

57

Emergent

•Lessdefined/unstructuredproblemspace

•Exploration,novelty

•Focusoncreatingnewknowledge/assets

•Emphasison‘unknownconnections’inknowledge-base

Centralized

Diffused

•Dominantplayerled

•Communityled

Network

•Moreformatstructures/linkages

•Moreinformal

structures/linkages

Leadership

•Hierarchical

•Etherarchical

•Lowdecisionalopenness

•Highdecisionalopenness

•Visiblecore/periphery

ation

•Lessvisiblecore/periphery

v

Inno

Space

Defined

•Clearlydefined/structuredproblemspace

•Exploitation,efficiency

•Focusonutilizingexistingknowledge/assets

•Emphasison‘knownconnections’inknowledge-base

Figure3.1Dimensionsofnetwork-centricinnovation

Anotherwaytounderstandthiscontinuumistothink

aboutitsimplicationsforcapabilitiesandknowledge.Themorewell-definedtheinnovationspaceis,themorethefocusonexploitinganexistingknowledge-baseorleveragingexistingtechnologies.Ontheotherhand,themoreemergenttheinnovationspace,themoretheemphasisonexplorationofopportunitiesintheinnovationspaceandonmakingcreativeconnections

amongdisparateknowledgedomains.

Now,considertheseconddimension—thestructureofthenetworkleadership.

StructureoftheNetworkLeadership

Aninnovationnetwork—whetheritisanopensourcecommunity,anelectronicR&Dmarketplacelike

NineSigma.com,oranecosystemoftechnologyfirmsasinthecaseofSalesforce.com—consistsofasetofindependentactorswithvaryinggoalsandaspirations,diverseresourcesandcapabilities,anddifferentbusinessmodels.

58

THEGLOBALBRAIN

Foralltheseentitiestoplaytogetherintheinnovationinitiative,therehastobeamechanismtoensuresomecoherenceamongtheiractivities,capabilities,andaspirations.Thismechanismcangobydifferentnames—networkleadership,governance,ormanagement.Whateverthepreciseterm,theessenceistheneedforamechanismthatcanprovidethevisionanddirectionfor

theinnovationandestablishtherhythmfortheinnovationactivities.

Thus,thenamewegivetotheseconddimension—theNetworkLeadership—

capturesthisgovernanceaspect.

Networkleadershipcanbethoughtofasacontinuumofcentralization,withthetwo

endsbeingcentralizedversusdiffused.Atthecentralizedendofthecontinuum,thenetworkisledbyadominantfirmthatleadsthenetwork.Leadershipmaybeexercisedindifferentways—envisioningandestablishingtheinnovationarchitecture,makingthecriticaldecisionsthataffectorshapethenatureandtheprocessofinnovation,anddefiningthenatureandmembershipof

thenetworkitself.Forexample,initstechnologyecosystem,Salesforce.comprovidestheleadershipbyestablishingandpromotingthetechnologyplatformandbyfacilitatingtheactivitiesofitsexternaldevelopers.

Atthe“diffused”endofthecontinuum,theleadershiptendstobelooselydistributedamongthemembersofthenetwork.All

membersofthenetworkshareresponsibilityforleadingthenetwork.Forexample,manyOpenSourceSoftwareprojectshaveademocraticleadershipstructurewhereinthedifferentmembersofthecommunitysharethedecision-makingpowers.

Tofurtherunderstandthedistinctionsbetweenthesetwoends,thinkaboutthe

conceptofthecoreandtheperipheryinnetworks.Thecoreofanetworkcanbethoughtofasoneormoremembersofthenetworkwhoareconnectedtooneanothermorecloselyandformthecentralpartofthenetwork.Theperipheryconsistsofthosemembersofthenetworkwhohavelimitedtieswithothermembersofthenetworkandaremoredistantfromthecenterofthe

network.11

Forexample,consideryourownsocialnetwork.Asmallsetofpeopleformsthecoreofyoursocialnetwork.Thesepeoplemightincludeyourimmediatefamily,yourclosefriends,andyourcolleagues.Thentherearemorecasualacquaintances,yourrelativesanddistantfamilymembers,thepeopleatyourworkplacewhointeractwithyou,andso

onwhoformtheperipheryofyoursocialnetwork.

Aswemovefromthelefttotherightonthecontinuumofnetworkleadership,wethinkaboutinnovationnetworksthathaveaclearlydefinedcorewithasingledominantfirmtonetworkswherethecoreandperipheryarelesswellCHAPTER3•THEFOURMODELSOFNETWORK-CENTRIC

INNOVATION

59

definedorwherethecoreconsistsofallormostofthemembers.Forexample,attheextremeleft,wemightconsidernetworkssuchasMicrosoft.NETorIntel’smicroprocessorplatformnetwork—contextswhereasinglefirmformsthecoreofthenetwork,providesthe

leadership,andmakesallthekeyinnovationdecisions.Aswemovetowardthecenter,wethinkofnetworkssuchasIBM’sPowerchipinnovationalliance(www.power.org)whereinIBMformsthe

coreofthenetworkbutsharesmoredecision-makingrightswithothermembersofthenetwork.Aswegofurthertotheright,thecoremightconsistofmorethanone

http://www.power.org

member,andattheextreme,thecoremightincludemostorevenallofthemembersofthenetwork.Forexample,OpenSourceSoftwareprojectshaveleadershipstructuresthatlieatdifferentpointsontherightpartofthiscontinuum.

INTRODUCINGTHEFOURMODELSOFNETWORK-CENTRIC

INNOVATION

Thetwodimensions—innovationspaceandnetworkleadership—whencrossedtogether,definefourarchetypicalmodelsthathelpstructurethelandscapeofnetwork-centricinnovation.Withabowtotheentertainmentindustry,wecallthesefourmodelstheOrchestramodel,theCreativeBazaarmodel,the

JamCentralmodel,andtheModStationmodel(seeFigure3.2).

Emergent

Creative

Jam

Bazaar

Central

vationSpace

Inno

MOD

Orchestra

Defined

Station

NetworkLeadership

Centralized

Diffused

Figure3.2Thefourmodelsofnetwork-centricinnovation

60

THEGLOBALBRAIN

Wenowpaintapictureofthedefiningcharacteristicsofeachofthesemodels,

drawingparallelsfromthemusicandentertainmentworld.WewillexploreeachmodelingreaterdetailinChapters5through8ofthebook.

THEORCHESTRAMODEL

Whenwethinkaboutanorchestra,wevisualizeaconductorholdingswaywithhiswand,directingagroupofmusicians—eacha

specialistinaspecificmusicalinstrument.Themusicianscometogethertoplayscripted(often,classical)music.Thescriptedmusic—whetheritisBeethoven’sEroicaSymphonyorMozart’sSymphonyNo.40inGMinor—providesawell-definedstructurefortheperformancesofindividualmusicians.Althoughindividualmusiciansmight

havesomeleewayininterpretingthemusiccreatively,theyaregenerallysupposedtofollowthescript.Andtoalargeextent,theresponsibilityofcoordinatingthemusiciansfallswiththeconductor.Theconductorcommunicateswithindividualmusicians(usuallythroughgestures),andthiscommunicationdetermineswhetherthemusicthattheaudiencehearsisjusta

mechanicalrenditionofthescriptoramovingandelegantinterpretationofthescript.AsthecriticEduardHanslicknotedinthe1880s,thebestconductorsareabletocontrolandshape“everynoteandinflectionemanatingfromthemusiciansundertheircommand.”12

TheOrchestramodelfornetwork-centricinnovation

closelyresemblestheorganizationandthestructureofatypicalsymphonyorchestra(seeTable3.1).

Inthiscontext,thestructureoftheinnovationspaceisfairlywell-definedandthenetworkleadershipiscentralizedwithasingledominantfirm.Theinnovationcontextprovidesaclearbasisforstructuringthe

activitiesoftheindividualactorsintheinnovationnetwork.Andjustasthemusicalinstrumentsinanorchestraneedtoresonatewitheachother,theinnovativecontributionsofnetworkmembersintheOrchestramodelalsocomplementoneanother.

Justasanorchestraisledbyaconductorwhoorchestratesthemusicalperformancesof

individualmusicianstocreateacoherentsymphony,inthenetwork-centricinnovationcontext,theleadershipprovidedbythedominantfirmiscrucialtoensuringthattheinnovativecontributionsofindividualcontributorsadduptoavaluablewhole.


61

Table3.1TheOrchestraModelofNetwork-CentricInnovation

OrchestraModelof

SymphonyOrchestra


Consistsofdifferenttypesof

Consistsofadiversesetofpartners,each

instrumentalists,eachplayinga

responsiblefordifferenttypesofinnovation

specificrole

activities(orcomponents)

Thecompositionorthescript

provides

Innovationarchitectureprovidesthe

thestructureforthemusical

structurefortheinnovativecontributionsof

performances

networkmembers

Conductorormaestroorchestratesthe

Dominantorleadfirmorchestratesthe

musicalperformanceofindividual

innovationactivitiesofnetworkmembers

musicians

Hierarchicalrelationshipsexistbetween

Formalrelationshipsortiesexistbetween

andacrosstheinstrumentsubgroups

networkmembers

Further,inanorchestra,oftenthereisahierarchyofleadershiporasetof

generallyaccepted(formal)relationshipsortiesbetweentheinstrumentalists.Forexample,eachinstrumentalgrouporsectionhasanassignedleader(principalorsoloist)whoisresponsibleforleadingthatgroup.Often,thereisalsoahierarchybetweentheinstrumentgroups.Forexample,theviolinsaredividedintotwogroups,firstviolinsandsecondviolins.Theleaderof

thefirstviolingroupisconsideredtheleaderoftheentirestringsection.Moreover,thisleaderisalsothesecond-in-commandoftheorchestra,andisresponsibleforconductingtheorchestraifthemaestroisnotpresent.Similarly,theprincipaltromboneisconsideredtheleaderofthelow-brass(trombone,tuba,andsoon)section,whereastheprincipaltrumpetis

generallyconsideredtheleaderoftheentirebrasssection.13Eventhoughsuchasetofhierarchicalrelationshipsmightnottranslatedirectlyintothenetwork-centricinnovationcontext,theanalogyliesintheformalrelationshipsortiesamongthemembersoftheinnovationnetwork.

TheOrchestramodelofnetwork-centricinnovation

describesasituationwhereinagroupoffirmscometogethertoexploitamarketopportunitybasedonanexplicitinnovationarchitecturethatisdefinedandshapedbyadominantfirm.Theinnovationarchitecturetypicallyemphasizesefficiencyovernovelty,sothereisaheavyemphasisonmodularityoftheinnovationarchitecture.

62

THEGLOBALBRAIN

Innovationprocessestendtobehighlyorganizedandcoordinatedwithsignificantinvestmentsmadeininfrastructuretosupporttherolesandactivitiesofthemembersofthenetwork.

ExamplesoftheOrchestraModelrangefromMicrosoft

.NETinitiativeandSalesforce.com’sAppExchangenetworktoBoeing’sdevelopmentofthe

Dreamliner787.TheseexamplesrepresentseveralvariationsoftheOrchestramodel.InChapter5,“TheOrchestraModel,”wewillexaminetheOrchestramodelandthesevariationsinmoredetailthroughspecificexamples.

THECREATIVEBAZAARMODEL

Whenyoulistentoyourfavoritenewmusicartist,haveyouwonderedhowheorshegotnoticedfromamongthecrowdofstrugglingartists,andendeduplaunchinganalbumwithamajorrecordlabel?Recordlabelslookfor“diamondsintherough”inlotsofways.Theymightlookfor

promisingbutunknownartiststhroughtalentscoutsandtalentcontestsliketheAmericanIdol.Ortheymightoptfortriedandtrustedperformerswhohaveanewalbumorsingleandwhohaveaready-madeaudience.Inbothsituations,therecordcompanytypicallyonlyspecifiesthebroadcategoryofinterest—thegenreofmusicandthetargetcustomersegments—andnot

thelyricsorchoreographyofthemusic.However,thelabeldoeshavethefinalsayinselecting,developing,andmarketingthealbums.Inotherwords,whiletherecordlabelstillplaystheroleofadominantplayer,ittakesaflexibleandopenapproachtofindingtalentandlettingthemcomeupwithinnovativemusic.Ineffect,therecordlabelshopsaroundinthetalentbazaar.

Thismodelofmusicproductioniswhatwethinkofasananalogyinproposingthesecondmodelofnetwork-centricinnovation—theCreativeBazaarmodel(seeTable3.2).Thismodeldescribesacontextwhereinadominantfirmshopsforinnovationinaglobalbazaarofnewideas,products,andtechnologiesandusesitsproprietarycommercialization

infrastructuretobuildontheideasandmakethem“market-ready.”Thecommercializationinfrastructuremightincludedesigncapabilities,brands,capital,andaccesstodistributionchannels.


63

Table3.2TheCreativeBazaarModelofNetwork-CentricInnovationMusicRecordingStudio

CreativeBazaarModelof

orLabel


Thestudioisthedominantplayerand

Thecompanyisthedominantmemberof

makesthecriticaltechnicalandmarket

theinnovationnetworkandmakesthe

decisions

criticaldecisionsregardingcommercialization

oftheinnovation

Musicofferingsacquiredfromawide

Innovativeideas(products,services,

rangeofsourcesandinvaried

technologies)sourcedfromadiversenetwork

forms—fromtalenttomarket-ready

ofinventorsandinvariedstagesofmaturity—

songs

fromrawideastomarket-validatedconcepts

Arangeofmechanismstosource

Arangeofinnomediariesusedtosource

music—fromtalentscoutstotalent

innovation

conteststomusicagents

Thespecificnatureofthemusicis

Thenatureoftheinnovation

isemergent—the

moreemergent—theonlyconstraintis

onlyconstraintisthatitshouldfitthe

thatitshouldfitthestudio’sbroad

company’soveralltargetmarketandbrand

marketstrategy

portfolio

Inmuchthesamewayasamusicstudiosourcesnewmusicalcompositionsfromawidevarietyofartists,companiesthatusetheCreativeBazaarmodeltosourcenewproduct/serviceuselotsofmechanismstosourcenewideasandtechnologiesfrominventors.

Forexample,productscoutsandlicensingagentsidentifypromisingnewproductandtechnologyideasandbringthemtolargecompaniesforfurtherdevelopmentandcommercialization.Companiescanalsoshopformoremarket-readyproducts(thatis,productortechnologyconceptsthathavebeenprototypedandmarketvalidated)andacquirethemfromincubators

andventurecapitalfirms.Regardlessofthesourcingapproach,thecompanyplaysthedominantroleintheinnovationnetworkbyofferingitsinfrastructurefordevelopingandcommercializingtheinnovation.However,thenatureoftheinnovationspaceisnotthatwell-defined,becausethetargetmarketsortechnologyarenasaredefinedrelatively

broadly,anditisn’tclearwheretheideawillcomefrom,orwhatitwilllooklike.

Insummary,theCreativeBazaarmodelaimstoseekoutandbringtofruitioninnovationopportunitiesthatmeetthebroadmarketandinnovationagendaofthedominantfirm.Thetermbazaarimpliesadizzyingarrayofwaresonoffer,

rangingfromrawideasandpatentstorelativelymatureor“market-ready”newproductconcepts,aswellasthepresenceofdifferenthawkersthatcompaniescandealwith,fromideascouts,patentbrokers,andelectronicinnovationmarketplacestoincubationagencies,venturecapitalists,andsoon.

64

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THEJAMCENTRALMODEL

Consideramusicaljamsession.Ittypicallyinvolvesagroupofmusiciansgettingtogethertoplayor“jam”withoutextensivepreparationandwithouttheintentiontofollowanyspecificmusicalpatternorarrangement.Improvisationisthekeytoa

goodjamsession.Musiciansoftenfollowa“callandresponse”

pattern—thatis,asuccessionoftwodistinctnotesorphrasesplayedbydifferentmusicians,where“thesecondphraseisheardasadirectcommentaryonorresponsetothefirst.”14

Thetermjamcanbetracedbackto1929whenitwas

usedtoreferto“short,freeimprovisedpassageperformedbythewholeband.”15Thetermsignifiestwokeythemes:Itisagroupactivityanditisimprovisational.Thedegreeofimprovisationmightvaryfrombeinglooselybasedonanagreedchordprogressiontobeingcompletelyimprovisational.Further,unlikeanorchestraorothermusicalcontexts,typically,

thereisnosingleleaderinajamsession.Allthemusiciansshareintheresponsibilitytokeepthetimeortherhythm.

Thejamsessionisourinspirationforthethirdmodelofnetwork-centricinnovation—theJamCentralmodel(seeTable3.3).Thismodelinvolvesindividualcontributorscomingtogethertocollaborateinenvisioning

anddevelopinganinnovation.Theinnovationspaceistypicallynotwellstructuredandtheobjectivesanddirectionoftheinnovationtendstoemergeorganicallyfromthecollaboration.Therearenodominantmembers,andtheresponsibilityforleadingandcoordinatingtheactivityisdiffusedamongthenetworkmembers.Eveniftheleadershipisnotequally

sharedbyallmembers,keydecisionsthatshapetheinnovationprocessesandoutcomestendtoevolvefromtheinteractionsofthenetworkmembers.

Table3.3TheJamCentralModelofNetwork-CentricInnovationJamCentralModelof

MusicalJamSession


Groupofmusiciansgettogetherto

Membersofaninnovationnetworkget

performmusicinanimprovisational

togethertoinnovateinanimprovisational

manner

manner

Thenatureandformofthemusic

Thestructureoftheinnovation(goals,

evolvesoremergesfromthe“calland

architecture,processes,and

soon)are

response”amongthegroupmembers

emergent;thatis,itevolvesfromthe

continuedinteractionsofthemembers

Alltheparticipantsofthejamsession

Theleadershipoftheinnovationnetworkis

shareintheresponsibilityforcoordinating

diffusedamongalloragroupofthenetwork

themusic

members

CHAPTER3•THEFOUR


65

Insum,theJamCentralmodelischaracterizedbyasharedexplorationofaninnovationarenabyapeergroupofcontributorswhoshareintheresponsibilityofdirectingandcoordinatingtheinnovationeffort.

THEMODSTATIONMODEL

ThetermmodoriginallystoodformodernismandwasusedtorefertoayouthlifestylebasedaroundfashionandmusicthatdevelopedinLondon,England,inthelate1950s.16Butthetermhadarebirthinthecomputergamingindustryintheearly2000s.Computer-basedgamesthat

weremodificationsofexistinggameswerereferredtoas“mods.”Inotherwords,modstoodformodification.

And,thisistheperspectivethatweadoptherewhenusingthetermmod.

Byofferingthesourceofavideogametoacommunityofgamers,acompanycanenablethecreationofvariationsofthegame.These

modificationscaninvolveaddingnewcharacters,newtextures,newstorylines,andsoon.

Dependingontheextentofmodifications,theycanbe“partialconversions”or

“totalconversions.”Totalconversionstypicallyturnouttobecompletelynewgamesthathappentousesomeofthebasiccontentor

structureoftheoriginalgame.Modsaremadebythegeneralgamingpublicormodders.Increasingly,thegamingcompanieshavestartedassistingmoddersbyprovidingextensivetoolsanddocumentation.ThemodsarethendistributedandusedovertheInternet.ThemostpopularmodisCounter-Strike,agamethatoriginatedasamodificationofanothergamecalledHalf-Life

producedbyValveCorporation,asoftwarefirmbasedinBellevue,Washington.

Basedonthemodidea,wedefinethefourthandfinalmodelfornetworkcentricinnovation—theModStationmodel(seeTable3.4).Thismodelhastwokeycharacteristics.First,itlargelyinvolvesmodifyingorleveraginganexisting

(product,process,orservice)innovation—thatis,activitiesthatoccurwithintheboundariesofapredefinedinnovationspace,andaimtoadd,enhance,oradaptexistingproductsorservices.Second,itoccursinacommunitywherethenormsandvaluesthatgoverntheinnovationareestablishedbythecommunityandnotbyanyonedominantfirm.

66

THEGLOBALBRAIN

Table3.4TheModStationModelofNetwork-CentricInnovationModForumsinComputing

ModStationofNetwork-

GamingIndustry

CentricInnovation

Involvesmodificationofexisting

Innovationthatisbasedonanexisting,

computer-basedgamesbasedon

well-definedarchitecture—thenatureofthe

thesourceprovidedbytheoriginal

innovationisincremental

creator

Themodsarecreatedbythegeneral

Theinnovationiscarriedoutbyacommunity

gamingpublic

ofusersandexperts

Thecoordinationfortheinnovation

Theleadershipisdiffusedamongthemembers

isdiffusedwithinthecommunity

oftheinnovationnetwork

Insum,theModStationmodelisfocusedonexploitingexisting

innovationorknowledgetoaddressmarket/technologicalissuesbyacommunityofinnovators(innovationusers,customers,scientists,experts,andsoon).Examplesofsuchnetwork-centricinnovationrangefromcommercialopensourcecommunitiessuchasSugarCRMtoopensourceprojectssuchasOpenSPARCwhereinnetworksofscientistsandexperts

innovatewithintheboundariesdefinedbyanexistingproductorprocessarchitecture.

FROMTHEPLAYSTOTHEPLAYERS

Thesefourmodelshelpustostructurethelandscapeofnetwork-centricinnovation.Butourframeworkisnotyetcomplete.Ineachofthemodelsofnetwork-centric

innovation,firmscanplaydifferenttypesofroles.Whatisaninnovationrole?And,whatarethebroadcategoriesofsuchinnovationroles?

Further,allinnovationnetworksrequiresomebasicoperationalinfrastructureforcreatingaswellascapturingvalue.Thisincludesthemechanismsformanagingintellectualpropertyrightsandthesystemsforsharing

knowledge.Whatarethegeneralelementsofthenetworkoperationalinfrastructure?Inthenextchapter,weaddressthesequestions.

C

H

A

P

T

E

R

4

InnovationNetworks:The

PlayersandthePlays

Thinkaboutthelastbighomeremodelingprojectyou

undertook.

Theprojectprobablyinvolvedanumberofactors—thegeneralcon-

tractor,thesubcontractors,thearchitect,themortgagecompanyor

bank,theworkers,andthematerialsuppliers.Eachoftheseactors,includingyou,playedaclearlydefinedrole

intheproject.Andto

managetheproject,youneededtofigureouthowtocoordinateand

communicatewitheveryone.Thismighthaveincludeddefiningthe

contractterms,settingouttherulesofengagement,andmakingsuretheprojectstayedontrack.A

remodelingproject,likeanycollaborativeactivity,bringstogetherasetofindependentplayerswith

clearlydefinedroles,whooperatewithinasupportingsystemto

managetheproject.

Similarly,network-centricinnovationrequiresparticipantsinthe

networktoplayspecificroles.Theseinnovationrolesarecharacterizedbythetypesofactivitiesinvolvedorthetypeofinnovativecontributionsthatarerequired.Understandingthenatureofthese

differentinnovationrolesisimportantbecausetheydefinethecapabilitiesthatplayersneedtobringtotheinnovationproject.

Acollaborativeprojectalsorequiresasystemtofacilitateandcoordinatetheactivitiesinthenetwork.Someoneneedstodecidehow

theprojectwillbemanagedorgoverned.Andsomeoneneedsto

67

68

THEGLOBALBRAIN

managetheknowledgethatiscreatedanddecidewhoownswhatintellectualproperty.

Inthischapter,weconsiderthedifferenttypesofplayersinaninnovationnetwork,andthedifferenttypesofactivitiesthatneedtobeperformedtomanagethenetwork.Weidentifythreedistinctrolesthatnetwork

memberscanplay—

architects,agents,andadapters.Andwehighlightthethreekeyelementsofnetworkmanagement—networkgovernance,knowledgemanagement,andintellectualpropertymanagement.Wereflectuponthedifferencesintheserolesandactivitiesbasedonthetypeofnetwork-centricinnovationmodel.

PLAYERSINNETWORK-CENTRICINNOVATION

Eventhoughaninnovationnetworkcanbecomplex,thereareonlythreekeycategoriesofrolesthatmembers(firms,individuals,andsoon)canplayinthenetwork:architects,adapters,andagents(seeTable4.1).

Table4.1Typesof

InnovationPlayers

Typeof

Innovation

Player

NatureofActivities

Example

Characteristics

Architect

Triggerandcatalyze

Platformleader,

Typicallysituatedatornear

innovation

innovationportal,

thecoreorcentralpart

innovationsteward

ofthenetwork;assumes

Envisionanddirect

higherriskandenjoysgreater

innovation

returnsfrominnovation

Tendtothe

innovationnetwork

Adapter

Providespecialized

Complementor,

Typicallysituatedawayfrom

knowledge/services

innovator,expert

thecentralpartofthe

andinfrastructure

network;exerciseslimited

services

directinfluenceonthe

innovation

Agent

Mediateinteractions,

Ideascout,patent

Tiedtodiversetypesof

knowledgetransfer,

broker,innovation

membersinthenetwork;

andinnovation

capitalist

typicallyassumeslowerrisks

andenjoyssmallerreturns

frominnovation

CHAPTER4•INNOVATIONNETWORKS:THEPLAYERSANDTHEPLAYS

69

ARCHITECTS

Toconstructahouse,thefirstpersonyouneedtohireisan

architect.Heenvisionstheblueprintforthehouseanddefinesthekeyelementsofhowtheroomsfittogetherintoalogicaldesign.Andsoitiswithinnovationnetworks.

Thearchitectisthecentralmember(orsetofmembers)whodesignsandinfluencestheevolutionofaninnovationnetwork.Thearchitecthasaring-sideseat

attheinnovationgamebecauseitcarriesoutorinfluencesactivitiesthatarecentraltotheinnovationagendaofthenetwork.Theseincludedefiningtheinnovationarchitectureandstandards,anddecidinghowtocommercializethecreativeoutputsoftheinnovationnetwork.Inotherwords,thearchitectenvisionsandimplementsthe“architectureofparticipation”inthe

network.

Themembersplayingtheroleofanarchitecttypicallytendtobepositionedinornearthecentralpartofthenetworkwithdirectlinkagestotheotherkeyplayersinthenetwork.Duetothenatureoftheiractivitiesandcontributions,typically,thearchitectsassumegreaterinnovationrisksthanothermembersinthenetworkand

alsoderivegreaterreturnsfromtheirparticipationthanothermembers.

Architectsperformthreesetsofactivities:triggerandcatalyzeinnovation,envisionanddirectinnovationactivity,and“tend”theinnovationnetwork.

Thefirstsetofactivities,“triggerandcatalyzeinnovation,”relatesto

providingtheinitialimpetustocreatetheinnovationnetworkandtodefinetheinnovationagenda.Italsoincludessupportingandplayingacatalyticroletobuildmomentumandensuresuccessoftheinnovationproject.Forexample,whentheHumanGenomeProject(HGP)waslaunched,apartfromtheinvolvementoftheU.S.governmentandscientificagenciessuchas

theDoEandtheNIH,akeyentitywastheU.K.-basedWellcomeTrust.Duringtheearly1990s,WelcomeTrustplayedacentralroleintriggeringthegenomicresearchactivitiesintheU.K.InOctober1993,theWelcomeTrustfundedandco-sponsoredtheSangerInstitute(atHinxton,southofCambridge,U.K.)—thecenterlaterbecameoneofthemajorsequencinglabsin

theinternationalconsortium.Astheprojectprogressed,WelcomeTrustcontinuedtoplayacatalyticroleintheprojectbyfunding,bringingtogether,andfacilitatingtheinteractionsofotherkeypartnersintheproject,particularlyintheU.K.

Thesecondsetofactivities,“envisionanddirectinnovation,”relatestoprovidingstructureand

bringingcoherencetotheactivitiesofparticipantsintheinnovationnetwork.Thismightrangefromestablishingandmaintainingtheinnovationarchitecturetomakingthecrucialdecisionsrelatedtotheevolution70

THEGLOBALBRAIN

orthecommercializationoftheinnovation.Forexample,IBMandMicrosoftplaythis

roleinmanyoftheinnovationnetworksthattheylead—whetheritisIBM’sPowerchiparchitectureorMicrosoft’s.NETarchitecture.Intheconsumerproductsector,companiessuchasP&GandJ&Jplayasimilarrolethroughtheircommercializationcapabilities—ineffect,offeringtheircommercializationinfrastructureasaportalfor

bringingtomarketexternalinnovativeideasandtechnologies.

Thethirdsetofactivities,“tendingtheinnovationnetwork,”involvesmaintainingandsupportingtheinnovationnetworkasawhole.Considertheactivitiesperformedbyagardener.Heorshedecideswhichplantstoseedinthegardenandwhatpositionorplacethey

shouldoccupyinthegarden.Thegardeneralsonurturesandfostersthegrowthoftheplantsandmakessurethattheweedsandotherplantsthatmightinhibittheoverallhealthofthegardenareidentifiedandpromptlyremoved.Further,agoodgardenerwillalsoknowthemeritsofcompanionplanting—plantsthatcomplementoneanothershouldbeplantedcloseto

eachother.Forexample,inavegetablegarden,basilandtomatoesshouldbeplantedtogether.Basilactsasafungicideandcanslowthegrowthoforrepelmilkweedbugs,aphids,mites,andsoon—therebyimprovingthegrowthandflavorofthetomatoes.

Similarly,the“gardening”roleplayedbyanarchitectinaninnovationnetwork

involvesmanagingthemembershipofthenetworkandprovidinganurturingenvironmentforthenetworktoflourish.Dutiesincludepromotingasharedsetofnormsandvalueinthenetwork,communicatingacommon“worldview”tonetworkmembers,weedingoutmemberswhoaredetrimentaltothehealthofthenetwork,andbringingtogethermemberswhose

capabilitiesandresourcescomplementoneanother.Thesegardeningactivitiesshapetheoverallsuccessoftheinnovationproject.

Someoftheactivitiesthatunderlietheprecedingthemesmightoverlapandsomeoftheactivitiesmightappearindifferentformsindifferentnetworks.

Furthermore,someofthe

playersmightcarryoutactivitiesthatrelatetomorethanoneoftheprecedingthemes.Thus,wecanidentifydifferenttypesofarchitectsbasedonthenatureofactivitiestheyassumeinagivenmodelofnetwork-centricinnovation.WhileweprovideafewexamplesoftheseplayersinTable4.1,wewillidentifyanddescribespecifictypesofarchitectslateroninthebook

(Chapters5to8)whenwediscusseachofthefourmodelsofnetworkcentricinnovationindetail.

CHAPTER4•INNOVATIONNETWORKS:THEPLAYERSANDTHEPLAYS

71

ADAPTERS

Everyqueenbeeneedsanumberofworkerbeeswhotakedirectionfromherandperformaspecifictaskinmakingabeecolonywork.Similarly,everyarchitectneedsasetoffirmswhotakedirectionandcontributetothenetwork.Wecalltheseplayersadaptersbecausetheyadapttothedirectionofthearchitectandplayasupportingrolethatislesscentral,butnonetheless

important,inthenetwork.Adaptersaretypicallylocatedawayfromthecoreofthenetworkandmaintainalimitednumberoftiesorrelationshipswithothermembersofthenetwork.

Theactivitiesofadapterscanbegroupedintotwobroadthemes:providespecializedknowledgeorservicesandprovideinfrastructureservices.

SomeadaptersbringhighlyspecializedknowledgeandexpertisetoinnovationprogramstosolveuniqueR&Dproblemsortocreatenovelcomponentsandservicesthatcomplement,extend,orenhancetheinnovation.Forexample,IntacctCorp.playssucharoleinSalesforce.com’sCRMplatformnetwork;ithasdevelopedandpublishedafinancialmanagementadd-

oncomponentthatworksontheCRMplatform.Similarly,ascientistwhotapsintohis/herspecializedknowledgetoprovideasolutiontoacriticalR&DproblemposedbyacompanyinanelectronicR&Dmarketplacealsoplayssucharole.Or,inanOpenSourceSoftwarecommunity,anindividualmightplaytheroleofadapterbywritingcodethataddressesaspecific

featureorrequirementofthesoftwareproduct.

Adapterscanalsoofferothersupportservicesinthenetwork.Considerinnovationnetworksinthesemiconductorindustry.Insuchnetworks,often,amemberfirmmightassembleandofferdesignandtestinglibrariesasinfrastructureservicestosupportthedesignanddevelopmentactivitiesof

othermemberfirms.Forexample,TSMC(TaiwanSemiconductorManufacturing

Company),theworld’slargestfoundryforsemiconductorcomponents,offerssuchaWeb-basedlibraryofthird-partycircuitdesignstotheotherfirms—thefablesschipdesignfirms—initsnetwork.1Similarly,inanetworkofindividual

inventors,companiessuchasEurekaRanchplaysuchasupportiverolebyofferingmarketvalidationservicesfornewproductconcepts.

Table4.1providesafewexamplesoftheadapterrole.WewilldescribetheseandothertypesofadapterrolesinmoredetailinChapters5to8.

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THEGLOBALBRAIN

AGENTS

Innovationnetworksrequireverydifferentsetsofactorstocometogether.

Insteadofrelyingonserendipityandchancetobringtheseactorstogether,hiringabrokeroranintermediarymakessense.Wecalltheseentitiesagents.

Anagentisaninnovation

intermediarythatmediatestheinteractionsandinnovationactivitiesinaninnovationnetwork.2Agentsserveasbrokers,bridges,orgo-betweensininnovationnetworks.However,theycanalsoplaymoresubtlerolesthatgobeyondsimplebrokering.

Agentsperformthreesetsofactivitiesinnetwork-centricinnovation:linkingmembers

ormediatinginteractions,technologybrokeringormediatingknowledgetransfer,andinnovationtransformationormediatingtheinnovation.

Thefirstsetofactivitiesrelatestothetraditionalroleofanintermediary—linkingtwonetworkmemberswhoarenototherwiseconnectedtooneanother.Asinthecaseofbrokeringarealestate

transactionorexecutiverecruiting,agentsalsohelpto“searchandfilter”intheinnovationlandscape.Forexample,ideascoutsareagentswhotrollinventorcommunitiestoseekoutandfilternewproductconceptsthatmightbeofinteresttoalargeclientfirm.Whentheyfindapromisingidea,theybringtogetherorconnecttheinventorandtheclientfirm.

Agentscanalsofacilitateormediatethetransferofinnovation-relatedknowledgefromonemembertoanother;thatis,theycanplaytheroleofaknowledgeortechnologybroker.Thisactivityinvolvesnotjustmakingconnectionsbetweentwomembersbutalsomakingconnectionsbetweenthedifferenttypesofknowledge(ortechnologies)heldbythosetwomembers,

andtherebypromotinganinnovationthatcapitalizesonthatconnection.

Awell-knownknowledgebrokerisIDEO,aleadingdesign-consultingfirm.

ConsiderIDEO’sworkasanagentintransferringa“smartfabric”technologydevelopedbyacompanycalledElekSentoanewapplicationarea.3ElekSenistheworldleader

intouch-sensitiveinteractivetextiles,whicharebuiltaroundthecombinationofconductivefabricandmicrochiptechnologies.Thecompany’scoretechnologyisElekTex,auniqueelectro-conductive,flexible,durable,andrugged“smart-fabric.”Whilethetechnologyhasdiverseapplications,itsentryintothecomputermarketwasbrokeredbyIDEO.IDEObroughttogetherElekSenand

Logitech(thedeveloperofcomputermice,keyboard,andotheraccessories)andfacilitatedthetransferoftheElekTextechnologytoLogitechforapplicationinthecomputeraccessorymarket.UsingElekTextechnology,LogitechdevelopedKeyCase,afabriccaseforPDAsthatunfoldsintoaCHAPTER4•INNOVATIONNETWORKS:THE

PLAYERSANDTHEPLAYS

73

keyboard.Thus,inthiscase,IDEO’sroleasanagentwasnotjusttobridgetwomembers,butalsotoserveasaconduitforthetechnologytransfer.

Thethirdsetofactivities,“mediatingtheinnovation,”

relatestotheinnomediarynotjustmediatingtheinteractionsormediatingtheknowledgetransfer,butmediatingtheinnovationitself.Forexample,consideranagentthatacquiresaninnovativeideafromonemember,buildsontheidea,andthenpassesthetransformedideatoanothermemberforfurtherdevelopment.Comparedtotheearlieractivities,in

carryingoutthisactivity,theagenttakesapositionthatismuchclosertotheinnovation—and,inpartbecomestheinnovator,too,ratherthanjustanintermediary.WewillidentifysuchanagentrolecalledtheinnovationcapitalistinChapter6,“TheCreativeBazaarModel.”

IMPLICATIONSOFINNOVATIONROLES

“What’sinarole?”youmightask.Or,“Whyisitimportanttounderstandthenatureofthedifferentinnovationrolesinnetwork-centricinnovation?”Aninnovationroleisanopportunitytoparticipateinnetwork-centricinnovation.

So,understandingdifferentinnovationrolesallowsfirmstoassesstwoquestions:First,dowehavewhatittakesto

playthisrole?Second,whatroleshouldweplaytomaximizeourgainsfromtheinnovationnetwork?

Toanswerthefirstquestion,firmsneedtounderstandtheimportantresourcesandcapabilitiesneededtoperformtherole.AswewilldiscussinChapter10,

“PreparingtheOrganization,”preparingthe

companyfornetwork-centricinnovationinvolvesidentifyinganddevelopingtheserole-relatedorganizationalcapabilitiesandcompetencies.

Toaddressthesecondquestion,firmsneedtoassesstherisksandreturnsassociatedwiththerole.Understandingthenatureofrisksandreturnsiscriticalforacompanytoevaluate

whetheranetwork-centricinnovationopportunityisworthpursuingevenifithastherequisitecapabilitiestobeaplayer.

Inadditiontothesequestions,thereisathirdreasonwhyfirmsneedtounderstandtheinnovationroles.Sometimes,firmsmightplaydifferentrolesindifferentnetworks.TaketheexampleofIBM.Inthe

Powerchipalliancenetwork(power.org)—anetworkthatisbasedonpromotingandenhancingPowerarchitecture—IBMplaysaleadingrole.Ontheotherhand,intheLinuxopensourcecommunity,IBMplaysamoresecondaryandsupportiverole.Suchmultiplerolesleadtothequestions,“Doweneedthesamesetoforganizationalcapabilitiesforthedifferent

roles?”“Aretheresynergiesbetweentherolesthatwecanexploit?”

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InChapters5through8,whenwediscusseachofthefourmodelsorarchetypesofnetwork-centricinnovation,wewillidentifythesetofrolesthatapplytoeachofthe

modelsanddiscusstheirimplications.ThisdiscussionallowsustoanalyzelaterinChapter9,“DecidingWhereandHowtoPlay,”anindividualfirm’snetwork-centricinnovationstrategyvis-à-visthetypesofrolespossibleinthatspace.

ELEMENTSOFNETWORKMANAGEMENT

Torunanetwork,theplayers

needasetofsystemsandmechanismstosupportandfacilitatecollaborativeinnovation.Thethreeelementsofnetworkmanagementarenetworkgovernance,knowledgemanagement,andIPrightsmanagement(seeTable4.2).

Table4.2ElementsofInnovationNetworkManagement

Elementsof

Innovation

Network

CriteriaforSelecting

Management

Objective

TypesofSystems

AppropriateSystems

Network

Ensurecommon

Formalmechanisms

Natureofinterdependen-

governance

patternsofbehavior

(contractsand

ciesbetweennetwork

amongmembers

agreements,rules

members;natureofthe

andcoordinate

andprocedures,

innovationspace

intermemberstandards)

exchangeof

knowledgeand

Informalorsocial

resources

mechanisms(restricted

accesstonetwork;

macroculture;collec-

tivesanctionsand

reputationalsystems)

Knowledge

Facilitatethe

Mechanismsthat

Degreeofoverlapof

management

generation,codifi-

facilitatemember

domainknowledge;

cation,andutilization

dialogue;provide

natureofinnovation;

ofknowledgeinthe

commonvocabulary;

technological/domain

network

facilitateknowledge

“distance”between

transfer,interpretation,networkmembers

andintegration

CHAPTER4•

INNOVATIONNETWORKS:THEPLAYERSANDTHEPLAYS

75

Elementsof

Innovation

Network

CriteriaforSelecting

Management

Objective

TypesofSystems

AppropriateSystems

IPrights

Enableinnovators

Traditionallegal

Natureofinnovation;

management

(orcreators)tocontrolinstrumentssuchas

natureofrelationships

theuseoftheir

patent,trademark,

amongnetwork

innovationandits

copyright,andsoon,

members;structureof

derivatives

andmoreflexible

thenetwork

licensingschemes

suchasCreative

Commons,General

PublicLicense,and

soon

NETWORKGOVERNANCE

Thewordgovernanceisoftenassociatedwithpolicingorcontrol.Networkgovernancedoesinvolvemonitoringandcontrollingpotentially

deceptiveoropportunisticbehaviorofindividualmembersthatmightbedetrimentaltotheothermembersandtheoverallnetworkagenda.Butgovernanceismorethanjustpolicing.Italsoinvolvescreatinganenvironmentthatisconducivetointeractingandexchanginginformationandresources.Thesystemsandmechanismsforgovernanceshapethepattern

ofinteractionsbetweenmembers,aswellastheflowofresourcesbetweenthemembers.4

Consideryourpersonalnetworkattheworkplace—thenetworkofcolleaguesandbusinesspartners.Yourrelationships,interactions,andexchangesinsuchanetworkaregovernedbothbyformalandinformalmechanisms.Forexample,

theorganizationalstructuremightspecifyorshapethenatureofyourrelationshipswithothermembersinyourorganization.Youremploymentcontract,anyconfidentialityagreementsthatyouhavesigned,andtherulesandproceduresinyourdepartmentmightalsogovernyourinteractionswithemployeesinthecompanyandbeyond.

Ontheotherhand,thewidelyacceptedbutimplicit“do’sanddon’ts”mightalsoshapeyourrelationshipsandexchangesinthenetwork.RememberthescenefromtheTVseriesSeinfeldwhenthecharacterGeorgeCostanzaiscaughthavingsexwiththeofficecleaninglady?Whenaskedabouthisques-tionabletête-à-tête,George’sreplywas,“Wasthatwrong?ShouldInot

have76

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donethat?Itellyou,Igottapleadignoranceonthisthing,becauseifanyonehadsaidanythingtomeatallwhenIfirststartedherethatthatsortofthingisfrownedupon....”Well,asGeorgesoonfoundoutwhenhegotfired,somethingsarenotwrittendownormadeexplicit,but

stillguidethenatureoftherelationshipsandexchangesamongmembersofanorganizationoranetwork.

Sowouldthepotentialthreatofsanctionsorlosingcredibilityforpursuingactivitiesthatarebeneficialtoyoubutnotnecessarilybeneficialfortheoverallorganization.Theseconstitutethemoreinformalorsocialmechanismsof

governance.

Ininnovationnetworks,bothformalandinformalmechanismsarerelevant,thoughtheirrelativeimportancedependsonthespecificmodelofnetwork-centricinnovation.Formalmechanismsforgovernanceincludelegalcontracts,partnershipagreements,agreementsonexchangerulesandprocedures,shared

setofstandards,andsoon.Forexample,innovationnetworksledbycompaniessuchasIntelandCiscooftenhaveacharterofmemberrightsandresponsibilitiesthatapotentialpartnerhastosignbeforebeingacceptedintothenetwork.Similarly,inthesoftwareindustry,thestandardsandmetricsspecifiedbytheCapabilityMaturityModel—developedandpromotedbythe

SoftwareEngineeringInstitute—hasbeenusedasamechanismtocoordinateandgovernlarge-scaleco-developmentprojects.Formalmechanismsnotonlydefinewhatisacceptablebutalsoprovideaframeworktocoordinateinteractionsandexchanges.

Whenitcomestoinformalorsocialmechanismsfornetworkgovernance,there

areseveralchoices.Theseincluderestrictingaccesstothenetwork,developingandestablishingamacro-culture,imposingcollectivesanctions,andusingotherreputationalmechanisms.Oneoptionistorestrictmembershiptoplayerswhohavedemonstratedtheircompetencethroughpastassociationswithexistingmembersortheirbroaderstatusintheindustryor

sector.Forexample,manycountryclubsusesucha“gatednetwork”approach.Theyrestrictclubmembershiptothosepeoplewhoarewell-knowntotheexistingmembersoftheclub(orwhoareinfluentialmembersofthebroadersociety).

Ifnetworkmembershipisbasedonsuchcriteria,typicallythememberswill

havemorecommonalitiesintheirexpectationsandattributes.Thus,monitoringand/orcoordinatingeachandeveryexchangeinthenetworkwillbemucheasierandlessfrequentlyrequired.Inotherwords,thenatureofmembershipitselfservesasagovernancemechanism.

Anotheralternativeistoestablishandpromoteaculturethatreflectsthe

overallinnovationagendaofthenetwork.Thismightrangefromshared

business/innovationassumptionstonormsandvaluesthatcanbringaboutaCHAPTER4•INNOVATIONNETWORKS:THEPLAYERSANDTHEPLAYS

77

levelofcoherenceintheactionsanddecisionsofindividualmembersinthenetwork.Forexample,howshouldmemberscritiqueoneanother’scontributionsinanopensourcecommunity?Thecultureofanetworkgetsdefinedovertimethroughrepeatedinteractionsamongthenetwork,leadingtoadefinitionof“acceptable”behaviorsandnormsintheinnovationnetwork.

Collectivesanctionsandreputationalsystemsformanothersetofgovernancemechanisms.ConsidereBay.TheabilityofeBaymerchants(thatis,members)torateoneanotherbasedonthenatureandthequalityoftheexchangestheyhavehadwithoneanotherserveasthemechanismtogovernfutureinteractionsinthenetwork.Ratingsthatlowerthecredibilityandreputationof

themembercanprovetobeverycostlyinthelongerrun.Further,sanctionsmightalsobeimposedoneBaymemberswhooperatecontradictorytothecommonlyacceptednormsandvalues.SuchcollectivesanctionscanrangefromtemporaryexclusionfromtheeBayboardstooutrightejectionandlossofprivilegestobuyandsellonthenetwork.

Thethreatofcollectivesanctionsencouragesmemberstoadheretoacceptablebehaviors.Themoreefficienttheinformationflowaboutmemberbehavior,themorecostlyitbecomesforindividualmemberstodestroytheirreputationinthenetworkthroughdeceptivebehavior.

Whichofthepreceding

possiblegovernancemechanismsareappropriateforaspecificinnovationnetwork?Thisdependsonthetypeofinterdependenciesbetweenmembersinthenetwork—inotherwords,onthenatureofthenetwork-centricinnovationmodel.Further,mostnetworksrequireaportfolioofformalandinformalmechanisms.InChapters5to8,weidentifytheappropriateportfolioof

governancemechanismsforeachofthefourmodelsofnetworkcentricinnovation.

KNOWLEDGEMANAGEMENT

ConsiderthecaseofDucatiMotoranditsinnovativecustomercommunity,whichwedescribedinChapter2.WhenDucatiengagesitscustomercommunitytoinnovateinthedesignand

developmentofnewmotorcycles,itdoessobyensuringthreebasicaspectsrelatedtoinnovationandknowledgecreation:

■

First,Ducatirealizesthatinteractionsanddialogueinthecustomercommunityformthebasisfornewknowledgecreation.Therefore,it

facilitatessuchdialogueamongthecustomersbyestablishingdifferenttypesofonlineandofflineforumsthatbringtogetherthecustomersandbyhostingtheirinteractions.

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■

Second,Ducatialsorealizesthatforsuchcustomerdialoguetobeeffective—forsuchdialoguetoleadtoacoherentsetofinnovativeideas—

customershaveto“understand”oneanother’sideas.Thisrequiresa

commonvocabulary.Toachievethiscoherence,Ducatiprovidesaset

ofdesigntemplatesandstandardsforthecustomercommunity.

■

Ducatialsounderstandsthat,inordertoconvertcustomerideasintoproducts,customerknowledgehastobetransferredintotheorganizationandinterpretedandintegratedwithotherdesignknowledge.Forthis,

Ducatihasestablishedneworganizationalrolesaswellascreatednewprogramsstaffedbyproductengineerstoenableeffectiveand

appropriateutilizationofcustomerinnovation.

ThreeknowledgemanagementthemesunderlieDucati’scustomer-based

network-centricinnovation

initiative:dialogue,commonvocabulary,andtransferandinterpretation.

Theprecedingthreethemesarenot,however,uniquetoDucati’sinnovationcontext.Theyapplyequallywelltoallothernetwork-centricinnovationcontexts.Infact,thethreethemesreflectthethreebroadknowledgemanagementactivitiesthatmustbesupportedinany

innovationnetwork:knowledgegeneration,knowledgecodification,andknowledgeutilization.5

Thesystemsandmechanismsestablishedintheinnovationnetworkformanagingknowledgehavetosupportthesethreeactivities.Forexample,asinteractionsamongnetworkmembersincreasinglyformtheavenueforknowledgegeneration,

systemsandmechanismsthat“connect”membersandfacilitaterapidandfrequentinteractionsassumeimportance.Theseneednotalwaysbeonlineorinformationtechnology–enabledcommunication.Forexample,Intelconductscomplianceworkshops(calledPlugFests)thatbringtogethervendorsofdifferenthardwareproductsandcomponentsthatarebasedon

Intel’stechnologyplatform.6Theseworkshopsprovidethecontextforthedialoguetooccuramongthesecompanies(thatis,Intel’snetworkmembers)toensurethatthedifferentproducts(orprototypes)arecompatiblewithoneanotherandinteroperable.Theknowledgegeneratedthroughtheseinteractionsistakenbacktoindividualcompaniesandincorporatedasdesign

modifications.

Similarly,theneedtocodify(ormakeexplicit)theknowledgethatisgeneratedallowssharingandbuildingonsuchknowledge.Suchcodificationisenabledbyacommonvocabularyrangingfromtechnologystandardsandtechnologyarchitecturetocommonmarketmetrics.

Finally,formembersto

utilizetheknowledgegenerated,systemsandmechanismsfortransferringsuchknowledgetoappropriatemembersinthenetworkCHAPTER4•INNOVATIONNETWORKS:THEPLAYERSANDTHEPLAYS

79

needtoexist—thatis,

membershavetoknowwheretheknowledgeislocatedandhowtoaccesssuchknowledge.Further,aftertheknowledgeistransferredbyamember,ithastobeinterpretedandintegratedwithinthemember’sowncontext.Forexample,inthecaseofStapleswediscussedinChapter2,thecompanyacquiresnewproductconceptsfromindividualinventorsthrougharangeof

mechanisms,includingproductscoutsandideacontests.Andaftertheideaisacquired,Stapleshastointerpretandintegrateitwithinitsowncontext—acontextthatisdefinedbyitstargetmarket,existingbrandportfolio,anditscommercializationinfrastructure.

Facilitatingthegenerationandflowofknowledgeisa

criticalroleinmanagingnetwork-centricinnovation.Asthenumberofmembersinthenetworkandthediversityoftheirexpertise(orknowledgebase)increase,sodoesthecomplexityandimportanceofthesystemsandmechanismstofacilitateknowledgemanagementinthenetwork.7

Therearedifferenttypesofknowledgemanagement

systemsandmechanisms,andtheirappropriatenessdependsonseveralfactors,includingthe“distance”

betweenmembers,thenatureandextentofoverlapoftheknowledgetransacted,andthenatureoftheinnovation.InChapters5to8,weidentifyanddiscussspecificknowledge-managementmechanismsthatapplytoeachofthefourmodelsof

network-centricinnovation.

IPRIGHTSMANAGEMENT

Thehistoryofintellectualproperty(IP)canbetracedbacktoancientGreecein700B.C.,whenthechefsinSybarites(aGreekcolonyinwhatisnowSicily)weregrantedone-yearmonopoliesonthepreparationofa“newordeliciousdish.”8OtherelementsofmodernIPrights

suchaspatents,trademarks,andtradesecretswereevidentinancientRomeaswellasduringtheRenaissanceperiod.Forexample,lawswereenactedinRomein100B.C.toprotecttrademarksoncloth,lamps,glass,andlivestock.Similarly,thefirstpatenteverforatechnicalinventionwasgrantedin1421toFilippoBrunelleschi,thearchitectofFlorence’s

cathedral,foranewandefficientwaytotransportmarblebyriver-boat.9Theseandotherexamplesindicatethattheeconomicandsocietalmotivestoprotectandmanagerightsassociatedwithcreativityandinventionhasalonghistory.

AlthoughthesesystemsandmechanismsformanagingIPrightshaveevolvedconsiderablyinformaswell

asformatoverthecenturies,theirfundamentalbasishasperhapsremainedlargelyunquestioned—thatis,untilveryrecently.

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THEGLOBALBRAIN

Withtheemergenceof“freesoftware”and“OpenSourceSoftware”inthe1980sand1990shavecomefreshand

radicallynewperspectivesandinterpretationsregardingIPrightsmanagement.Andtheprimarymotivationforthesenewperspectiveshasbeentheincreasinglevelofcollaborationininnovation.

Indeed,oneofthemostvexingissuesthatcompaniesfaceincollaborativeinnovationprojectsisthatofpartitioningtherightstotheinnovation.Inotherwords,

whowillownwhat?Orwhogetswhatshareoftheprofitsfromtheinnovation?Asthenumerouspatent-relatedandotherIPlawsuitsandcaseshaveshown,issuesrelatedtoIPrightsmanagementistrickyevenwithtwocollaborators.Ifwethrowinafewmorecollaborators,theissuebecomesmuchmorechallenging.Thus,systemsandmechanismstosupportandfacilitateIPrights

managementareofutmostimportanceforallparticipatingmembersinnetwork-centricinnovation.

Theextenttowhichacompany(ornetworkmember)cancapturethereturnsfromitsinnovativecontributionsisafunctionoftheappropriabilityregime—

thetermeconomistsusetoindicatethewaysandmeans

ofprotectingtheinnovationanditsprofitability.ThelegalIPregimeiscomprisedoffourinstruments:tradesecrets,patents,copyrights,andtrademarks.Patentsofferthelowestdurationofprotectionfortheinnovation,followedbycopyrights,tradesecrets,andtrademarks.Inaddition,IPcontractsformanotheravenueforcompaniestoderivereturns.Forexample,IPlicenses

specifythetermsofIPusebetweentwoormoreentities.

Incertaincontexts,suchlegalinstrumentsmighthavelimitedeffect;instead,thenatureofthetechnologyortheknowledgethatunderliestheinnovationmightserveasamorepracticalappropriabilityregime.Forexample,inthesurfingequipmentindustry,akeyknowledgeinthe

manufacturingofsurfboardsrelatestotherigidpolyurethanefoamcores,orthe“blanks”asitisknownintheindustry.ThedominantplayerinthismarketuntilveryrecentlywasClarkFoams.ThecompanywashighlyinnovativeandhadperfectedthecreationofblankstotheextentthatmostothersurfboardmakersdependedexclusivelyonClarkFoams.Indeed,Clark

Foamshad80%to90%oftheU.S.blanksbusinessforcustom-shapedsurfboards.ClarkFoamswasledbyGordon“Grubby”Clark,oftenreferredtoasthe“HowardHughesofsurfing.”ThesuccessofClarkFoamswasnotduetotheprotectionofitsintellectualassetsbylegalinstrumentssuchaspatentsortradesecrets;instead,itwasthehighlytacitknowledgeinvolvedin

theveryprocessofmakingtheblanks.Asonesurfingindustrycommentatornoted,“Blowingfoamisablackart.”10Inotherwords,inthecaseofClarkCHAPTER4•INNOVATIONNETWORKS:THEPLAYERSANDTHEPLAYS

81

Foams,thenatureofthe

technology(knowledgebase)servedasthemainelementofitsappropriabilityregime.Inshort,theavailability,strength,andeffectivenessoftheappropriabilitymechanisms—whetherlegalinstrumentsorotherwise—canvaryacrossindustriesandsectors.

AnotherlimitationofthetraditionalIPregimebecameobviouswiththeemergence

ofcollaborativeinnovationstructuresandtheemergenceofnewdigitaltechnologiestoacquire,access,modify,anddistributeinnovativeknowledge.

Suchradicalchangesininnovationcontextsbroughtaboutbynewtechnologiestendtoweakenthecontrolsthatcanbeexercisedthroughtraditionallegalinstruments.

TheOpenSourceSoftwarecommunitytooktheleadinaddressingthedemandfornewIPregimesandintroducedseveralinnovativelicensingschemesthatenablesoftwaredeveloperstopublishthesourceoftheirproductandallowotherstouseitormodifyitonflexibleterms.Forexample,theGNUGeneralPublicLicense(orGPL)isanearlyandperhapsthedominantlicensing

schemeintheOpenSourceSoftwarearena.AGPLlicensegrantstherecipienttherightstouse,modify,improve,andredistributetheproduct.And,importantly,GPLseekstoensurethattheaforementionedrightsarepreservedinthederivatives,too;thatis,itisa“copyleft”license.Unlikethislicense,themorepermissive“freesoftware”licensingschemessuchastheBSDlicensenot

onlygranttherightstouse,modify,and/ordistributethesoftwareproduct,italsoallowsderivativeworkstoberedistributedasproprietarysoftware(thatis,itisa“copycenter”license).Apartfromthesetwobroadlicensingschemes,numerousother“open”licenseshavebeendeveloped—forexample,MozillaPubliclicense,CommonPubliclicense,OpenSourcelicense,

OpenSSLlicense,andEclipsePubliclicense—eitherpertainingtoparticularproductsortoparticularpartsoftheopensourcecommunity.

ThesealternativelicensingschemeshavepavedthepathforthedevelopmentofinnovativeIPregimesindomainsoutsidethesoftwareindustry.MostnotableinthisregardaretheCreative

CommonsandtheScienceCommonsinitiativesthathaveextendedmanyoftheseIPrightsmanagementconceptstothedomainofarts,entertainment,sciences,andsoon.Forexample,CreativeCommonshastakenthenotionofcopyleftandintroducedsixdifferentlicensingschemesthatvaryonthenatureoftheattributionandtherightsgrantedtotherecipientfor

derivativeworksandcommercialuse.11

AstheapplicationoftheCreativeCommonslicenseandothersuchemerginglicensingschemesisrapidlyexpandingintootherdomains—frommusicand82

THEGLOBALBRAIN

artstojournalism,academiccurricula,andmedicine—the

optionsformanagingIPrightsindifferentnetwork-centricinnovationcontextsarealsoexpanding.Accordingly,inthisbook,weconsiderarangeofIPrightsmanagementsystems—fromtraditionallegalinstrumentstothenewerandmoreflexiblelicensingschemes—and,identifyanddescribetheappropriateportfolioofmechanismsforthedifferentmodelsofnetwork-centric

innovation.

CONCLUSION

Inthischapterandthepreviouschapter,wepresentedaframeworkforanalyzingthestructureandtheopportunitiesintheemergingnetwork-centricinnovationlandscape.Wefirstdefinedthetwodimensionsofnetwork-centricinnovationand

identifiedfourarchetypicalmodelsofnetwork-centricinnovation.Next,weofferedatypologyofinnovationrolesandalsoidentifiedthethreeelementsofthenetworkmanagementinfrastructure—networkgovernance,knowledgemanagement,andIPrightsmanagement.Insubsequentchapters,weapplythisframeworktodelvedeeperintothedifferentmodelsofnetwork-

centricinnovation.

P

A

R

T

III

TheFourModelsofNetwork-

CentricInnovation

Chapter5TheOrchestraModel85

Chapter6TheCreativeBazaarModel113

Chapter7TheJamCentralModel139

Chapter8TheMOD(“MODification”)

StationModel157


C

H

A

P

T

E

R

5

TheOrchestraModel

Thinkaboutthelastpotluckdinneryouwereinvitedto.Thehost

probablydecidedthetheme—forexample,abarbequeor

anItalian

dinner—andrequestedthateachpersonbringadish,dessert,or

suppliesthatcontributetotheoveralltheme.Andthehostprobablycontributedamaindish,andotherpeople’scontributionswere

meanttocomplementthemaindish.

Nowconsiderthestoryofthe“stonesoup.”Legendhasitthatawanderingsoldiercameuponafamine-riddenvillage,andfoundthatallthepeoplewerejealouslyhoardingtheirfood.Atfirst,thesoldierthoughtofmovingonbecausetherewasnothingforhimtoeat,but

hedecidedtotryacreativestrategytogetameal.Heannounced

thathehadeverythingheneededtomakesoup,andproceededto

fillanironcauldronwithwater.Heplacedastoneinsidethecaul-

dron,andbuiltafireunderit.Acuriousvillagerapproachedthesoldierandaskedwhathewasdoing.Thesoldieransweredthathewas

makingstonesoup,whichwouldtastewonderful,althoughitstill

neededalittlebitofcabbagetoimprovethetaste.Soonanothervillagerapproachedandofferedhimcabbage.Thesoldieraddeditto

thesoupandmentionedthatitmightneedsomepotatoesand

onions.Anothervillagersoonofferedtheseforthesoup.Andsoit

went,fromvegetablestoseasoningtogarnishes.Finally,everyone

enjoyedadeliciouspotofsoup.

85

86

THEGLOBALBRAIN

Thesescenarioshavesomesimilaritiesandsomedifferences.Bothinvolvedacentralentity(thehostfamilyorthetravelingsoldier)whodefinedtheprimarythemeforthedinner—athemethatwouldshapethecontributionsofothermembersofthecommunity.Inbothcases,thecontributors(theinviteesor

thevillagers)sharedthevaluederivedfromthefinaloutcome.However,inthecaseofthepotluckdinner,thehostcontributedthemaindishasthefoundationforthedinnerandthecontributionsfromothermembersbuiltonthefoundationandenhanceditwithcomplementarycontributions.Ontheotherhand,inthecaseofthestonesoup,thecontributionsofthevillagerswerecooked

together(orintegrated)toformonefinaldish(thesoup),whicheverybodyconsumed.

ThesesimilaritiesanddistinctionsareagoodanalogyforthetwotypesoftheOrchestramodelofnetwork-centricinnovation.Asyourecall,theOrchestramodelinvolvesagroupoffirmscomingtogethertoexploitamarketopportunity

basedonanexplicitinnovationarchitecturethatisdefinedandshapedbyadominantfirm.Therearethreeimportantconceptsinthisdefinition:dominantfirm,innovationarchitecture,andnetworkmembers.However,basedontheroleplayedbythedominantfirm,thefunctionsservedbytheinnovationarchitectureandthenatureofcontributionsmadebythenetwork

members,theOrchestramodeltakesontwodifferentforms:

■

TheOrchestra-Integratormodel.Thismodelresemblesthestonesoupscenario.Adominantfirm(ornetworkleader)definesthearchitectureforthecoreinnovationandthenetworkmemberscontribute

thedifferentcomponentsorelementsthatmakeupthiscoreinnova-

tion.Thenetworkleaderthenintegratesthedifferentcontributionsorcomponentstobuildthecoreinnovationandthenmarketit.

■

TheOrchestra-Platformmodel.Thismodelresembles

thepotluckdinnerscenario.Adominantfirmdefinesandoffersthebasicarchitecture,whichthenbecomestheplatformorthefoundationfortheothernetworkmemberstobuildonthroughtheirowncomplementaryinnovations.Thesecomplementaryinnovationsextendand/orenhancethe

reachandrangeofthebasicarchitectureorplatform.

Inthischapter,throughdetailedexampleswedescribethetwotypesoftheOrchestramodelincludingthedifferenttypesofplayers(orinnovationroles)andthenetworkmanagementsystems.WestartwiththeOrchestra-Integratormodel.AnexcellentillustrationofthismodelisthedevelopmentoftheBoeing787Dreamliner.

CHAPTER5•THEORCHESTRAMODEL

87

THEORCHESTRA-INTEGRATORMODEL:THECASEOFTHE

BOEING787DREAMLINER

The787Dreamlinerprojectwasofficiallylaunchedby

BoeingonApril26,2004.The787isdesignedasafamilyofairplanesinthe200to300seatclassandrepresentsBoeing’sentryintothemid-sized,long-rangecommercialjetmarket.1ThefirstdeliveryisscheduledforMay2008.The787isabigbetthatBoeingisplacingtowinbackdominanceofthe$60billionjetlinermarketfromAirbusSAS.2

Thenew787incorporatesseveralradicaladvancesintermsofbasicdesignandtechnologiesaswellasfacilitiesforpassengersandcrew.Itusesanewlightweightcarboncompositeasthematerialforbuildingmuchoftheplane.3Theuseofthelightweightmaterialissupposedtotranslateintoatleast20%reductioninfuelconsumptioncomparedtothatofjetsofsimilarsize.

The787willallowtheuseoftwotypesofengines—theGENextGeneration(GEnx)engineandtheRollsRoyceTrent1000engine.4Inotherwords,the787offersastandardengineinterfaceandanewplanecanbefittedwitheitherofthetwotypesofengineswithoutmakinganyotherchangeselsewhere,therebyprovidingmoreflexibilityforcarriers.

Theinteriordesignofthe787incorporatesseveralinnovativefeaturesforcrewandpassengers.Forexample,the787willbean“e-enabled”airplane—itwillhaveelectronicflightbags(EFB)todeliverelectroniccharts,manuals,andreferencedatatoflightcrews;asatellite-basedcommunicationssystemtoprovideInternetaccesstopassengers;andwireless

networksformaintenanceaccessaswellasforin-flightentertainment.Anotherinterestingfeaturerelatestocabinpressureandhumidity.Thecabinofthe787willbepressurizedto6,000feetaltitudeinsteadoftheconventionalpressurizationto8,000feetaltitude.Thehigherairpressureissupposedtotranslateintoamorecomfortableride,particularlyduringlong

flights.Similarly,thecabinhumiditywillbemaintainedatahigherlevel—between20%and30%ratherthanthe10%humiditythatistypicalofotherairplanes.The787canmaintainsuchhigherhumiditybecausethecarboncompositeusedtofabricatethestructuredoesnotcorrodewhenexposedtomoisture.Thehighercabinhumiditywillalsocontributetoamorecomfortableridefor

passengers.5

Boeing’sformerCEO,HarryStonecipher,remarkedin2004thatthenew787

willbe“agamechanger.”AlanMulally,theformerCEOofBoeingCommercial88

THEGLOBALBRAIN

Airplanes,notedthatthenew

787“willallowustocontinuetosetthestandardforcommercialaviationinthesecondcenturyofflight.”6WhilebothStonecipherandMulallywerereferringtotheaforementionednewtechnologiesandfeaturesoftheairplane,theircommentsalsocapturedtheinnovativewayinwhichBoeingwentaboutdesigningandbuildingthisnewaircraft.

Indeed,thestoryofthe787Dreamlinerisalsoverymuchastoryof“innovatinginnovation”inthecommercialaviationindustry—howBoeingredefinedtheveryprocessbywhichitdevelopednewairplanesandcollaboratedwithanetworkofglobalpartners.

ELEMENTSOFBOEING’SNETWORK-CENTRICINNOVATIONSTRATEGY

Inbuildingthe787,Boeingmadearadicaldeparturefromitstraditionaldesignanddevelopmentstrategy.The787programstartedwiththeexpectationthatanyexternalpartnerthathadtheresponsibilitytobuildapartoftheairplanewouldalsoberesponsiblefordesigningit.Thiswasamajorpointofdeparturefrompreviousprograms,whereBoeingdidmostorallofthedesign

workandothercompaniesthenbuilttheairplane.7The787projectwasconceivedattheveryoutsetasahighlycollaborativeinnovationprogramconductedwithanetworkofpartners.

Boeingassembledasetofglobalpartnerswhomitcouldtrustwiththeprocessofcreatingentiresectionsoftheplane,fromconcepttoproduction.Theglobal

partnersconsistedofcompaniesfromallovertheworld,includingJapan,Australia,Italy,andCanada.Eachglobalpartnerwasselectedbasedonastrictsetofstandardsaseachcompanywouldbeassumingresponsibilityforahigherlevelofsystemsandstructure—andbringingintheirownsetofsub-contractorsandsuppliers.

Thedesignanddevelopmenttaskswerenotjustoutsourcedtothesepartners.

Instead,partnersmadefinancialinvestmentsinthosetasks.AsThomasPickering,Boeing’sseniorvicepresidentforinternationalrelationsnoted,“Wesaid,‘let’sspreadtheriskandspreadthebenefit’…theygettheadvantagesbuttheyalsocarrythe

burden.”8Specifically,eachpartnerwassupposedtoinvestintheprojectbypayingtheupfrontcostrelatedtodesignanddevelopment.Withapproximately$10billionrequiredforthedevelopmentofthenewjet,partnerswereresponsibleforinvestingcloseto$4billion—asignificantcommitment.

Theywereexpectedtoabsorb

thisnon-recurringcostofdevelopment—inotherwords,theywerenotpermittedtoincludethosecostsintheirpricing.And,thiswasbuiltintotheagreementswithindividualpartners.ContractshadcommonCHAPTER5•THEORCHESTRAMODEL

89

provisionsthatreflectedthe

centralthemeofBoeing’snetwork:“What’sgoodforoneisgoodforall.”

Boeing’snetworkalsoincludesitscustomers,althoughtheirroleislargelylimitedtoprovidingideasandsuggestionsintheproductdefinitionphase.Boeingconductsalarge-scalemeetingwithanumberofitscustomerpartners(airlinesfromalloverthe

world)calledtheProgressSummit,whichfeaturesopendiscussionsoncustomerrequirementsandconceptsforstandardizingandsimpli-fyingthe787design.9ThesummitisalsoavenueforBoeingtoupdateitscustomerpartnersontheprogressofthe787developmentproject.Eachpartner(ornetworkmember)inthe787projectisdirectlytiedtoBoeing,although

operationallyeachoneisalsolinkedtooneanother.Theinnovationnetworkforthe787projectishighlycentralized,withBoeinginthecenterandtheglobalpartnersaroundit.

Thedevelopmentofthe787followsathree-phaseprocess:conceptualization,jointdevelopment,anddetaileddesign.Theconceptualizationphase

startedinearly2003withtheappointmentofthecore787projectmanagementteamwithinBoeing.MichaelBlair,a24-yearBoeingveteran,wasappointedastheseniorvicepresidentandgeneralmanagerofthe787program.OthermembersoftheteamincludedWalterGillette,anotherBoeingveteranwhoisconsideredthetechnicalandintellectualinspirationforeveryBoeing

jetsincethemid-1970s.10GillettewastobethecreativeforcebehindDreamliner,too.Duringtheconceptualizationphase,theinternalBoeingteaminteractedwithanumberofexternalentitiesincludingcustomers(airlines),suppliers,technicalexperts,andmarketexpertstoidentifyanddefinethebasicnewproductconcept.Thebusinesscaseforthenew787

wasclarified.Boeingalsoentertainedinnovativeideasforthesystemsandthestructuresfromtheexternalentities.

Forexample,thepotentialforusingcompositesasthematerialfortheairplanestructurewasexploredandanumberofalternativematerialsweretested.Aftertheproductconceptualizationphasewasover,itwastime

todefinethebasicstructureofthe787.

Thesecondphase,thejointdevelopmentphase,wasthemostcrucialasitwoulddefineonceandforallthebasicconfigurationofthenewplane.AsMichaelBlair,generalmanagerofthe787projectnoted,“Firmconfigurationmeanstheairplane’sstructural,propulsion,andsystems

architecturesarefirmordefined.”11Forexample,specifyingthesweepandsizeofthewings,theexactsizeofthefuselage,tail,engines,andallothermajorcomponentsoftheairframe.Inotherwords,thisphasewaswhenthebasic(innovation)architecturewouldgetdefined.

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AlthoughBoeingwillhavethefinalsayinallaspectsrelatedtothefinalconfiguration,theinvolvementoftheglobal

partnersiscriticalastheyalongwithBoeingstartassumingrisks(relatedtotheproductdevelopment)rightfromthisstageonwards.Boeinganditspartnersspentthenextyearorsodefiningthe787architecture.

The787programreachedthefinalconfigurationonSeptember15,2005.

Thejointdevelopmentphase

notonlydefinedthe787configurationbutalsospecifiedthewayinwhichthedesignjobwouldbedividedamongtheglobalpartnersaswellasthestandardsormetricsbywhichthedesignwouldbeevaluated.Thedesignworkfortheentirestructureofthenewjetwasdividedintosix“integratedassemblies”orworkpackages.Eachoftheselargecomponentswas

designedfromthebottom-upbyoneormoreofthepartnerfirms.

Boeingtooktheresponsibilityforthedetaileddesignanddevelopmentofonlyaround35%oftheplane’sstructure.Thisincludedtheverticalfin,flightdeck,fixedandmovableleadingedgesofthewing,partsoftheforwardfuselage,andwing-to-body

fairing.TherestofthestructurewastheresponsibilityofasetofglobalpartnersthatincludedMitsubishiHeavyIndustries,FujiHeavyIndustries,AleniaAeronautica,VoughtAircraftIndustries,Goodrich,andKawasakiHeavyIndustries(seeFigure5.1).

Whomakesthepartsandwheretheengineeringjobsare

Numbersofengineersareprojectionsfortheendof2005madebyBoeing’sfirst-tierpartners,andmaynotincludeallengineeringspecialties.Productionworkersarenotincluded.

“Whomakesthepartsandwheretheengineeringjobsare,”ReportingbyDominicGates,GraphicsbyMarkNowlin.SeattleTimes,September11,2005.©2005

TheSeattleTimesCompany.Reprintedbypermission.

Figure5.1Thedistributionofthe787designanddevelopmentCHAPTER5•THEORCHESTRAMODEL

91

Forexample,MitsubishiHeavyIndustrieswasresponsibleforthemainwingboxwhereasFujiHeavy

Industriesdesignedanddevelopedthecenterwingboxandalsointegratedthewingboxwiththemainlandinggearwheelwell.

KawasakiHeavyIndustriesprovidedthefuselagesectionbetweenthewingandthecabin,themainlandinggearwheelwell,andthemainwingfixedtrailingedge.AleniainItalydesignedanddevelopedthe64-foot-wide

horizontalstabi-lizerandpartneredwithVoughtIndustriestobuildtheaftfuselage.

Theglobalpartnerswereaskedto“designandbuildtoperformance”—insteadofgivingeachexternalpartnerdetaileddesignsthattheyhadtoimplement,theywerenowgiventhebroadarchitectureandtheperformancestandards.

Theinnovationtasksneededtogettotheseperformancestandardswerenowthesoleresponsibilityofindividualglobalpartners.Thus,thefinalconfigurationandtheassociatedperformancestandardsbecamethesetofsharedgoalsandobjectivesofthenetworkofglobalpartners.

Afterthefirmconfigurationwasdefined,Boeingandits

partnersstartedonthethirdandfinalphaseofinnovation—thedetaileddesignofthemajorcomponents.Eachpartnerknewtheexpectationsregardingnotonlytheirowncontributions(thatis,thelargecomponents)butalsotheotherpartners’

contributions.Suchasharedunderstandingofthegoalsservedtobringcoherenceto

thedetaileddesignanddevelopmentactivitiesofthedifferentpartnerslocatedindifferentpartsoftheworld.

Theglobalpartnerswereresponsibleforthedetaileddesignaswellasthefinalproductionofthecomponents.Thedifferentcomponentsofthe787wouldthenbebroughttogetheratEverett,Washingtonforthefinalassembly.

Thetargetforthefinal787assemblyinEverettisthreedays.However,Boeingplanstobringdownthefinalassemblytimetotwodaysby2011:thatis,anew787willrollouteverytwodays!12

TheRoleofBoeingandItsPartnersinthe787Program

LetusnowexaminetherolesthatBoeingandtheotherpartnersplayinthe787

program.Boeingdevelopedamasterdesignthatdefinedthegeneralcontoursoftheplane,however,thespecificdesigntasksofthedifferentpartswerelefttoindividualpartners.Infact,networkpartnerswereresponsibleformorethan70%oftheoveralldesignwork.Moreimportantly,partnersweregiventheresponsibilitytodesignanddevelopsomeofthemostimportantstructures

oftheairplane.Forexample,theJapanesepartnersdevelopedtheentirewingsectionofthe787.AsBoeing’sThomasPickeringnoted,“Thisisthefirsttimewehaveeverputthefullwing…intothehandsofapartner.”13Indeed,noBoeing92

THEGLOBALBRAIN

planehaseverflownon

foreignwingsandthecompanyhasalwaysheldontosuchcriticalknowledge(the“crownjewels”)relatedtobuildingairplanes.14

Thus,inbuildingthe787,Boeingmadearadicalshiftinitsownrole—inthewordsofScottStrode,Boeing’svicepresidentofairplanedevelopmentandproduction,Boeingmadeashiftfrombeinga“manufacturer”to

beingan“integrator.”AsStrodenotes,Boeing’sroleasintegratorrequiresittoshoulder“abroaderrangeofresponsibilitiesthatincludeassemblingthepartnerteamandmakingworkassignments,establishingclearexpectations,decidingoncommontoolsandprocesses,andmakingthecriticaltechnologicaldecisions.”15

Suchashiftinrolesisapartofamasterplan—theBoeing2016Vision—tochangethecompanyfromamanufacturertoadesignerandassemblerofhigh-techairplanes.16AnditisachangethatBoeing’spartnersunderstandverywell.

VernBroomall,vicepresidentofqualityandengineeringatVoughtAircraftIndustries,oneof

Boeing’spartnersinthiseffort,notes,“Thereisarealdifferenceinthebusinessapproach—withBoeingtakingtheroleoftheintegratorandthepartnerstakingtheresponsibilityforthemajorpieces.”

Boeingwasalsothecentraldecisionmakerinthenetwork.Althougheachglobalpartnerhadalotofautonomywithregardtothe

designoftheirindividualcomponents,therewasstillaneedforasingledecisionmakeronimportantdesignanddevelopmentissues.ThosedecisionsweremadebyBoeingmanagement.Boeing’sleadershiproleissuccinctlycapturedbySteveShaffer,vicepresidentofGlobalPartnersforBoeingCommercialAirplanes:“Weshareinformationwithourpartners,welistentothem,

andweinfluenceeachother.Butattheendoftheday,there’snodoubtthatBoeingisleading.”17

Boeingalsomakessurethatotherpartners’rolesareclearlydefinedandmadeexplicit.AsVought’sBroomallnoted,“We’veneverdoneaprojectbeforewheretherolesandresponsibilitiesareasclearandconsistentastheyareon

thisone.”18Theyhadbetterbe.Voughtisdesigningtwolargesectionsofthefuselage,whichthenhastobeintegratedwiththecomponentsthatarebeingmadebyAleniaAeronautica,anotherpartner,inItaly.AsBroomallcontinues,“We(Vought)workdirectlywiththeItalian(company),andhaveanexcellentrelationshipwiththem,whileBoeingfacilitatesthework

forallofus.”Thus,whilethenetworkpartnersbuildoneachother’sdesignideas,Boeinghastonotonlyfacilitatesuchcumulativeknowledgecreation,butalsoorchestratethedistributedinnovationactivities.

Boeing’sroleastheintegratoranditslimitedinvolvementinthedetaileddesignanddevelopmentalsomeantplacingdifferent

emphasisonitsothertasks.ForCHAPTER5•THEORCHESTRAMODEL

93

example,asWaltGillette(787programvicepresidentofengineering,manufacturing,andpartneralignment)notes,assumingtheroleoftheintegratorallowedBoeingtoconcentratemoreon

attendingto“thevoiceofthecustomer”

throughtheproductdevelopmentphase.19Inthisrole,Boeingcouldfocusitseffortsonmaintainingtheintegrityoftheoverallproductvisionvis-à-visthedynamicexternalenvironmentandmarketneeds.

Whatwastheroleofthe

globalpartnersinthenetwork?Theirprimaryrolewasthatofaninnovator—tohelpBoeingdefinetheoverallconfigurationoftheairplaneandtoinnovateinthedesignanddevelopmentoftheindividualcomponents.Theywerealsoresponsibleforselectingandoverseeingthesecond-andthird-tierpartners(orsuppliers)inthenetwork—atasktraditionallycarriedout

withtheinvolvementofBoeing.Infact,the787projectwillbethefirsttimeanentityotherthanBoeingwillcontroltheselectionofthesecond-andthird-tiersuppliersinaBoeingcommercialaircraftprogram.20

ManagingCollaborationAmongPartners

Coordinatingtheworkon

threecontinentsofthepartnerfirmsraisessomecriticalchallengesrelatedtoinformationflowandcommunications.Thegloballydispersedpartnercompaniesneededtoconverseinreal-timeusingthesamevocabulary,interpretthedesigninformationgainedfromothers,andintegratethatknowledgewiththedesignofthecomponentsthatthey

themselveswereresponsiblefor.Inotherwords,whatwasneededwasasystemforcollaborativedesignthatfacilitatedthedialogueamongthecompanies,providedacommonvocabulary,andallowedrapidtransferandintegrationofdesignknowledge.Andastheleaderofthenetwork,Boeinghadtheresponsibilitytoprovidesuchaknowledge-managementinfrastructure.

BoeingaddressedthischallengebycreatingasophisticatedvirtualGlobalCollaborationEnvironmentforitspartnerstoshareinformationandcollaborateondesignonareal-timebasis.TheGlobalCollaborationCentersatBoeingandineachofthepartnerlocationswerelinkedtooneanotherforlivevideo-conferencing(withencryptedtransmissionforadditional

security).

Theendsolutionbroughttogetheravarietyoftechnologiesandtools.Forexample,BoeingpartneredwiththeDassaultSystems,theFrenchsoftwarecompany,toputtogetherasuiteofProductLifecycleManagementtoolstosupportthecollaborativedesignanddevelopmenttasks.ThisincludesCATIA(V5)the

computer-aideddesigntool;DELMIA,themanufacturingsolution;andENOVIA,theengineeringinterface.Theglobalpartnersalsomadeuseof94

THEGLOBALBRAIN

collaborationtoolsavailablethroughExostar,anonlinetradingexchangefortheaerospaceindustry.Similarly,databaseand

communicationtoolsfromRadianceTechnologieswereusedtotransmithighvolumesofdataamongpartners.Inaddition,avisualizationapplicationdevelopedbyBoeingallowedglobalpartnerstoconductreal-timedesignreviewswithoutanylagtimeforthemodelstoload.

Thesetoolshelpedcreateahighlycollaborative

environment.Thefacilitiesforreal-timeinteractionfacilitatedandpromotedcontinueddialogueamongthepartnerfirms.Further,theconfigurationorthearchitectureoftheairplaneandthedesigninterfaceswereembeddedincommondatabasesthatweresharedbyallpartners.Andmanyofthetoolsemployedastandardizedengineeringdesignlanguagetofacilitate

interpretationandintegrationofdesigndonebythedifferentmembers.

SteveShaffer,vicepresidentofGlobalPartnersforBoeingCommercialAirplanes,notedthatthe787projectemphasizeda“situationalawareness”

amongthepartners.21Eachpartnerwaskeptcontinuallyawareofthedesignactivities

underwayinotherpartnerfirmsaswellastheimpactoftheexternalenvironmentonthebusinessandtechnologicalassumptions.This“situationalawareness”orasharedworldviewisoneofthecornerstonesofnetwork-centricinnovation.Inthecaseofthe787program,theGlobalCollaborationEnvironmentfacilitatedbuildingandmaintainingsuchsituational

awarenessthroughoutthelifetimeoftheproject.

BuildingaTrust-BasedEnvironment

FormalcontractssignedbetweenBoeingandeachoneofthepartnersexplicitlyoutlinedthenatureofcollaborationandtheexpectationsregardingtheoutcomes.Inaddition,Boeingalsoinvestedheavily

indevelopingatrust-basedenvironmentinthenetwork.Astheglobalpartnerssoonrealized,itisaverycomplexundertakingtojustgeteverybodytocometogetherasateamandagreeontechnicalmatters,letalonetointegratethedifferentculturalmindsets.Akeyingredientofsuccessisthetrustandtheunderstandingofoneanother’sworkprocessesandculturethat

evolvesovertime.

Considerthedevelopmentofthewingbox,whichistheresponsibilityofJapan’sMitsubishiHeavyIndustries(MHI).Thewingforthe787willbethelargestcompositestructureeverbuiltforacommercialaircraft.Indevelopingandtestingthewingbox,MHIhadtointeractandcoordinatecloselynotonlywithBoeing

butalsowithotherpartnersinthenetwork.WhenthewingboxCHAPTER5•THEORCHESTRAMODEL

95

testingcameupduringdevelopment,MHIhadadifferentapproachforprototypingandmaterialtestingthanBoeing.Thewingboxtestarticlemeasuresroughly18feetat

itswidestpointandishalfthelength,approximately50feet,oftheentirewing.Theuseofnewmaterialscreatedtwochallenges:thechallengeofdesigninganewcomponentandthechallengeofunderstandingthenewmaterialthatwillbeusedtoproducethatcomponent.

AsDanSmith,Boeing’s787wingtestandtechnologyLCPTleadernoted,“Wetook

sometimeearlyinthe(designanddevelopment)processtobuildthetrustbetweenBoeingandMHI.”22Forexample,SmithcalleduponboththeMHIandBoeingteamstocompletetheinitialdevelopmentoftheequipmentprototypeinsixweeks—BoeinghadthejobofdevelopingtheprototypewhileMHIhadthetaskofbuildingthetoolingtosupportthetestingofthe

prototype—andsetupa“beer/sakechallenge.”IfMHImetthescheduleandBoeingdidnot,theBoeingteamwouldbuysakeforMHIteammembers,whereasifthereversewasthecase,MHIwouldbuybeerfortheBoeingteam.Suchteam-buildingchallengeshelptobuildaleveloftrustamongpartnerfirms.Asithappenedinthiscase,bothteamsmetthetimelineandso

everybodyhadbothbeerandsake.Andmoreimportantly,intheprocessbothteamsgainedbetterappreciationandtrustofeachother’scapabilitiesandexpertise.

Suchtrustandsharedunderstandingoftheuniqueworkandculturalcontextsofthepartnerfirmshavetobedevelopedacrossallmembersofthenetwork,notjustbetweentwopartners.

Thisrequiresadoptingnewperspectivesonrisksharingandinformationsharing.SteveHugginsisaseniorvicepresidentofstrategyandbusinessdevelopmentinGoodrichCorp,akeypartnerofBoeing.

Hugginsnotedthatcomponentprovidersusedtokeeptheirstrategiesandinformationtothemselves,likepokerplayersholding

cardsclosetothevest.

Butsuchanapproachwentagainstthegoalsandobjectivesofthe787program.

AsHugginscommented,“Thedegreetowhichourcompaniesshareforecastsandvisionsofthefuturetodayismoreliketalkingwithacolleaguethantellingthe‘boss’whatyouthink

theywanttohear.”23Suchopensharingofinformationandideascontributetothedevelopmentoftrustandhigherlevelofsharedworldviewthatisfundamentaltothesuccessofnetwork-centricinnovation.

Theflipsideofthetrustdevelopedinthenetworkisthelong-termriskthatBoeingmightbeassumingwithregardtothecritical

knowledgeandtechnologiesthatitwillbesharingwithitspartnersinthe787development.Forexample,technologicalknowledgerelatedtowingdesignisconsideredthecrownjewelofaircraftbuilding.Inthe787project,theJapanesecompaniesthatwillbeinvolvedinthewingdesignhavetheirownlong-termagendaintheaviationindustry.

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Forexample,Kawasakihasfutureplanstoenterintothecommercialaviationindustryindependently.Similarly,MHIplanstousetheknowledgeitgainsfromthe787projectrelatedtothenewcompositetechnologytofuelitsownfutureplansinthisarea.JunichiMaesawa,

executivedirectorofMHI,notesthatthe787“isacornerstoneforJapantobecomeastand-aloneaircraftmanufacturerinproducinga30to50seateraircraftinafewyears.”24SowillBoeing’scollaborationwiththesecompaniesleadtoknowledgespilloverandcreatenewcompetitorsinthefuture?Thatremainstobeseen.

COMPARISONSWITHAIRBUSA380ANDBOEING777PROJECTS

Insum,the787DreamlinerexhibitsallthekeycharacteristicsoftheOrchestra-Integratormodelofnetwork-centricinnovation.Table5.1capturestheessenceofthemodelvis-à-visthenetwork-centricinnovationframeworkpresentedinearlierchapters.

Table5.1Boeing’s787DreamlinerNetwork

Elementsof


Boeing’s787DreamlinerNetwork

Natureoftheinnovationspace

Productmarketfocusandthefirmconfigurationof

thenewairplanearedefinedbyBoeingwithassis-

tancefromexternalpartners.Thesespecifications

structurethenatureoftheinnovationspaceand

incorporatethemodularityneededforthecollabora-

tivedesignanddevelopmentofthejet.

Structureofthenetwork

Boeingistheleaderofthenetworkandallthekey

leadership

decisions,includingthefirmconfiguration,aremade

byBoeingalone.Inother

words,networkleadership

ishighlycentralizedinBoeing.

InnovationRoles

Architect

Boeingplaystheroleofintegrator—theonlyleader-

shiproleinthenetwork.

Adaptor

GlobalpartnerssuchasKawasakiandFujiplaythe

roleofinnovatorbyinnovatinglargecomponentsof

thenewairjet.

Agent

Therearenofirmsplaying

theroleofintermediaryor

agentasBoeingmaintainsformaldirecttieswithall

thekeyadaptors(innovators).


97

Elementsof


Boeing’s787DreamlinerNetwork

NetworkManagement

Networkgovernance

FormalagreementsbetweenBoeingandeachofthe

globalpartners;trust-based

mechanismsalsoserveto

facilitatenetworkgovernanceandcoordination;restricted

networkaccessandreputation-basedsystemsarealso

used.

Knowledgemanagement

GlobalCollaborations

Centersatalllocations,including

partnerlocations,facilitateandenhancethequalityof

partnerdialogue,knowledgetransfer,andknowledge

integration.

IPrightsandvalue

Patentsandotherformal

instrumentsofIPrights

appropriation

managementareused.SomeoftheIPrelatedto787are

ownedbyBoeing,somebyindividualglobalpartners,

andsomearejointlyownedbyBoeingandthepartners.

Beforeconcludingthis

discussion,itmightalsobeusefultohighlightBoeing’suniqueapproachinthe787projectbycomparingandcontrastingitwiththedevelopmentstrategiesrelatedtotwootherprojects:thedevelopmentofBoeing777andthedevelopmentofacompetingaircraftbyAirbus—theAirbusA380

megajumbo.Table5.2comparesthesethree

projects.

Table5.2ComparisonofBoeing777,Boeing787,andAirbusA380DevelopmentApproaches

CharacteristicBoeing777

Boeing787

AirbusA380

Theproject

Launchedin1990;

Launchedin2004;

Launchedin2002;

costof$6–$7billion

costof$13–$14billion

costof$10–$12

billion

Broad

“BuildtoPrint”

“DesignandBuildto

Combinationof

approach

approach

Performance”approach

“BuildtoPrint”and

“DesignandBuildto

Performance”

continues

98

THEGLOBALBRAIN

Table5.2Continued

CharacteristicBoeing777

Boeing787

AirbusA380

Relationships

Boeingastheprime

Boeingdecidesonits

Airbusastheprime

contractorisincontrol

keyglobalpartners;

contractorselects

ofallsuppliers,includ-globalpartnerswillin

andcontrolsall

ingsecond-andthird-

turnselectandmonitor

suppliers

tiersuppliers

second-andthird-tier

suppliers

Risk/reward

Suppliersassume

Globalpartnersassume

Suppliersassume

sharing

limitedinnovationor

significanttechnological

considerablefinancial

financialrisk;

andfinancialrisk

risk(contributing

(suppliersbidon

(partnersinvestinand

$3.1billionto

fixed-pricecontracts

absorbcostof

development)

basis)development)

Leadership

Boeingdesigns,

BoeingastheOrchestra-

Airbuscorporate

role

develops,builds,and

Integratorenvisionsand

headquarters

assemblesfrom

coordinatesinnovation

(Toulouse,France,

groundup;suppliers

activity

supposedto

providecomponent-

coordinateactivities)

levelbuildservices

Natureof

Boeing’sshareof

Boeing’sshareofdesign

Airbusbearsmajority

design

designandbuild

andbuildis35%;even

ofthedesignrespon-

distribution

was76%;building

componentssuchas

sibility;buildingof

ofthemostcritical

wingsectionisgivento

criticalcomponents

componentsremain

globalpartners

remainwithAirbus

withBoeing

todesign

Indevelopingthewide-bodiedjetairliner777,Boeingfollowedthetraditional

“buildtoprint”approachwhereinsupplierswererequiredtomanufacturetofitthedetaileddesignrequirementsspecifiedbyBoeing.The777involvedsignificanttechnologicalachievements.However,manyoftheseadvancementscamefromBoeing.Externalsuppliersplayedaverylimitedroleinthedevelopmentofthe777.Forexample,theJapanese

companiescontributedtothebuildingoflessthan20%ofthe777components.Further,unlikeinthe787project,muchofthemostcloselyguardedtechnologiesanddesigncomponents(forexample,wingdesign)remainedwithBoeing.Also,inthe777project,thesuppliersassumedverylimitedrisk—relatedtothetechnologiesortotheinvestmentneededfornew

designandmanufacturingfacilities.

ThedevelopmentoftheA380reflectsamorenetwork-centricapproach,butitfallssignificantlyshortofBoeing’sapproachindevelopingthe787.WhydoweCHAPTER5•THEORCHESTRAMODEL

99

callitanetwork-centricapproach?Technically,AirbusS.A.S.isasinglecorporateentitybasedinToulouse,France.However,inreality,itsfourdivisionslocatedinBritain,France,Germany,andSpainstilloperateasfourdistinctcompaniesthattracetheirrootstothefourEuropeannationalaviationfirmsfromwhichAirbustookitsbirth.Indeed,inearly2006,former

AirbusCEO

ChristianStreiffnotedthat“(Airbus)isstillinpartajuxtapositionoffourcompanies.”Thecompanyis“terriblybalkanized”withthefourdivisionsoftenpronetonationalpoliticalforcesandharboringcross-borderjealousies.25

Themajordesignanddevelopmenttasksofthe

A380projectwerespreadacrossthesefourdistinctdivisionsofthecompany,withBritaininchargeofwingdesign,Germanyinchargeofcabinoutfitting,Spainresponsibleforthetail,andFranceresponsibleforthefinalassembly.Inaddition,anumberofexternalsupplierslocatedinEuropeandinotherpartsoftheworldwerealsoinvolvedinthedesignandbuildingof

smallerairframesubassemblies.Thus,theA380developmentfollowedanetwork-centricapproachalthoughthedesignresponsibilitiesofexternalsupplierswerelimitedcomparedtothe787

project.However,asinthecaseof787,thesuppliersofAirbusA380werealsorequiredtocontributetothedevelopmentcosts—tothe

tuneofapproximately$3.1billion.26

Whatdotheseexamplesshowabouttheimplicationsoffollowingthe

Orchestra-Integratormodeloninnovationoutcomes?Acomparisonofthe777

andthe787indicatesthesignificantreductionsintime,developmentof

innovativetechnologiesandmaterials,andreductionofoveralldevelopmentcost.

Vought’sBroomallnotes,“Wehaveprobablytakenmorethanone-thirdtoone-halfofthetimeoutandperhaps50percentoutofdevelopmentcostversushistoricalmethods(asfollowedin777).”27

Ontheotherhand,thecaseof

A380indicatesthecentralimportanceoftheleadershiproleplayedbythedominantfirm(thatis,theIntegratorrole).Forexample,inJuly2006,AirbusannouncedsignificantprojectdelaysthatwereattributedtoproblemswiththeinternalwiringdesignsoftheA380.Specifically,wiringthatwasdesignedandproducedinHamburgfailedtofitthefinalassemblyrequirements

inToulouse,France.Investigationsshowedthatthiswasduetotheuseofincompatibledesignsoftware.AdetailedanalysisoftheA380projectshowedthatwhilethedesignanddevelopmenttasksweredistributedacrossthedifferentdivisionsorentities,therewasnobodytoplaythecriticalleadershiproleoftheOrchestra-Integrator.Anotherissueinthecaseof

A380wasrelatedtothelackofacommonknowledge-managementsystem.ThePLMsoftwaretoolsusedforthedevelopmentofA380wereoutdatedandhadlimitedcapabilitiestosupportvirtualcollaborationamongthedifferentnetworkentities100

THEGLOBALBRAIN

(forexample,thetoolsdid

notsupportcreatingadigitalmockupoftheA380).

Suchlackofknowledge-managementcapabilitiesalongwithhighlydeficientnetworkorchestration(ornetworkleadership)ledtolimitedsharedawarenessorworldviewoftheprojectamongthedifferentpartnersandfailuretodetectdesignflawsearlyenoughtoavoidprojectdelaysandcost

overruns.

TheseandotherexamplesindicatetheimportanceofthreebroadthemesthatunderlinethesuccessoftheOrchestra-Integratormodel:

■

ThefirmplayingtheIntegratorrolehastoprovidestrongleadershiptotheinnovationactivities—

leadershipthatshouldbeevidentinenvisioningandclarifyingtheinnovationarchitecture,facilitatingandcoordinatingtheinnovationactivitiesofthenetworkpartners,and

integratingandbringingtomarkettheinnovation.

■

Thekeynetworkpartners

involvedinthedesignanddevelopment

shouldbesufficientlyinvestedintheproject—inotherwords,thedominantfirmshouldensurethatthepartnersshareintherisksaswellasintherewardsrelatedtotheinnovation.

■

Theleadfirmshouldalso

establishanenvironmentthatsupportsbuildingtrust-basedrelationshipsandtheabilitytorapidlyshare

knowledgetherebyensuringhigh“situationalawareness.”

LetusnowconsiderthesecondformoftheOrchestramodel—theOrchestra-Platformmodel.

THEORCHESTRA-

PLATFORMMODEL:THECASEOF

SALESFORCE.COMANDAPPEXCHANGE

InChapter2,“UnderstandingNetwork-CentricInnovation,”webrieflyintroducedSalesforce.com(thecustomerrelationshipmanagementsolution

provider)andits

AppExchangeforumasanexampleofanetwork-centricinnovationinitiative.Morespecifically,aswewillshowhere,Salesforce.comisagoodexampleoftheOrchestra-Platformmodelofnetwork-centricinnovation.

SALESFORCE.COM—JOURNEYFROMASOLUTIONPROVIDERTOA

PLATFORMPROVIDER

Foundedin1999andbasedinSanFrancisco,Salesforce.comisoneoftheleadingsoftwareprovidersintherapidlygrowingCustomerRelationship


101

Management(CRM)market.Thecompany’scoreofferingsfocusprimarilyonsalesforceautomation,marketingautomation,partnerrelationshipmanagement,andcustomerserviceandsupportautomation.Thesalesforceautomationserviceshelpcompaniestoestablishsystemsandprocessestomanagecustomeraccountsandtotracksalesleads,share

salesforecasts,andcoordinateothertaskswiththesalesforce.Themarketingautomationservicesenablecompaniestomanagemarketingcampaigns.Thecustomerserviceandsupportautomationservicesallowcompaniestotrack,manage,andcoordinatetheirinteractionwithexistingcustomersinvariousareas(forexample,requestsfor

repairs,adviceaboutproductsandservices,complaintsaboutfaultygoods,andsoon).

Theuniqueaspectofthecompany’scoreofferingsistheiravailabilityas“ondemand”servicesthatclientcompaniescanaccessthrougharegularWebbrowserovertheInternet.ThemarketforsuchondemandorWeb-delivered

software(alsoknownassoftwareasservice)isexpectedtogrowrapidlyinthenextdecadeorso—forexample,onereportestimatesthatby2011,25%oftheenterprisesoftwaremarketwillbeon-demand.28Intheeightyearssinceitsbirth,Salesforce.comhasgrownrapidly,ridingontheincreasingpopularityofitsparticularvisionofWeb-deliveredsoftware.Asof

July2007,thecompanyhadapproximately32,000customersusingitssoftwareandapproximately646,000payingsubscribersworldwide.

DespiteitssuccesswiththecoresetofCRMproducts,Salesforce.complanstobemorethanjustaCRMsolutionprovider.Startingin2003,itgraduallystartedevolvingintoaplatform

leader.Specifically,thecompanydefinedafoundationalon-demandarchitecturethatwillhelpexternaldeveloperstobuildapplicationsthatextendthescopeofthecompany’scoreofferings.Thisshifttoaplatformproviderisintendedtogreatlyexpandthecompany’sreachintoapplicationsareasbeyonditscustomerrelationshipmanagementroots.Insteadof

creatingandofferingallsuchapplicationsbyitself,theplatformstrategyenablesSalesforce.comtoharnesstheinnovativenessandthecapabilitiesofexternaldevelopersandtransformitselfintoanall-purposeenterprisecomputinginfrastructureprovider.29

Asthecompany’sfounderMarcBenioffnotes,“Thestrategyistolet1,000flow-

ersbloomandlookforinnovation.”30Thecompanyhopestogetexternalpartnerstobuildapplicationsthatareintegratedwiththecompany’sCRMsolutionsandmimictheembeddedexperienceoftheSalesforce.comuserinterface,therebymakingthemanapplicationwithinSalesforceasfarastheuserisconcerned,andallowingSalesforce’sproduct

portfoliotogrowwithoutthecompanybuildingallofthembythemselves.

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SALESFORCE.COM’STECHNOLOGYPLATFORM

Theon-demandtechnologyplatformthatthecompany

hasdevelopedandmadeavailabletoexternaldevelopersconstitutesseveralcomponents.Firstandforemost,itincludesthecoresalesandmarketingapplicationandthecustomerserviceandsupportapplication.Inaddition,theplatformalsoincludesanon-demandoperatingsystem,anon-demandprogramminglanguage,anintegrationplatform,andon-demand

applicationsharingservice.

ConsiderApex,animportantelementofSalesforce.com’stechnologyplatform.

ApexisanewJava-likeon-demandprogramminglanguagethatthecompanyhasmadeavailabletoexternaldevelopersandcustomers.ApplicationsbuiltusingthelanguagecanbemadeavailableasaWeb

serviceandaccessedusingXMLandSOAPstandards.ApexcoderunsnativelyontheSalesforce.comhostedserverinfrastructureandassuchitisfasterandmorepowerfulthanotherlanguages.Thisenhancedfunctionalityopensupnewpossibilitiesforexternaldevelopers.Further,applicationsdevelopedusingApexcaninteractwiththeaccessandmanipulatedata

throughthestandardapplicationprogramminginterfaces(APIs)thecompanyhasmadeavailabletoitscoreCRM

applications.

Salesforce.com’snetworkpartnerscanuseApextobuildentirelynewapplicationsorsolutionsandintegratethemwiththeflagshipCRMapplication

itself.

Apexisderivedfromthesametechnologiesthatthecompanyusesinitsinternaldevelopmentactivities.Assuch,thecompany’scurrentcustomerscanalsousetheApexlanguagetocustomizecorefeaturesandfunctionsofSalesforce’son-demandapplications.Apexenablesexternaldevelopersandclientstocreateormodify

applicationsinacontrolledmannerwithallcoderunningofftheSalesforceplatformitself.

Salesforce.com’stechnologyplatformalsoincludesotherelementsthatenhancetheoverallcapabilitiesandrangeofapplicationsthatcanbedeveloped.Forexample,itincludesadatarelationshipAPIforaccessingandmanagingcomplexdata

relationships,real-timemessagingandintegrationfornotifyingotherapplicationsormiddlewareofbusinesseventsinSalesforce,andanAjaxtoolkitforlinkingSalesforceapplicationsin“applicationmash-ups”

withothersystemssuchasGoogleMaps.

Thecompanyisclearabout

itsmotivesbehindopeningupandofferingsuchatechnologyplatform.“Wehaveavisionformillionsofapplicationsondemand,”

notesAdamGross,vicepresidentofdevelopermarketing,“butasacompanywechoosetobuildonlyoneclassofapplicationscalledCRMapplications.ApexCHAPTER5•THEORCHESTRAMODEL

103

andotherelementsofourplatformwillgiveourpartnersunburdenedfreedomandthecapabilitytodevelopanentireuniverseofon-demandapplications…

rangingfromHRandinventorymanagementtotransactionalapplicationslikeecommerce.”31Indeed,inreleasingApex,the

companywantstohaveamuchbroaderimpactontheenterprisesoftwarearena—specifically,itwantsApextohavethesameeffectontheballooningmarketforon-demandorWeb-deliveredbusinesssoftwareasJavadidontheconsumerWebinthe1990s.

Thus,unlikeinthecaseoftheOrchestra-Integratormodel,here,thedominant

firm’sobjectiveindefiningthetechnologyarchitectureisnottospecifytheinnovationcomponentsthatothernetworkmembersshoulddevelopandcontribute.Instead,the“on-demand”architectureservesasafoundationfornetworkpartnerstobuildcomplementaryapplicationsthatextendthereachandrangeofthecompany’ssuiteofproducts.

However,pursuingsuchaninnovationagendarequiresmorethanjustdefiningatechnologyplatform.Itrequiresplayingtheroleofaplatformleaderinthenetworktopromoteandfacilitatethecomplementaryinnovationactivitiesofitsnetworkpartners.InthecaseofSalesforce.com,thevehicleforexercisingsuchaleadershiproleistheAppExchangedevelopers’

networkorforum.

APPEXCHANGENETWORK

AppExchangeisaforumthatthecompanyhascreatedtoserveasacommongroundforallthedifferentmembersofitsnetworktocometogether.Thesemembersincludeindependentsoftwaredevelopers,customers,andothertechnologypartners.

TheAppExchangeforumservesmultipleobjectivesrangingfromprovidingamarketplaceforcomplementarysolutionsdevelopedbyexternaldeveloperstofacilitatingthesharingofknowledgerelatedtothetechnologyplatform.

TheprimaryparticipantsinSalesforce.com’sinnovationnetworkaretheindependentsoftwaredeveloperswho

createapplicationsbasedonthecompany’stechnologyplatform.Theirroleisthatofa“complementor”—buildingapplicationsthatcomplementthecoreCRMsolution.Thenatureoftheinnovationpursuedbythecomplementorsislimitedonlybythespecificationsofthetechnologyplatformandtheimaginationofthedevelopersandtheon-demandcommunity.

TogetasenseofthenatureanddiversityoftheapplicationsavailableonAppExchange,considerthefollowingtwoexamples.EnvoxWorldwide,a104

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providerofvoicesolutions,hascreatedanewapplicationcalledEnvoxPhoneLink.TheapplicationworksontopoftheCRMsolutionand

enablesbusinessestoaddscreenpop-upsandclick-to-dialcapabilitiestotheircustomercontactcenters.32Anotherexternaldeveloper,DreamFactorySoftware,makesadd-onapplicationcomponentsthatextendthebasicCRMfeaturesbyincludingteamworkautomationandmanagementcapabilities—specifically,projectmanagement,collaborativecalendaring,

anddocumentsharingcapabilities.

AppExchangehastwoobjectives:

■

Toenablethecompanytomakeavailabletheplatformtechnologiesaswellastheknowledgerequiredtousethosetechnologies.Asthe

platformleader,Salesforce.comhasthesoleresponsibilitytodefineandleadtheevolutionoftheplatform.AppExchangeallowsthecompanytomaintainitscommunicationwiththedevelopercommunity—educatingthemaboutnewdevelopmentsintheplatform,capturingthecom-

munity’semergingneedsand

issues,andfacilitatingtheoveralluseofthetechnologies.

■

Toserveasaforumfornetworkmemberstoshareordistributeapplicationsbuiltontheplatform,makingitamarketplaceforcomplementaryapplications.ItofferstheAppExchangedirectory

whereinexternaldeveloperscanlisttheirofferings.Othernetworkmembers

(forexample,existingusersoftheCRMsolution)canbrowsethedirectory,selectanapplicationthatintereststhem,andtestdriveorinstallthatapplicationfortheirownuse.

AsofJuly2007,theAppExchangedirectorylisted

about600suchon-demandcomplementaryapplicationsrangingfromfinancialsolutionstohumanresourcemanagementandinventorymanagementsolutions.And,7,400outofthecompany’s32,000customershadinstalledatleastoneapplicationfromtheAppExchangedirectory.33Whilesomeoftheseapplicationsareofferedfreeofcost,othersneedtobe

purchasedfromtheexternaldeveloper.Thedirectorymakesiteasyforfinding,testing,andinstallingtheapplications—inverymuchthesamewayyouwouldbrowsetheiTunesWebsitetosampleanddownloadorpurchasesongs.Thus,AppExchangeservesasanonlineserviceforsharingbusinessapplicationsbuiltonthecompany’stechnologyplatform.

ThecompanycallsitsAppExchangean“eBayforon-demandcomputing”34—acommunityforumthatgivesanopportunityforexternaldeveloperstocreateandofferan“ecosystemofservices”thatmergewellwiththecompany’sownCHAPTER5•THEORCHESTRAMODEL

105

coresolutions.And,extendingtheeBayanalogy,thecompanyexpectsviralgrowth—asAppExchangeaddsmoreproducts,morebuyersshowup,andinturn,moredevelopers.

GovernanceofAppExchange

AsisthecasewitheBay,offeringsuchaforumforexternaldevelopersandpartnersrequiresSalesforce

toprovidetheappropriatelevelofgovernanceandmonitoring.SeveralelementsmakeupthegovernanceontheAppExchangenetwork.ThecompanyusesthefollowingformalandinformalmechanismstogoverntheAppExchangenetwork:

■

Registration:Only

registeredexternaldevelopersorpartnersareallowedtoparticipateintheAppExchangedirectoryservice.Thus,

whileregistrationisfree,itenablesthecompanytomaintaina“gated”

networkthatprovidesthefirstlevelofgovernance.

■

Certification:AlltheapplicationsthatexternaldeveloperswanttoshareordistributethroughtheAppExchangeforumhavetoundergoanextensivereviewandcertificationprocessfromthecompany.Thecertificationensuresthattheapplicationmeetspredefinedstandards

regardingsecurity,reliability,andquality.The

certificationprocessincorporatesarigorous300-pointtestplanthatincludesasecurityaudit,integrationandfunctionaldesignreview,functionaltesting,andanauditofareferencecustomer.Thelastpart—customeraudit—aims

toincorporatecustomerfeedbackinthecertificationprocess.Afteranapplicationhassuccessfullypassedthe

certificationtests,thecompanyawardsan“AppExchangeCertifiedApplication”logotothedeveloper

forthatapplication.

■

QualityRatings:Salesforce.comusesitsusercommunitytoevaluatethequalityoftheapplications.

AsinthecaseofeBay,thecommunityactsasthejudgeofthequalityofitsmembers’performance.

AppExchangecommunitymemberscanrateanapplicationona

5-pointscaleandtheaverageratingsofallcustomersareshownontheAppExchangedirectory.Communitymemberscanalsoprovide

detailedcommentsandcritiqueonapplications.

■

PlatformMonitoring:Salesforce.comalsomonitorsthewayitstechnologyplatformisusedbyexternaldeveloperssothatitcanprotecttheintegrityoftheplatformandthesolutionsbasedonit.Solutionsfrom106

THEGLOBALBRAIN

externaldeveloperscanposetherisksofcomplexityandbrokenapplicationsandworkagainstthecompany’snormsandvaluesregarding

easeofuseandtrustworthiness.Toheadoffthisrisk,thecompanyhascreatedmeasurestoguardagainstdevelopersusingApextoinadver-tentlywreak

havocwithitsSalesforce.comdeployments.Forexample,whenApexcodeisbeingexecutedonitson-demandplatform,theapplicationisconstantlymonitoredforwhatitisdoingandwhatresourcesitisconsuming.Thecompany’smonitoringofhostedcomplementary

applicationsfromexternaldevelopersdoesnotstopwith

thecertificationprocess.Rather,itcontinuesduringtheexecutiontoo.35

SALESFORCE’SOTHERINITIATIVESASPLATFORMLEADER

Salesforce.comhasadoptedseveralotherinitiativesinrecentyearstoenhancethenatureandqualityoftheinnovationoutcomesinthenetwork.Letustakeabrief

lookatsomeofthese.

IdeaExchange

Salesforce.com’scustomersarealsoparticipantsintheinnovationnetwork.

Theyplaytheroleofan“ideator”byservingasthesourceofnewproductorproductimprovementideas.Thecompanyhascreatedaseparateforumcalledthe

IdeaExchangetofacilitatethedialoguebetweenactivesubscribers(customers)andthecompanyonproduct-andtechnology-relatedissues.

CustomerscanvisittheIdeaExchangeandsuggestproductimprovementideasaswellasnewproductconceptstothecompany.Commentsandsuggestionsontheforumarecontinuouslymonitoredby

thecompanytoidentifypromisingideasforimplementation.Customerscanalsoweighinonothercustomers’

ideasby“promoting”themontheIdeaExchangeforum—thatis,indicatingthattheideaisuseful,relevant,andimportant.Ideasthatarepromotedthemostgetthecompany’sattentionandareactivelyconsideredfor

implementation.Theforumalsoenablescustomerstointeractdirectlywiththecompany’sproductmanagers.Thus,theIdeaExchangeisamechanismforSalesforce’ssubscriberstoactivelyparticipateintheproductinnovationinawaythatwillbenefitthemthemost.

Mostimportantly,theforumalsoservesasanidea

“garden”fortheexternalapplicationdevelopers.Inotherwords,manyoftheideassuggestedintheforumrelatetocomplementaryfunctionsorproducts—functionsthatcustomerswouldliketohavebutarenotincludedinthecoresuiteofproductsCHAPTER5•THEORCHESTRAMODEL

107

fromthecompany.Andassuch,theyindicatethepotentialmarketforspecificcomplementaryapplications.ThecompanyalsousestheIdeaExchangetocommunicatewithitscustomersandotherstakeholdersaboutitstechnologyandproductdevelopmentplans.AsKendallCollins,seniorvicepresidentofthecompanynotes,theIdeaExchange

providesatransparentroadmapofthecompany’sdevelopmentpipelineandthecustomerdemandfornewapplicationsandcomponents.36

Co-MarketingandValueAppropriation

AppExchangeisamarketplaceforcomplementaryapplications.Externaldeveloperscan

marketandtradetheirapplicationstopotentialcustomers.Assuch,itservesasaworldwidemarketforon-demandapplications.However,AppExchangeisnottheonlyvalueappropriationvehicleforexternaldevelopers.Salesforce.comalsotakesamoreactiveroleinmarketingexternaldevelopers’applicationstoitscustomers.

Forexample,afteranapplicationhasgainedthecompany’scertification,theexternaldevelopercanpartnerwiththecompanyandmapoutco-marketingplans—eventsponsorship,paidplacementsonAppExchange,andsoon.Inaddition,Salesforce’sowninternalsalesteamwillactivelypromotespecificcomplementaryapplicationsbasedontheneedsofits

customers—inessence,externaldeveloperscanutilizethecompany’sinternalmarketingandsalesinfrastructuretopromoteandmarkettheircomplementaryapplications.Inmanyoftheseopportunities,thesynergybetweenSalesforce’sCRMsolutionandtheexternaldeveloper’scomplementaryapplicationisleveragedtoenhancetheoverall“value”appealtothe

customers.Ifasalegoesthrough,theexternaldevelopers’shareofthesalesproceedsischanneledthroughthecompany.

OtherPartnerAlliances

OthertechnologycompaniesarealsokeypartnersofSalesforce’sinnovationnetwork.Theyincludemajordevicemanufacturersandsecurity,integration,and

computertelephonyintegrationcompanies.Thesecompaniesoffercomplementarytechnologiesthatthecompanycanleveragetodevelopcustomizedsolutionsforitscustomersinspecificindustryniches.

Salesforcebringstogetherthesecompaniestosupportandpromotespecificaspectsofitstechnologyplatform.

Forexample,thecompanyhasformedtheApexAlliancetopromoteApex,theon-demandprogramminglanguage108

THEGLOBALBRAIN

componentofitstechnologyplatform.TheApexAllianceincorporatesseveralofSalesforce’stechnologypartnersincludingAccenture,Adobe,BusinessObjects,

CingularWireless,Dell,Deloitte,ExactTarget,Palm,ResearchInMotion,SatyamComputers,Siemens,andTataConsultancyServices.

Suchforumsandalliancesserveasamechanismforthecompanytoshareknowledgeaboutitstechnologyplatformandtoidentifyopportunitiesforitsexternaldevelopersandpartnerstoexploittheplatforminspecific

applicationareas.Thealliancesalsoenablethecompanytosignalthecommitmentofotherindustryleaderstoitstechnologyplatform,therebyenhancingitsoverallstatusinthemarketandinducingmoreexternaldeveloperstojointhenetwork.

AppExchangeCentralBusinessIncubator

WementionedearlierthatSalesforceplaysanactiveroleinpromotingandmarketingthecomplementaryapplicationsdevelopedbyitsexternalpartners.Inlate2006,thecompanyannouncedamuchmoreambitiousinitiative,calledtheAppExchangeCentralBusinessIncubator,tocultivate,nurture,andpromotetheinnovationactivitiesofits

complementaryapplicationdevelopers.

AppExchangeCentralisessentiallyanincubationprogramforpartnersbuildingapplicationsforAppExchange.Salesforcewillinvestincreatingaphysicalinfrastructuretohouseitsfledglingpartners.TheincubatorwillalsohouseSalesforcetechnicalstaffersreadytoassistin

AppExchangeapplicationdevelopment.ThefirstsuchAppExchangeCentralincubatoropenedinJanuary2007inSanMateo,California,nearthecompany’sSanFranciscoheadquarters.

Partnercompaniescanrentspaceinthefacilityforabout$20,000ayear,whichalsoincludesthecostofaccesstoSalesforce’stechnicaland

businessresourcestohelpbringproductstomarket.Thecompanyplanstosetupmoresuchincubatorsinotherlocations,includingTokyo,London,Bangalore,andSingapore.37

AppExchangeincubatorsaredesignedtoprovideentrepreneurs(orexternaldevelopers)withapackageofbusinessservicesaimedatcompressingthe

developmenttimelineandthego-to-marketcostsfortheincubatorcompanies.

TheseservicesincludeaccesstotheApexprogramminglanguageandothercomponentsofthetechnologyplatform,technologyinfrastructure,productdevelopment,salesandmarketingsupport,fundraising,andbusinessdevelopmentassistance.


109

TheAppExchangeincubatorrepresentstheveryactiverolethatSalesforceexpectstoplayingrowingitsinnovationnetwork.Itwillnotonlyidentifypotentialexternalpartnersbutalsoinvestresourcesinassistingthemtodevelopandget

productstothemarket.Inturn,thecompanyexpectsitsincubatorstrategytoenhancetheoveralldemandforitstechnologyplatformandthecoresuiteofCRMproducts.

Theincubationcentersalsorepresentanotheropportunityforthecompany—

itwouldlikelyprovideafunnelofacquisitioncandidates,orapplications

thatthecompanycancherry-pickforfutureacquisition.

Whileplatformleadersshouldbecarefulaboutshowinganappetiteforacquiringitscomplementarysolutionproviders,inmanycases,anacquisitioncanbeawin-winsituation.Forexample,in2006,SalesforceacquiredatinycompanycalledKiedenthathadcreatedanadd-ontoits

hostedservicesforpurchasingandmanagingGoogle-drivenWebadvertisingcampaigns.Theadd-onsolutionthatbecameapartofthecompany’scoreproductsuiteallowsmarketingandadvertisingmanagerstoanalyzeongoingcampaignsbyviewingwhichofthepeoplewhoclickonGoogleAdWordskeywordsbecomesalesleads.Kieden,whichwasaSanFrancisco-

basedfour-personcompany,wasabletodevelopapublicbetaversionoftheapplicationandlaunchitontheAppExchangewhereitclearlydemonstratedtheoverallmarketappealofthesolution.

TheexampleofKiedenthusshowsthatSalesforcecanharnesstheinnovativepowerofitscommunityofdevelopersinmorethanone

way—itcannurturethegrowthofsuchapplicationstherebyindirectlyenhancingitstechnologyplatformaswellasacquirehighlypromisingsolutionsandmakethempartofitscoreproduct.

CRITICALELEMENTSOFTHEORCHESTRA-PLATFORMMODEL

Insum,AppExchange

representsSalesforce.com’sbranchingoutfromapositionasaCRM-onlycompanytobeingaproviderofanapplicationplatformforalltypesofon-demandsolutions,addingvalueasaplatformcompanyandleveragingtheeffortsofnumerouspartnersintheAppExchangeinnovationnetwork.Table5.3capturesthecriticalelementsofSalesforce.com’sOrchestra-

Platformmodelofnetwork-centricinnovation.

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Table5.3Salesforce.comandtheAppExchangeInitiative

Elementsof

Network-Centric

Innovation

Salesforce.comandtheAppExchangeForum

Natureoftheinnovation

Salesforce.com’scoreoffering(theCRMsystem)andits

space

on-demandarchitecture

providestheplatformforexternal

developerstobuildapplicationson.Theplatformbothmodu-

larizestheoverallsolutionspaceandalsoenablesthedifferent

applicationsto“talktooneanother.”


Salesforce.comistheleaderofthenetwork;itowns

leadership

theunderlyingtechnologyplatformandmakesallthedeci-

sionsrelatedtotheevolutionoftheplatform.

InnovationRoles

Architect

Salesforce.complaystheroleoftheplatformleader,theonly

leadershiproleinthenetwork.

Adapter

Externalapplication

developersplaytheroleofcomplementor

bydevelopingsoftwareapplicationsthatcomplementand/or

augmentthefunctionalityofthecoreCRMoffering;customers

playtheroleofideatorbyprovidingideasfornewapplications

andratingtheperformanceofexistingsolutionsofexternal

developers.

Agent

Salesforce.comalsoplaystheroleofaninnomediarybymedi-

atingthetransferofsolutionsfromexternalpartners(inde-

pendentsoftwaredevelopers)toendcustomersthroughthe

AppExchangeDirectory(anapplicationlistingservice).

NetworkManagement

Networkgovernance

Salesforce.com’sPartnerProgramprovidesquasi-formalties

forexternalpartnerswiththecompanyandisbasedonspe-

cificselectioncriteria;theexternaldevelopercommunityis

moderatedbySalesforce.com;AppExchangeactsasamarket

mechanismfortransactionsbetweenmembers.

Knowledgemanagement

ADN(AppExchangeDeveloperNetwork)providestheforum

formemberdialogandknowledgesharing;italsoallows

Salesforce.comtodiffusenewdevelopmentsintheplatform.

Offlineforumssuchastheadn@dreamforcebringtogether

externaldeveloperstocritiquenewplatformdevelopments.

AppExchangeBusinessIncubatorhelpstechnologytransferto

partners.


111

Elementsof

Network-Centric

Innovation

Salesforce.comandtheAppExchangeForum

IPrightsandvalue

AppExchangeprovidestheprimarymarketmechanismfor

appropriation

externaldevelopers.Salesforce.comalsopromotesandmar-

ketscomplementaryapplicationsthroughitsown

salesinfra-

structureandchannelssaleproceedstoexternalpartners;all

rightsrelatedtocomplementarysolutionsaremanagedby

partnersthemselves.

ThecaseofSalesforce.comaswellasotherplatform

leaderslikeIBM,Microsoft,Intel,andCiscohighlightthecentralroleoftheplatformleaderinorchestrat-ingtheinnovationactivitiesofthedifferentplayersinthenetwork.38Byclearlyexplicatingthetechnologyplatform,theplatformleaderprovidesastructuretotheinnovationspacethatdirectsandbringscoherencetotheinnovationactivitiesofthediversepartners.And,aswe

sawinourcasestudies,theroleinvolvesthreeimportantsetsofactivities:“seeding”andnurturingcomplementorsandotherinnovationpartners,facilitatingandsupportinginnovation,andprovidingmarketdeliveryandothervalueappropriationmechanisms.WewillcomebacktothesethemeslateroninChapter10,“PreparingtheOrganization,”whenwediscusstheorganizational

capabilitiesneededtocarryouttheroleoftheplatformleader.

CONCLUSION

ThetwoformsoftheOrchestramodelthatwehavedescribedinthischapterrepresenttwosidesofthesamecoin.

InboththeIntegratorandthePlatformmodel,the

innovationarchitecturedefinedbythedominantfirmbecomesthecontextforthenetworkpartnerstoinnovate.However,whileintheIntegratormodel,theobjectiveistoconstrainpartners’activitiesandchanneltheirinnovativeeffortstosuitthedominantfirm’svisionofthefinalproductorserviceoffering,inthePlatformmodel,theobjectiveistoexpandthe

opportunitiesfornetworkpartnerstoinnovateandbuildontheplatformsoastoenhanceitsoverallreachandrange.

Inbothcases,thetrickypartistobringtogetheradiversesetofcapablepartnerswhoaresufficientlycommittedtotheinnovationarchitectureandtoorchestratetheiractivitiesinamannerthatleadstooutcomesthatare

beneficialtoallthenetworkmembers.Insum,thedominantfirmhastocreatetheimpressioninthenetworkthatitisgivingitspartnerstheopportunitytobepartofitssuccess.


C

H

A

P

T

E

R

6

TheCreativeBazaarModel

Sometimes,insteadof

creatinganinnovativeproductfromscratch,

firmsmightchooseto“shop”forinnovativeideasavailablefromtheGlobalBrain.Shoppinginthe“CreativeBazaar”—theglobalmarketplaceofideas,products,andtechnologies—isparticularlyusefulwhentimetomarketisanimportantconsideration,andwhenthe

firm’sexternalenvironmentisrichwithcreativepotential.

Shoppingforinnovationisnotunlikeshoppingforfoodtosatisfy

yourhunger.Youbasicallyhavetwoverydifferentoptionsbefore

you.Youcouldgotoagrocerystore,buythe

ingredients,andcook

amealyourself.Alternatively,youcouldorderafullycookedmealatarestaurant.Cookingamealyourselfwouldlikelycostless,butitwouldtakemoretimeandeffort.Moreover,thequalityofthemeal

wouldbealittleuncertainifyouaren’tanexpertcook.Ontheotherhand,orderinga

fullycookedmealfromarestaurantwouldbequick

andeasyandinmostcaseswouldensurereliablequality.However,

yourchoiceswillbelimitedtowhat’sonthemenu,andfurther,youwouldhavetopayahigherpricefortheconvenienceandthe

reducedrisk.

Likewise,whenacompanyshopsforinnovation,ithassimilar

options.Itcansource“raw”newproductandtechnologyideasfrom

inventorsandthengoabout“cooking”theseideasintocommercial

113

114

THEGLOBALBRAIN

productsandservices.Alternatively,itcanacquire“market-ready”products,technologies,orstartupfirms.Asinthefoodanalogy,theseoptionshaveverydifferentimplicationsforcost,reach,risk,andtimetomarket.

Regardlessoftheoptionthefirmchoosestoshopforinnovation,itneedstopartnerwithanetworkofinventorsandinnovationintermediaries.Inthischapter,wedescribethedifferentoptionsthatfirmshaveinshoppingforinnovationintheCreativeBazaar.AswenotedinChapter3,“TheFourModelsofNetwork-CentricInnovation,”theCreative

Bazaarmodelinvolvesalargefirmsourcinginnovativeproductideasandtechnologiesfromexternalsourcesandusingitsproprietarycommercializationinfrastructure(includingitsbrands,designcapabilities,andaccesstodistributionchannels)tobuildontheideasandmakethemmarket-ready.

THE“CREATIVEBAZAAR”CONTINUUM

Innovativeproductortechnologyideascanbeacquiredatdifferentlevelsofmaturity,rangingfrom“raw”ideasorconceptsto“market-ready”products.

Andcompaniescanusedifferentmechanismsordifferenttypesofintermediariesforsourcing

suchinnovation.Thesemechanismsdifferintermsofthecostofacquiringtheinnovativeideaandtheriskmitigationthatthemechanismallows.Inaddition,thereareadditionalconsiderationssuchasthereachofthemechanism(howmanyideascanbesourced)andthetimetomarket(howmuchtimeitwilltaketocommercializetheidea).Figure6.1depictsthe

continuumofinnovationsourcingmechanisms.ThesesourcingmechanismsrepresenttheCreativeBazaarcontinuum.

Lookingattheleftendofthecontinuum,companiescansourcerelativelyunde-velopedor“raw”productortechnologyideas.Theycandothisbyreachingoutdirectlytoindividualinventors,asProcter&

GamblehasdonethroughitsConnect+Developinitiative.1P&Ginvitesindividualinventorstosubmitpatentedproductortechnologyideasthatcanpotentiallybecommercializedbythecompany.2CompaniessuchasKraft,KimberlyClark,andsoonhavealsoannouncedsuchinitiativestoinviteideasfromexternalentitiesthroughtheirWebsite.

Such“raw”ideasorpatentedinventionscanalsobesourcedthroughasetofinnovationintermediariesthatincludepatentbrokersandelectronicR&Dmarketplaces(forexample,NineSigmaandYet2.com).Theseintermediarieslargelyfocusonconnectinglargefirmswithindividualinventors(ortheirpatents).

Theyarepurebrokers,inthat

theyplayamatchmakingrole,andhavelimitedinvolvementinthedevelopmentoftheinnovativeideas.3Similarly,anothertypeofintermediary,ideascouts—entitieswhotrawlforinnovativeideasintheCHAPTER6•THECREATIVEBAZAARMODEL

115

inventorcommunityonbehalfoflargefirms—utilizedomainormarketknowledgetolocatepromisingnewideaswithoutmuchinputintotheinnovationprocess.Whilesuchbrokersandmiddlemenbroadenthereachandrangeofideasourcingandlowerthecostofacquiringideas,theytypicallydealwithratherimmatureideasthatarealongwayfrombeingready

forprimetime.Assuch,thereisstillalotofmarketriskthatthefirmhastomitigatethroughfurtherdevelopmentandmarkettesting.

High

High

Risk

ost

C

andR

and

each

Speed

Low

Low

Market-

Market-

Raw

Ready

Ready

Ideas

Ideas

Products

–LicensingAgent

–InnovationCapitalist

–InternalBusinessIncubator

–PatentBroker

–ExternalBusinessIncubator

–ElectronicRandDMarketplace

–VentureCapitalist

–IdeaScout

–InventionCapitalist

InnovationIntermediaries

Adaptedfromfig.“TheExternalSourcingContinuum,”onpg.111of“ABuyer’sGuidetotheInnovationBazaar”bySatishNambisanandMohanbir

Sawhney.HarvardBusinessReview,June2007.©2007HarvardBusinessSchoolPublishingCorporation.Allrightsreserved.

Figure6.1TheCreativeBazaarContinuum

Now,considertheotherendofthecontinuum.Themechanismsatthisendforbuyinginnovationincludeinternalincubators(suchas

Salesforce.comAppExchangeCentralBusinessIncubator),externalincubators(forexample,university-basedincubators),andventurecapitalists—entitiesthatinvestinand/orincubatenewventureswiththepurposeofofferingtheseventuresasacquisitioncandidatesforlargefirms.Typically,theinnovativeideasunderlyingsuchnewventuresarefullydeveloped,

market-demonstrated,andmarriedwithmatchingorganizationalinfrastructure.

TheclassicexamplehereisP&G’sacquisitionoftheSpinBrushproduct(thenovel,low-costbattery-operatedtoothbrush).TheSpinBrushwasdevelopedandlaunchedin1999byastartup(Dr.JohnsProductsLtd.)ledbyentrepreneur116

THEGLOBALBRAIN

JohnOsherandtheprincipalsofNottingham-Spirk(aCleveland-basedindustrialdesignfirm)andtheirin-housepatentlawyer.BythetimeP&GacquiredSpinBrushin2001,theproducthadbeentest-marketedandproclaimedacommercialsuccessbasedonitsinitialsalesperformanceinWal-Martstores.

Thesourcingmechanismsatthisendofthecontinuumenablethedevelopmentoftheproductconcepttoastagewhereitcanbetakentothemarketdirectly,thatis,a“market-ready”product.Consequently,thelargefirmcanbenefitfromlowerinnovationriskandfastertimetomarket.However,thesebenefitscomeatacost.Acquisitioncostsarehigh(forexample,P&Ghadto

shellout$475millionfortheSpinBrush).Andthereachofthefirmislimitedbecausefewideasmakeitfarenoughintheinnovationpipelinetobemarket-ready.Further,theroutestomarket,thesalesorganization,andtheothercommercializationinfrastructurethatgetsaddedtotheproductconceptmightnotbeneededbytheacquiringfirms,andoftenmightneedtobediscardedat

acost.

THEINNOVATIONCAPITALIST—FILLINGTHEGAPINTHEMIDDLE

Havinglookedatbothendsofthecontinuum,wefindthatneitherextremeprovidesanappetizingsolutiontothetrade-offsinshoppingforinnovation.Ideascoutsandothersuchintermediariesattheleftendofthecontinuum

sell“rawideas”whereasventurecapitalistsandincubatorssell“market-readyproducts”

or“fullybaked”companies.Rawideasaretoorisky,whereasfullybakedcompaniesaretoocostly.Aseveryshrewdpoliticianlikestosay—therehastobeathirdway—amechanismthatrepresentsthebestofbothworlds.Indeed,thereissuch

anentitythatfillsthegapinthemiddleoftheCreativeBazaarcontinuumandallowsfirmstoachieveabalanceamongthereach,theinnovationcost,theinnovationrisk,andthetimetomarket.

Wecallthisentitythatrepresentsthis“thirdway”aninnovationcapitalist(IC).Aninnovationcapitalistisanorganizationthatseeksout

promisingnewideasfromindividualinventors,transformsthoseideasintomarket-readyconcepts,andsellstherelatedintellectualpropertytolargefirms.Ineffect,theIC

offersa“market-readyidea”asopposedtoa“rawidea”ora“market-readyproduct.”Insodoing,anICaddssignificantvaluebeyondthebrokeringfunctionprovided

byideascoutsandR&Dmarketplaces.Specifically,anICinvestsintheidea,assumesrisk,andsharesintherentsgeneratedfromsellingtheintellectualproperty.

ICsactastheextensionofthe“fuzzyfront-end”(thatistheinitial,unstructuredpart)oftheinnovationprocessoflargefirms,byallowingthemtomakeCHAPTER6•THE

CREATIVEBAZAARMODEL

117

effectivetradeoffsbetweeninnovationreachandbusiness-readinessininnovationsourcing.Revisitingourcookinganalogy,ICssell“step-savermeals”—

ingredientsthathavebeen

assembledintoarecipethatlookspromising,andonlyneedsafewmorestepstomakeadeliciousmeal!

Beforewediscusstheinnovationcapitalists(andhowcompaniescanpartnerwiththem)inmoredetail,letusfirstconsiderthetwooptionsthatcompanieshavetosource“rawideas”attheleft-endofthecreativebazaarcontinuum:(a)

partneringwiththeinventorcommunityand(b)partneringwithideascouts(andothersuchintermediaries).Weomittheright-handextremeofthecontinuumbecausetheacquisitionofastartupfirmistraditionalM&A,andisoutsidethescopeofnetwork-centricinnovation.

PARTNERINGWITHTHEINVENTORCOMMUNITY:

DIAL

CORPORATIONANDTHE“PARTNERSININNOVATION”INITIATIVE

Partneringwithinventorsinvolvesgoingdirectlytothesource—toindividualswhohavecreativeideas.Tounderstandhowthisapproachworks,considerhowDialCorporation,alarge

consumerproductcompanybasedinScottsdale,Arizona,hassuccessfullyreachedouttoinventorsthroughits“PartnersinInnovation”initiative.Dialhasapresenceinthreecoremarkets:personalcare,laundrycare,andhomecare.Someofitswell-knownbrandsincludeDial,Purex,RightGuard,Pure&Natural,Borax,andSoftScrub.ItsproductshavebeenintheAmericanmarket

formorethan130years.In1953,Diallaunchedoneofthebest-knownmarketingslogansever—“Aren’tyougladyouuseDial?”—toestablishDialasthenation’sbestantibacterialsoap.

InMarch2004,DialbecameasubsidiaryofHenkelKGaA,aGermanconsumerproductsconglomeratebasedinDüsseldorf,Germany.Whiletheparentcompany

affordeditagreaterglobalreachandpresence,intheU.S.market,Dialremainedamid-sizedcompanycompetingagainstmuchlargerconsumercompaniessuchasP&GandJ&J.ThissizedisadvantagenecessitatedthatDialbeveryaggressiveininnovationtostaycompetitive.Inrecentyears,thisdriveforinnovationhasledtoamoreopenapproachtosourcing

innovationfromexternalsources,andmorespecificallytothelaunchofitspartnershipwiththeinventorcommunitycalledthe“PartnersinInnovation”initiative.

Dial’sstoryofitspartnershipwiththeexternalinventorsstartedwiththeestablishmentofaseparateorganizationalunitcalledtheTechnologyAcquisition

groupin2003.DebraParkwasappointedasthedirectorofthegroupwiththemandatetoseekoutnewproductandtechnologyideasfromexternalsources118

THEGLOBALBRAIN

andtofeedtheorganization’sR&Dpipelinewithcommerciallyfeasibleinnovativeideas.

The“PartnersinInnovation”initiativelaunchedin2004wasthefirststep.ItoriginatedasaWebsitewhereindividualinventorscouldgoandsubmitpatentedideasthatDialwouldthenevaluateforcommercializationpotential.Ifideaswerefoundtobecommerciallyattractive,Dialwouldpursuethoseideaswiththeindividualinventor—inmostcases,buying

outrightthepatentedideafromtheinventor.In2004,aspartofthisinitiative,Diallaunchedacontestforindividualinventorscalledthe“QuestfortheBest.”Inthiscontest,individualinventorswereinvitedtosubmitpatented(orpatentpending)ideastoDial.

Dialspecifiedtheproductcategoriesinwhichitwasseekinginnovativeideas.

Thenumberofsubmissionsranintothehundreds.ApanelofjudgeswithinDialthenscreenedthoseideasandnarrowedthelistdownto60inventions.Dialthenaskedtheseinventorstocreateafive-minutevideooftheirideasothatDialcouldgetafirst-handfeelfortheidea.Dialaskedinventorstoanswertwokeyquestions—“Howdoestheideawork?Andhowisitbetterthan

what’soutthere?”Basedonthesevideosubmissions,Dialfurthernarrowedthelistdowntothetopteninventors.TheseinventorsweretheninvitedtoDial’scorporatecampusinArizonatoshowcasetheirinventionstotopDialexecutives.

Eachinventorwasassignedaboothtoexhibittheprototypeoftheirinvention.

Judgesselectedthreeideasandtheinventorsweregivenawards.Dialagreedtopursuethesethreetopideasformoreformalmarketevaluationandfeasibilityanalysis.TheagreementwasthatifDialdecidedthatoneoftheseideaswascommerciallyattractive,itwouldbuythepatentedideafromtheinventor.

In2005,Dialrananother

versionoftheQuestfortheBestcontestandgarneredafreshsetofinnovativeproductideasforinternalevaluation.Inthesameyear,itaddedanotherelementtothePartnersinInnovationprogrambyestablishingthe“Submit&Win”sweepstakesforonlineideasubmissions.Allsubmissionsthatmetthebasiccriteria(forexample,patentedorpatentpendingidea)were

enteredintoasweepstakeandthreewinnersselectedatrandomwereawarded$1,000each.Theobjectivewastokeepinventorscomingtothecompany’sWebsiteandsubmittingtheirinnovativeideas.Sofar,thePartnersinInnovationprogramhasgeneratedatleastfivenewproductconceptsthathavemadeitintotheofficialDialproductdevelopmentpipeline.Thisfeatisquite

impressiveforaconsumerpackagedgoodscompanyinrelativelymaturemarkets.

Dial’sinitiativeembodiesseveralbestpracticesworthnoting.Thefirstrelatestothenatureoftheinnovationnetwork.ThemembersofDial’sinnovationnetworkprimarilyconsistofindividualinventors.Theyareadiverselot.AsDebraCHAPTER6•THE

CREATIVEBAZAARMODEL

119

Parknotes,“Someofthemareretireeswhohavemulledoverthesethingsandnowtheyhavetimetoworkonit.Butforsomeofthem,it’sasidepassion.OnegaveapresentationatthelocalinventorassociationhereinArizona.And,thesepeople

arefromallwalksoflife.”4

Dialwasabletoreachouttosuchadiverseandwidelydistributedsetofinventorsbypartneringwithlocalandnationalassociationsofinventors.Itdecidedearlyonthatestablishingcredibilitywiththeinventorcommunitywascritical.

PartneringwithinventorassociationssignalsthatDial

isacredibleandtrustworthypartner.Dialsoughtandgotthesupportoftwoinventorassociations—

theUnitedInventorAssociation(UIA),anationalbody,andtheInventorAssociationofArizona,thelocalassociation.UIAwasinstrumentalingettingthewordoutintheinventorcommunityaboutDial’s“QuestfortheBest”contest

andotherinitiatives.AccordingtoDebra,“UIAisamuchrespectedorganizationwithintheinventorcommunity.So,hearingitfromthemmadeinventorsfeelmorecomfortable…intheireyes,Dialisabigcorporateentity.”

Dialalsoprovidedthecommercializationplatformforgettingtheinnovative

ideastothemarket.Wecallthisroletheinnovationportal—arolethatinvolvesservingastheportaltothemarketfornewideasandconcepts.Asthedominantplayerinthenetwork,Dialmadethecrucialdecisionsregardingthecommercialfeasibilityoftheinnovationandtheapproachitshouldtaketodevelopandmarketthenewproduct.Andiftheideaorthepatentwas

licensed,Dialassumedtheresponsibilityforappropriatingthevaluefromtheinnovationandsharingitwiththeinventor.

AkeytothesuccessofDial’sinitiativewastoestablishitselfasthepreferredinnovationportalforindividualinventorswithneatideas.AsDebraParknotes,

“Tome,oneofthemantrasofthePartnersinInnovationprogramis—‘thinkofDialfirst.’Cometousfirstwithyouridea,nottoourcompetitors,andsetupDialasacompanythatyouwouldwanttodobusinesswith.”Toachievethisgoal,Dialhadtomaketheprocessastransparentaspossibleandalsobuildalong-term,trust-basedrelationshipwiththeinventorcommunity.For

example,itmadesurethatitcommunicatedtheoutcomesoftheideassubmittedpromptlyandinarespectfulmannertotheinventors.Suchactionsenabledthecompanytoestablishandmaintainanetworkofinventorswhoarelikelytobringtheirideastothecompanyinthefuture.

AlthoughDialdoesnotuseintermediaries,preferringto

interactdirectlywithindividualinventors,theinventorassociationsdoplayasupportingrolebyfacilitatingthoseinteractionsandpromotingDial’sinitiativesinthecommunity.Forexample,theyhelpedtocommunicatedetailsofDial’scontestand120

THEGLOBALBRAIN

otherinitiativestothe

differentchaptersoftheassociationacrossthecountry.

Inventorassociationshaveanincentivetoplaysuchafacilitatingroleastheyspendalotoftheirresourceseducatingtheirmembersonhownottogetrippedoffbyfraudulentpatentbrokersandagents.BypartneringwithareputedandestablishedcompanylikeDial,the

associationisabletoofferasafeandtrustedavenueforinventorstoshoptheirideas.Inreturn,Dialalsosponsoredsomeoftheassociations’educationalactivitiestocementitsperceptionasa“goodcitizen”oftheinventorcommunity.

Inpartneringwithindividualinventors,therearenoformallinkagesamongthemembersinthenetwork,so

governanceislargelybasedontrustandreputation.Mostindividualinventorshavelimitedknowledgeaboutpatentsorproductcommercialization.Thus,theirtrust-basedrelationshipwithDialiscrucialintheirdealingswiththecompany.Ontheotherhand,Dialhasacriticalneedtomaintainitscredibilityandreputationintheinventorcommunity.Anybadexperiencethatan

individualinventormighthavewiththecompanywouldlikelytravelfastwithintheinventorcommunityviawordofmouthanddamageDial’slong-termobjectiveofbecomingthepreferredportalofinnovativeideas.

Dialalsomadesurethataclearorganizationalmandateexistedtotakethepromisingexternalideasintotheformal

productdevelopmentchannelswithintheorganization.Forexample,DialinstitutedinternalsystemswherebyinnovativeideascouldbefundedfortheproofofprinciplestageevenifinitialevaluationsdidnotmatchwithDial’scurrentproductportfolio.Withoutsuchamandateandassociatedsystems,externallysourcedideaswouldlikelystagnatewithin

thecompanyandnotseethelightofthedayinthemarketplace—

therebydiscouraginginventorsfrombringingtheirideastoDialinthefuture.

Furthermore,withtheacquisitionofDialbyHenkel,thescopeofbothideacollectionaswellasideautilizationhasbecomemoreglobal.Forexample,in

early2007,HenkellaunchedtheHenkelInnovationTrophy,aglobalcontestforinnovativeproductideas.TheprogramwaslaunchedincollaborationwithU.S.

andinternationalinventorassociations,includingtheUnitedInventorAssociationintheU.S.andtheDeutscherErfinderverband,theGermaninventorsassociation.Further,innovativeideas

sourcedbyDialfromtheinventorcommunity(intheU.S.)thatdonothaveadirectfitwithDial’scurrentproductstrategyareshoppedaroundamongHenkel’sotherbusinessunitsworldwide.InthewordsofDebra,“WearenownotonlysourcingideasforDialbutforHenkel,too.”SuchaglobalreachenhancestheattractivenessofDialasthepreferredportalforindividualinventors.

CHAPTER6•THECREATIVEBAZAARMODEL

121

DialusesseveralmetricstoevaluatethesuccessofitsPartnershipinInnovationprogram.Forexample,thecompanytrackstheideasastheyprogressthroughthedevelopmentpipeline—howmanyideaswerebroughtin,

howmanyproceededtoconcepttest,howmanywereincorporatedintoaproject,andhowmanyactuallywentintothemarket.Ofcourse,theultimatesuccessmetriciswhethertheideagotintothemarket.AsDebranotes,“AllofthisboilsdowntothatsomethingwasputoutintothemarketundertheDialname—thattomeistheonlymeaningfulmeasureofwhetherIamdoingagood

jobhere.”

WhileDialisdefinitelyoneofthepioneersinemployingthisformoftheCreativeBazaarmodel,othercompaniessuchasP&G,KimberlyClark,andKraftFoodshavealsostartedsimilarinitiatives.ThecaseofDial,however,suggeststhatsuccessinthisapproachrequirespatientlybuildingtrust-based,long-term

relationshipswiththeinventorcommunityandseekingthehelpofinventorassociationsandothersuchentities.

PARTNERINGWITHIDEASCOUTS:THEBIGIDEAGROUP

AND“IDEAHUNTS”

AnotherformoftheCreativeBazaarmodeleschewsdirect

interactionswithinventors,relyinginsteadontheservicesofanintermediary,suchasanideascouttoseekoutinnovativeideasortechnologies.

TheBigIdeaGroup(BIG),locatedinManchester,NewHampshire,isafirmthatfocusesonidentifyinginnovativeproductconceptsforlargecompanies,particularlyintheareasof

consumerpackagedgoods,foodandbeverages,andpersonalmediaandtechnology.ThecompanywasfoundedbyMikeCollins,aformerventurecapitalistandtoyindustryentrepreneur,in2000.Overtheyears,thecompanyhasbuiltalargenetworkofindependentinventors,whichitminesfornewideasandconcepts.

Reminiscentofthepopularpublictelevisionshow,“AntiquesRoadshow,”

whereantiqueexpertsofferappraisalsforantiquesthatpeoplebringinfromtheirhomes,BIGconducts“roadshows”—eventsatdifferentlocationsofthecountrywhereinventorscanwalkinandpresenttheirideastoapanelofexpertswhoprovideaquickandfree

evaluationoftheidea.Therearenoobligationsonthepartofthecompanyortheinventorforthispreliminaryideaevaluation.Iftheinitialevaluationshowsthattheideamighthavepotential,thecompanyinvitestheinventortosubmittheideainamoreformalmanner122

THEGLOBALBRAIN

andsignarepresentation

agreementwithBIG,whereinittakestheresponsibilityforshoppingtheideatolargeclientcompanieswhomightbeinterestedincommercializingit.Ifacompanyisinterestedinlicensingtheidea,BIGsplitsroyaltieswiththeinventor(inmostcases,thesplitis50-50).

BIGachievesseveralobjectivesthroughthe

roadshows:

■

Itprovidesafreeservicetoindividualinventorsandestablishesitsreputationintheinventorcommunityasatrustworthypartner.

■

Eachinventorwhoparticipatesinaroadshow—

whetherornotthe

ideasgetpursuedfurther—becomespartofthe“inventornetwork”thatBIGmaintains.TheroadshowshelpbuildBIG’smostimportant

resource—itsinventornetwork.AsofJuly2007,BIG’sinventornet-

workwas12,000strong—animpressivepoolofcreative

talentforanyclientcompany.

■

Withinitsvastinventornetwork,BIGhasidentifiedamorefocusedsetofaround500“strong”inventors—individualsthatBIGhasevaluated

as“highlycreative”andwhosetalentisparticularly

relevantforthemorefocuseddiscoveryofinnovativeideasthatthecompanypursues

forclientfirms.

Suchfocuseddiscoveriesarecalledideahunts.BIGconductstheideahuntsonbehalfoflargeclientsfirmssuchasGillette,Staples,Sunbeam,andBellSports,aswellastoolmakerssuchasSkil-BoschandDremel.

These“ideahunts”areessentiallyanexerciseinminingBIG’sinventornetworkforpromisingideasrelatedtoaspecificthemeormarketneedthattheclientfirmhasexpressed.

Forexample,aclientfirmmightspecifyabroadmarketneedortheneedforaparticulartypeofproduct;BIGthencommunicatesthisneedtoitsinventornetwork,

seekingpotentialproductideas.Aftertheideasaresubmitted(usuallyonline),BIGdoesaninitialscreeningandthenforwardsthemtothesponsoringfirm.Suchideahuntsmightcostthesponsoringfirmanywherefrom$40,000andup.5Sofar,theseinitiativeshaveledtothecreationofmorethan60newproductsforcompanieslikeStaples,GeneralMills,eToys,

Sunbeam,andQVC.6

BIGisnottheonlyfirmplayingtheroleofsuchanintermediary.AnotherideascoutistheProductDevelopmentGroup(PDG)LLC.7PDGplaystheroleofanideascreener—itreceives,compiles,andreviewsnewproductideasonbehalfofcompaniessuchasStaples.Itsobjectiveistodeterminethelikelihoodofapotential

matchbetweentheproductideaandStaples’needs.PDGdoesnotdoanymarketresearchontheviabilityoftheideas.Itonlyscreensandaggregatestheideasthatitreceivesbeforeforwardingthemtoclientfirms.


123

AsimilarroleisalsoplayedbyelectronicR&Dmarketplaces,suchasInnoCentiveandYet2.com.Independentinventorslisttheirpatentedtechnologiesonsuchsites,whichcompaniescanbrowsethroughandthenevaluateforpotentialcommercialization.Anumberofothernewtypesofentitieshaveenteredthisspace(seethefollowingsidebar,“Intellectual

Ventures:AnInventionCapitalist”).

INTELLECTUALVENTURES:ANINVENTIONCAPITALIST

IntellectualVenturesLLC(IV)isaninventioncapitalistfirmco-foundedin2000byformerMicrosoftCTO,NathanMyhrvold,andscientist,

EdwardJung.Thecompany’sgoalistoinvestinawiderangeofpatentswiththeobjectiveofsellingorlicensingthosepatentstoclientfirmsthatareinterestedincommercializingthem.MyhrvoldandJungbuiltthecompanybasedonthebeliefthatinventionorpatentsisthe“mostinterestingpartofthecommercialfoodchain.”8

However,ratherthanfocusingonmarketingindividualpatents,thecompanyaddsvaluebybringingtogetherpatentsrelatedtoacommonmarketproblem.9Thus,whilethecompany’sfocusisnotontraditional

productdevelopmentanditdoesnotinvestintransformingthepatents(invention)toproducts

(innovation),itdoeshelpclientfirmsbyofferingamorecompletesetofpatentsthatarerequiredinagivencommercializationcontext.

IntermediariessuchasIVoffertwopotentialbenefitsforclientfirms:

■Asinthecaseofideascouts,theygotrawlingforinnovativepatentedideasandtechnologies;thatis,theydo

themostdifficultjoboffindingthe“diamondsamongtherough.”

■Theymakecriticalconnectionsamongthedifferentpatentsvis-à-visacommercializationopportunityandthenmarketthatportfolioof

patentstoclientfirms,therebyacceleratingtheinnovationprocessand

enhancingitssuccess.

However,rememberthatcompaniesthatbuythesepatentsfroman

inventioncapitaliststillhavetodotheheavy-liftingofdevelopingandcommercializingthemintonewproducts(orservices).

124

THEGLOBALBRAIN

TheroleofinnovationintermediariessuchasBIGandPDGistomediatebetweentheinventornetworkandthelargecompanyseekingtheinnovation.

AsBIGfounderCollinssays,“Corporationsdon’twanttodealwithinventorsone-on-one.Wesawtheneedtobridgebetweenallthese

inventorsandclientswhowantedinnovation,”10Theseintermediariesdonotinvestanymoneyindevelopingorvalidatingtheinnovativeideas.Instead,theyaddvaluetotheprocessbyseekingoutandfilteringthepromisingideas.

Todothis,however,theyhavetofirstgetaccesstotheinventorcommunity.

Thus,thekeycapabilityforanintermediarysuchasBIGistheabilitytoestablishandmaintainanetworkofindependentinventorsfromwhichthecompanycansourceinnovativeideas.Thelargerthenetwork,themoresuccessfultheinnovationsourcingislikelytobe.However,becausenoformaltiesexistbetweenanyoftheentitiesinthisnetwork,socialmechanismsof

governance—

trustandreputation-basedsystems—formthegluethatholdsthenetworktogether.Informationtechnology—forexample,Web-basedforums—canbeusedtocommunicate,interact,andshareknowledgewithindividualinventors.

Finally,formalagreementsbasedonthesaleorlicensing

ofpatentsformtheprimarymechanismfortheappropriationandsharingofvaluefromtheinnovativeidea.

PARTNERINGWITHINNOVATIONCAPITALISTS

Aninnovationcapitalist(IC)isanorganizationthatseeksoutandevaluatesinnovativetechnologyandproduct

conceptsfromtheinventorcommunityandotherexternalsources,developsandrefinestheseideastoastagewheretheirmarketpotentialisvalidated,andthenmarketsthesetechnologyandproductconceptstolargeclientfirms.Inotherwords,anICfirmtransformstheideastoastagewherealargefirmcanmakeamuchbetterjudgmentoftheirmarketpotential(see

thefollowingsidebar,“ProfilesofInnovationCapitalistFirms”).

PROFILESOFINNOVATIONCAPITALISTFIRMS

EvergreenIPisafirmbasedinEvergreen,Colorado,thatfocusesontheinnovationoutsourcingmarketintheconsumerproductsector.

Specifically,itseeksoutpromisingideasandinventionsfromindividualinventorsandmakesselectiveinvestmentstoupgradethoseinventionsviamarketresearch,productdesign,andpatentwork.ItthensellsorCHAPTER6•THECREATIVEBAZAARMODEL

125

licensestheresultinginnovationandrelatedIPtolargeconsumerproductcompaniessuchasP&GandDial.Thecompanytargetsanumberofproductcategories,includinghealthandbeauty,householdproducts,petcareandpetaccessories,andlow-techgadgets.Thefoundersofthecompanyincludeanentrepreneur,afinancialspecialist,andaconsumer

productmarketer.Thecompanyhassofarreviewedmorethan1,600

productideas,hasmorethan15ongoingproductdevelopmentprojects,andisindiscussionswithprospectivelicenseeson6ofthoseprojects.

IgniteIP(IIP)isaU.S.-basedinvestmentfirmwithofficesinNewYorkandCalifornia

thatfocusesonIPplacementinthetechnologysector.ItseeksoutpromisingIPandinvestsinthem(intherangeof$500,000to$2million)toupgradetheIPandsecurelicensingopportunitiesinexistingmarketchannels.Forthistask,thecompanybringstogethera

diversesetofknowledgeandexpertiseincludingtechnical,industry,marketing,and

legalexpertise.Thecompanyhasestablishedanextensivenetworkamongseniormanagersintechnologycompaniesanduti-

lizesthenetworktomarketandplaceitscandidateIP.Giventhe

risks—largelytechnologicalanddevelopmentrisks—itassumesonthe

IP,thecompanysharestheIProyaltieswiththeinventor.WhileIIPdoesnotexplicitlyspecifyaparticulartechnologysector,thedominantareasincludechemicals,energy,environment,andsoftware.

ICshelpcompaniesoutsourcetheearlystageideationanddevelopmentprocesses,oftenthemostriskyandtime-consuming

stageofthedevelopmentcycle.Theirvaluepropositioncentersonfourthemes—greaterreach,lowerrisk,greaterspeed,andlowercost.ICsenablelargefirmstobroadentheirinnovationreach—therangeofideastheycanconsider—withoutrequiringdirectinteractionwiththeinventorcommunityandtheassociatedinvestmentinrelationshipmanagementor

risksrelatedtoIPrightsandknowledgespillover.Further,theyprovideclientfirmswithaccesstoinnovativeproductortechnologyideasthataremuchfartheralongonthematurityscale(thatis,more“market-ready”ideas),therebymitigatingearly-stageinnovationrisksaswellasloweringthetimetomarketwithoutsignificantlyincreasingtheinnovationacquisitioncost.By

selectivelyinvestinginandbuildingonpromisingideas,ICsallowlargefirmstolowertheoverallbusinessrisksrelatedtotheinnovation.Also,ICslowerthecostofacquiringtheinnovationbynotadding126

THEGLOBALBRAIN

anymanagementorothercommercializationinfrastructuretothe

innovation,relyinginsteadontheexistingbrandandoperationalinfrastructureoftheclientfirmformarketexploitation.Moreover,ICssourceinnovationatafairlyearlystage,allowingforcheaperacquisitionsthanbuyingafullybakedstartupfirm.Inreturnforthisuniquevalueproposition,ICsexpectashareoftheproceedsfromtheinnovationfromtheclientfirm.

HowdifferentisanICfromotherinnovationsourcingmechanismswehavediscussedinthischapter?InTable6.1,wesummarizethekeydifferencesbetweenaninnovationcapitalistandotherinnovationsourcingmechanisms.

Aswediscussedearlier,anICdiffersfromanideascoutorpatentbrokerinthatitinvestsinandaddsvalueto

theinnovation.AndalthoughanICsharessometraitswithventurecapitalistfirms,itisdifferentfromtheminthatitscapitalinvestmenttendstobeverylimitedandtheinvestmentfocusedonlyonrefiningtheproductideaandnotonbuildinganorganization(ormanagementinfrastructure)aroundthatidea.Further,mostoftheprojects(productconceptsortechnologyideas)thatICs

pursuetypicallydonotfitthe“businessmodel”ofVCs.Theydon’thavethe“size”tojustifyadditionalmanagementoverheadsorthecreationofnewmarketchannels.Also,theexpectedpayofftendstofallbelowthethresholdofmostVCs—thatis,theprojectsdon’texploitorwarrantthecorecompetenciesofVCsnordotheyprovidesufficientreturns.AsStephan

Mallenbaum,apartneratNewYork–basedJonesDay,notes,an“innovationcapitalistcanserveasanextensionofalargeclientcompany’sinnovationengine.Suchaserviceprovidedby(aninnovationcapitalist)isreallyuniqueandVCsarejustnotequippedtoservelargefirmsinthatmanner.”11

Table6.1Comparisonof

InnovationCapitalistwithOtherInnovationSourcingMechanisms

IdeaScout,

VentureCapitalist,

InventionCapitalist,

Innovation

BusinessIncubator,

Characteristics

andsoon

Capitalist

andsoon

Coreobjective

Toconnectcompanies

Toconnectcompanies

Toconnect

withindependent

with“market-ready”

companieswithnew

inventorsandpatents

innovativeconcepts

venturesthathave

“market-ready”

products


127

IdeaScout,

VentureCapitalist,

InventionCapitalist,

Innovation

BusinessIncubator,

Characteristics

andsoon

Capitalist

andsoon

Keyfunction

Createsabrokering

Bringsindustryand

Bringsmarketand

infrastructureinthe

marketexpertiseto

financialexpertiseto

“rawidea”market

ideadevelopment

newventures

Valueaddition

Seeksoutandfilters

Buildsonand

Buildsanorganiza-

newideasthatfit

transforms“raw”

tionaroundanew

companies’innovation

ideasto“market-

idea

goals

ready”concepts

Core

Cost-effective

Front-endinnovation

Venturecreation

competencies

“sniff-testing”ofnew

management

ideas

Marketexpertise

Networkingin

Industryandmarket

Financialrisk

inventor

expertisemanagement

community

RelationshipNetworking

in

management

inventorcommunity

IPrights

management

Capital

Noinvestmentin

Limitedinvestments

Substantialinvest-

investment

concept/patent

inconcept

mentinbuilding

development(patent-

development

newventure

relatedinvestmentfor

inventioncapitalist)

Risksassumed

Noneorlittle(patent-

Considerableearly-

Considerablefinan-

relatedriskfor

stageideadevelop-

cialriskassociated

inventioncapitalist)

mentrisk

withnewventure

IPrights

Noneorfew(inventionOwnsashareofthe

Ownsashareofthe

ownership

capitalistowns

IPrights

newventure(includ-

patent-relatedrights)

ingassociatedIP)

Relationshipwith

Transactional

Long-termpartnership

Transactional

clientcompany

Adaptedfromtable“TheDifferingRolesofInnovativeIntermediaries,”onpg.114of“ABuyer’sGuidetotheInnovationBazaar,”by

SatishNambisanandMohanbirSawhney.HarvardBusinessReview,June2007.©2007HarvardBusinessSchoolPublishingCorporation.Allrightsreserved.

VALUECHAINANDCOMPETENCIESFORINNOVATIONCAPITALISTS

Todeliversuchavalue

proposition,aninnovationcapitalisthastoimplementavaluechainwiththreecomponents:SeekandEvaluate,DevelopandRefine,andMarketthenewproduct/technologyconcept.Figure6.2showsthevalue128

THEGLOBALBRAIN

chainofaninnovationcapitalistandTable6.2lists

thekeycompetenciesneeded.Letusexaminethesevaluechainactivitiesandassociatedcompetenciesinmoredetail.

Market-Ready

RawIdea

Idea

Seekand

Developand

Market

Evaluate

Refine

NewProduct/

Client

Inventor

NewProduct/

NewProduct/

Technology

Firm

Technology

Technology

Concept

Concept

Concept

InnovationCapitalist

Figure6.2Thevaluechainofaninnovationcapitalist

SeekandEvaluate

TheSeekandEvaluateactivityrelatestosourcinginnovativeideas(orpatents)fromtheinventorcommunityandselectingthosethathave

thebestpotentialtodevelopintoamarketableproductortechnology.

Thisactivityrequirestwocompetencies.OneisthattheIChastoestablishandmaintaindeeprootsindifferenttypesofinventorcommunitiestoallowittosourceideasfromawiderangeofplaces.SomeoftheICfirmsareactiveinattendingregionalandlocal

inventorclubmeetingsandsponsoringandparticipatingininventoreducationevents.ThisdirectoutreachtoinventorclubsbuildsawarenessoftheICfirmandestablishesalong-term,trust-basedrelationshipwiththeinventorcommunity.Trustiscrucialbecausehistorically,intermediarieslikepatentbrokershaveearnedanunsavoryreputationbyrippingoff

inventorswhohavelimitedknowledgeofthepatentingandcommercializationprocesses.Buildingtrustandofferingafairandjustideareviewprocessareessentialtoattractgoodideasfrominventors.AsBrandonWilliams,themanagingdirectorandco-founderofIgniteIPnotes,“Theoverallapproachshouldbe—wewinwhenyouwin.”


129

Table6.2CompetenciesforInnovationCapitalist

NatureofCompetency

InnovationIndustry/Market-

Innovation

Project

Network/

CapitalistValue

Related

Management

Relational

ChainActivity

Competencies

Competencies

Competencies

SeekandEvaluate

EvaluatemarketriskEstablishtransparent

Buildandmaintain

reviewprocesses

inventornetworks

Identifycritical

marketneeds/gaps

Assessandmanage

Establishtrustin

ICportfoliorisk

inventorcommunity

Communicateclient

andmarketneeds

DevelopandRefine

Integratediverse

Manageidea

Buildandmanage

industryknowledge

developmentrisks

partnernetwork

Identifycritical

Coordinateidea

marketsuccess

development

factorsactivities

Market

Understandclient

Understandclient

Buildandmaintain

firm’sbrandand

firm’sinnovation

long-termrelation-

innovationportfolio

processesand

shipswithclient

prioritiesmetrics

firms

ManageIPrights

Structurevalue

appropriationdeals

Communicatemar-

ketpotentialofnew

ideaorconcept

Thesecondcompetencyrelatestotheabilitytoscreenoridentifyideasthatareworthfurtherconsiderationandinvestment.Typically,thefirstscreeningisaqualitativeanalysisofthekeyvaluepropositionoftheideaandthepotentialfor

buildingsufficientIP—afive-minute“snifftest.”Giventhevolumeofideastobescreened,itiscriticalthattheICfirmbeabletodothisascosteffectivelyaspossible.AsyousawearlierintheexampleoftheBIG,pre-scheduledevents(suchas“roadshows”)heldindifferentpartsofthecountrywhereindividualinventorscancomeandpresenttheirideastoapanelofexpertsfor

preliminaryscreeningisonesuchcost-effectivemechanism.EvergreenIP,ontheother130

THEGLOBALBRAIN

hand,pursuesamorecommunity-centricapproach—itsendsoutits“scouts”

toplacesthatinventorsfrequentandprovidesideaassessmentsthenandthere

itself.ThistechniqueallowsEIPtofindoutthroughwordofmouth“wheretheideasarelocated”andproviderapidassessments,whichmighthelptheinventortofurtherrefinetheideaandinducehim/hertocomebacktothecompanylateron.Theoverallobjectiveistoofferatransparentandfairprocessbywhichthebusinesspotentialofnewideascanbequicklyevaluated.

Theinitialevaluationisoftenfollowedbyamorerigorousquantitativebenchmarkingtestofthemarket/businessviabilityoftheproductortechnologyconcept.EIP,forexample,usesanideahandicappingtoolsuchasMerwin,abenchmarkingdatabasefromEurekaRanch,themarketresearchfirm,forthisscreening.Itevaluatesandprovidesascoreforanideathatreflectsitspotential

marketsuccess.JohnFunk,aco-founderofEIP,describesthisinitialscreening:

Theaveragemarketsuccessscoreis100onthatscale.TheCPGcom-

paniesthatuseMerwin,whichthere’safairnumberthatdo,theygetexcitedwhenthey’reatabout120.Sowe’vehandicappedourselvestosayit’sgottobereally

northofthat.We’relookingfor170.Andthat’sourfirstscreenforidentifying.Andthenweusea“spiralriskreduction”model.What’sthebigshowstopper?Isthereaprotectableassethere?Becauseifwedon’thaveaprotectableasset,wedon’thaveanythingtotransactaround,alicenseagreement.Sosometimeswe’llgotherefirst,dothepatentsearchtoseeifwe’vegotenough

green

space.

Isitabigenoughidea?Isthesizeofprizegoingtobemeaningfulenoughthatourroyaltystreamisgoingtobeworthahillofbeans?

Andthisiswheretheresearchtoolcomesintoplay.Sowecanboth

clarifytheproduct,enhancetheproductwithdesigninfiguringouthowtodoit,anditeratethatthrougharesearchloopthat’llmake

surethatwe’vegottherightpurchaseintenttomakeitmeaningful

andtogetsomebody’sattention.

Whenwegointoalarge

clientcompany,wecanhaveawonderful

relationshipwiththem.Everybodyknowsusandlikesusandwecan

getameeting.Butifwedon’thavesomethingthatisworthjumping

thequeue,nothingwillhappen….Theinertiafactorishugeintheselarge

companies.Sowe’vegottohavesomethingthattheysaythisisworthscrewingup,orcreatingchaosinternallyforme.12


131

DevelopandRefine

Aftertheideasaresourced,theyneedtobedevelopedortransformedtoastagewherethereisgreaterclarityaboutthecommercializationpotential,andtheideascanbemarketedtoalargefirm.Typically,thisactivitystartswiththeIC

firmnegotiatingadealwiththeinventortoownpartoftheideaasaprerequi-siteformakingfurtherinvestments

init.Thus,atthisstage,theideabecomesaprojectintheICfirm’sportfolioandthefirm’sabilitytomanagethisprojectfromhereondeterminesitssuccessrate.

Whilemanyofthecapabilitiestodevelopandrefinetheproduct/technologyconceptcanbeacquiredfromoutside,anICfirmneedstwoin-housecompetencies:relevantdomainknowledge

andanexceptionalmarketfocus.Thetransformationprocessoftenprogressesiterativelybyidentifyingandresolvingthekeyriskareasintheinnovativeidea.Suchrisksmightrelatetomarketrisks(whichinturnwouldrequiremarketvalidation),manufacturingrisks(whichmightrequireprototypingandaddressingmanufacturabilityissues),assetprotectionrisks(which

mightrequireevaluatingthequalityofthepatent),andsoon.Thedegreeortheextentofideatransformationdependsonthenatureoftheproductconceptoridea,thenatureoftheindustryormarket,andthenatureoftheclientfirmforwhichtheideaistargeted.

ConsideraprojectthatEvergreenIPpursuedrecently.Aninventorbrought

anideaforacollapsibleplastictrashcollector—asasolutionfortemporarytrashsituationssuchasparties,picnics,andincommunityevents.Theinitialevaluationshowedthatwhiletheideawaspromising,theparticularsolutionthattheinventorcameupwithwasnoteconomicallyfeasible.EIPcheckedwithafewpotentialclientfirmsandrealizedthattheinventorhadindeed

identifiedaveryuniqueproblem—a$250millionproductopportunity—althoughtheproposedsolutionwasnotthebestwaytotapintotheopportunity.SoEIPinvestedcapitalintransformingthesolutiontomakeitcommerciallymorefeasible.Theresultingworkproducedaproductdesignandprototypethatattractedseriousattentionfromseverallargemanufacturers

inthatproductmarket.Inthiscase,thetransformationwascomprehensive—itinvolvedthedevelopmentofanewsolution.

Moreinterestingly,theprecedingexamplealsoshowsthatindividualinventorsmightnotalwayshavegreatproductinventionsfromtheoutset.However,theycanoftenbeexcellent“sensingmechanisms”for

productopportunities.Assuch,theICneedstoremainflexibleandadaptitsstrategytobuildonandtransformtheinventor’sinnovativecontribution,whateverbethestartingpoint—agreatworkingproductprototypeoranimportantmarketneed.

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Market

Thispartofthevaluechainrelatestoplacingtheproductortechnologyconcept(orrelatedIP)withinaclientfirm—inotherwords,appropriatingthevaluefromtheinnovationthroughlicensingagreementsorsaleofthepatentorothersuchmechanisms.Itcallsforseekingoutthefirmthatismostlikelytobeinterested

intheinnovativeideaandmarketingandnegotiatingtheIPsaleorplacement.

Thisactivityrequirestwocompetencies.Forone,theIChastohaveexcellentrelationalskills—theyhavetoestablishandmaintainlong-termrelationshipswithlargeclientfirms.AnICfirm’sunderstandingofaclientfirm’scompetitivecontextenablesittoconduct

betteranalysisofthepotentialfitofaninnovativeideavis-à-visthefirm’scommercializationinfrastructure.AsDaveBaylessofEvergreenIPnotes,“Itisallabouttheclient’sbrandwindow—gapsinthebrandportfolio—andtheirinternalhurdlerate.And,wespendconsiderableeffortingettingtoknowourpotentialclients…whataretheirprioritiesnow,whatare

theylookingoutfor,andwhatkindofmarketsizewilltheyaccept?”SuchanunderstandingcanalsoenableICfirmstocustomizetheirback-endprocessestointegratewellwiththeclientfirm’sopeninnovationprocesses.TheICfirmalsoneedstodevelopatrust-basedrelationshipthatcanhelpthenegotiationprocess.

Anothercompetencyrelates

tothemanagementofintellectualpropertyrightsrelatedtotheproductconcept.ICshavetopossessknowledgeandcapabilitiestonavigatetheIPplacementprocessandtoensurethatequitableshareoftheIPareappropriated.Forexample,IgniteIPrecentlyassessedanewtechnologyforremovingheavymetalsfromwater,whichcouldreducehazardouswasteinthe

miningindustry.Theinventorshadtriedunsuccessfullytocreateanewbusinessaroundthetechnology.WhenIgniteIPtookovertheproject,itevaluatedthemarketanddecidedthatthegreatestchallengelayinovercomingtheminingindustry’sinertiaaroundadoptinganewtechnologylikethis.So,inadditiontomodifyingthetechnologytoclarifyits

potential,IgniteconstructedaninnovativelicensingschemethatprovidedsufficientincentivesforaclientcompanytoacquirethenewtechnologyandalsoensuredthatIgniteandtheinventorswouldreceivesufficientreturnontheirinvestment.

ICfirmsneedtohaveappropriateskillstonegotiateeffectivelyin

asymmetri-calpowersituations(thatis,withlargeclientfirms)toappropriateafairshareofthereturnsfromtheinnovation.Giventhatonlyaround2%oftheideasthatanICfirmreviewsmakesittothecommercializationstage,itiscriticalthatthefirmhasexcellentcapabilitiestoappropriatevaluefromthoseideasthatdofinallygetplacedwithinalargefirm.


133

Unlikeearly-stageinnomediaries,ICfirmsdonotoperateonservice-basedfees.

Instead,theysharethereturnsfromtheinnovationwiththeinventor.Whilethis

mightbestructuredindifferentways,thetypicalmethodistopre-specifytheproportionofthelicensingroyalties(orproceedsfromthesaleoftheIP)thattheICfirmwillretain.ICfirmsretainanywherefrom40%to70%oftherevenuestream.

ThescaleofcapitalinvestmentsthatICfirmsmakeintheirprojectsvarywidelybasedonthesizeof

thepotentialmarketfortheproductorthetechnology,buttheyrangeanywherefrom$50,000to$500,000.AccordingtoBrandonWilliamsofIgniteIP,“(our)objectiveisnottoaddvaluethroughcapitalinvestmentsasventurecapitaliststendtodo.Instead,weaddvaluethroughauniquecombinationofourdomain/market,networking,andinnovationmanagement

skills.”ItisalsoimportantforICfirmstoshapethisvalueadditionsoastocomplementtheinnovationstrategiesandinitiativesoflargefirms.Thus,theICfirm’sabilitytomeldtogetheritsvariedcompetenciesinawaythatcomplementstheinternalinnovationinfrastructureofthelargefirmisthemostimportantfactorindeterminingitslong-term

successasaninnovationpartneroftheclientfirms.

HavingexaminedtheIC’svaluepropositionandcompetenciesinsomedetail,wenowlookattheICfromtheperspectiveofthelargeclientfirmbyconsideringtheapproachesthatlargefirmssuchasP&G,J&J,andUnilevercanadopttopartnerwithICfirms.

BUILDINGWINNINGPARTNERSHIPSWITHINNOVATIONCAPITALISTS

AnICcanserveasaveryeffectivepartnertostrengthentheinnovationpipelineofalargefirm.However,forthesepartnershipstosucceed,theclientfirmhastoplayaneffectiveroleonitspartasapartner.

ThefirstimportanttaskthelargefirmhastoundertakeistobuildandnurtureaspecialrelationshipwithafewselectedICfirms(andtheirassociatedinventorcommunities).Anothertaskistodirectordrivetheinnovationinthenetwork—eitherbyseekingoutideasforspecificproductmarketsorbydrivingtheinnovativeideausingthefirm’sinternalcommercializationengine.

Letuslookatsomestrategiesrelatedtothesetwotasks.

Clientfirmsneedtoacknowledgethattherearenostandingformaltiesbetweenanyofthemembersintheinnovationnetwork—eitherbetweentheIC

firmandindividualinventorsorbetweentheICfirmandtheclientfirm.Theimportanceoftrustand

understandingintherelationshipbetweenalarge134

THEGLOBALBRAIN

clientfirmandanICthuscannotbeoverstated.Onewaytoachievethisgoalistoestablishlong-termrelationshipswithaselectedsetofICfirms.Thisstepensuresasmoothernegotiationprocessfor

productortechnologycommercializationdealsasbothpartnersareawareofeachother’sdecisioncriteriaandprocesses.Further,alargefirmcanalsobuildintoitsrelationshipaninformalagreementthatitwillgivealltheproposalsbroughtforwardbyanICfirmseriousconsideration,inreturnforgivingthecompanythefirstchancetoevaluatenewideas—inotherwords,becomethe

“preferredinnovationportal”fortheIC

firmanditsassociatedinventorcommunity.

AnotherwaytoenhancetrustintherelationshipisforalargefirmtoshareinformationmoreopenlywithICs.Forexample,thefirmcanprovideICswithawindowintoitsproductgaps,innovationpriorities,and

businessgoals.AsharedunderstandingoftheinnovationprioritiesenablestheICfirmtomatchpromisingideasandconceptsfromtheirinventornetworkswiththerequirementsofthelargecompany.ItalsoallowsICstomakebetterjudgmentsonwhetherornotapotentialideawouldmeettheinternalthresholdofthelargefirm(intermsofmarketsize,profitmargins,andsoon).

Theeventualgoalofinformationsharingistodevelopasharedworldviewofthelargefirm’sinnovationenvironment.

Itisalsoimportantforthelargefirmtoeducateitsinternalunits(particularlytheR&Dunit)ontheuniqueroleandvaluepropositionoftheICfirm.Suchinternalevangelism(orbuildingtheorganization’sfaithinthe

valueoftheinnovationcapitalist)helpstoovercomethe“NotInventedHere”syndromethattendstobiasinternalR&Dunitsagainstexternallysourcedideas.Anditpromotesbetteralignmentofthefirm’sinternalinnovationdecisionprocesseswiththeroleplayedbytheinnovationcapitalist.Byintegratingthefront-endworkdonebytheICwiththeback-end

developmentdonebythelargefirminternally,timetomarketcanbefurtherreducedandsuccessratescanbeenhanced.Forexample,oneoftheICswestudiedusedproductconceptevaluationsystemsandtools(forexample,theProductLifecycleManagementtool)thatwerealreadybeingusedbytheir“preferred”clientfirm.Thisallowedfasterprojecttransitionsfromthe

ICfirmtotheclientfirm.

LargefirmscanalsostrengthentheirpartnershipwithICfirmsbyadoptinga

“reverseflow”model—thatis,becomingthesourceofinnovativeideasfortheICfirm.Often,largecompanieshaveproductortechnologyconceptsthattheyhavedevelopedtodifferentstages(includingworking

prototypes),butforvariedstrategicormarketreasonsarenotconsideredhighpriorityandhencesitontheshelf.


135

JohnFunkofEIPnotes,“Often,whenwehavegone

toourclientcompanies,theytellusthattheyhavesomethingwhichtheywouldlikeustotakealookat.Theseareideasthatthey(clientfirm)havelettheirpeopleincubatethatmightnotfitwiththeirbrandsatthetimeortheyhavesoldoffthebrandthattheyoriginallyincubateditunder.Sometimesas(theseideas)getfartheralongtheydon’tfit—strategicreasons,brand

fit,resource,sizeofprize,hurdlerates,whateveritmightbe.Theyputthemontheshelf.Andthere’snowhereforthosetogotoday.Wecomeonitandwesaywe’lltakethoseon.Wewilldevelopthemfurtherandmarkettootherfirms.”Inotherwords,thelargeclientfirmnowbecomesthe“inventor.”

Forexample,P&G’sExternal

BusinessDevelopment(EBD)grouprecentlyinitiatedsuchaprojectwithoneoftheICfirms.P&Ghaddevelopedaproductconceptbutfoundthatthetargetmarketwasonlyaround$35to$50millionworth(wellbelowP&G’sinternalthresholdandalsotheconceptdidn’thaveanaturalfitwithanyofitsexistingbrandportfolio).Becausetheconceptrequiredfurther

work,itnegotiatedadealwithanICfirmtodeveloptheconceptfurtherandmarketittootherlargefirmsinthatproductmarket.

AsTomCripe,associatedirectoroftheEBDgroupofP&Gnotes,“Wearedefinitelyinterestedinsuchdealsastheyallowustopotentiallyderiverevenuefromideasthataresittingonourshelvesbutrequiremore

conceptworkbeforetheyarebusiness-ready.SuchdealsalsoallowustostrengthenourrelationshipwithspecificICfirms.…And,inturn,wewantthoseICfirmstoconsiderP&G

asthepreferreddestinationwhentheycomeacrossinterestingideasinthe(inventor)community.”Sothisapproachformonetizingstrandedassets(whether

thosearepatentsorjustproductconcepts)hastwopayoffs—potentialnewproductrevenues,andastrongerrelationshipwiththeICfirmtobecomethe“preferredinnovationportal.”

Arethereanydownsidestopartneringwithaninnovationcapitalist?Well,therearedefinitelysomerisksthatclientfirmsneedtokeepin

mind.Preciselybecausetheyarenewonthescene,innovationcapitalistsarestillrefiningtheirbusinessmodelsandthusmustworkoutsomewrinkles.Forexample,theygetmuchmoremodestreturnsthando,say,venturecapitalists.Thatmeanstheyneedenoughongoingprojectsintheirportfoliostosustainthebusiness.Butanoverlargeportfoliowillreducethe

valueanICfirmcanaddindevelopinganygivenideaandalsothreatenitsrelationshipswithbothclientcompaniesandtheinventorcommunity.Anotherriskfortheclientfirmisrelationalrisk.Ontheonehand,tobenefitfromtheICfirm’scapabilities,aclientfirmhastoopenupandshareitsinnovationpriorities;ontheotherhand,buildingthetrust136

THEGLOBALBRAIN

neededforsuchsharingofinformationwilltakesometime.Thus,thisposessomeriskfortheclientfirmespeciallyiftheICfirmisstillveryyoungandnotwellestablished.

Table6.3showssomeofthekeyelementsofthisformoftheCreativeBazaarmodelthatinvolvespartneringwith

ICs.Thekeyobservationthatbearsrepe-tition—successinpartneringwithICs—dependsontheclosenessofthepartnershiptheclientfirmcanbuildwithICs.

InthewordsofDavidDuncan,theheadofR&DforUnilever’shomeandpersonalcaredivision,atbestsuchrelationshipsoffermorethanapipelineofnewprojectsandbecome“a

collaborativeeffortatbuildingtheinnovationcapability”ofaclientcompany.13

Table6.3TheCreativeBazaarModel&TheInnovationCapitalistElementsofNetworkCentricInnovation

PartneringwithInnovationCapitalist

Natureoftheinnovation

Theideasthatemergefromtheinventorcommunityare

space

evaluatedforcommercializationfeasibilityandalignment

withclientfirm’scorporateinnovationgoalsandpriorities.


Theclientfirm(forexample,P&G,Dial,Staples,andso

leadership

on)makesallthekeydecisionsrelatedtothecommercial-

izationoftheinnovativeidea(patent).

InnovationRoles

Architect

Clientfirmplaystheroleofaninnovationportal.

Adapter

Independentinventorsplaytheroleofinnovatorandcon-

tributenewproductandtechnologyideas.

Agent

Innovationcapitalist.

NetworkManagement

Networkgovernance

Therearenoformaltiesamongnetworkmembers;trust-

basedandreputationalmechanismsserveto

facilitatenet-

workgovernanceandcoordinationinthenetwork.

Knowledgemanagement

Theinnovationcapitalistprovidestheinfrastructuretocom-

municateandshareknowledgewithindividualinventors;

theclientfirmshareswiththeinnovationcapitalistitsinno-

vationgoalsandpriorities.

IPrightsandvalue

Patentsandlicensingagreementsareusedtoassignthe

appropriation

rightsandforvalueappropriation.


137

CONCLUSION

TheCreativeBazaarmodelinvolvesalargefirm“shopping”forinnovative

ideasbyestablishinganetworkofpartnersthatmightrangefromindividualinventorsandinventorcommunitiestodifferenttypesofinnovationintermediaries.

YouexploredthreepartneringmodelsontheCreativeBazaarcontinuumthatrepresentdifferentpointsonthecontinuumofriskandcostandconsideredthe

importantroleplayedbyanemergingclassofentitiescalledinnovationcapitalists.

Althoughtheinnovationcapitalistisapowerfulapproachtosourcinginnovativeideas,itisjustoneweaponinthearsenalofalargefirm.Mostlargefirmsneedtopursuenotjustonebutacombinationofthedifferentoptionswehavediscussedsofar.Inother

words,theyneedtoimplementaportfolioofinnovationsourcingmechanisms.Thequestionthenis,howshouldalargefirmgoaboutselectingtheappropriatesetofsourcingmechanismsandmakingsurethatitsoverallportfolioofinnovationsourcingisbalanced?Whatdoestheoptimalportfoliolooklike?Theseareimportantquestions,andwhilewecan

statetheobviousbysayingthattheanswerswouldbedictatedbyindustryandmarketfactors,wewilladdresstheseissuesinmoredetailinChapter9,“DecidingWhereandHowtoPlay,”whenwediscusshowafirmcanidentifyopportunitiesinnetwork-centricinnovation.


C

H

A

P

T

E

R

7

TheJamCentralModel

IntheOrchestramodel,thefirmhasaveryclearsenseforthe

natureoftheinnovationitseekstoco-createwithpartners.IntheCreativeBazaarmodel,whiletheinitialinnovativeideamight

emergefromtheinventor

community,thefirmstillplaysthedomi-

nantroleindecidinghowtheinnovationwillevolveintoamarket-

readyproductorservice.Sometimes,however,innovationsare

emergentinnatureandinvolvethecommunitytoamuchgreater

extent—takingshapethroughthecollaborativeeffortsofcontribu-

tors,andevolvinginwaysthatarenotwell-understoodattheoutset.

Recallingouranalogyfromthemusicbusiness,welookatadifferentapproachtocreatingnetwork-centricinnovationthatisakinto

musiciansjammingtogethertocreatenewmusic.Inintroducingthe

JamCentralmodelinChapter3,“TheFourModelsofNetwork-

CentricInnovation,”wecomparedmusicaljammingsessionstocol-

laborativeinnovation,andweidentifiedthreethemesthat

definetheessenceoftheJamCentralmodel:

■

Anemergentinnovationvisionandgoalsthatevolvefrom

intenseinteractionsamongthecommunitymembers

■

Adiffusedleadershipstructurethatreliesoneachmember

ofthecommunity

■

Aninfrastructuretosupportimprovisationandsharingof

innovationbenefits

Aninnovationinitiativethat

embodiesallofthesethemesisthe

developmentofApache,anOpenSourceWebserversoftwarethat

runsonmostoperatingsystems,includingUNIXandWindows.First

139

140

THEGLOBALBRAIN

createdin1996,ApachehasestablisheditselfasthemostpopularWebserverontheInternet;morethan70%ofallWebsitesontheInternetcurrentlyuseApache,makingitmorewidelyusedthanallotherWebserverscombined.1

ThehistoryofApachecanbetracedbacktotheearly

1990swhenagroupofindividualsstartedworkingonimprovingtheHTTPDserveroriginallydevelopedbyRobMcCoolattheNationalCenterforSupercomputingApplications,UniversityofIllinois,Urbana-Champaign.Whentheresultingproduct—Apacheserverv0.6.2—wasreleasedinApril1995,ittookoffimmediatelyintheWebservermarketasan

opensourcealternativetootherproprietaryproducts.In1999,astheprojectgotwiderrecognitionandattractedmorevolunteers,theApacheSoftwareFoundation(ASF)wasestablishedtobetterorganizeandchannelthecreativecontributionsofthevolunteercommunity.

AninterestingtwistintheApachestoryisthatwhiletheoriginaleffortwasfocused

solelyoncreatingandsupportingtheApacheWebserverproduct,bytheearly2000s,abroadervisionhademergedinthecommunity—avisionthatencompassedprojectsrelatedtoanumberofotheraspectsoftheWorldWideWeb.Inthisbroadervision,theASFwasnolongerjustaWebserverinitiative;instead,ithadevolvedintoaninnovationcommunitytiedtogetherbya

commonsetofvalues(includingmeritocracyandopenness)andpursuingamoreemergentsetofsoftwaredevelopmentgoals.

Asthenumberofcommunitymembers(orinnovationparticipants)andthediversityoftheinnovationprojectsgrew,theApachecommunityadoptedaveryopengovernancestructure.Eachprojecthasitsown

separateprojectmanagementcommittee,comprisedofmemberscommittedtothatproject,whichexercisesfullautonomyonproject-relateddecisionsandactivities.Acentralboard(againcomprisedofthemostcommittedsetofcommunitymembers)keepsthecommunitytogetherthroughappropriatesupportactivities.Newprojectideasfromindividualmembersare

evaluatednotforthenatureoftheproject(allprojectideasareequallywelcome)butforthepotentialforthegroupassociatedwiththatprojecttoadheretotheoverallcommunitygoals,norms,andvalues.

TheWeb-basedinfrastructureatApache.orgsupportsthecollaborativeprocessandenablesthecommunitymembersto

cometogetherandcontributetothevariousindividualprojects.Further,alltheoutputfromthecommunity’sinnovationeffortsismadeavailableinthepublicdomainundertheopenApachelicense,benefitingthebroadercommunity.

CHAPTER7•THEJAMCENTRALMODEL

141

TheApacheinitiativeunderscoresthekeytenetsoftheJamCentralmodeloutlinedearlier—anemergentinnovationvisionbeingpursuedinacommunity-ledenvironmentinamannerthatbenefitsallthecommunitymembers.Suchacollaborativeinnovationmodelisclearlyevidentinmanyotherpartsofthesoftwareindustry,too—fromoperatingsystems

andWebserverstoenterpriseapplicationsandend-usertools.

ButtheJamCentralmodelhasapplicabilitywellbeyondsoftware.Itisbeingappliedwithsuccessinawiderangeofdomainsandindustriesthatarequitedifferentfromsoftware.Inthischapter,wedescribeexamplesfromtwoverydifferentindustrycontexts—thebiomedical

researchfieldandtheconsumerinteractive-servicesindustry—toillustratethekeyaspectsoftheJamCentralmodel.Byconsideringsuchdivergentcontexts,wehopetodemonstratehowbroadlythismodelcanbeapplied.

WestartwiththecaseoftheTropicalDiseaseInitiative(TDI)—acommunity-basedinnovationinitiativeinthe

areaofbiomedicalresearch.

FINDINGCURESBY“JAMMIN”TOGETHER:THETROPICAL

DISEASEINITIATIVEANDTHESYNAPTICLEAP

Tropicaldiseasesarealargelyneglectedfrontierinthecommercialdrugdiscoveryarena.Onlyabout1%ofallnewlydeveloped

drugsarefortropicaldiseases.2MostofthetropicaldiseasesoccurindevelopingcountriesinAfricaandAsiawherepatientscanseldomaffordtopaythehighpricesthataretypicalofpatenteddrugs.Assuch,thereislimitedinterestfromcommercialpharmaceuticalfirmstopursuedrugdiscoveryinthisarea.AstheWorldHealthOrganizationreportnotes,

tropicaldiseasesrepresentboththegreatestneedandtheopportunityforopencollaborativeresearch,onethatisnotdependentoncommercialproprietarysolutions.3

TheTDIisaWeb-based,collaborativeinnovationeffortaimedatidentifyingcuresfortropicaldiseasessuchasmalariaandtuberculosis.Theprojectwas

launchedbyagroupofscientistsandresearchersincludingStephenMaureroftheUniversityofCaliforniaatBerkeley,ArtiRaiofDukeUniversity,andAndrejSalioftheUniversityofCaliforniaatSanFrancisco.TheTDIprojectaimstobringtogethercomputationalbiologistsandothervolunteerresearcherstoworkcollaborativelyonspecifictropicaldiseasesandthen

makestheresultsofsuchcollaborativeinnovationavailableinthepublicdomain,whereotherresearcherscouldusethemtoguidetheirclinicalresearchwork.

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THEGLOBALBRAIN

Drugdiscoveryisparticularlywell-suitedtoa

collaborativeinnovationapproachbecauseofthedichotomyoftasksinvolvedindrugR&D.TheR&D

processconsistsoftwobroadtypesoftasks:knowledge-basedtasksandrule-basedtasks.Knowledge-basedtaskscallfordeepdomainknowledgealongwithintelligenceandjudgmentcapabilitiesbutverylimitedlaboratoryorothertechnical

infrastructure.Examplesofknowledge-basedtasksincludeidentifyingpromisingtargets,designingcomputerizeddiseasemodels,andsoon.AsBernardMunoswroteinNature,suchknowledge-basedtasksare“aboutscientistsleveragingeachother’sideasandusingtoolstogaindeeperinsightsthatmightleadtobreakthroughs”4—inother

words,buildingonandimprovisingthroughcontinuedinteractions.Ontheotherhand,rule-basedtasksinvolveclinicalexperimentationandrequiresignificantlaboratoryfacilities,equipment,studysubjects(patients),andfunding.Examplesofsuchtasksincludeclinicaltrials,toxicologystudies,andotherlab-intensivework.Rule-basedtasksarealsosubject

torigidregulatoryrequirements,sotheytendtorequirehighlystructuredandcontrolledresearchenvironments.Thus,whileaWeb-basedcollaborativeinnovationmodelmightnotbeappropriateforrule-basedtasks,itisanexcellentapproachtocarryoutknowledge-basedtasks.5

Collaborativeworkinknowledge-basedtaskshas

becomeevenmorepromisingduetotheincreasingimportanceofcomputationinthedrugdiscoveryprocess.6Indeed,computingandbiologyareconvergingrapidly,openingupnewpossibilitiesfororganizingcollaborativeinnovationefforts.Computingresourceshavebecomecheaperandmorewidelyavailable.Newdistributedcomputingtechniquesallowspare

computingresourcesdistributedacrossorganizationalandnationalboundariestobeintegratedintoapowerfulcommoninfrastructure.And,newerandmorepowerfulsoftwaretoolsarebecomingavailablefordrugdiscovery.Thesenewtoolscanhelpscientistsidentifypromisingproteintargetsandleadchemicalcompounds,minegenomicdatabases,visualizebind

sites,mapmetabolicnetworks,anddesigncomplexmolecules.

Thesetoolscanworkondiversemedicaldatabasesandenablevolunteerstoparticipateintheinnovationprojectfromtheirhomes.Further,manyofthesetoolsarenowavailableasOpenSourcetools.Forexample,theOpenScienceprojectisdedicatedtodevelopingand

releasingfreescientificsoftwarefordrugdiscoveryandotherresearchpurposes.7

Thesetwofactors—morecomputingresourcesandbettertools—haveradicallychangedthefaceofcomputationaldrugdiscovery.ThefoundersofTDI,SteveMaurer,ArtiRai,andAndrejSali,drawparallelsbetweencomputationaldrug

discoveryandsoftwaredevelopment:


143

Verysimilartothewaysoftwaredevelopersfindbugsandwrite

patchesinopensourceprojects,biologistslookfor

proteins(“tar-

gets”)andselectchemicals(“drugcandidates”)thatbindtothemandaffecttheirbehaviorindesirableways.Inbothcases,innovativecontributionsconsistoffindingopportunitiesandfixingtinyproblemshiddeninanoceanofcode.8

THETDI-TSLNETWORK

TheTDIbringstogetheracommunityofresearchersandscientistswhohavecommoninterestsrelatedtodrugdiscoveryandarewillingtovolunteertheirtimeandeffortincollaborativelypursuingsuchinterests.TheTDIoffersaWeb-basedenvironmentthathelpstointegratescientifictalent,computingresources(forexample,softwaretools),andawidevarietyof

chemical,biolog-ical,andmedicaldatabases.Inthisenvironment,TDIpartnerswithanotherentitycalledTheSynapticLeap(TSL).

TSLisaNorthCarolina–basednon-profitorganizationfoundedin2005byGingerTaylor,asoftwareprofessional.TSLprovidesapackageofWeb-basedfacilitiestosupportopencollaborativebiomedical

research.9TheWebsiteprovidesthevehiclefororganizingthedifferentresearchtools,technologies,anddatabasesandmakingthemavailabletothecommunitymembers(scientists).

MemberscanperusetheresearchtasksontheWebsite,choosetheonethattheyareinterestedinworkingon,andregisterthemselvesas

contributors.

Contributorscanthendownloadanynecessarydataandtoolsandstartworkingonthatdata.OtherWeb-basedfacilities(forexample,chatrooms,wikis,blogs,anddiscussionboards)providethecommunicationinfrastructureforthecommunitytodiscussanddebatetheinnovativeideasineachproject.Thus,by

providingtheWeb-basedinfrastructure,TSLcomplementstheresourcesandcapabilitiesoftheTDI.AsTaylornotes,“Afterspeaking(withtheTDIfounders),Idiscoveredthattheirheartisreallyinthebiomedicalscience.TheyhavelittleinterestinbuildingandrunningacollaborativeWebsite.Wethereforecombinedforces;theyprovideinputstous,andwe

buildandmaintainthesitewheretheyandotherscientistscancollaborate.”10

TherearethreetypesofplayersintheTDI-TSLnetwork.Acorebodyoffoundingmembers(whichincludespeoplefromTDIandTSL)playstheroleoftheinnovationstewardbyprovidingthebroaddirectionforthecommunityandfacilitatingcollaborationand

communicationamongmembers.Scientistsfromallovertheworldcontributetoindividualprojectsbyvolunteeringtheirtime144

THEGLOBALBRAIN

andscientificexpertise.Insodoing,theyplaytheroleofinnovators.Theirincentivesincludereputationalbenefits,acquisitionofnewskillsandknowledge,expandingtheir

professionalnetwork,andtheprospectofgainingprominenceintheemploymentmarket.Finally,externalorganizations(for-profitaswellasnon-profit)playtheroleofinnovationsponsorsbyprovidingfundingandothertypesofresources,includingcomputingresources,softwaretools,andsoon.

TDIhasdefinedabroad

focusontropicaldiseases.However,thespecificprojectsarelefttoindividualcontributorsorcommunitymembers.Anycontributorcanproposeanewproject,andaslongastheprojectfallswithinthebroadscopeofTDIandthereissufficientinterestamongthecommunitymembers,itwillbeincorporatedintothefold.ThefirstactiveprojectintheTDIportfolioisfocusedon

malaria.

Asnotedearlier,thegoalsandactivitiesofthecommunityareemergent.Forexample,considertheevolutionoftheSchistosomiasisproject.SoonafterthemalariaprojecttookoffintheTDL-TSLforum,MathewTodd,achemistfromtheUniversityofSydney,hadanideaforanopenresearchprojectfor

Schistosomiasis.HisobjectivewastodevelopacheaperprocessforproducingPraziquantal,thecurrenttreatmentforSchistosomiasis.HeinteractedwiththeTDIfoundersandexpressedhisinterestinstartingthisnewprojectandwasencouragedtocollaboratewithGingerTaylortocomeupwithamoreformaloutlineoftheprojectandthedesignofthe

communitysite.HisblogpostontheproposedprojectontheTSLWebforumelicitedmanypositivereactionsfromthecommunitymembers.OnesuchvolunteerwasJean-ClaudeBradley,achemistfromDrexelUniversityinPhiladelphia.BradleyfoundTodd’spostandbegantoofferideasforcollaborativelypursuingthoseresearchgoals.With

sufficientinterestexpressedbycommunitymembers,itwasevidentthattheprojecthadlegsandToddvolunteeredtoplaytheroleoftheSchistocommunityleader.Overthenextfewmonths,heworkedwithTSL’sTaylortodevelopaninformationarchitecturetoserveastheportalfortheSchistocollaborativeresearchproject.

Similarly,newprojectsarebeingdefinedandinitiatedaspartofTDI.Forexample,theideaforaprojectonChagas,adiseasethatplaguesSouthAmerica,wassuggestedbyayoungbiologyresearcherfromVenezuela.Similarly,anotherscientist,MiguelMitchell,isleadinganothernewprojectthatrelatestotuberculosis.Thus,asnewcontributorsjointhecommunity,newresearch

ideasemerge,getsharedandbuiltupon,andevolveintoindividualprojects.


145

MOVINGFROMTHELABTOTHEMARKET

AcriticalissueintheTDInetworkrelatesto

intellectualpropertyrightsandproductionofdrugs.Specifically,who“owns”theoutputfromtheTDIprojectsandhowshouldsuchoutputsreachthe“market”?TheTDIcommunitymembershaveattheirdisposalseveralintellectualpropertyownershipoptions.

Researchersalwayshavetherighttopublishtheirideasintraditionalpeer-reviewed

scientificjournals.Inaddition,theScienceCommonsofferspublicdomainlicenses(similartotheCreativeCommonslicensingscheme)thatcanbeusedtomakeavailabletheleadsortargetsgeneratedthroughtheTDIprojecttootherscientistsforfollow-upwork.

Similarly,ifapromisingleadoranewcompoundis

generatedthroughtheTDIproject,thenitsfurtherdevelopmentcanbeoutsourced.Notethattheearlydrugdiscoveryprocesses,whichformtheprimaryfocusofTDI,occuratapre-commercialstageandtypicallytheoutputmightnothavereachedapatentablestage.However,heregiventhenichefocusofTDI,theobjectiveistokeepthenewknowledgecreatedin

thepublicdomainsothatallthedifferentoptionstoexploitsuchknowledgecanbeexercised.Thisincludesoutsourcingtheclinicaltrialsandproductiontonon-profitpharmaceuticalentitiesor“VirtualPharma”entitiesliketheInstituteforOneWorldHealthandtheDrugsforNeglectedDiseasesInitiative.

TheTDIinnovationnetwork

owesitsearlysuccesstoseveralfactors:theemergenceofcomputationalbiologyasapowerfulandsophisticatedvehicletoresearchanddiscovernewdrugcandidates,theabilityofWeb-basedinfrastructuretobringtogetherhundredsofscientistsandresearcherswhoarewillingtodonatetheirtimeandknowledgeincollaborativeresearch,andthealternativesystemsand

mechanismsavailabletoprotectandsharetheintellectualpropertyrightsinthepublicdomain.TheseforceshaveenabledthecreationofacollaborativeresearchforumthatadherestoallthreecentraltenetsoftheJamCentralmodel—anemergentinnovationvisionandgoals,acommunity-leddiffusedleadershipstructure,andarobustinfrastructuretosupportcollaborative

knowledgecreationandvalueappropriation.

OTHERINSTANCESOFTHEJAMCENTRALMODELINBIOMEDICAL

RESEARCH

AnothersetofexamplesoftheJamCentralmodelevidentinbiomedicalresearchrelatestotheopendatabasesapproach.The

morefamousexamples146

THEGLOBALBRAIN

includetheHumanGenomeProject,theSNPconsortium,andtheInternationalHapMapproject.

ConsidertheInternationalHapMapproject.Theprojectisamulti-countryefforttoidentifyandcataloggeneticsimilaritiesanddifferences

inhumanbeings.11TheHapMap(HaplotypeMapping)isacatalogofcommongeneticvariantsthatoccurinhumanbeings.UsingtheinformationintheHapMap,researcherswillbeabletofindgenesthataffecthealth,disease,andindividualresponsestomedicationsandenvironmentalfactors.Inotherwords,

researcherscanlinkhaplotypes(patternsofgeneticvariation)todiseasephe-notypes.Theproject,startedinOctober2002,involvesscientistsandfundingagenciesfromsixcountries:Japan,theUnitedKingdom,Canada,China,Nigeria,andtheUnitedStates.Theprojectreleasesallinformationgeneratedbyresearchersintothepublicdomain.However,the

informationisreleasedundera“click-wrap”license,whichrequiresthosewhoaccesstheHapMapdatabasetoagreethattheywillnotfileproductpatentapplicationsifsuchpatentsarebuiltupon,evenifonlyinpart,HapMapdata.12Inotherwords,theHapMapprojectadoptsthe“copyleft”licensingscheme.13

Althoughtheprojectdoesnotallowjustanybodytoget

involved—onlythosewhoaretiedtotheaffiliatedorganizationscancontribute—theoverallstructureoftheinitiativefollowstheJamCentralmodel.Thenetworkofscientistsmaintainsabroadinnovationvisionfortheproject—forexample,inthiscase,todevelopahaplotypemapofthehumangenomesoastodescribethecommonpatternsofhumangeneticvariation—and

collaboratebyimprovisingandbuildinguponeachothers’researchwork.Theleadershipforindividualprojectsisdiffusedtothelocallevelandthecentralnetworkinfrastructureisusedtoshareaswellasprotecttherightstothedataandtheotheroutputsfromtheproject.

ToseehowtheJamCentralmodelcanbeappliedtoa

verydifferentcontext,weshiftourfocustothecreationofWeb-basedconsumerinteractiveservicesandthecaseofSecondLife.

CREATINGCONSUMEREXPERIENCESBY“JAMMIN”TOGETHER:

THESECONDLIFE

In1992,NealStephensonauthoredanow-classic

sciencefictionnovelcalledSnowCrashinwhichheenvisionedasuccessortotoday’sInternet—avirtualreality–basedInternetthathecalledtheMetaverse.InStephenson’sMetaverse,CHAPTER7•THEJAMCENTRALMODEL

147

denizenscreate“avatars”oronlinevirtualbodiesand

theirsocialstatusderivesfromthesophisticationoftheiravatars.TheMetaverseinspiredseveralattemptstocreatesuchvirtualrealityworldsandimplementsomeoftheconceptshedescribedinhisbook.Bythetimethe1990srolledaround,3-D

technologieshadalsoadvancedsignificantly,andsuchvirtualworldimplementationsbecame

feasible.

OneofthefirstMetaverse-like3-DvirtualrealityworldswasActiveWorld,launchedinJune1995.ItwassoonfollowedbyahostofotherimplementationsincludingThere,SecondLife,ThePalace,Uru,DotsoulCyberpark,Blaxxun,andEntropiaUniverse.Whilesomeofthesenolongerexistandsomeareontheirway

out,perhapsthemostrepresentative—anddefinitely,themostwell-known—isSecondLife.

SecondLife(SL)isapartlysubscription-based3-Dvirtualworldthatwaslaunchedin2003byLindenLab—aprivatelyheld,SanFrancisco-basedcompanyfoundedin1999byformerRealNetworksCTOPhilipRosedale.TheSecondLife

“world”residesinavastarrayofcomputerserversownedandoperatedbyLindenLab.ThecompanyalsoprovidestheWeb-basedtoolsandtechnologiesforuserstocreate,view,andmodifytheiravatarsandtheotherobjectsintheSLworldandparticipateinitsvirtualeconomy.TheresidentpopulationinSLhasbeengrowingexponentiallysinceitsinception—onOctober18,

2006,thepopulationhitthe1millionmark,andbyJuly2007,ithadreached7million.

ThegoalofLindenLabistocreateauser-definedMetaverse-like“virtualworld”

inwhichusersor“residents”caninteract,play,andparticipateinotheractivities.However,SLismuchmore

thana3-Dvirtualworldforentertainment.

LindenLabseesitselfasbeinginthebusinessofhostingandfacilitating“consumerexperience”innovation.SLoffersdiversetypesofexperiencestoitsresidents.TheseexperiencesarenotcreatedbyLindenLab—theyarecreatedcollaborativelybytheresidentsthroughindividual

creativityandinteractions.

TheroleofLindenLabistoprovidethecontextandthetoolsforresidentstocreatethoseexperiences.Inshort,SecondLifeisamassiveexperimentincollaborativeexperienceinnovation.Assuch,itisanexcellentexampleoftheJamCentralmodel—whiletheinnovationspaceconstitutes“userexperiences,”thenatureof

theseexperiences(thatis,theinnovationgoals)areemergentandtheresidents(thatis,theinnovators)“jamtogether,”improviseininnovatingthoseexperiencesandshareinthefruitsoftheinnovation.

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THEGLOBALBRAIN

THESLNETWORKAND

THEPLAYERS

LetusconsiderthenatureoftheinnovationnetworkandtheplayersinSL.

Broadly,theinnovationnetworkinSLconsistsofthreeplayers:LindenLabplaystheroleofinnovationsteward,individualsandotherresidentsofSLplaytheroleoftheinnovatorsandcorporationsseekingto

connecttothecommunityplaytheroleofinnovationsponsors.

LindenLab’sprimaryroleistofacilitateexperienceinnovationinSLbybringingthecollaboratorstogetherandprovidingthemwiththesupportingtoolsandtechnologiestoinnovateandtheinfrastructuretoappropriateandsharethevaluefromtheinnovations.

ItssuccessinthisrolecanbetracedtothreekeyideasofLindenLabfounder,Rosedale.

Rosedale’sfirstkeyideawastocreatealiveforumthatcouldbringtogethertheresidentsandhosttheirinteractions.Theseliveinteractionsformtheexperience—nothingispredeterminedorpre-designed.LindenLab’s

computersdoalltheintensecomputationalworkthatisneededtokeeptheSLdynamicandasliveastherealworld.

Thesecondkeyideawastosupportresidents’creativitybyofferingeasy-to-usetoolsandtechnologiesthatcanbeusedtocreateobjects(includingresidents’

ownavatars)inSL.While

thetechnologiesareuser-friendly,theyarepowerfulenoughtosupportthediversecreativetalentthatresidentsbringtoSL.Forexample,onesuchtoolisa3-DModelerthatallowsresidentstocreatecomplexobjects—rangingfromavatarattachmentstobuildings,sculptures,andgardens—outofasetofbasicbuildingblocks.ResidentscanthenuseSL’sscriptinglanguage

(calledLindenScriptingLanguage)toapplyscriptstoshapethebehavioroftheobjectstheycreate.SLalsoprovidestoolstoaddtexturetothesurfaceofany3-Dobject(forexample,tattoosonanavatar’sskin)toenhanceitsrichness.Multimediacapabilities(forexample,sound)canalsobeaddedtosuchobjects.Thispowerfulsuiteoftoolsenablesresidentstocreate

veryrichobjectsinSLthatexhibitdiversebehaviorsandleadtodiverseexperiencesthroughtheirinteractions.

ThethirddecisionthatRosedalemadewastoallowtheresidentstoretaintherighttotheircreation,whetheritbetheirownavataroranyotherobjectthattheycreatedinSL.ThisfeatureallowedLindenLabtodevelopatruly

collaborativeinnovationenvironmentinSLthatemphasizestheresidents’roleasinnovators.

Asinnovators,residentscontributetothecommunitythroughtheobjectstheycreateaswellasthroughtheinteractionstheyparticipatein.Thus,themorediversetheresidents,themorediversetheoverallexperiencesintheSLworld.


149

Finally,corporate,non-profit,andothertypesoforganizationsparticipateinSL

bysponsoringandcatalyzingthecollaborativeexperienceinnovation.Asaninnovationsponsor,afirmcandirectly

hostandfacilitateexperiences.Forexample,AmericanApparelopenedanoutletinSLthatallowsresidentstobrowsethroughmerchandiseandshopforvirtualclothingfortheiravatars.14

Thecompanyisnowconsideringtest-marketingnewstylesofjeansinthevirtualenvironmentbeforetheyarelaunchedinreal-life

stores.Bycatalyzingsuchvirtualshoppingexperiencesforresidents,thecompanycontributestothecommunity—inreturn,garneringadditionalcompanyexposureandbrandrecognition.Companiescanalsosponsorusers’experienceinnovation.Forexample,onSeptember14,2006,PopSci.com(theonlinehomeofPopularScience)sponsoredaspecialliveconcertinSLthat

featuredpopularSLmusiciansincludingJonathanCoulton,MelvinTook,andEtherianKamaboko.

MANAGING“AVATAR”BEHAVIORANDRIGHTSINSL

MembersoftheSLcommunityaretiedtoLindenLabthroughasetofTermsofServicetheyagreetowhentheyjointhenetwork.This

formalagreementallowsLindenLabtoestablishabasicsetof“accepted”behaviororgroundrulesandspecifiesconsequencesifsuchrulesarenotadheredto.Forexample,residentswhoharassotherresidentsorengageindestructivebehaviorcanbeejectedfromthecommunity.Similarly,residentscanalsoregisterciviccomplainsinregulartown-hallmeetingsandthese

complaintswillthenbeacteduponbyLindenstaff.TheseformalgovernancemechanismsenableLindenLabtoensureaninnovationenvironmentthatmemberswouldwanttobeapartof.

However,suchformalmechanismsareonlypartofthestory.

Moreimportantasagovernancemechanismare

thebehavioralnormsthatexistamongthemembersthemselves.Suchsocialmechanismsincludegroup-drivencultureandreputationalsystems.Forexample,SLiscomposedofnumerous“interest”groups.Individualresidentscancreategroupsandinviteotherresidentstojointhem.Groupscanbebasedonaparticularinterestoractivity.Thenamesofthegroupsthat

aresidentbelongstoaredisplayedinthatuser’sprofile.Eachgroupcansetupitsowngroupleadershipteamwithtitlesandresponsibilities.Thegroupsthroughtheirinteractionssetuptheirownnormsandvalues—suchgroup-drivencultureformsapowerfulmechanismtobringcoherencetomembers’interactionsandexperienceswithinSL.

Asnotedpreviously,residentsowntherightstotheirinnovationsinSL—forexample,theobjectsthattheycreate.EventhoughtheactualcomputercoderelatedtotheobjectsresidesonLinden’sservers,residentsretainthefull150

THEGLOBALBRAIN

intellectualpropertyrightsforallthedigitalcontent

theycreate.LindenLabemploystheCreativeCommonslicenseschemetoenableresidentstoassignrightstotheirinnovations.Thisgivesresidentsconsiderableleewayindecidinghow,when,andinwhatwaysotherresidentscanuseorbuildontheirinnovation.

Itisimportanttonotethat,whileresidentsmightown

therightstotheobjectstheycreate,“consumerexperiences”arebasedontheinteractionsamongtheobjectscreatedbythedifferentcommunitymembers.Assuch,thereissufficientincentiveforcommunitymemberstosharetheirinnovationswithothersandtofacilitatesuchinteractions.

LindenLabalsoprovidesthe

infrastructureformeasuringandmonetizingvaluecreatedinthecommunity.SLhasitsowncurrency,referredtoasLindenDollars(L$).ResidentscanacquireL$bysellingtheobjectstheycreate.TheeconomythatisbasedonL$hasgrownconsiderablyoverthepastfewyearswiththeincreasedlevelofactivityintheSL“economy.”IntheSLeconomy,residentscan

appropriatevaluefromtheirinnovationsbytransactinginL$.

LindenalsoprovidesanexchangecalledtheLindeXforresidentstoconvertL$

intoUS$.

ThecaseofSecondLifethusillustratestheapplicationoftheJamCentralmodelinyetanothercontext—the

consumerinteractiveservicesindustry.

Whiletheparticularsandthedetailsmightbedifferentfromtheearliercontextsofsoftwareandbiomedicalresearch,thethreethemesoftheJamCentralmodeloutlinedearlierformstheessenceofSecondLife,too—SLresidents(innovators)collaborateandimprovisetocreatenewinteractive

experiences(innovation)inacommunity-ledenvironmentthatissupportedbyaninfrastructureforprotectionandsharingofinnovationrights.

“JAMMIN”TOGETHERTOCREATEMUSIC:MYVIRTUALBAND(MVB)

MyVirtualBand.com(MVB)(acquiredbyNetMusicMakers.comin

December2006)isaWebportalformusicianstocometogetherand

form“virtualbands”tocollaborativelywriteandproduceoriginalmusicthatcanthenbefreelysharedwithothers.15

MVBwasstartedin2004bytwoMadison,Wisconsin-basedfriendsKellySenecal(aguitarist)andScottMason

(adrummer).ThetwohadstartedCHAPTER7•THEJAMCENTRALMODEL

151

andplayedinabandtogetherfrom1996onwards.However,whenone

ofthemhadtomovetoadifferentcity,theyfelttheylackedthetoolstoworkonmusicalprojectstogether.

ThisunmetneedgaverisetotheideaofbuildingaWebportaltofacilitatecollaborativesongwritingandrecording.

MVBoffersanonlineforumformemberstoadvertisetheirindividualprojectsandinviteothermemberstojointhoseprojectsbyuploadingaudiotracksoftheirowninstrumentsorvocalsandspecifyingthetypeof

collaborationthatisneeded.Memberscandownloadthefiles,addtheircontributions,andreuploadthem—sothesongevolvesovertimethroughcontributionsfrommultiplecommunitymembers.Whenasong

iscompleted,MVBputsitasanMP3fileontheFeaturedSongslist,whichnon-membersaswellasmemberscanlistento.

MVBoperatesonaCreativeCommonsAttribution2.0licensethatit

callsthe“MVBOpenMusicAgreement.”Thelicenseappliestoallaudiofilesandothersupportingmaterials(forexample,lyrics)thatare

uploadedontheMVBserver.Italsoappliestocompletedsongs.Thus,anymembercanfreelycopy,distribute,

display,perform,andofcourse,addtoormodifythesongsaslongasacknowledgmentsaremadetotheoriginalauthorsofthemusic.MVBalsooffersamoreformalmusic

showcaseordistributioninfrastructurecalledtheMVBRadiothatisapodcastofthecompletedsongs.Memberscanvoteonthesongsfor

inclusioninthepodcast.Insum,MVBrepresentstheessenceoftheJamCentralmodel—acommunityofmusicianscomingtogethertoimprovise

andcreatenewmusicthatisopenlysharedandthusbenefitstheentirecommunity.

ELEMENTSOFTHEJAMCENTRALMODEL

WhenwecomparethedifferentexamplesoftheJamCentralmodelthatwehavedescribedinthischapter,weseesomecommonelementsthatdefinetheessenceofthisformofnetwork-centricinnovation.Table7.1summarizesthesecommonelements.

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THEGLOBALBRAIN

Table7.1ElementsoftheJamCentralModel

Elementsof

Network-Centric

Innovation

TDI/TSL

SecondLife

Apache

Natureofthe

Drugdiscoveryfor

Creationofrichand

DevelopmentofWeb-

innovation

tropicaldiseases

diversedigital

relatedsoftware

space

andotherneglected

experiencesfor

products

diseasesconsumers

Structureofthe

TDIboardprovides

Individualresidents

ASFcouncilprovides

network

broadguidance;

andresidentgroups

broadguidance;

leadership

individualproject

makekeydecisions

individualproject

teamsexercise

teamsexercise

completeproject

completeproject

autonomyautonomy

InnovationRoles

Architect

TDI/TSLasinnovation

LindenLabas

ASFasinnovation

steward

innovationsteward

steward

Adapter

Individualscientist

Residentasinnovator

Individualdeveloper

asinnovator

asinnovator

Agent

Pharmacompaniesas

Consumercompanies

Softwarecompanies

innovationsponsor

asinnovationsponsor

asinnovationsponsor

NetworkManagement

Network

Trustandreputation-

Formalmechanisms

Apache“meritocracy”

governance

basedsystems

(TermsofService)

andsocialmechanisms

(groupculture,trust,

andsoon)

Knowledge

Web-basedfacilitiesto

Onlineforumsfor

Onlineforumsto

management

shareinformationon

consumerstoextend

supportknowledge

“targets”andco-create

supporttopeers

sharing

knowledge

IPrightsand

ScienceCommons;

CreativeCommons

ApachePublic

value

Licensingrightsto

license

License

appropriation

“virtualpharma”and

non-profits

Thefirstcommonthreadinalltheseexamplesistheemergentnatureoftheinnovationgoals,andtheneedforcontinuousimprovisationthroughiterationsandinteractions.Theinnovationspaceisonlybroadlydefined—whetherit

beCHAPTER7•THEJAMCENTRALMODEL

153

thefocusontropicaldiseasesinTDI,theWeb-basedsoftwareintheApachecommunity,ortheinteractiveexperiencesinSecondLife.Thespecificinnovationgoalsthenemergefromthecommunitythroughthecontinuedinteractionsofthe

members.Thistwo-phasegoalsetting(broadinnovationfocusandemergentinnovationgoals)wasevidentinallthedomainswestudiedandindicatesthenatureofthecommunity-basedleadershipstructurethatprovidesthefoundationfortheinnovationactivities.Suchemergentgoalslendtoasenseofbelongingandownershipamongcommunitymembers

astheyworktogethertoevolvethesharedgoalsandobjectives.Theyalsoimbuethecommunitywiththeimprovisationalspiritthatpervadestheinnovationprocess.Indeed,theactualinnovationismarkedbya“callandresponse”pattern—membersrespondtoandimproviseoneachothers’contributionstoiterativelyevolvetheinnovation.

Thesecondcommonthreadrelatestothedecentralizednatureofdecisionmakingintheinnovationnetwork.Inallthecontexts,thediffusedleadershipisachievedthroughtwomechanisms.Thefirstmechanismenablestheentirecommunitytocometogethertomakecriticaldecisionsregardingthebroaderinnovationagendaorthecommunity’sgoals.InthecaseofTDI,this

taskisachievedbyaninformalbodythatconsistsofthefoundingmembersandsomeofthemostactivecommunitymembers.InthecaseofApache,thetaskisachievedthroughtheBoardoftheApacheSoftwareFoundation.Thesecondmechanismoperatesattheindividualprojectorgrouplevelandenableslocalizeddecisionmakingthatinvolvesonlythosemembers

whoparticipate(orhaveastake)inthatproject.Thecombinationofthesetwomechanismsensuresthecontinuedinvolvementofthecommunitymembersintheevolutionoftheinnovationagendaaswellasthenecessaryflexibilityforindividualprojectstocharttheirownpath.

Athirdcommonthreadrelatestothenatureofthe

collaborationinfrastructure.Giventheimprovisationnatureoftheinnovationprocess,theJamCentralmodelreliesonaneffectiveinfrastructuretofacilitatetheconstant

“giveandtake”thatinvolvesmultiplemembersofthecommunity.Typically,theinfrastructurehaselementstosupportboththe“socialknowledgecreation”

aswellasthedevelopmentofa“sharedworldview”thatiscriticaltokeepthecoherenceofthevariedinnovationactivitiesinthecommunity.

Inmostcases,theinnovationstewardhadtheresponsibilitytomaintainthecollaborationinfrastructure—whetheritisasimpleonlineforumforcommunitymemberstointeract(forexample,discussionboards

intheApachecommunity)ormorecomplexfacilitiestoswapknowledge(forexample,thewikisanddatabasesinthecaseofTDIorobjectrepositoriesinthecaseofSecondLife).

154

THEGLOBALBRAIN

AnotherimportantobservationintheJam

Centralmodelrelatestotheappropriationofrewardsfromtheinnovation.Whilethereisanemphasisonsharingthefruitsoftheinnovationwiththewidercommunity,thisdoesn’tnecessarilymeanthatallintellectualpropertyrightsarereleasedtothecommunity(ortothepublicdomain).Indeed,aswehaveseeninthecaseofSecondLife,certainrightsrelatedto

aninnovationmightstaywithanindividualmember.However,thecommunitymightprovidethemechanismforindividualmemberstosharesomeofthoserightswithothercommunitymemberssothattheycanbuildonthoseinnovations.Asisevidentfromtheexamples,theabilityofthecommunitytodeviseanddeployinnovativemechanismstoshare

intellectualpropertyrightsamongthecommunitymembersisessentialtoensurethesuccessoftheinnovationinitiatives.

JOININGTHEJAMSESSIONS:HOWLARGECOMPANIES

CANPARTICIPATE

Despitethecommunity-basedinnovationagendaandgovernancesystemoftheJamCentralmodel,abundantopportunitiesexistforlargefor-profitcompaniestoparticipateinsuchinitiatives.However,realizingsuchopportunitiesrequirescompaniestounderstandthespecificrolestheycanplayandthecompetenciestheyneedtoperformsuchroles.

Largecompaniescanplaytheroleofaninnovatorbycontributingtheiremployees’timeandefforttoJamCentralprojects.Forexample,IBM“donates”

hundredsofitsemployeestotheLinuxcommunity.TheseIBMemployeeswritecodeandcontributetotheLinuxdevelopmentinthesamewayanyothermemberoftheLinuxcommunitywould.

TheyparticipateintheLinuxonlineforumsanddiscussthedifferentmoduleenhancementideaswithothervolunteerdevelopers,writecodetoaddnewfunctionalities,andtestfinishedcodewrittenbyothercommunitymembers.

Similarly,companiesinbiomedicalresearch,canparticipateasinnovatorsbydonatingtheiremployees’

timeandexpertise.Forexample,onecompanythatisparticipatinginaTDIprojectisInpharmatica,amidsizedLondon-basedbiotechcompany.Similarly,severallargepharmaceuticalcompaniesincludingEliLillyandMerckareactivelyexploringopportunitiestoparticipateinsuchcommunity-led,drugdiscoveryprojects.Inatypicalscenario,ascientist

employedbythepharmaorbiotechcompanywouldparticipateasavolunteerresearcherinaproject—forexample,byworkingonprotein“targets”identifiedCHAPTER7•THEJAMCENTRALMODEL

155

inpriorresearchandhelpingthecommunityadvancethedrugdiscoverytothe

experimentalstage.Playingsuchaninnovatorrolemight,however,requirethecompanytomakeastrategiccommitmenttotheinitiativeasitislikelytoinvolvecontributingvaluableandexpensiveresources(domainexpertise,scientifictalent,andsoon)totheprojectwithlimitedclarityonanydirecteconomicreturns.

Corporationscanalso

promoteandfacilitatecommunity-ledprojectsbyplayingtheroleofaninnovationsponsor.Theycanprovidecomputing,laboratory,orothertypesofinfrastructuralsupportforinnovationactivities.Forexample,CollaborativeDrugDiscovery,aSanFrancisco-basedcompanythatwritessoftwareforbiomedicalresearch,providesfreeaccesstoitsbiomedicaldatabasesto

themembersoftheTDIcommunity.ThisaccessofferstheTDIcommunitymembersarichresourcetominetargetsrelatedtothedifferentdrugdiscoveryprojectsthattheypursue.Similarly,inApril2006,MicrosoftlaunchedacollaborativeinitiativecalledtheBioITAlliance,whichaimstounitethepharmaceutical,biotech,hardware,andsoftware

industriestoexplorenewwaystosharecomplexbiomedicaldataandcollaborateamongmulti-disciplinaryteamstospeedthepaceofdiscoveryinthelifesciences.16TheothermembersofthenetworkincludeAmylinPharmaceuticals,AppliedBiosystems,Geospiza,Hewlett-Packard,Interknowlogy,ScrippsResearchInstitute,Sun

Microsystems,andVizXLabs.Microsoftplaystheroleoftheinnovationsponsorinthisnetworkbyprovidingbothdatamanagementresourcesaswellasspecifictechnicalexpertisetothenetworkmembers.Oneofthefirstprojects,theCollaborativeMolecularEnvironment,involvesbuildinganapplicationenvironmenttocapturelaboratorydata

electronicallyandenablescientiststoannotateitandsearchforiteffectively.TheprojectutilizesthesoftwaretoolsandothertechnicalresourcesprovidedbyMicrosoft.

Althoughcorporateorganizationscancontribute“free”resourcestothecommunity,suchcontributionsarenotentirelyaltruistic.IBM’s

contributionstotheLinuxdevelopmentprojecthaveearneditthegoodwillofthecommunity.

IthasevenearnedIBMaseatatthedecision-makingtableintheLinuxcommunity.Forexample,participationintheOpenSourceDevelopmentLab(OSDL)allowsIBMtonotjustparticipateactivelyintheadvocacyofLinuxbutalsoinfluencetheevolution

oftheoverallcommunityinnovationagenda.

Similarly,Microsoft’scontributionstotheBioITalliancealsohavecommercialbenefitsforthecompany.AsDonRule,platformstrategyadvisoratMicrosoft,notes,“We’relookingattheareaswheredisruptivechangesareoccurringinthe156

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(pharmaceutical)industry,focusingonbringingtogetherproof-of-conceptapplicationsthatwillalleviatesomeofthebottlenecksweseeintheindustry.

TheadvanceswillbenefitMicrosoftaswellastheothercompanieswearecollaboratingwith.”17

CONCLUSION

Thecommunity-centricJamCentralinnovationmodelholdstremendous

promiseasawaytoorganizeandshapetheinnovationactivitiesindiverseindustriesandmarketsrangingfromsoftwaretodrugdiscoverytointeractiveentertainment.However,animportantissuethatwehave

notdiscussedsofarrelatestotheappropriatenessofthismodeltoparticularcontexts.WhatarethefactorsthatdeterminetheapplicabilityoftheJamCentralmodelinspecificinnovationcontexts?Wewillreturntothisquestionafterwedescribeinthenextchapterthefourthandfinalmodelofnetwork-centricinnovation,theModStationmodel.

C

H

A

P

T

E

R

8

TheMOD(“MODification”)

StationModel

Intheprecedingchapter,wesawhowacommunityofinnovators

cancometogethertoimprovisetheirwayinaninnovationinitiative.

However,notallcommunity-

basedinnovationneedstobemanaged

inthisemergentmanner.Communitiescanalsocometogetherto

innovatearoundawell-definedtechnologyorplatform.

InChapter3,“TheFourModelsofNetwork-CentricInnovation,”we

talkedaboutaninnovativecommunity-basedapproachtocreatea

movie,Sanctuary.Themovie,offeredintothepublicdomainunderanopenlicense,fueledthecreativeenergyofindividualcontributorswhoadapt,interpret,andevolvetheoriginalmovie.Thisopen

approachhastwo

requirements.First,theinnovationprojectshould

bedesignedsothatelementsoftheprojectcanbepartitionedand

handedofftodifferentcommunitymembers.Second,theproject

sponsorshouldprovidethetoolstomodify,adapt,andrecombine

theelementsoftheinnovation.Thiscommunity-basedmodification

approachisyetanotherformofnetwork-centricinnovation—one

thatmarriesthecertaintyofawell-definedinnovationarchitecturewiththediversityandthecreativityofacommunityofcontributors.

Inthischapter,weexaminethismodelofnetwork-centricinnova-

tion,whichwecalltheMODStationmodel.AswenotedinChapter

4,“InnovationNetworks:ThePlayersandthePlays,”thetermMOD

itselfisassociatedmostwith“modifications”madetoa

computer

gamebythegeneralpublic(orusers)andhence,knownas“mods”

inthecomputergamingindustry.Generalizingfromthisdefinition,

157

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werefertotheMODStationmodelofnetwork-centricinnovationasaninnovationcontextwhereinacommunityofinnovatorscometogethertocreatenewofferingsbymodifying,extending,and/orenhancinganexistinginnovationplatforminwaysthatbenefitallmembersofthenetworkincludingthecreatoroftheinnovation

platform.

TounderstandhowtheMODStationmodelworks,wetakealookatthecomputergamingindustrywherethismodeloriginated.Later,weconsiderothercontextsincludingthesemiconductorindustry.

“MODDING”INTHECOMPUTERGAMINGINDUSTRY

AnarenawheretheMODStationmodelisquitepopularisthecomputergamingindustry.Manygamersarehighlyconversantwithcomputerprogramming,andafairnumberofthemalsobelieveinthe“hackerculture”—pursuinginnovativeideastochangethegametoaddanextradimensionofchallengeorexcitementtothegame,ortoimprovetheiroddsofsuccess

inplayingthegame.Soavidgamersoften“hack”ormodifythegames,andsometimestaketheadditionalstepofreleasingtheirmodificationstoothergamersthroughonlinegamingcommunityWebsites.MostcontemporaryPC-basedgamesaredesignedsothattheycanbemodifiedbygamersrelativelyeasily.Thecombinationofthehackingcultureandtheease

withwhichgamescanbemodifiedhasgivenrisetothephenomenonof“mods”inthecomputergamingindustry.

Thebenefitsfrommodsaccruetogamersaswellastothedevelopersoftheoriginalgames.And,thishasledtomanygamedevelopers(forexample,EpicGames,idSoftware,ValveSoftware,BethesdaSoftworks,andso

on)takingamoreproactiveapproachtopromoteandsupporttheinnovativeactivitiesofthegamingcommunityinwaysthatopenupnewcommercialpossibilitiesfortheoriginalgameaswellasenhancetheoverallgamingexperience.

THE“MODDING”ANDTHE“MODDERS”

Theoriginalgameprovides

thestructurefortheinnovativeactivityofthegamingcommunity.However,theprecisenatureandextentofthemodificationscanvarywidely.Broadly,themodscanbeoftwotypes—partialconversionsandtotalconversions.

Partialconversionsarerelativelyminoralterationstoagame,inthattheydonot

changetheunderlyingelementsorflowoftheoriginalgame.Forexample,CHAPTER8•THEMOD(“MODIFICATION”)STATIONMODEL

159

modificationscanchangetheexecutionofcertainfunctionsofthegameincludingthebehaviorofspecificactors,theoperation

ofparticularweapons,andsoon.Partialconversionscanalsoinvolveaddingnewelementstothegame—forexample,newweapons,newgamemaps,new“skins”—thatbringmorecomplexitywithoutchangingtheunderlyingflowofthegame.Forexample,TeamFortress,oneofthemostpopularmods,isapartialconversionoftheoriginalgamecalledQuake.

Totalconversions,incontrast,involvemodifyingtheoverallgameplayaswellasthecoreelementsofthegame.Whileatotalconversionmodmightstillemploythebasicengineoftheoriginalgame,theendproductcanbeacompletelydifferentgamewithadifferentlookandfeel.Typically,suchtotalconversionprojectsinvolvecomplexdevelopmentwork

andasignificantamountofdevelopmenttimeandthusareoftenpursuedasagroupproject.

Whilemodsexistformostofthepopulargames,somegamesinparticularhaveattractedalotofattentionfromthegamingcommunity.AnotableexampleisHalf-Life,agameproducedbyValveSoftwarein1998.Half-Lifewasasingle-player

“first-personshooter”(FPS)gamewithacomplicatedplotinvolvingaprotagonistwithanadvanceddegreeintheoreticalphysicssavingEarthfromasetofattackingaliens.Withmorethan8millioncopiessoldsinceitsrelease,Half-Lifeisoneofthebest-sellingPCFPSgamestodate.ThesuccessofHalf-Lifecanbeattributednotonlytothepioneeringelementsoftheoriginal

gamebutalsotothehighlyinnovativemodsthatfollowedintheeightyearsorsosincethereleaseoftheoriginalversion.

ModsforHalf-Lifehaverangedfrompartialconversionsthatinvolvednewgamemapstototalconversionthatchangedthegamefromsingle-playertomultiple-playerformat.Thebest-knowntotalconversion

modofHalf-LifeisCounterStrike,whichusestheHalfLifeenginebutisamultiplayer-onlygame.CounterStrikeisateam-based,first-personshooterinwhichtheplayersjoineithertheterroristsorthecounter-terrorists,andcombattheopposingteamwhilefulfill-ingpredeterminedobjectives.Releasedshortlyaftertheoriginalgame,CounterStrikeisthemostpopularonline

first-personshootergameinhistory—withmorethan94,000gamersplayingatanygiventimeandcollectivelycontributingmorethan5billionminutesofplayingtimeeachmonth.1Indeed,CounterStrikehasbecomesopopularthatithasgenerateditsownmodsanddedicatedgamingcommunities.

Becausemosttotalconversionmodsusethe

basicengineoftheoriginalgame,playingsuchmodsrequiresowningtheoriginalgame,too.However,someofthegameengineshavebecomefreesoftwareallowingthetotalconversionsto160

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becometrulystand-alonegames—playablewithouthavingtoowntheoriginal

game.ExamplesincludetheTremulousmodforQuakeIIIArenaandtheD-Day:NormandymodforQuakeII.

Inthisinnovationnetwork,thegamedeveloperplaystheroleofaninnovationcatalystbymakingthegame“moddable”;thatis,releasingitinaformthatallowsmodding.Forexample,gamedeveloperscanfacilitatemoddingby

defininggameplayvariablesinnon-proprietaryfileformatsandadoptinggraphicsofastandardformat(forexample,bitmapfiles).Developerscanalsomakeavailableextensivetoolsanddocumentationtoassistmodmakers.Forexample,inthecaseofHomeworld2,agamethatrequiresaverysophisticatedtoolcalledMayatobuildnewin-gameobjects,afreeversionofthe

toolwasmadeavailabletothemoddingcommunity.

Similarly,inthecaseofHalf-Life,ValveSoftwareprovidedtoolsandcodetothegamingcommunity.Forexample,itincludedWorldcraft,thedesigntoolusedduringthegame’sdevelopment,aspartofthegamesoftware.Thedeveloperalsoreleasedacomprehensivesoftware

developmentkit(includingtextureeditors,modeleditors,andrivalleveleditors)thatenabledeasiermodding.Finally,thesourcecodeofthegamewasalsoreleasedandhasbecomethebaseforthemanymultiplayermodesthathavebeencreatedforthegame(includingCounterStrike).

Theindividualswhoparticipateincreatingthe

modsplaytheroleofinnovators.Inthegamingcommunity,theyarereferredtoasmodders.Mostmoddersbelongtothefancommunityassociatedwithaparticulargame.Theonlineforumsassociatedwithsuchcommunitiesalsoprovidetheplatformforthemodderstopromoteanddistributethemods.

Theonlineforumsalso

providethecontextforagroupofmodderstocometogetherasateamtopursueprojectsofcommoninterest.Someofthesemodderteamsgoontocreatemorethanonemod.OnesuchexampleisTeamReaction,aprolificmodteam,mostnotablyknownfortheQPongandJailbreakmods.

INCENTIVESFORMODDING

Allcomputergamesinvolvesomecombinationofintellectualpropertyrights—

copyrights,trademarks,patentedtechnology,andtradesecrets.However,byandlarge,acopyrightisthemostwidelyappliedIP(intellectualproperty)rightmanagementmechanisminthecomputergameindustry.Acopyrightinacomputer-basedgameprotectsthe

sourcecode(eitherembeddedonaphysicalCHAPTER8•THEMOD(“MODIFICATION”)STATIONMODEL

161

mediumsuchasaDVD-ROMorasafilemadeavailablefordownload).Manyotherelementsofagame(suchasgameartwork,musicalscore,andsoon)

mightbesubjecttothecopyrightofadifferententity(author).

TheIPissuesrelatedtothemodsarecomplexandyettoberesolved.2Mostmodsarederivativeworksastheyarebuiltonorusepartsofothergames.Assuch,gamedevelopersrequiremodstobenon-commercialorfree.Asnotedpreviously,somegamedevelopershave

openedupthesourcecodeoftheirgamesforusebythemodcommunitywhileotherdevelopershavepartiallyopenedupthecode.Forexample,theQuake2gameenginefromidSoftwarehasbeenreleasedtotheopensourcecommunityundertheGNUPublicLicense(GPL).Similarly,RavenSoftware(whichlicensedtheQuake2engineprivatelytocreatethegameHereticII)released

partofthesourcecodeofHereticIItothemodcommunitywhilekeepingclosedsomeotherpartsastheywereconsideredtradesecrets.

Despitetheissuesrelatedtointellectualpropertyrights,gamedevelopershavelargelyadoptedapositiveapproachtowardsthemoddingcommunity,becausetheyrealizethatmoddingoffers

importantindirectbenefitsforthem.Goodmodshelptobuildandmaintainafanbaseforthegame.Thelargerthenumberofmodsassociatedwithagame,thebiggertheplayercommunityassociatedwithit.Modsalsoextendthelifecycleofagame.Eachtimeanewmodisreleased,theoriginalgameattractsanewgenerationofplayers.Formostmods,theoriginalgameisstillrequiredtorun

themod,soanumberofhigh-qualitymodscanresultinasignificantincreaseinthesalesoftheoriginalgame.Forexample,inthecaseofHalfLife,popularmodssuchasCounterStrike,TeamFortressClassic,DeathmatchClassic,Firearms,Ricochet,andDayofDefeathaveextendedthelifeofaproductthatwasfirstreleasedin1998byseveralyears,andhavehelpedpush

thetotalsalestoover15millionunits.

Gamedeveloperscanalsoacquirethemorepopularmodsandconvertthemintodistinctproducts.Forexample,bothCounterStrikeandDayofDefeatweresopopularinthegamingcommunitythattheywereboughtbyValveSoftwareandturnedintofull-fledgedretailproducts.Game

developerscansavedevelopmentcostsaswellasdevelopmenttime.Inaddition,somegamedevelopershavealsoencouragedmodcreationbyhiringthestarmodcreators.

Althoughalltheprecedingincentivesbenefitthegamedeveloper,theplayercommunityalsogainsmuchfromthemodscreatedbythecommunitymembers.

Mostmodsarenon-commercialproducts,sotheyarefreeofcost.Thismeansthatmodsmultiplythereturnsfrompurchasingtheoriginalgame.Modsalsoprovideapowerfulavenuetochannelthecreativityofindividualdevelopers.Witha162

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greaterproportionofgame

codeaswellasdevelopmenttoolsavailableinthepublicdomain,thedevelopmentofmodshasbecomeeasier.Further,thereputationalincentivesassociatedwithcreatinghigh-qualitymodsserveasapowerfulmechanisminattractingmoreandmoretalentintothemoddingcommunity.

Insum,thecomputergameindustryoffersanexcellent

illustrationoftheMOD

Stationmodelofnetwork-centricinnovation—acommunityofinnovatorscomingtogethertoinnovateinaclearlydefinedandstructuredinnovationspaceandsharingthebenefitsofsuchinnovationwithothermembersofthenetwork.

However,thismodelisnotlimitedtothecomputer

gamingcontext.Indeed,itfindsapplicationinseveralothercontexts.Letusnowconsideranexampleofthismodelfromaprojectinthesemiconductorindustry—namely,the

OpenSPARCInitiative.

“MODDING”THECHIPARCHITECTURE:THEOPENSPARC

INITIATIVE

Inearly2006,SunMicrosystemsInc.launchedtheOpenSPARCInitiative—acommunity-basedinitiativetopromoteopenandcollaborativeinnovationarounditshitherto-proprietarySPARCmicroprocessorarchitecture.TheinitiativeinvolvedthecreationofacommunityWebsite

http://www.OpenSPARC.net

(www.OpenSPARC.net)

whereSunreleasedthesourcecodeandotherspecificationsintothepublicdomainunderanopensourcelicenseallowinganycontributortomodifyandbuildontheSPARCarchitecture.

SPARCstandsforScalableProcessorArchitectureandisatechnologythatisbasedon

therevolutionaryReducedInstructionSetArchitecture(RISC)createdattheUniversityofCalifornia,Berkeleyinthe1980s.TheSPARC

architecturewasinitiallyimplementedinworkstations,whichwerehigh-performancestandalonemachinesusedforscientificandfinancialservicesapplications.Later,itwas

usedtobuildprocessorsforlargeservers,averydifferentapplication.SPARCmachinesgenerallyuseSun’sSolarisoperatingsystem,butovertheyears,otheroperatingsystemsrangingfromFreeBSD,OpenBSD,andLinuxhavealsobeenused.OneofthemorepopularSPARC

implementations—theSPARCstation1—was

introducedbySunin1989.

Inthesameyear,SunalsoestablishedaseparateentitycalledSPARC

InternationaltopromotetheSPARCarchitectureandtoprovideconformancetesting.SPARCInternationalownsandmanagesthelicensingoftheSPARC

architectureandthe

associatedtrademark.Theorganizationhasbeeninstrumentalinthelate1980sandearly1990sinlicensingthetechnologytoseveralCHAPTER8•THEMOD(“MODIFICATION”)STATIONMODEL

163

manufacturersincludingTexasInstruments,Cypresssemiconductors,andFujitsu.

Overtheyears,severalversionsoftheSPARCarchitecturehavebeenreleased—themostnotablehavebeenSPARCVersion8,thestandard32-bitarchitecturedefinitionreleasedinthelate1980s;SPARCVersion9,the64-bitarchitecturereleasedin1994;andUltraSPARCArchitecture2005,anextendedarchitecturedefinition,releasedinlate

2005.

Inlate2005,SunalsointroducedUltraSPARCT1,anewmicroprocessorimplementationthatconformstotheUltraSPARCArchitecture2005specificationandexecutesthefullSPARCV9instructionset.UltraSPARCT1isdesignedasamultithreading,multicoreCPUandisattheheartof

Sun’snewestserverline,theSunFireT2000andSunFireT1000servers.

OnMarch21,2006,SunmadetheUltraSPARCT1processordesignavailableundertheGNUGeneralPublicLicense(GPLv2)throughtheOpenSPARC

project.

Sunpursuedtheopenlicense

strategyfortworeasons.First,Sunrealizedthattherevenuesitcouldderivefromitsproprietaryinternal“builds”andsupportservicescouldbesignificantlyenhancedbythecomplementaryexternalinnovationthatcouldbecreatedforitsarchitecture.Second,thecompanyalsorealizedthattherewerediversenewapplicationareasforitsSPARCarchitecture

chips,rangingfromconsumerelectronicstohealthinformatics.Enteringsuchnewmarketswouldbefareasierifthecompanyadoptedamoreopenapproachtowarditstechnologyarchitectureandencouragedcommunity-basedinnovationinitiativestargetedatsuchnewapplicationareaswhereSunhadlimitedexpertise.

Thus,theprimaryobjectiveoftheOpenSPARCinitiativewastoenableacommunityofinnovatorstotakethesourcecodeandspecificationsofthe64-bitUltraSPARCT1processorandmodifyandbuildonittodesignanddevelopanewgenerationofmulticore,multithreadedchipsandcomplementarysoftwareproducts.Thenewerchipsandsoftwareproductswould

openupnewermarketsfortheUltraSPARCT1design,benefitingallcommunitymembers.

WhilemodifyingandimprovingthebasicSPARCarchitectureisoneoftheprimaryobjectivesoftheOpenSPARCinitiative,anotherequallyimportantobjectiveistofacilitatethe“SystemOnaChip”(SOC)design.TheSOCdesign

movementisdictatedbytheneedtolowerproductcostsaswellastospeedupproductdesigncyclesinthesemiconductorindustry.Itinvolvesintegratingontoasinglechipanumberoffunctionalmodulesthatinthepasthavebeen164

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spreadacrossseveralchips.Akeychallengeinthis

designapproachinvolvesgettingaccesstotheIPrelatedtotheseparatepieces(neededforintegrationonagivenchip)inaformatthatfacilitateseasycustomizationandreadyintegration.TheOpenSPARCinitiativeisaimedatbuildingmomentumforsuchanSOCdesignmovement.

Thus,theinnovationspaceintheOpenSPARCprojectis

clearlydefinedandstructuredbytheSPARCarchitecturespecificationsandtheinstructioncodesetthatSunreleasedintothepublicdomain.Specifically,SunreleasedthesourcecodeinVeriloglanguageofthe64-bit,32-threadedUltraSPARCT1

processor.ThisnewopensourceversioniscalledtheOpenSPARCT1.Alongwith

thisversion,SunalsoreleasedthefullUltraSPARCArchitecture2005

specification(thatis,theinstructionset)aswellasthefullOpenSPARCsimulationenvironmentandverificationsuites.Inaddition,severalothersupporttoolsandtechnologiesthatfacilitateinnovationonthearchitectureincludingSunStudiosoftwareandSPARC-

optimizedcompilerwerealsoreleased.AllofthesetechnologieswerereleasedundertheGPLv2license,whichgivestherighttouse,modify,and/orredistributethetechnologies,therebyenablingawiderangeofinnovationactivities.Tounderstandwhattheseactivitiesare,letustakeacloserlookattheoperationoftheOpenSPARCcommunity.

THEOPENSPARCCOMMUNITYANDTHEINNOVATIONACTIVITIES

MembershiptotheOpenSPARCcommunityisopenandfreetoanyinterestedentity—firmsaswellasindividuals.ByregisteringatthecommunityWebsite,contributorscangetaccesstoallthecodeandthetools.Theycanalsoparticipateinanyoftheopen

projects.Inmid2007,morethan200registeredmemberswereintheOpenSPARCcommunity,amajorityofthembeingfirms.

Whoarethekeyplayersinthiscommunity?ThefirstkeyplayerisSunitself.

Thecompanyplaystheroleofaninnovationcatalystbycontributingthebasearchitectureuponwhichall

theinnovationactivitieswillbebased,andbycreatingtheWeb-basedinfrastructuretosupportthecommunityactivities.SunalsoactivelyparticipatesinthecommunitygovernanceandprovidesabroadroadmapfortheevolutionoftheSPARCarchitecture.

Thesecondkeyroleisthatoftheinnovator.Allcommunitymemberswho

contributetotheenhancementoftheSPARCarchitectureplaythisrole.ThesecommunitymembersorinnovatorsrangefromsoftwareandhardwarefirmstoindividualdevelopersandacademicresearcherswhocontributeindifferentCHAPTER8•THEMOD(“MODIFICATION”)STATIONMODEL

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ways.Forexample,softwarefirmstakethesourcecodeoftheSPARCarchitectureandcreateinnovativesoftwareapplicationsthatarehighlyoptimizedandtightlyintegratedwiththehardware.Microprocessorchipdesignersandmanufacturers(foundries)taketheSPARCarchitectureandmodifyittodevelopnewerchips.Similarly,otherhardwarevendorsuseknowledgeof

SPARCarchitecturespecificationstodesignhighlycustomizedbenchmarkingtoolsandverificationsuites.Finally,individualdevelopersandresearchersbuildontheSPARCarchitectureandspecificationstoresearchanddevelopnextgenerationchiparchitectures.Manyoftheseindividualdeveloperstendtoworkforfirmsorresearchinstitutions.

ThenatureoftheOpenSPARCcommunityissuchthatmembersdonotnecessarilyhavetohaveanyformalrelationshipswithSun.OpenSPARC.netisanindependententityandassuchallthemembersdeveloptheirtieswithoneanotherthroughthecommunity.Further,therearenointermediariesinthecommunity.Tiesamongcommunitymembersare

developedovertimebasedonthenatureoftheprojectstheyareworkingon.

MembersintheOpenSPARCcommunityarefreetoinnovateeitherwithinoroutsidethearchitecture.Withinthearchitecture,memberscan,forexample,addordeletecores,addnewinstructionstotheinstructionset,modifythedifferenttypesofinterfaces(memory

interface,Input/Output,cache/memoryinterface,etc.).Memberscanalsoinnovateoutsidethearchitecturebydesigningadditionalcomponentsthatextendthearchitecture—forexample,videoorgraphicscomponents,networksinterface,andsoon.

AsofJuly2007,therehavebeenmorethan4,700OpenSPARCT1RTL

downloadsthroughthecommunityWebsite.TypicalprojectsintheOpenSPARC

communityhaverangedfromportingoperatingsystemstothecurrentSPARC

chiptodevelopingnewerchipsthatbuildontheSPARCarchitecture.

Forexample,inItaly,asmallcompanycalledSimplyRISC

designedandpublishedthefirstderivativeproductoftheOpenSPARCchipdesign.SimplyRISC

isacompanythatdevelopsandsupportsCPUcores,peripherals,andinterfacesreleasedundertheGNU-GPL(opensourcelicensingscheme)tobuildfreehardwaredesignsofmicroprocessors,Systems-on-a-ChipandNetworks-on-

a-Chip.In2006,ateamofengineersatSimplyRISCcreatedacut-down(single-core)versionoftheOpenSPARCT1processorcalledtheS1core,whichcanrunonUbuntuLinuxandcanbeusedinembeddeddevicessuchasPDAs,set-topboxes,anddigitalcameras.ThisversioncanbefreelydownloadedandimplementedonaLinuxhost.

166

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Anotherprojectrelatestooperatingsystemsoftware.DavidMiller,anindividualsoftwaredeveloper,ledtheLinuxcommunityincreatingaLinuxportfortheOpenSPARCT1processorthatwasaddedtothemainlineLinuxkernel.Theportallowsaverydiverseset

ofapplicationstorunontheOpenSPARCarchitectureandalsopavesthewayforabroaderadoptionofthetechnology.And,basedonthiswork,twoLinuxdistributors—UbuntuLinuxandGentooLinux—

havealreadybroughtoutOpenSPARC-specificLinuxdistributions.

Finally,amoreambitious

projectbasedontheOpenSPARCopensourceisbeingpursuedbyasetofresearchersattheUniversityofCalifornia,Berkeley.

Theproject,calledResearchAcceleratorforMultipleProcessors,orRAMP,isaimedatdevelopinganewmulticore,microprocessorarchitecturethatisfocusedonparallelcomputing.Theresearchersareworkingon

buildingamassivelypowerfulandcomplexarchitecturethatinvolveschipsthatholdonetotwodozencores.TheRAMPteamhasadoptedtheOpenSPARCT1processorasatargetprocessorforitsprojectbecauseitisavailableinthepublicdomain.

COMMUNITYGOVERNANCEANDINFRASTRUCTURE

AlthoughSunistheinitiatoroftheOpenSPARCproject,itisacommunity-ledinitiative.Thecommunityhasestablishedaformalmechanism,anelectedcommunityadvisoryboard,toexercisesuchcommunityleadership.Reflectingthecommunity-basedgovernancestructure,theadvisoryboardisexpectedtosolicitinputfromthecommunityonaregularbasis

andusethisinputtoshapetheevolutionoftheinitiative.TheOpenSPARCcharterexplicitlystatesthat

“TheboardshallbeselectedandshallconductitsaffairsinaccordancewithdemocraticprinciplesandshallrepresenttheinterestsoftheOpenSPARCcommunity.”3Assuch,theroleoftheadvisoryboardissimilartothatofadvisory

councilsthatarecommoninOpenSourceSoftwarecommunities.

Theadvisoryboardhelpstosetacoherentinnovationagendaforthecommunity—anagendathatembodiesthewillandtheinterestsoftheoverallcommunity.AsDavidWeaver,Sun’srepresentativeontheOpenSPARCboardnoted,“Theboardistheretohelpfosterthedevelopment

ofthecommunityandasafinalarbiterincaseofanydisputesthatmightarise.”4Theboardalsohelpsinpromotingasetofcommunity-wideprinciplestoguidethecollaborativeinnovationactivitiesandpractices.Theseguidingprinciplesincludeequalrightsandopportunitiesforallmembers,fairprocessesinallcommunityprojects,andtheobligationtomake

available,wheneverpossible,theIP(intellectualproperty)rightstoallcommunitymemberstobuilduponandshare.5

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167

Sohowcanamemberinitiateandparticipateina

collaborativeprojectinOpenSPARC.net?Anyregisteredcommunitymembercanstartanewproject.

Whenamembermakesarequesttostartanewproject,therequestisevaluatedbyacommunitymanagertoensurethattheproposedprojectmeetstheguidingprinciplesofthecommunity.Aftertheprojectisapproved,

thememberswhoparticipateinthatprojecthavealltherightsandresponsibilitiestomanagetheactivitiesandmakealltheproject-relateddecisions.Memberscanplaydifferentcontributingrolesinaproject—fromprojectownertodevelopertocontentdeveloper.

OpenSPARC.netconstitutesthecentralforumformemberstointeract,

downloadandusethetoolsandtechnologies.Itliststheongoingprojectsandtheirdetailstoallowmemberstojointheprojects.Italsoprovidesdifferenttypesofinteractionfacilitiestomembersrangingfromcommunitydiscussionboardstoblogsandwikis.Anditofferstoolstosupportcollaborativedevelopment,includingmailinglists,sourcecodeversioncontrol,

issuetracking,andfilesharing.

Thecommunityisalsointheprocessofdevelopingan“openbook”onOpenSPARCT1thatislicensedundertheCreativeCommonsAttributionLicense.Theobjectiveistodescribethearchitectureindetail(asortofusermanual)toassistthedevelopercommunity.

IPRIGHTSMANAGEMENTANDVALUEAPPROPRIATION

SunmadetheOpenSPARCarchitectureandthespecificationsavailabletothecommunityundertheGPLv2license.TheGPLv2isanopensourcelicensethathasbeenapprovedbytheOpenSourceInitiativeandprovideswidelatitudetotheusertorun,copy,distribute,

ormodifythetechnology.TheGPLisbuiltonthe“copyleft”principle,whichgiveseverypersonthepermissiontoreproduce,adapt,modify,ordistributeawork(asoftwareprogram,anart,apieceoftext,andsoon)aslongassuchrightsarepreservedforanyresultingmodificationsoradaptationsaswell.

Communitymembersare

allowedtomakeprivatemodifiedversionsofthetechnology,withoutanyobligationtodivulgethemodifications,aslongasthemodifiedtechnologyisnotdistributedtoanyoneelse.However,ifamemberchoosestomodifyandredistributethetechnology,thenthemodifiedtechnologymustalsobelicensedtotheOpenSPARCcommunityunderthesame

GPLv2license.Thispracticeensuresthatthewholecommunitybenefitsfromtheinnovativeeffort.Notethatmembersareallowedtodistributeamodified168

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technologyandchargeafeeforitaslongasthemodifiedtechnologyisalsoreleasedunderGPLv2tothecommunity.

AllcontributorstotheOpenSPARCcommunityarealsorequiredtosignaContributorAgreement(CA)beforecontributingcodetothecommunity.6TheCAensuresthatthecommunityhasapatentlicenseforallcontributionsmadetotheproject.TheCAestablishesajointcopyrightassignmentinwhichthecontributorretainscopyrightownershipwhilealsograntingthoserightsto

Sunastheprojectsponsor.However,theCAdoesnotchangeanyoftherightsandresponsibilitiesthatareduefromtheGPLv2oranyotheropensourcelicenseusedinthecommunityWebsite.

TheSPARCtrademarkremainsthepropertyofSPARCInternational.Assuch,whilemodifiedornewdesignsbasedontheOpenSPARCarchitecturecan

bemarketedbycommunitymembers,theywillneedtolicensethetrademarkiftheywanttoassociatesuchnewormodifieddesignswiththeSPARCname.

AninterestingquestionhereishowdoesSunbenefitfromtheOpenSPARCinitiative?Or,inwhatwaysdoesSunappropriatevaluefromthisproject?

OnebenefitisthatbecauseSunstilldevelopsandmarketssystemsthatarebasedontheUltraSPARCT1architecture,byopeningupthearchitectureandestablishingavibrantcommunityaroundit,theinitiativewillleadtothecreationofnewmarketsthatthecompanycantarget.Forexample,withtheporting(implementation)ofLinuxontheOpenSPARCplatform,

themarketforSun’sUltraSPARC-basedsystemsbroadenedconsiderably.AsDavidWeaverofSun’sArchitectureTechnologiesGroupnoted,“Ourhopeisthatthecreativitythatgetsunleashedontheopenplatformwouldleadtonewandinnovativeapplications—applicationsthatSunhasneverthoughtabout(andmayneverwill)—thatexpandandenhanceour

broaderecosystem.Anoverallbiggerpieandanincreasedsliceofthepieforeveryone.”AnotherbenefitisthattheOpenSPARCinitiativeenablesmoreexternal“eyes”tobefocusedonresearchingthechallengesandopportunitiesaroundmultithreadingand64-bitprocesses(forexample,theRAMPproject)therebyenablingthesetechnologiestoevolvemorerapidlyand

creatingneweropportunitiesforSun’sowninternaltechnologydevelopmentprojects.Further,byincreasingthenumberofpeoplewhocanobtaintheSPARCarchitecturecode,theOpenSPARCinitiativealsoincreasesthenumberofdeploymentsandthebaseofcustomerslikelywillingtopayforsystems,software,andservicesfromSun.

CHAPTER8•THEMOD(“MODIFICATION”)STATIONMODEL

169

Forcontributingmembers,thecommunityprovidesothertypesofincentives.

TheOpenSPARCWebsiteoffersamarketplacetoexchangeortradeproductsandtechnologiesdeveloped

bycommunitymembersontheOpenSPARCarchitecture.Memberscanmarketfreeaswellas“paidfor”products.Forindividualdevelopersaswellasothercommunitymembers,returnscanalsocomethroughexposuretootherfirms.Byparticipatinginandcontributingtothecommunity,firmscanenhancetheirreputationamongtheirpeersaswellastrackthetechnology

evolutionandmarketdynamicsthatinturnmightinformtheirowninternaltechnologydevelopmentstrategies.

COMBININGOPENSPARCWITHOTHERSUNINITIATIVES

SunhasextendedtheOpenSPARCmodeltoitsothertechnologies—most

notably,itsoperatingsystemSolaris—throughtheOpenSolariscommunityprojectanditsJavatechnologythroughtheOpenJavainitiative.

TheSolarisOSisSun’soperatingsystemdistributionandisbranded,tested,maintained,andsupportedasaSunproduct.TheOpenSolarisprojectprovidestheopensourcecodebaseof

Solaris,the“build”toolsnecessaryfordevelopingthecode,andaninfrastructureforcommunicatingandsharingrelatedinformation.7Overtime,Sunexpectsmost(ifnotall)developmentofthesourcetotakeplaceintheOpenSolariscommunity.SincelaunchingtheOpenSolarisinitiative,SunclaimsasignificantincreaseintheinstalledbaseofSolaris(uptonearly6

millionregisteredlicenses).8

InMay2007,SunreleaseditsimplementationoftheJavatechnologyasfreeOpenSourceSoftwareundertheGNUGPLv2license—effectivelyreplicatingthesamecommunity-basedcollaborativeinnovationmodelthatitusedfortheOpenSPARCandtheOpenSolaristechnologies.Thesourcecodetoallthree

implementations—theJavaPlatformStandardEdition(JavaSE),theMicroEdition(JavaME),andtheEnterpriseEdition(JavaEE)—werereleasedtothecommunityformodificationandenhancement.

Thesuccessofthesecommunity-basedinitiativeswilldependonSun’sabilitytobeaneffectiveinnovationcatalyst—offeringan

appropriateinnovationinfrastructure,beingcreativeindevisingIPrightsmanagementsystems,andbeingaresponsiblecommunitypartner.Inaddition,Sun’sabilitytofindpotentialsynergyamongthethreeinitiativeswouldalsoshapethegrowthandsuccessoftheseinitiatives.

170

THEGLOBALBRAIN

MODDINGINTHEWEBSERVICESARENA:THE“MASHUP”

MOVEMENT

AmorerecentexampleoftheMODStationmodelofnetwork-centricinnovationistheMashupmovementthathasemergedintheWebservicesmarketsince2005or

so.TheMashupmovementrepresentsthecreativityofindependentdevelopersandentitiesinmixingandmatchingdataandpresentationelementsfrommultipleWebinformationsourcestooffernewandinnovativeWebservices.

TheinnovationarchitectureinthiscontextisdefinedbythedataandpresentationelementsofpopularWeb

informationsitessuchasYahoo!,GoogleMaps,Flickr,VirtualEarth,Technorati,YouTube,Zillow,andAmazon.Theinnovationactivitiesinvolvecombiningdifferentelementsofthesearchitecturestocreatemashupsornewservices.

TherearetwotypesofplayersintheMashupcommunity:ThelargeWebinformationcompaniesthat

playtheroleofinnovationcatalystsandtheindividualsandsmallfirmsthatplaytheroleofinnovatorsbycreatingthemashups.Theapplicationprogramminginterfaces(APIs)publishedbythelargecompaniesprovidetheprimarymechanismfortheinnovatorstocombineelementsfrommultiplesources.Furthermore,theselargecompaniesalsoprovidefreeaccesstotheirdata(as

wellasthepresentationformats)therebypromotingtheMashupmovement.Inmanycases,theyalsoprovidevisibilitytosuchinnovativeeffortbylinkingsuchmashupstotheirWebsites.

ConsiderMappr,onesuchmashup.9MapprwasdevelopedbyateamofSanFrancisco–baseddesignersandprogrammers.The

MapprserviceusestheFlickrAPIsandsiftsthroughthetagsofallthephotospostedonFlickr.com(bymorethan300,000Flickr.comcustomers)andthentransposesthemagainsttheU.S.

map—ineffect,creatingaphotoguideofthedifferentplacesandpeopleindifferentpartsofthecountry.

AsofJuly2007,thereweremorethan2,000mashupsrangingfrommapmashupstonewsmashups.10Morearebeinginnovatedeveryday,atanaveragerateofaroundthreeperday—indicatingtherichnessoftheinnovationspace.

WhatistheincentiveforthelargeWebcompaniessuchasFlickrtooffersuchfreeaccessandplaysucha

sponsoringrole?Mashupsallowthemtotapthecreativityofexternaldevelopersinawaythatenhancesthevisibilityandusageoftheirownproducts.Forexample,throughtheMapprservice,Flickr.comcangetCHAPTER8•THEMOD(“MODIFICATION”)STATIONMODEL

171

moreWebsurfers(orcustomers),someofwhommightbewillingtopaymoreforpremiumservices.Inotherwords,theMashupmovementenableslargeWebcompaniestoexpandthereachoftheirWebservicesplatformstonewermarketsandcustomers.AsPaulLevine,generalmanagerofYahoo!Localnotes,

“Wewanttoencourage

communityparticipation(throughmashups).It’sessentiallyresearchanddevelopmentandmarketingforus.”11

Asatruecommunity-basedinitiative,theMashupmovementalsomaintainsanexpectationtogivebacktothecommunity.Forexample,inthecaseofMappr,theservicepublishesitsownAPIsthatotherdevelopers

canuse.Inshort,onemashupcanbuildontopofanothermashupbyusingtheappropriateAPIs,therebyformingatrulycollaborativeinnovationprocess.

TYINGTOGETHERTHECOMMONELEMENTSOFTHEMOD

STATIONMODEL

Thethreeexamplesofthe

MODStationmodelofnetwork-centricinnovationaredifferentinmanyrespects,buttheyhavesomecommonthemes(seeTable8.1).Webrieflydiscussthesethreekeythemes.

Table8.1ComparisonoftheThreeMODStationExamples

Elementsof

Network-Centric

OpenSPARCComputer

Mashup

InnovationInitiative

Games

Movement

Natureoftheinno-

Definedbythe

Definedbyindivid-

Definedbythedata

vationspace

SPARCarchitecture

ualcomputergames

andpresentation

architectureofkey

Webinformation

serviceproviders

Structureofthenet-

OpenSPARC

Communityof

Communityof

workleadership

communityled

modders

developers

InnovationRoles

Architect(innovation

SunMicrosystems

Gamedevelopers

Webinformation

catalyst)

serviceproviders

Adapter(innovator)

Individualandfirm

Individualsandmod

Individualandfirm

innovators

teams

innovators

continues

172

THEGLOBALBRAIN

Table8.1ComparisonoftheThreeMODStationExamples

Elementsof

Network-Centric

OpenSPARCComputer

Mashup

InnovationInitiative

Games

Movement

NetworkManagement

Networkgovernance

Advisoryboard

Moddingcommunity

Mashupaggregator

providesbroadcom-

forumsassociated

forumsserveasthe

munityguidance;

withindividual

platformforthe

individualprojects

gamesdevisenorms

broadercommunity

managed

andvaluesand

todevise“do’sand

autonomously

validate/regulate

don’ts”andtoeval-

modquality

uatemashupquality

Knowledge

OpenSPARC.net

Onlineforumsserve

APIsprovidethepri-

management

providesallthe

tosharetools,docu-

marymechanismto

infrastructure

ments,andsoon

sharedataandinte-

relatedtothegame

grateknowledge

IPrightsandvalue

Openlicensing

Mixofopen(for

Individualdevelop-

appropriation

scheme:GPLv2

example,GNU-GPL)

ersdecidetheIP

andproprietary

rightsoftheir

licensing

mashups

Onethemeisthat,ineachoftheexamples,theplatformfortheinnovationactivitieswasclearlydefinedorwellspecified—forexample,theOpenSPARC

architectureortheHalfLifecomputergame.Theavailabilityofsuchastructuredinnovationspaceservesasacatalysttobringtogetheracommunityof

innovatorsandalsoprovidedcoherencetotheircreativecontributions.Whileasingleentityisgenerallyresponsibleforreleasingtheinnovationplatformtothepublicdomain,thenatureoftheinnovationactivitiesonsuchaplatformislargelylefttothecommunity.Forexample,inthecaseofcomputergames,individualmodteamsdecidethespecificnatureof

modificationstheywouldmaketothegame.

Anothercommonthemeisthepresenceofsomeformofcommunitygovernance.InthecaseoftheOpenSPARCcommunity,aformalmechanism—agoverningboard—channelsandfacilitatescommunityleadership.Inthecaseofcomputergames,themodcommunitiesaremore

looselyorganizedaroundthedifferentonlinemodforums.Theinteractionsofthecommunitymembersintheseforumsprovidethecontextfordevisingandapplyingthecommonnormsandvaluesofthecommunity.CommunityinteractionsalsoservetoregulateorCHAPTER8•THEMOD(“MODIFICATION”)STATIONMODEL

173

validatethequalityofthemodsandindirectlyallowthecommunitymemberstoformulateasharedvisionofthedesirednatureofinnovations.Inallthreeexamplesthatweconsidered,thesuccessofaninnovationislargelybasedontheuseofthatinnovationbythecommunitymembers.Assuch,communitymembers

exerciseconsiderableinfluenceontheoverallinnovationagendaandtheoutputs.

Thethirdcommonelementrelatestotheintellectualpropertyrightsandtheincentivesassociatedwiththeinnovativecontributionsofthecommunity.OurexamplessuggestthattheMODStationmodeldemandsamixofIPrights

mechanismsandincentivesappliedtopromoteandsustaincommunity-basedinnovationactivities.Itisalsoevidentthatopen(left)andclosed(right)IPrightsmechanismscancoexistinmanyofthesecontextsandhelpchanneltheinnovativecontributionsofthecommunitytospecificareasoftheinnovationplatform.Forexample,byopeningupcertainpartsofthecode,

gamedeveloperscanencouragethedevelopmentofmodsrelatedtospecificelementsofthegame.Similarly,intheinformationservicesindustry,bycarefullyopeningupcertainelementsofinformationdeliveryarchitecture,technologyfirmshavebeenabletoencourageandpromotethecreationofinnovativemashups.Theseexamplessuggestthat

applicationoftheappropriatemixofIPrightsandincentivescanhelptocatalyzecommunity-basedinnovationactivitiesinwaysthatbenefitallthemembersofthenetwork,includingthefirmsthatcontributetheplatformforsuchinnovation.

LARGECOMPANIESANDTHEROLEOFTHEINNOVATION

CATALYST

Ourexamplesclearlydemonstratethatcompaniesthatplaytheroleoftheinnovationcatalystbycontributingtheinnovationplatformtothecommunitycanrealizeseveralbenefits—bothdirectandindirect.Forexample,weoutlinedsomeofthebenefitsthatSunderivesfromitsOpenSPARCinitiative—expan-sionofthe

company’sexistingcustomerbase,greaterreachintonewermarkets,explorationoftheapplicationpotentialoftheSPARCarchitecture,andsoon.Wealsoindicatedthedifferenttypesofbenefitsthatgamedevelopersmightobtainfrommodsassociatedwiththeirgameproducts—highersales,longerproductlifecycle,largerandmorediversefancommunity,brandrecognition,andsoon.

Ineffect,byopeningupcertainpartsoftheirproductortechnologyarchitectureforcommunity-basedinnovation,companiescancreatewin-winsituationsforallthemembersofthenetwork.

174

THEGLOBALBRAIN

Howcancompaniesadopt

theMODStationmodeltopromotesuchcommunity-basedinnovationinitiativesfocusedoncertainpartsoftheirproductortechnologyarchitectureinwaysthatbenefitsalltheentitiesinvolved?Whatspecificcapabilitiesandresourcesdotheyneedtobringasaninnovationcatalyst?

Weaddressthesequestionsindetailinthenexttwo

chapters.AkeyobservationisthatthesuccessfuluseoftheMODStationmodelrequiresaclearunderstandingoftheincentivesforthecommunitymemberstoinnovateontheplatformandtodeviseandapplytheappropriatemixofIPrightsmechanismsthatwouldsupportsuchincentives.Italsodemandsthatcompaniesserveasatrue“partner”ofthe

innovationcommunity,andbecomfortablewithoperatinginacontextwheretheinnovationgoals,objectives,andactivitiesarelargelyshapedbythecollectivedesiresofthecommunitymembers.

CONCLUSION

TheMODStationmodelofnetwork-centricinnovationisarelativelynascent

phenomenon.Mostoftheapplicationsofthismodelhavethusfarbeenlimitedtoinformation-basedproductsandservices(forexample,software,computergames,computerhardware,movies)thataremorereadilyamenablefordeployingsuchapartitioned,community-basedinnovationinitiative.Asthetrendtowardincreasingtheinformationintensityofproducts

continues,wearelikelytoseethismodelextendedtootherproductsandmarkets.

Wehavenowcompleteddescribingthefourcoremodelsofnetwork-centricinnovation.Beginningwiththenextchapter,wefocusonthelogicalnextquestion—whichmodelisthemostappropriateforaspecificcompany?Andwhatdoesittaketomakeeachmodel

work?Weexploretheseissuesbyshowinghowtomatchthemodeltothecontextofthecompany’smarketandenvironment,andbydetailingthecompetenciesandbestpracticesassociatedwithspecificrolesineachofthemodels.

P

A

R

T

IV

ExecutingNetwork-Centric

Innovation

Chapter9DecidingWhereandHowtoPlay177

Chapter10Preparingthe

Organization197


C

H

A

P

T

E

R

9

DecidingWhereand

HowtoPlay

Inthepublicspeakingbusiness,itisoftensaidthatagoodpresentationshouldanswerthreequestions:

What?Sowhat?Andnow

what?Sofarinthisbook,wehaveaddressedthefirsttwoquestionsbyintroducingtheGlobalBrainanditsawesomepowertoturbo-chargeinnovation,andbydescribingthefourmodelsofnetwork-

centricinnovation.Butwearestillleftwiththethird,andperhaps,themost

importantquestion—nowwhatdowedo?Howshould

yourcompanytapintotheGlobalBrain?Whatmodelshouldituse?

Andhowcanyouprepareyourorganizationtoembraceanetwork-

centricinnovationstrategy?Inthischapter,weofferapractical

roadmapforcompaniesandmanagerstoidentifyandpursueoppor-

tunitiesfornetwork-centricinnovationthatbestmatchthecontext

ofthecompanyanditsbusinessenvironment.

Intheprocessofresearchingthisbook,weinterviewedasenior

manageratalarge,Midwest-basedtechnologyfirmwhowasrespon-

sibleforleadinghiscompany’scollaborativeinnovationinitiatives.

Duringourconversation,themanagerremarkedthatinthelasttwo

yearsorso,thecompanyhadbeendabblingwith“open”

innovation

initiatives.However,hewasnotsatisfiedwiththeprogresstheyhadmade.Hefeltthatalotofenergyandinvestmenthadbeenexpended

ontheseeffortswithlittletoshowintermsoftangibleoutcomes.

177

178

THEGLOBALBRAIN

Theproblemwasnotalackofcommitmentfromseniormanagement,R&D,ortheproductdevelopmentorganization.Rather,hefeltthattheproblemlayinthelackofacoherentapproachtoidentify,evaluate,andpursueexternally-focusedinnovationopportunities.

Compoundingtheissuewasthefactthatthecompanyparticipatesinawiderangeofmarketsandhasseveralthousandproductsspreadacrossmanybusinessunits.Facedwithawidearrayofopportunities,theexecutivefeltthatthecompanywasunclearaboutwhatopportunitiesandrelationshipsitshouldfocuson,andhowitshouldpursuepromisingopportunities.

Thisconcernisechoedbymanagersinmanylargecompanieswehavestudied.

Werespondtothisconcernbyofferingathree-stepapproachtoaddressingthequestionofwhereandhowacompanyshouldtapintotheGlobalBrainthroughanetwork-centricinnovationstrategy:

1.Welookathowacompany

canscopeitsnetwork-centricinnovationinitiativesanddeterminethemostappropriateopportunities.

2.Weshowhowthecompanyshouldprepareitselfintermsoforganizationalcapabilitiesandresourcestopursuethosespecificoppor-

tunities.

3.Wehighlightbestpracticesthatitcanadoptforimplementingitsnetwork-centricinnovationstrategy.

Inthischapter,wefocusonthefirststepbyprovidingguidelinesformanagerstoevaluatethedifferenttypesofopportunitiesbasedonindustry/marketfactorsandtoselecttheopportunitiesthatbestleveragethefirm’sresourcesandcapabilitiesas

wellasalignwiththefirm’soverallinnovationagenda.

POSITIONINGYOURFIRMINTHEINNOVATIONLANDSCAPE

Thediscussioninthepreviousfourchaptersillustratedthatdifferentmodelsinthelandscapeofnetwork-centricinnovationhavedifferentimplicationsforaparticipatingfirm—

implicationsforthenatureoftheinnovationroles,innovationcapabilities,innovationoutcomes,andvalueappropriation.Ifthereare

“differentrolesfordifferentfolks,”howshouldacompanyanswertheseem-inglysimplebutimportantquestion,“Wheredoesmycompanyfitinthenetwork-centricinnovation

landscape?”(seeFigure9.1)CHAPTER9•DECIDINGWHEREANDHOWTOPLAY

179

Emergent

CreativeBazaar

JamCentral

YourFirm?

Network

Leadership

Centralized

Diffused

vation

Inno

Space

Orchestra

MODStation

Defined

Figure9.1Positioningyourfirminthenetwork-centricinnovationlandscapeThefirststepinansweringthisquestionrequiresanalyzingtheindustryandmarketcharacteristicsforthefirmandidentifyingthequadrantinthenetworkcentric

innovationlandscapethatismostappropriateforthefirm’scontext.ForlargemultibusinesscompanieslikeP&G,DuPont,GE,IBM,andUnilever,thisanalysismightneedtobeconductedattheStrategicBusinessUnit(SBU)level,becausetheindustryandmarketcontextislikelytobequitedifferentacrosstheSBUs.Forexample,atGE,theGEHealthcarebusinesshasa

verydifferentbusinesscontextfromGENBCUniversalorGEMoney.

Thesecondstepistoanalyzethenatureoftheinnovationcontributionthatthecompanycanmakeandthespecificroleitcanplayinthatpartofthenetworkcentricinnovationlandscape.Thisanalysishastotakeintoconsiderationtherequirementsofthe

innovationroleaswellastheuniqueresourcesandcapabilitiesthatthecompanycanbringtotheinnovationcontext.

Westartwiththefirststep.

DECIDINGONTHEMOSTSUITABLEMODEL

Thefirm’sinnovationcontextplaysakeyroleindeterminingwhichmodelof

network-centricinnovationismostappropriate.Threebroadsetsofquestionsframethecontext:

180

THEGLOBALBRAIN

■

Howwelldefinedistheinnovationspace?Aretheinnovationgoalsclearly

articulated?Doestheinnovationdefineanewarchitectureorextend/enhanceanexistingarchitecture?Howvisiblearethemarket

opportunities?Howwelltiedaretheinnovationgoalsandthearchi-

tecturewiththosemarketopportunities?

■

Whatisthenatureoftheknowledgeandcapabilitiesdemandedbytheinnovation?Doinnovationprojectsinvolvehighlyspecializedor

advanceddomainknowledge?Whatistheextentofknowledgeintegra-

tionrequired?Whatarethecapabilitiesneededfor

participatingintheinnovationactivities?Howwidelydistributed(oravailable)arethesecapabilities?

■

Howwellestablishedarethemechanismsforappropriatingvaluefromtheinnovation?Willtheinnovationrequireestablishingradicallynew

valueappropriationsystems?Doestheinnovationcontextallowamixof“open”and“closed”IPrightssystemstocoexist?Isitpossibletodeployadiversesetofincentivestoappealtodifferenttypesofcontributors?

Table9.1capturestheimportantindustryandmarketconditionsthatreflecttheprecedingissuesand

shapethechoiceofthedifferentnetwork-centricinnovationmodels.Basedonthesefactors,wenowdescribethetypicalcontextthatbestsuitseachofthefourmodels.

First,consideracontextwhenthereisaclearlydefinedinnovationarchitectureortechnologyplatformthatiswelltiedtoamarketopportunitywith

establishedmechanismsforvalueappropriation.AswehaveseenfromtheexamplesofBoeingandSalesforce.com,thiscontextisbestsuitedtotheOrchestramodel,particularlyiftheknowledgeneededforimplementingthearchitectureishighlyspecializedandheldbyafewentitiesorifpartners’capabilitiesareimportanttoenhancethereachand

richnessoftheecosystem.Further,ifthetechnologicalormarketriskintheinnovationprojectisrelativelyhigh,itisimportanttopoolandshareriskwithanetworkofpartners.Marketsthatshowthesecharacteristicsincludesemiconductors,software,computerhardware,biotechnology,networkingequipment,consumerelectronics,andsoon;in

eachofthesesectorsareseveralexamplesoftheOrchestramodel.

CHAPTER9

Table9.1ContingenciesforModelsofNetwork-CentricInnovationIndustry/MarketFactors

ModelsofNetwork-CentricInnovation

•

Orchestra

CreativeBazaar

JamCentral

MODStation

DECIDINGWHEREANDHOWTOPLA

Innovationgoalsand

Well-definedinnovation

Broadinnovationgoals

Broadinnovationgoals

Well-definedand

architecture

goals;clearlyspecified

thatcanbetiedtoa

butnotwelltiedtoany

relativelymodular

andmodularinnovation

specificmarketspace;

particularmarketspace;

architecture;innovation

architecture

limitedarticulationof

limitedarticulationof

opportunitiesnot

innovationarchitecture

innovationarchitecture

predictableorwell

defined

Addressablemarketfor

Clearlydefinedmarket

Marketopportunitiesare



innovation

opportunity(often

evidentbuttendto

notalwaysclearly

notalwaysquiteevident

significant—greaterthan

rangefromsmallto

defined;mightinvolve

andtendtobeniche

Y

$300million)thatistied

medium

immaturemarketsthat

totheinnovation

havethepotentialto

architecture

growrapidly

Natureofinnovation

Implementing,

Mostlystand-alone

Specialized

Complementingor

contributions

complementing,or

innovationsthatmeet

contributionsthathelp

enhancingtheexisting

extendingtheinnovation

thebroadinnovation

defineandimplement

innovationarchitecture;

architecture

goalsofthefirm

theinnovation

newmarket

architecture

opportunities

Natureoftechnological

Predictablebut

Relativelymoderate

Significantandoften

Predictableand

change

potentiallymajor

technologicalchanges

unpredictable

relativelymoderate




Natureofinnovationrisk

Highdevelopmentand

Moderatetohigh

Highdevelopment,and

Lowdevelopmentrisk;

commercializationrisk

developmentrisk;

commercializationrisks

moderatetohigh

181

moderate

commercializationrisk

commercializationrisks

continues

182

Table9.1Continued

Industry/MarketFactors

ModelsofNetwork-CentricInnovation

THEGLOBALBRAIN

Orchestra

CreativeBazaar

JamCentral

MODStation

Natureofinnovation

Innovationknowledgeis

Innovationknowledge

Involvesintegrationof

Innovationknowledgeis

knowledge/expertise

complex/diverseand

rangesfromsimple

complex,new,and

somewhatcomplex/

heldbyalimited

tomoderately

diverseknowledgethat

specializedbutwidely

numberofentities;

complex/diverse;some

is,however,widely

distributed

requiresknowledge

knowledgeintegration

distributed

integrationacross

required

domains

Natureofinnovation

Ideadevelopment

Ideadevelopmentand

Ideadevelopmentand

Ideadevelopmentand

supportfacilities

testingrequires

testingfacilitiesare

testingfacilitiescanbe

testingfacilitiesare

expensiveand

morewidelyavailable

madewidelyavailable

oftenwidelyavailable

sophisticated

andtendtorangefrom

althoughtendtobe

andrelatively

capabilities

inexpensiveto

sophisticatedand

inexpensive

moderatelyexpensive

moderatelyexpensive

NatureofIPrights

Highlypredictableand

IPprotectionisfeasible

Largelyunpredictable

FairlypredictableIP

management

manageableIPrights

andpredictablebut

context;cansupport

context;supportsmixof

context

requiresmorework

mixofopenandclosed

openandclosed

systems

systems

Valueappropriation

Clearlydefined

Clearlydefinedand

Limitedornoexisting

Mixofexistingandnew

systems

mechanismsforvalue

alreadyexisting

mechanismsforvalue

valueappropriation

appropriation

mechanismsforvalue

appropriation

mechanisms

appropriation

CHAPTER9•DECIDINGWHEREANDHOWTO

PLAY

183

Incontrast,eveniftheinnovationarchitectureisclearlydefined,iftheexistingmarketopportunitieshavealreadybeenexploitedandnewmarketopportunitiesarenotveryclear,thenthecontextsuggeststheuseoftheMOD

Stationmodelofnetwork-centricinnovation.ThecaseofSun’sOpenSPARC

Initiativeisillustrativeofthismodel.TheMODStationmodelworksparticularlywelliftheinnovationknowledgeisdiffusedorwidelydistributedandtheinnovationcontextdemandsamixofopenandclosedIPrightsmanagementsystems.Insuchacontext,thefullor

partialunlockingoftheinnovationarchitecturetofacilitatemore“open”andcommunity-basedinnovationpursuitscanuncovernewmarketopportunitiesforapplyingorextendingtheinnovationarchitecture—opportunitiesthathadneverbeenrecognizedortargetedbythefirmthatdevisedthearchitecture.AndastheexamplesofthecomputergameindustryandtheWeb-

basedinformationservicesindustrysuggested,aslongastherightmixofincentives(andIPrightssystems)arecreated,suchcommunity-ledinnovationcanbenefitallthemembersofthenetwork,includingthefirmthatcreatedthearchitectureorplatform.

Inothersituations,theinnovationarchitectureorthespecificinnovationoutcomes

arenotdefinedbutthemarketopportunitiesarevisibleand/orwellarticulated.Ifsuchacontextisalsomarkedbyinnovationexpertiseandfacilitiesthatarenottoocomplexandareratherwidelydistributed,thentheCreativeBazaarmodelbecomesrelevant.AswesawfromthevariousexamplesinChapter6,“TheCreativeBazaarModel,”severalmarketsinthe

consumerproductsindustry(forexample,officesupplies,homecare,andsoon)aretypicalofsuchinnovationcontexts.Individualinventorscanthinkofinnovativeproductideasthatalignwellwiththebroadmarketgoalsandobjectivesarticulatedandcommunicatedbylargefirms.Further,itisimportanttoutilizeanexistinginfrastructurefor

commercializingtheinnovation,whichcanonlybeprovidedbyadominantfirminthenetwork.

Anadditionalinterestingissuehererelatestothenatureofthemarketopportunity.OurresearchsuggeststhatthetypicalsizeofthetargetmarketassociatedwiththeCreativeBazaarcontexttendstoberelativelymodest.Indeed,if

themarketopportunityisrelativelybig,thenitmightpiquetheinterestofalargefirm,whichwouldpursueitaggressively.TheCreativeBazaarcontextworkswellwhenthemarketopportunityisdiverseandrichindetail—therebycallingforveryinnovative(evenifsimple)solutions.

Finally,consideracontextwheretheinnovation

architectureisnotverywelldefinedandneitherarethespecificmarketopportunities.Instead,onlythebroadcontoursoftheinnovationdomainmightbeevident.Inthiscontext,184

THEGLOBALBRAIN

thereisfairlyhighdevelopmentriskaswellasmarketrisk.SuchacontextbecomesripefortheJam

Centralmodelofnetwork-centricinnovation.

Examplesofsuchcontextsincludenewandemergingtechnologicalareas(forexample,biotechnology,nanotechnology,renewableenergy,andsoon)orpreviouslyunchartedareasofexistingdomains(forexample,software,drugdiscovery,andsoon).

Insuchacontext,iftheinnovationknowledgeorexpertiseisalsowidelydistributed,thenitmightleadtotheformationofanetworkofinnovatorswhohaveasharedinterestinthatinnovationdomainbutdonothaveanyimmediatefocusonvalueappropriation.Thespecificinnovationgoalsandarchitecturewillthenemergefromtheinteractionsofthesenetworkmembers,aswasthe

caseintheTropicalDiseaseInitiativediscussedinChapter7,“TheJamCentralModel.”Theneedtocontinuetoattractandmaintainthecreativeenergyofthemembersrequiresamore“open”governancesystem,onethatensureseverymember’sabilitytovoiceandinfluencetheinnovationproceedings.Inaddition,thegreatertheeasewithwhichopenIPpoliciescanbe

deployedintheinnovationcontext,thegreaterwillbetheappealofthecommunity.Further,acombinationoffactors—includinglackofclarityonimmediatemarketpotential,longerinnovationincubationtime,andhigherextentofinnovationrisk—

allcontributetocorporateentitiesassumingasponsoringroleratherthanamoreactiveroleinthe

innovationprocess.

Theidentificationofthemostappropriatemodelrelatedtoaninnovationcontextisonlyonepartofthesolution.Thesecondpartistoidentifythemostappropriaterolethatthecompanycanplayinthatinnovationcontext.

DECIDINGONTHEMOSTSUITABLEINNOVATION

ROLE

Inearlierchapters,duringourdiscussionofthefourmodelsofnetwork-centricinnovation,wehadidentifiedseveralinnovationrolesthatfirmscanplay.Table9.2liststhesedifferentroles.Firmschoosingtoplayoneoftheserolesshouldcarefullyexaminethekeyunderlyingissuesandconditionsthatwould

determinetheappropriatenessofthatroleoropportunity.

CHAPTER9•DECIDINGWHEREANDHOWTOPLAY

185

Table9.2RolesinNetwork-CentricInnovation

ModelofNetwork-

CentricInnovation

InnovationRoles

Architect

Adapter

Agent

Orchestramodel

Integrator

Component

Platformleader

developer

Complementor

CreativeBazaarmodel

Innovationportal

Inventor

Ideascout/broker

Innovationcapitalist

JamCentralmodel

Innovationsteward

Innovator

Innovationsponsor

MODStationmodel

Innovationcatalyst

Innovator

PARTICIPATINGINTHEORCHESTRAMODEL

ThetwotypesofrolesthatfirmscanplayintheOrchestramodelaretheroleoftheintegratororplatformleaderandtheroleofacomponentdeveloperorcomplementor.

INTEGRATORORPLATFORMLEADER

Asourtwocasestudies—BoeingandSalesforce.com—showed,firmswantingtoplaytheroleofanarchitectintheOrchestramodelneedtoownaninnovationarchitecture(orplatform)thathassignificantappealtoawiderangeofpotentialpartnerswhocancontributeindevelopingtheinnovationcomponentsorcomplementaryproductsandservices.Inadditiontothis

requirement,twokeyissuesdeterminewhetherthefirmcanplaytheroleofanintegratororplatformleader.

Thefirstissuerelatestotheaddressablemarketfortheinnovationplatformorarchitecture.Isthemarketopportunitydefinedbytheinnovationarchitecturelargeorbroadenoughtosupportthenetwork?WesawinthecaseofBoeingthatthekey

initialconsiderationforthecompanywastheabilitytoappealtoalargeenoughmarket—onethatcouldsupportandjustifytheinvestments186

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madeandtherisksassumedbyBoeing’spartners.Similarly,theroleofaplatformleaderwillalsobemoresuccessfulifthe

innovationplatformisrelevanttodiversemarketcontextsincludingnichemarkets.ConsiderIBM’sroleasplatformleaderinitsPowerarchitecturenetwork.Whiletheplatform’soriginaltargetmarket(forexample,PCsandWorkstations)isconsiderablylarge,theabilitytofindnewnichemarketsiscriticaltosustaintheappealofthenetworktoexistingandnewpartners.

Forexample,HCLTechnologies,anIndia-basedITfirm,recentlystartedinnovatingonthePowerarchitecturedesign—specifically,thePowerPC405andPowerPC440embeddedmicroprocessorcores—toextenditsapplicationtowirelessandconsumerdevicesareas.Thus,akeyconsiderationforafirmevaluatinganopportunitytoplaytherole

ofarchitectinanOrchestramodelisthesizeoftheaddressablemarket.

Thesecondissuerelatestothefirm’sowninternalresourcesandriskappetite.

Devisinganinnovationarchitecture(orplatform)andbuildinganetworkofpartnersaroundittakesconsiderabletimeandresources.Associatedwith

suchaninvestmentistheconsiderableamountofinnovationandmarketrisk.Inmostcases,theplatformwillendupinalongandbitterbattleofattritionwithotherplatforms(forexample,thecurrentbattlebetweenthecompetingBlu-RayandHD-DVDplatformsforhigh-definitionrecordedvideo),andoneormoreoftheplatformsmightendupgettingmarginalized(recall

theSonyBetamax).Beforeelectingtoplaytheroleofanintegratororaplatformleader,afirmhastocarefullyevaluatewhetherithasthestomachtoassumethislevelofrisk.AsourearlierexampleofSalesforce.comshowed,acompanycanalsograduallyevolveintotheroleofaplatformleaderbycommittingmoreandmoreresourcestobuildthenetworkasthefirmgains

moresuccessinestablishingitsowncoreproductsandtechnologies.Thus,thekeyconsiderationsforafirmshouldbetheamountofresourcesthefirmcanexpendonbuildingtheinnovationnetworkandtheextentofriskitiswillingtoassume.

COMPONENTDEVELOPERORCOMPLEMENTOR

AsanadapterintheOrchestramodel—thatis,acomponentdeveloperoracomplementor—afirmneedstocontributespecializedinnovationexpertiseorcapabilitiesaswellasbearitsshareoftheriskassociatedwiththeinnovationplatformorarchitecture.Twoconsiderationsareimportantinevaluatingsuchanopportunity.

Thefirstissuerelatestothenatureoftheconnectionbetweenthefirm’sspecializedcapability(thatis,itscontribution)andthenetwork(ortheinnovationCHAPTER9•DECIDINGWHEREANDHOWTOPLAY

187

platform).Ontheonehand,thetightertheconnection,

themorelikelythatthefirmwillbeavaluablenetworkpartnerandthatitcanrealizegreaterreturnsfromitscontributions.Ontheotherhand,thetightertheconnection,thegreatertheconstraintsthenetworkwillplaceonthefirm’sabilitytochartitsowngoalsandstrategies.Achievingabalancebetweenthesetwoforcesisimportant.Thequestionstoaskwouldbe,

“Canthefirm‘specialize’itsassetstomeetthenetwork’sgoalswithouttyingitsownfuturewiththesuccessofthatnetwork?”“Arethereopportunitiesforthefirmtodeploythesamesetofassetstoanothernetwork?”Or,“Willtheopportunitytoplaytheroleofanadapterinanetworkmoveitawayfromothernetworks?”Afirmhastoconsidertheseimportantissuesbeforecommittingtoa

particularinnovationplatformornetwork.

Anotherissuethatcandictatethechoiceoftheadapterroleisthelearningpotentialassociatedwiththatrole.ByparticipatingintheOrchestramodel,afirmcanacquirenewcapabilitiesorexpertise(technologicalormarketrelated)thatmightjustifytheoverallriskitassumesinplayingthatrole.For

example,inthecaseofBoeing’spartners,someoftheJapanesecompanies,includingKawasakiandMitsubishiHeavyIndustries,havelong-termplansofevolvingintostand-aloneaircraftmanufacturers.Theyfirmlybelievethattheirexperienceandthetechnologicalexpertiseacquiredfromthe787developmentprogramcanhelpthemachievethese

futureplans.Similarly,firmsthatdevelopcomplementarysolutionsonaninnovationplatform(forexample,Microsoft’s

.NETplatformorSalesforce.com’sAppExchangeplatform)mightdiscoverthatthepotentialtoacquirenewexpertisefromothernetworkmemberswouldoff-setsomeoftherisksassociatedwith

networkfailure.Thus,akeyconsiderationinevaluatingtheadapterrole,particularlyforsmallerfirms,shouldbethepotentialtoacquireadditionalexpertisefromtheirinteractionswithothernetworkmembers.

PARTICIPATINGINTHECREATIVEBAZAARMODEL

Weidentifiedthreetypesof

rolesintheCreativeBazaarmodel:innovationportal,inventor,andideascout/innovationcapitalist.Giventhattheroleoftheinventorisplayedlargelybyindividuals(customers,amateurinventors,andsoon),herewefocusontheissuesrelatedtotheothertworoles.

BECOMINGANINNOVATIONPORTAL

Firmscanplaytheroleofaninnovationportaltoensurearichandcontinualflowofinnovativeideasfortheirinternalproductdevelopmentpipelines.

188

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Inevaluatingtheopportunitytobecomeaninnovationportal,thekeyconsideration

relatestotherangeofinnovationsourcingmechanismsthatthecompanywillhaveaccesstointhatparticularindustry/market.Specifically,willthecompanybeabletoemployabalancedportfolioofsourcingmechanismsthatwouldenablethefirmtomanagetherisksassociatedwithentertainingandplayinghosttoexternalideas?

AswediscussedinChapter6,thesourcingoptionsattheleftendoftheCreativeBazaarcontinuum(forexample,ideascout,patentbroker)areattractiveinindustriesandmarketswhereamateurinventorscanworkbythemselveswithlimitedresourcestocomeupwithnewproductconcepts.Thus,companiessuchasDial,Staples,Sunbeam,LifetimeBrands,andChurch&

Dwight(representedbyFirmAinFigure9.2)withlotsofsmallanddiverseproductsmightfavorthosemechanisms.

Ontheotherhand,thesourcingoptionsattherightendofthecontinuum(forexample,venturecapitalist,externalincubator,andsoon)aremoreappropriateininnovationcontextsthatrequireconsiderabledomain

expertiseandsignificantcapitalandtimefordevelopmentandmarketvalidation.CompaniessuchasDuPont,3M,andKodak(representedbyFirmBinthefigure)whoparticipateinscience-basedmarketsmightrelymoreonthosemechanisms.

Firm“A”

Firm“B”

Firm“C”

Firm“D”

“Market-

“Raw”

Ready”

Idea

Product

CreativeBazaarContinuum

Figure9.2Towardabalancedinnovationsourcingportfolio


189

Factorsrelatedtoafirm’sparticularmarketcontextarelikelytoimplyabiastowards

onesetofsourcingmechanisms.However,therearedownsidesassociatedwithrelyingexclusivelyononesetofmechanisms—acceptingeithertoomanyriskyideasortoomanyexpensiveideas.Soitisadvisableforafirmtobalanceitsinnovationsourcingapproachesbycomplementingitsfavoredapproachwiththeotherapproachesonthe

continuum.This“movetothemiddle”mightinvolveworkingwithentitiessuchastheinnovationcapitalist,whorepresentsacompromisebetweenthetraditionaltwoextremesofthecontinuum.LookingatFigure9.2,FirmCandFirmDhaveamorebalancedinnovationsourcingstrategyalthoughtheirmarketandfirm-specificfactorsmightstillimplymaintaininganoverallbias

towardtheleftendandtherightend,respectively.GoingbacktotheexampleofDuPont,whileitmightfindthatbuyingcompaniesispreferableinitstraditionalmaturebusinesses,alternativeapproaches—liketheuseofinnovationcapitalists—mightbeusedinemergingbusinesseslikebio-basedmaterialsorelectronics.

Thus,companiesplanningtoplaytheroleofaninnovationportalshouldfirstevaluatetheirpotentialtoemployarangeofmechanismssoastominimizetheriskofunbalancedsourcing.Inshort,thegreatertherangeofinnovationsourcingoptionsavailableintheparticularindustry/market,thebettertheopportunityforassumingtheroleofaninnovationportalwithacceptablerisk.

IDEASCOUTSANDINNOVATIONCAPITALISTS

Companiesintendingtoplaytheroleofanagent(productscout,patentbroker,innovationcapitalist,andsoon)intheCreativeBazaarmodelneedtodecidethenatureoftheircontribution(orinnovationintermediation).Ingeneral,thegreaterthevalueaddition

afirmcanbringtotheinnovationsourcingprocess,thehigherthereturnsitcanobtainfromtheclientfirm.However,twoissuesdeservecarefulconsideration:First,whatistheuniquenessofthevalueadditionthatthefirmcanbringtoinnovationsourcing?Second,howimportantisthisvalueadditionintheeyesoftheclientfirm?

Considerthefirstissue.Doesthefirmhavesomeuniqueaccesstoinventornetworksthatitcanleverage?Doesthefirmhavespecializedexpertiseorpatentedprocessestofilterinnovativeideasortoconductrapidinitialmarketvalidation?Forexample,aswesawearlier,theBigIdeaGroup(BIG)cultivatesitsownnetworkofinventorsandalsoconductsuniqueroadshowsthatbring

togetherinventorsandapanelofexpertstoseekoutgoodideas.Ordoesthe190

THEGLOBALBRAIN

firmhaveuniquecapabilitiestointegratedifferenttypesofknowledgetoadvanceortransformaninnovativeidea?Arethereuniquerelationshipswithlargeclientfirmsthatthefirmcanbringtothesourcing

process?Forexample,IgniteIPreliesonitsexclusivenetworkofseniormanagersinlargeclientfirmstobecomeawareofcriticaltrendsintechnologiesandmarkets.Absentsuchuniquecapabilitiesorrelationships,itisunlikelythatafirmcanbeanythingmorethanabrokerintheCreativeBazaarmodelwithlimitedreturns.

Typically,entitiessuchas

ideascoutsandinnovationcapitalistsfocusononeortwospecificindustriesormarketswheretheyhavedeepdomainadvantage.

Itisimportantforsuchintermediariestocarefullyconsiderthehowmuchvalueadditiontheclientfirmwillperceiveinthecontributionthattheymake.

Forexample,incertain

marketswherenumerousrelativelyminorinnovativeideasneedtobesortedout(forexample,homeimprovementandself-helptools;toys),“ideafiltering”mightbeperceivedasvaluable;ontheotherhand,incertainothermarketscharacterizedbyfuzzyorunpredictableIPrightscontexts,validatingtheIPrightsofthoseideasmightbedeemedmorevaluable.

Thus,afirmshouldcarefullyconsidertherelativeimportanceofthedifferentvalueadditionactivitiesininnovationsourcinginagivenmarketanddecidethespecificrolethatseemsmostpromising.

PARTICIPATINGINTHEJAMCENTRALMODEL

IntheJamCentralmodel,themostlikelyroleforafirmis

thatoftheinnovationsponsor.Giventhattheideasemergefromthecommunity,theroleoftheinnovationstewardwillbecarriedoutbythoseentities(mostlyindividuals)thatprovidedtheinitialsparktotheinnovationcontext.Eventheroleoftheinnovatorwilllargelybeplayedbyindividualmembersofthecommunity.Assuch,herewelimitourfocustotheappropriateness

oftheroleofaninnovationsponsor.

INNOVATIONSPONSOR

Firmsdon’tplaytheroleofaninnovationsponsorasanactofaltruismorsocialservice.Suchdecisionsarealways(and,webelieveshouldrightlybe)basedonasoundbusinesscase.

ConsiderIBM.Ithasan

importantstakeintheOpenSourceSoftwaremovementandactivelypursuestheroleofaninnovationsponsorinthoseinitiatives.


191

InaninterviewwithIrvingWladawsky-Berger(IBM’s

formervicepresidentfortechnicalstrategyandinnovation),henotedtherigorthatIBMbringstothisdecision:

IBMtakesLinux,Apache,andothersuch(OpenSource)communities

veryseriously.Forus,workingwiththemisano-nonsensebusiness

decisionandwemakethemonlyafterconsiderableanalysisofthe

technologyandmarkettrends,theoverallqualityandcommitmentof

thecommunity,itslicensingandgovernance,andthequalityofits

offerings.Inouropinion,thekeytosuchopeninnovation

initiativesisthequalityofthecommunity,notwhetheryoucanhaveaccessto

thesourcecodeofthesoftware.And,ifyoudon’thaveagoodcom-

munity,thenthereisnothinginitforustojoin.Soweaskourselvesallthesetoughquestionsabutthecommunity,itsgoalsandobjectives,itswaysof

organizationbeforewemakeacommitmentto

supportthem.1

A“businessdecision”doesnotmeanthatafirmshouldplaysucharoleonlyiftherearedirectorvisiblebenefits.Inmanycases,suchdirectreturnsmightnotexist,atleastintheshortterm.Instead,innovationsponsorsneedtofocusontheindirect,

andoftenlong-termbenefitsthatsucharolemightbringtothefirm.ForIBM,thesebenefitsmightincludedevelopingafavorablebrandimageandgaininginfluenceintheOpenSourceSoftwarecommunity.InthecaseoftheTDI,largepharmaceuticalandbiotechcompaniesthatarecurrentlyexploringapotentialsponsoringrolewithTDImightconsiderthebenefitsofbeingexposedto

trendsanddevelopmentsindrugdiscoverythatareoutsidethescopeofitstraditionalbusinessunits.

Anothersetofissuesrelatetotheinnovationoutcomes.Whatarethetypesofexpectedinnovationoutcomes?Howpromisingandsignificantaretheseexpectedoutcomes?Dotheyhavethepotentialtoradicallychangeexisting

markets?WhattypesofIPrightsmechanismsarelikelytoapplytosuchoutputs?

Finally,itisalsoimportanttoevaluatehowthefirm’scontributionstotheinnovationcommunityarelikelytobeperceived.Aretheinputsgivenbythefirmasaninnovationsponsorlikelytobeperceivedascriticalfortheoverallinnovation?Andhowexactly

willithelpthecommunityadvanceitsinnovationagenda?

Theanswerstotheprecedingquestionscanindicatethelong-termsuccessofthecommunityagendaaswellasthelikelybenefitsthefirmmightpotentiallyderivefromsupportingsuchanagenda.Assuch,itisimportanttogiveeachof192

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theseissuescarefulconsiderationbeforecommittingresourcestosupportthecommunity-ledinnovationinitiative.

PARTICIPATINGINTHEMODSTATIONMODEL

AfirmcanplayprimarilytwotypesofrolesintheMODStationmodel:an

innovationcatalystoraninnovator.Westartwiththeroleoftheinnovationcatalyst.

INNOVATIONCATALYST

Asaninnovationcatalyst,afirmcontributestheinnovationarchitectureorplatformtoinitiatecommunity-ledinnovationactivitiesonit.Earlier,inChapter8,

“TheMOD(“MODification”)StationModel,”wehadidentifiedseveralincentivesforafirmtomakesuchacontribution.However,whilethebenefitstothefirmmightbeevident,thisdoesnotnecessarilymeanthatsuchacontributionwillalwayssparkthecreativeenergyofthecommunity.Indeed,theopportunitytoplaysucharoleiscriticallydependentonthenatureof

theinnovationplatformandassuchmanyoftheissuesrevolvearoundthisdependency.

Thefirstissuerelatestotheinnovationpotentialassociatedwiththeplatform.

Unlesstheinnovationplatformisinherentlyperceivedasvaluableandalsoopensupadiversesetofinnovativeopportunities,itis

unlikelythatthefirmwouldbeabletoattractacommunityofinnovatorsaroundit.Thus,someoftheissuesforthefirmare—howmodularistheinnovationplatform?Isthemodularityoftheplatformmatchedwiththeinnovationinterestofthecommunity?

Arethedifferentinnovationopportunitiesrelatedtotheplatformvisible?Arethere

specificmarketopportunitiestiedtotheseinnovationpossibilities?

Thesecondissuerelatestotheincentivesforthecommunitytoinnovate.Willthefirmbeabletocreateadiversesetofincentivestoattractandmaintaintheinterestoftheinnovationcommunity?CanthefirmfacilitatetheapplicationofamixofIPrightsmechanisms

(forexample,openandclosedlicensingschemes)thatwouldcatertoawiderangeofcommunitymembers—individualsaswellasotherentities?

Beyondtheprecedingquestionsistheissueofthefirm’sowncommitmenttotheinitiative.AstheexampleofSunanditsOpenSPARCinitiativeindicated,theprocessofbuildinga

communityaroundsuchinnovationarchitecturecanoftenbeslowandcallsforcontinuedcommitmentfromthecompany.Further,CHAPTER9•DECIDINGWHEREANDHOWTOPLAY

193

thefirm’sabilitytogradually“letgo”ofcontrolovertheinnovationplatformand

activelypromotecommunity-ledgovernancewillcriticallyshapethecontinuedparticipationofcommunitymembersandtherebythesuccessoftheinitiative.Suntookthestepofincorporatingleadmembersofthecommunityintothefirstgovernanceboardthatithelpedtocreate.ThesuccessofOpenSPARCwillbedependentonhowwellthecommunity

governancesystemworksandhowwelltheinnovationopportunityofferedbyOpenSPARCcancapturetheimaginationofthecommunitymembers.

Thus,overall,afirmshouldcarefullyconsiderhowitcanopenuptheinnovationplatformtothecommunityinawaythatbenefitseverybody,includingthefirm.

INNOVATOR

Nowconsidertheroleoftheinnovator.Althoughthisroleplaysoutinacommunity-basedinnovationforum,aswehaveseenfromthedifferentexamplesinChapter8,thereareseveralwaystoappropriatevaluefromsuchinnovation.

Assuch,undercertainconditions,itmightbe

appropriateforafirmtoplaytheroleofaninnovatorintheMODStationmodel.Whataresomeofthesecontextualconditions?

First,andperhapsthemostimportant,arethepoliciesrelatedtointellectualpropertyrights.Whilesomeoftheopenlicensingpolicies(forexample,GPLv2)mightprecludemostprofit-orienteddevelopmentactivities,other

variationsoftheopenlicensingschemesmightallowcertaintypesofsuchactivities,particularlyonderivativeproducts.

Anotherconsiderationrelatestotheoverallsizeandhealthofthecommunity.

Thelargerandthemoreactivethecommunity,thegreaterthepotentialtosustaintheplatformoverthe

long-termandthemorelikelytherewouldbemarketinterestforcomplementarysolutionsbasedontheplatform.Assuch,afirmhastotakeahardlookatthequalityofthecommunitythattheinnovationcatalysthasbeenabletoattractaroundtheplatformandthendecidehowworth-whileitwouldbetoplaytheroleoftheinnovatorinthatcommunity.

Table9.3capturesthekeyissuesthatwehavediscussedsofarregardingthedifferentrolesinthefourmodelsofnetwork-centricinnovation.Aswementionedearlier,theseareonlythemoreimportantones;theremightbeotherconsiderationsuniquetothefirmthatitwillneedtoconsiderinevaluatingthedifferentopportunities.

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Table9.3ConsiderationsfortheRolesinNetwork-CentricInnovationRolein


KeyIssuesforConsideration

OrchestraModel

Integrator,platformleader

Marketpositioningoftheinnovationarchitecture/plat-

form;riskappetiteofthefirm

Componentdeveloper,

Dependencyofthenetwork;opportunityforlearning

complementor

(growth)

CreativeBazaarModel

Innovationportal

Abilitytodeployabalancedportfolioofsourcing

mechanisms

Ideascout,innovation

capitalist

Uniquenessofvalueaddition;perceivedimportanceof

valueaddition

JamCentralModel

Innovationsponsor

Qualityofcommunity;importanceofcompany’s

contributions

MODStationModel

Innovationcatalyst

Abilityto“letgo”ofcontrolovertheinnovationplatform;

abilitytoattractandretainthecommunity

Innovator

NatureoftheIPrightspoliciesinthecommunity;

overallcommunityhealth

CREATINGAPORTFOLIOOFINNOVATIONROLESANDDECIDING

THE“CENTEROFGRAVITY”

Sometimes,notonlyaretheredifferentrolesfor

differentfolks,theremaybedifferentrolesapplicablewithinthesamefirm.LargecompanieslikeUnilever,DuPont,andIBMwithdiversebusinessunitswilltypicallyfindthatthereismorethanoneinnovationroletheycanpotentiallypursueacrosstheirdiverseinnovationcontexts.Assuch,itisimportanttothinkoftheportfolioofrolesthatalargefirmshouldassumeasit

formulatesitsnetwork-centricstrategy.

Considerafewexamples.

IBMplaystheroleofaplatformleaderinsomeofitstraditionalbusinessareas,includingsystemsandservers,semiconductors,andsoon.ThePower

CHAPTER9•DECIDINGWHEREANDHOWTO

PLAY

195

Architecturediscussedearlierisagoodexampleofthis.IBMdevisedandarticulatedtheplatformandnurturedanetworkofpartnerstoexpanditsreachandpotentialapplicationareas.Eveninmanyofitssoftwareproductbusinesses(forexample,middleware

softwareplatformssuchasWebSphere,operatingsystemssuchasAIX,andsoon),thecompanyplaystheroleofaplatformleader.

Ontheotherhand,morerecently,thecompanyhasbeenplayingtheroleofaninnovationsponsorinsomeofthecommunity-ledinnovationinitiativesinthesoftwareindustry,mostparticularly,theLinux

community.Thecompanyhasalsostartedplayingsucharoleininnovationcommunitiesinotherdomains—

forexample,inthebiotechnologyindustry.

Similarly,considerP&G.Intheconsumerproductbusiness,thecompanyfollowstheCreativeBazaarmodelandactivelyplaysthe

roleofaninnovationportal.P&Gpartnerswithadiversesetofinnovationagentsincludingproductscouts,eR&Dmarketplaces,andinnovationcapitaliststoseekoutinnovativeideasthatitcanthenbringinsidetocommercialize.Ontheotherhand,insomeofitsotherbusinesses—forexample,chemicals,pharmaceuticals,andsoon—thecompanyhasfollowedtheOrchestramodel

andplayedtheroleofanintegrator.Specializedcapabilitiesofpartnerfirmsarebroughttobearinthedevelopmentandcommercializationofnewproducts.

SunMicrosystemsisanexampleofafirmthatparticipatesinboththeOrchestramodelandtheMODStationmodel.Inmuchofitsserverbusiness,Sunis

aplatformleader,developingandpromotingproprietarytechnologyplatformsthatformthebasisforitsproductssuchasSunFireserversandSunUltraworkstations.Ontheotherhand,inrecentyears,thecompanyhascontributedsomeofitsproprietarytechnologyplatformstoinitiatecommunity-ledinnovationinitiatives.WedescribedtheOpenSPARC

initiativeearlier.OthersimilarinitiativesincludingopeninguptheJavasourcecodeforcommunity-basedinnovationhavefurtherexpandedthecompany’sroleasaninnovationcatalyst.

Theprecedingexamplesindicatethepotentialforcompaniestopursueaportfolioofrolesindifferentpartsofthenetwork-centricinnovationlandscape.The

natureofsuchaportfoliowillbeshapedbytheindustry/marketcharacteristicsofthedifferentbusinessunitsofthecompany.Further,itisalsolikelythatoneofthoseroleswithintheportfoliowillassumedominancedependingontherelativesizeandimportanceofthedifferentbusinessunits.Suchadominantroleindicatesthelocationofthe“center-of-

gravity”ofthefirm’snetwork-centricinnovationinitiatives.GoingbacktotheexampleofIBM,inspiteofallthecommunity-ledinnovationinitiativesthatthecompanyhasjoinedinrecentyears,196

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itsroleasaplatformleaderisstilldominantinitsoverallcollaborationstrategy.

Similarly,itisevidentthatforP&G,thecenterofgravityliesintheCreativeBazaarmodel.

Whyshouldyoubeinterestedinthe“centerofgravity”ofafirm’snetwork-centricinnovationstrategy?Asyouwillseeinthenextchapter,thenatureoftheresourcesandcapabilitiesthatacompanyneedstomusterdependsonwhereitscenter

ofgravityfallsinthenetwork-centricinnovationlandscape.

CONCLUSION

Inthischapter,weshowedhowafirmcanevaluatethedifferentopportunitiestotapintotheGlobalBrainandidentifythemostappropriateroletoplay.Afterthefirmhaspositioneditselfinthenetwork-centricinnovation

landscape,thenextsetofquestionsthatarisesis,“HowcanIpreparemyorganizationtocarryoutsucharolemosteffectively?”“Whatarethecapabilitiesandresourcesthatwouldbeneeded?”“Whataresomeofthebestpracticesthatmyfirmshouldbeawareof?”Inthenextchapter,weexploretheseissues.

C

H

A

P

T

E

R

10

PreparingtheOrganization

Imaginethatyouaresettingoutonatrekkingexpeditiontoaremotemountainousarea.Thefirststepinplanningyourexpeditionisto

understandthelandscapethatyouwillbetrekkingon,andtoplot

thebestrouteforyourtrek.Havingdonethis,youthenneedtoprepareyourself.Youneedtoassembleyourteamandgetthemphysi-

callyaswellasmentallypreparedforthetrip.Andyouneedto

gatherthesuppliesandtoolsthatyourteamwillneedtosurviveandsucceed.Withoutcarefulpreparation,

undertakingthetrekwouldbe

dangerous,nomatterhowwellyouunderstandtheterrainandthe

route.

SuchisthecaseinplanningyourexpeditiontotapintothepoweroftheGlobalBrain.Inthepreviouschapter,wefocusedon

understandingtheterrainofopportunities,anddecidingonacourseof

actionforyourorganization.Afteryouhaveidentifiedtheopportu-

nities,youneedtolookinwardandensurethatyourorganization

hasthecapabilitiesitneedstocapitalizeonthe

opportunities.

Inthischapter,weofferadviceonhowtomakeyourorganization

“innovationready.”Weconsidertwocomponentsofafirm’sreadi-

nessfornetwork-centricinnovationinitiatives:organizational

readinessandoperationalreadiness.

Organizationalreadinessreferstothepeopledimensionofthecapabilitiesneededfornetwork-centricinnovation.Essentially,itis

aboutcreatingtherightenvironmentwithintheorganizationto

encourageandsupport

participationinnetwork-centricinnovation.

Thisincludescreatingan“open”mindset,gettingleadershipon

197

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board,creatingthe

appropriateorganizationstructure,andcommunicatingtheinnovationstrategyinternallyandexternally.Operationalreadinessreferstotheprocessdimensionofthecapabilities.Thisincludesdesigningprocessesforprojectselection,partnerselection,riskmanagement,integratinginternalandexternalprocesses,andmanagementofintellectual

propertyrights.

Operationalreadinessalsoinvolvescreatingthetoolsandtechnologiestosupportexternallyfocusedinnovationandmetricstotrackyourprogressandassessyoursuccess.

Thestartingpointforreadyingtheorganizationistochangethemindsetoftheorganizationregarding

network-centricinnovation.Thisisthemostimportantandthemostdifficultstepinorganizationalreadinessbecauseitgoesagainsttheentrenchedproprietarymindsetthatmostorganizationshaveregardinginnovation.Letuslookatthechallengesinchangingtheinnovationmindset,andhowfirmscanovercomethesechallenges.

OPENINGYOURORGANIZATION’SMIND

AswenotedinChapter1,“ThePowerofNetwork-Centricity,”acentralchallengefororganizationsembarkingonanetwork-centricinnovationinitiativeistocreateamindsetthatencourageslookingoutwardandbecomingmoreacceptingoftheideasofoutsiders.Thisisespecially

challengingwhenintellectualpropertyandsecrecyisatstake.ConsiderInnoCentive,themuch-talkedabout“innovationmarketplace”createdasaspin-offfromEliLillyseveralyearsago.Dr.AlphBingham,afounderandboardmemberofInnoCentive,recallsthestiffresistancehisteamfacedwithinEliLilly.Whentheypresentedtheconceptinternally,theinternalR&D

andlegalteamsbalkedatthehereticalnotionthatLilly’ssecretR&Dproblemswouldbepostedonlineforthewholeworldtosee.Itwasahereticalideaforscientistsusedtotheimageof

“SkunkWorks”—thelegendaryR&DorganizationwithinLockheedwherescientistsandengineerstoiledawayincompletesecrecy,walledoutfromthe

worldandevenfromwithintheotherpartsoftheorganization.ButtheInnoCentiveteampersisted,andtoday,theconceptofanopenmarketplaceforinnovationseemsquitelogical.

Theresponsibilityforcreatingthe“open”mindsetrestslargelywithexecutivemanagement,anditbeginswiththeCEOofthe

company.Inourexperience,organizationsthathavemadeheadwayhaveoftenbeenmandatedbytheCEO

toadoptacollaborativeandexternallyfocusedmindset.IthelpsiftheCEO

publiclydeclarestheintentandthegoalsforthefirmtochangeitsinnovationstrategy.Thisleavespeoplewithverylittlechoicebutto

getonboard.ForCHAPTER10•PREPARINGTHEORGANIZATION

199

example,whenP&G’sCEOA.G.Lafleyproclaimedin2000thathalfofP&G’snewproductswouldcomefromitsownlabsandhalfwouldcomethroughthem,itcatalyzedpeopleintoaction.1AsTomCripe,

associatedirectorofP&G’sExternalBusinessDevelopment(EBD)grouptoldus,“Ourseniormanagementhasbeenveryfocusedonthisandtheyrepeatitateachandeveryinternalforum,andwhentheydothat,itslowlygrowsonyou,andhelpstoevolveaculturewherepeoplearemorereceptivetoideascomingfromotherplaces.”2

OVERCOMINGTHE“WEKNOWEVERYTHING”(WKE)SYNDROME

MalcolmS.Forbessaid,“Education’spurposeistoreplaceanemptymindwithanopenone.”Soitgoeswithchangingtheinnovationmindset.Thereisnogreaterenemyoflearningthanouroverconfidencethatwealreadyknoweverything.Indeed,weareprisonersof

whatweknow,becausewetendtorejectotherpeoples’ideaswhenwebelieveweknowallweneedtoknow.Alothasbeenwrittenaboutthe“NotInventedHere”(NIH)syndrome—aculturethatrejectsideas,research,andknowledgebecauseitwasn’toriginatedwithintheorganization.Welookatthissyndromesomewhatdifferentlyasthe“WeKnowEverything”(WKE)

syndrome,whichwedefineasanorganizationalmindsetthatisclosedtoexternalideasandknowledgebecauseofthebeliefthatinternalknowledgeandexpertiseissufficient,andthereisnoneedforimportingexternalexpertise.

TheWKEsyndromeisparticularlydangerousforcompanieswithalongandillustrioushistoryofR&D

accomplishments,suchasBoeing,Kodak,3M,DuPont,Merck,Motorola,Sony,andIBM.Thesecompaniespracticallyinventedtheirindustries,andrightfullyconsiderthemselvestobethepioneersoftheirmarkets.Theyhavealsobeenassociatedwithlegendaryinnovations,andtheyhavewithintheirrankssomeofthemosttalentedscientistsandengineers.

Furthermore,inmanyoftheseorganizations,theaveragetenureofresearchersandengineersisquitelong,andtheyhaveatremendousamountofaccumu-latedknowledgeandexperience.Insuchanorganization,itishardtobelievethatsomeoneoutsidetheorganizationcantellyousomethingyoudon’talreadyknow!

Consider3Masanexample.

Ithasmorethan6,000scientistsandresearchersinitsR&Dsetupworkingin30coretechnologyorscientificareasrangingfromadhesives,abrasives,andfilmstofiberoptics,imaging,andfuelcells.ThesescientistsworkatR&Dunitsatdifferentlevelsoftheorganization—inthedivisionlabs,inthesectorlabs,andinthecorporatelabs.3Mhassuchdeep

scientific200

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in-housetalentthatitsscientistsandengineershaveformedseveralinformalgroupsornetworksbasedontheirspecificresearchareastosharetheirknowledgeandresearchfindings(akintoIEEE-typeforumsinsidethecompany).3M

hasstruggledtoovercometheWKEsyndrome.Explicitacknowledgementfromseniormanagement—particularlytheCEOortheCTO—thattheWKEexistsintheirorganizationscanbethemostimportantfirststepinthisregard.Inthecaseof3M,JayIhlenfeld,seniorvicepresidentofR&D,playedakeyroleinhelpingtheorganizationtoacknowledgethischallenge

andtostartworkingonaddressingit.3

Itisalsoverylikelythateventhemereadmissionofsuchaproblem,letalonespecificactionstoovercomeit,islikelytocreateconfusionandresistancewithintheorganization.Forexample,whenMerck’snewR&Dchief,PeterKim,acknowledgedthatthecompany’sinternaltalent

wasunlikelytobesufficienttoreplenishthecompany’sR&Dpipelineforthefuture,heimmediatelysparkedprotestwithinthescientificestablishmentofthecompany.MerckR&D

veteranssuchasEmilioEmini(seniorvicepresidentofvaccineresearch),KathrinJansen(aresearchmanagerwhoplayedakeyroleinthedevelopmentofthecervical

cancervaccine),andScottReines(atopresearcherinpsychi-atricdiseases)allleftMerck.OneofKim’smainjobswastoinstillinMerck’sR&Dsetupthenotionthatitdidn’tknoweverything.And,moreimportantly,therewasaneedtotreatsmallercompanieslookingforpotentialcollaborationwithMerckwithrespectandhumility—notasan“arrogant”partner.Specific

counselingsessionswereconducted—inthewordsofDr.MervTurner,Merck’sheadoflicensing,“Wesentourguystocharmschool.”4

Suchinterventionsdonebyseniormanagementcaninstillamindsetthatacknowledgesthelimitationsofthecompany’sinternalknowledgebaseandismoreinvitingofexternalideas.

THEPOWEROF“LETTINGGO”

TheflipsideoftheWKEsyndromeisthefirm’sabilityto“letgo”ofitsproprietaryknowledgeandintellectualassets,orcedecontrolovertheinnovationprocessinordertoadvancetheoverallinnovationagenda.Thisactionisparticularlychallengingfororganizationsusedto

controllingeveryaspectoftheirinnovationactivitiesaswellas“hoarding”everysingleintellectualpropertyasset.

Ascompaniescollaboratewithexternalentities(whetherotherfirmsorindividuals)ininnovationinitiatives,theyhavetobecomecomfortablewiththeCHAPTER10•PREPARINGTHEORGANIZATION

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notionoflooseningcontrolovertheinnovationprocess.Andtheyhavetobecomecomfortablewiththeideathattheyhavetocontributesomeoralloftheir“proprietary”knowledgetoenhancetheinnovationeffort.Suchaneedtoletgomightcomeasanunpleasantsurprisetoseniormanagement,too.InChapter

2,“UnderstandingNetwork-CentricInnovation,”wedescribedIBM’srealizationofthisneedwhileworkingondevelopingthefirstOlympicsWebsite(fortheAtlantaOlympics).InthewordsofIBM’sIrvingWladawsky-Berger,wholedthatprojectinthemid-1990s,suchrealizationcanbemomentous.

Irememberwhenwedidthe

WebsitefortheAtlantaOlympicsin’96.

MypeoplewhodidthatWebsiteusedApacheinsteadofIBM’spropri-

etaryproduct.TheyreportedtomeatthetimeandIsaid,“Well,whyareyouusingApache?”Andtheysaid,“Becauseit’smuchbetter.YouwantagoodWebsiteordoyouwanttopushyour

ownproduct?”

And,Isaid,“No,wemusthaveagoodWebsite,becausenobodycareswhatthestackis.TheywanttheWebsitetoworkwell.”AndthiswasthefirsttimeanybodyhadputupOlympicresultsonaWebsite.So

wereallywantedtomakesureitworked.Andeventuallytheysaid,

screwit.Let’sditchtheIBMproduct,whichhasalmostnomarket

shareandisinferior,andjoinforceswithApache.Atthetime,thisseemedrevolutionary.Nowyoulookatthatandyousay,itseemsto

becommonsense.

Theconceptof“lettinggo”is

somethingthatanorganizationhastogetcomfortablewithovertime.Infact,somecompaniesrealizethattheyarelettinggoofthingsthattheyneverreallydidcontrolasmuchastheythoughttheydid.

Thereisanillusionofcontrolthatisgreaterthanthereality.However,evenifitisanillusion,gettingeverybodyinthe

organizationtoacknowledgeitisachallengeforseniormanagers.And,astheexampleofIBMshowed,sometimesitmightalsopercolatefromscientistsandengineersworkingontheprojectupthehierarchytoseniormanagers.

Preparingtheorganizationtoadoptsuchamindsetrequirestheseniorexecutivestocommunicatethebenefitsof

lettinggo.Thisprocessbecomesmorechallengingwhentheexpectedreturnsfromlettinggoarenotcontemporane-ousoreveninthesameproductmarketorbusinessdivision.Inotherwords,thepayofffromlettinggocanbedistantinbothspaceandtime.Furthermore,oftentheveryactoflettinggomightintheshorttermdisruptthefirm’sexistingrevenuestream

makingitevenmorepainfulandincreasingtheresistancewithintheorganization.Thus,theabilityoftheseniormanagementtoseethebroaderinnovationagendaandcommunicatehow“lettinggo”canactually202

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provetobebeneficial(orevennecessarytosustainthegrowthofthefirm)becomes

crucial.

Ananalogyfromparentingmighthelpillustratethechallengeandthebenefitsoflettinggo.Asaparent,youmighthavetheillusionofcontroloveryourchild’saspirations,careers,andinterests,andsolettinggocanbequitedifficult.

However,youreallydon’thaveasmuchcontrolover

yourchildasyouthinkyoudo.Andthemoreyouletgo,thegreatertheconfidenceandautonomyyoubuildinyourchild.Similarly,foranorganization,themoreitisabletoletgoofitscontrolorknowledgeinaninnovationinitiative,themoreitwilllikelygainfromtheparticipationofcollaborators.

STRUCTURINGTHE

ORGANIZATION

Afterafirmachievesanenlightenedinnovationmindset,thenextaspectofreadinessistocreatetheappropriatestructurefortheorganizationalentitythatleadsnetwork-centricinnovation.Inthisregard,wehaveencounteredtwofrequentquestions,“Doweneedtohaveadedicatedunittoleadournetworkcentric

innovationinitiatives?”and“ShouldwecreateaneworganizationalunitoruseourR&Dunit(orotherexistingorganizationalunits)toprovidethisleadership?”Ouranswertobothofthesequestionsis—itdepends!

Insomefirms,existingorganizationalunits(forexample,corporateR&Dunit,businessdevelopmentunit,andsoon)canevolveor

transformtospearheadthenetwork-centricinnovationinitiatives.Inothercases,newunitsandnewpositionsneedtobeestablishedtoprovidetheleadership.Threefactorsshapesuchdecisions:

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DoesthecompanyhaveahistoryofparticipatingincollaborativeR&D

ventures?

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Istheinnovationspacethecompanyismostlyfocusedonforcollaborationclearlydefinedormorediffusedinnature?Further,howdiversearethecompany’sinnovationpartnerslikelytobe?

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Aretheinitiativesbeingconsideredbythecompanyrelatedtoitsexistingproductsandservicesortonew/emergingbusinessareas?

Letusstartwiththefirstissue.Ifacompanyhasalongandconsiderablecollaborativeexperience(forexample,jointventuresinR&D,technologyconsortiums,andsoon),then

itislikelythatelementsofthecollaborativespiritaswellasassociatedcompetenciesarepresentwithintheorganization.Ifso,thereisnoneedtocreateneworganizationalunitsdedicatedtonetwork-centricCHAPTER10•PREPARINGTHEORGANIZATION

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innovationinitiatives.

Instead,thefirmcanrelyontransformingoneormoreexistingunitsthatalreadyhastheexperiencetotakeonthenewresponsibilitiesrelatedtoleadingandcoordinatingthecompany’snetwork-centricinnovationinitiatives.

AgoodillustrationofthiscollaborationhistoryisP&G’sEBDgroup—aunitwithmorethan50people.

EBDhasshoulderedaconsiderablepartoftheresponsibilityforP&G’sConnect+Developinitiativerightfromtheearlystageinthelate1990s.TheEBDgroupalreadyhadconsiderableexperienceininteractingwithexternalentitiesfortechnologycommercializationandlicensingdeals,andassuch,itonlyneededtoevolvefurthertointeractand

coordinatewithalargernumberofexternalpartners(includingproductscouts,innovationcapitalists,andsoon).OtherbusinessunitsutilizetheservicesofEBDtoseekoutexternalinnovationopportunities,negotiatedeals,andinteractwithexternalpartners,andinreturn,theseinternalclientscontributetoEBD’sbudget.Thus,inthecaseofP&G,itspriorcollaboration

experienceenabledittotransformexistingorganizationalunitssuchasEBDtoassumetheresponsibilitytocoordinatethenetwork-centricinnovationactivities.

Ontheotherhand,ifacompany’scollaborativeexperienceislimitedornotwidelydispersedacrosstheorganization,creatinganewunitmaybenecessaryto

signaltheshiftinthecompany’sapproachtoinnovation.ThisistheapproachthatKodakadopted.Thecompanyhasa100-yearoldtraditionofbeingahighlyverticallyintegratedcompanywithabundantinternaltechnologicalresources.However,asKodakstartedundergoingamajortransformationfrombeingachemical/analogcompanytobecominga

digitalcompany,thecompanyrealizeditcouldn’tmakethisshiftonitsown,andthatitneededtobemuchmoreaggressiveabout“goingout”togetthebreakthroughideas.So,inrecentyears,Kodakhascreatedneworganizationalunitsandnewpositions,liketheExternalAllianceGroup,tofacilitatethedevelopmentofnewpartnershipswithexternalinnovationnetworks.

TheneworganizationalunitsarehelpingKodakbreakdowntheculturalbarriersrelatedtoexternallysourcedinnovationandestablishsystemsandprocessestoidentifyandcollaboratewithawiderangeofexternalpartners,rangingfromearlystagefirmstoindividualinventorstoacademicscientists.5

Thesecondissuerelatesto

thenatureoftheinnovationspaceandthediversityofpartners.Evidently,ifyouareparticipatingintheOrchestramodel,muchoftheinnovationspaceisclearlydefinedandyouarelikelytointeractwitharelativelylessdiversesetofnetworkpartners.Inthiscontext,theroleofadedicatedorganizationalunitwouldlargelybetoestablishthestandardsetofpracticesthat

thedifferentpartsofthecompanyneedtofollow.Whiletheunit204

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mightassumeastrongleadershiproleintheinitialstages,astheprocessesandpracticestakerootindifferentpartsoftheorganization,itcanstepbackandpursueamoresupportiverole.

Ontheotherhand,ifthecompanyisparticipatingintheCreativeBazaarmodelortheJamCentralmodel,theuncertaintiesassociatedwiththeinnovationspaceandtheneedtointeractwithamuchmorediversesetofpartnersdemandaverydifferentrolefortheorganizationalunitresponsiblefornetwork-centricinnovationactivities.First,ascompanieslikeIBMandSunhaverealized,

partnershipwithinnovationcommunitiesandothersuchentitiesofteninvolvespontaneousorunplannedinteractionsbetweenacompany’semployeesandsuchexternalpartners.Adedicatedorganizationalunitcanhelptoincreasethecoherenceoftheseinteractionsandtofacilitatetheinteractionsinsuchawaythattheyadvancethecompany’sinnovation

agenda.Morespecifically,toensurethatvaluegeneratedthroughtheseinteractionsarecapturedanddonot“fallthroughthecracks.”Themorediversethesetofinnovationpartners,themorediversethesetofinnovationcapabilitiesneeded.Soanotherrolefortheorganizationalunitistoseekoutandassemblecapabilitiesfromdifferentplayers.Insum,inadiffusedinnovation

spaceandwithadiversepartnernetwork,thededicatedorganizationalunitactslessasaprocessenforcerandmoreasaclearinghouseforbestpracticesandskills.

Thefinalissuetoconsiderindefiningtheappropriatestructureiswhethertheinnovationinitiativerelatestothecompany’sexistingmarkets(products/services)

ordoesittakethefirmintoverynewarenas?Ifthefirmisstayingclosetoexistingmarkets,thenitislikelythatthecompanywillhavetocreatestronglinkagesbetweentheorganizationalunitspearheadingnetwork-centricinnovationactivitiesandtheR&Dunitswithinindividualbusinessdivisionsassociatedwiththoseexistingmarkets/products.Forexample,3Mhasfocused

onusingitscorporateR&Dunittoleaditsnetwork-centricinnovationactivities.

However,giventhatmanyoftheseinitiativesrelatetoexistingproductsandmarkets,theearlyfocushasbeenonbringingtogetherthedivisionalR&Dunitstodevelopacoherentplanfornetwork-centricinnovation.

Ontheotherhand,ifthe

initiativesrelatetoemergingornewbusinessareas,averydifferentstructuremightbeneeded.Forexample,inthecaseofDuPont,thebio-basedmaterialsareaisonemarketwherethecompanyintendstoactivelypursuenetwork-centricinnovationapproach.Thus,ithascreatednewpositionstocoordinateexternalinnovationsourcingactivitiesinthebio-basedmaterialsbusinessarea.

ThesenewstructuralarrangementsarenotyettiedtotheR&Dunitsinotherbusinessareas.However,itisexpectedthatasDuPont’sCHAPTER10•PREPARINGTHEORGANIZATION

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innovationstrategyexpandstoothercornersoftheorganization,eventuallythoselinkageswouldalsobe

established.

Overall,webelievethatdedicatedunitsarelikelytobehelpfultospearheadandprovidecoherencetoacompany’snetwork-centricinnovationactivities.

However,theextentofinfluenceandcontrolsuchorganizationalunitsshouldexercisedependsonthenatureofthefirm’sportfolio

ofnetwork-centricinnovationinitiatives.

LEADINGANDRELATINGWITHPARTNERS

Whenparticipatinginnetwork-centricinnovation,companiesmightoftenneedtoleadtheirnetworksandattheveryleast,relatewelltoothernetworkpartners.Inthefourmodelsofnetwork-centricinnovationthatwe

discussedinthisbook,thenatureofsuchleadershipandrelationalcapabilitiesneededarequitedifferent.

Earlier,wediscussedhow,intheOrchestramodel,acompanysuchasBoeinghastoexerciseleadershipinwaysthatbringcoherencetothegoalsandactivitiesofthenetworkmembersandinstillasenseoffairnessandpredictabilityinthe

processesrelatedtovaluecreationandvalueappropriation.

Inourdiscussionwithmanagersinsuchcompanies,oneleadershipthemehascomeagainandagaintotheforefront:theneedtoprojectanimageofdecisivenesswithoutimplyinga“high-handed”approachtodecisionmaking.Suchdecisivenesscanrelatetooneormoreof

thefollowingissues:whogetstoplay,whatisthearchitecturethatwillguidetheplay,andhowwilltheplayproceed?

Indeed,mostofthecompaniesthatplaytheroleofanadapter(complementor,innovator)intheOrchestramodelseekdecisivenessfromthenetworkleader.

Decisivenesshelpsthem

evaluatetheopportunitytoparticipateinthenetworkwithmuchmoreclarity.Andithelpsthemplantheircontributionstothenetworkinwaysthatlendstabilitytotheirowngoalsandstrategies.

EveninthecaseoftheCreativeBazaarmodel,althoughthecompanyplayingtheroleoftheinnovationportalmightnot

interactdirectlywithallthenetworkpartners,itsabilitytocreatealevelplayingfieldforallparticipantsisacriticalelementofleadership.Theleadershiproleincludesbringingmoretransparencytotheinnovationprocess—forexample,makingexplicitwhatthecompanyislookingfor,howitwouldevaluatetheinnovativeproductideas,andhowitwouldgoabout

bringingsuchideastothemarket.WhilecompaniessuchasKrafthaveputoutcallsontheirWebsitesforcustomerparticipationininnovation,the206

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emphasisshouldbeoninformingtheinventorcommunityabouthowthatprocessofsuchinnovationsourcingwillunfold.

Inthetwocommunity-ledmodels—JamCentralandMODStation—whilea

companymightnotplayadirectleadershiprole,itcanstillprovideconsiderablesupporttothecommunityinnovationgoalsandtherebyofferanelementofmoreindirectleadership.Inthiscase,leadershipismorelikegoodcitizen-ship.Aftertheleadergainsthetrustofthe

communityandisacceptedintothefold,thecommunitymembersexpectittocontributetowardstheinnovationagenda.Insomecases,employeesofthecompanymightplayleadershiprolesinthecommunitybasedontheirownindividualexpertiseandcapabilities—forexample,someofIBM’semployeesplaysuchrolesintheLinuxcommunity.Insomeother

cases,contributionsmighttaketheformofharnessingthecompany’sexpertiseininnovationmanagementforthebenefitofthecommunity-ledproject.Forexample,someofthelargepharmaceuticalcompaniessuchasPfizerandEliLillyhavestartedmakingsuchcontributionstothecommunity-ledinnovationprojectsinthebiomedicalindustry.

Turningtorelationalcapabilities,twoimportantthemesrunthroughthedifferentmodelsofnetwork-centricinnovation.

Thefirstthemerelatestothepotentialasymmetryinpowerandresourcesbetweenthelargerandthesmallerparticipantsornetworkmembersinallfourmodelsofnetwork-centricinnovation.Itisobviousin

thecasesofboththeOrchestraandtheCreativeBazaarmodels.Itisevenevidentinthecommunity-ledprojects,too,asmembersrangefromindividualstolargecompaniestonon-profitentities.Assuch,animportantrelationalcapabilityistheabilitytointeractwithadiversesetofpartnerswithavaryingextentofresourcesandinfluenceontheinnovation

process.

Asonemanagerofalargeconsumerproductsfirmputit,“thefirstcompetencethatwehavefocusedondevelopinghereistobeabletointeractwithoursmallerpartnerswithoutmakingthemfeeloverwhelmed.Wedon’twanttobeperceivedasthe800-poundgorillatryingtostealtheirideas—ratherwewanttocomeacrossas

theseniorpartnerwhohastheresponsibilitytolookoutforthewelfareofallofourpartners,includingthesmallerfirms.And,wespendconsiderableeffortineducatingourmanagersastowhatthismeanswithregardtotheirday-to-dayinteractionswithourpartners.”

Anotherthemerelatestotheabilitytobuildtrustthrough

moreopencommunicationandinteractions.Again,trustisequallyimportantintheOrchestramodelasintheJamCentralmodelalthoughthemechanismstobuildsuchtrustamongnetworkpartnersmightvary.WhenDial,Inc.acquiresthehelpofCHAPTER10•PREPARINGTHEORGANIZATION

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nationalinventorassociationstocommunicatetoindividualinventors,itisfocusingonbuildingsuchtrustwithitspotentialcontributors.Similarly,whenBoeingbuildsanextensiveIT-basedvirtualcollaborationsystemtoenhanceinformationsharingamongitspartners,itisfocusingonfacilitatingtrust-basedinteractionsinthenetwork.

OrasP&Ghasdiscoveredinplayingtheroleoftheinnovationportal,trustbuildswitheachadditionalinteractionwithanexternalpartner.ThecompanycallsthistheWeed’slaw6—“Theseconddealwithapartnertakeshalfthetimeasthefirstonedid.And,thenextdealtakeshalfofthattime,andsoon….”AswediscussedinChapter5,“TheOrchestraModel,”cultivating

relationshipswithaselectedsetofinnovationcapitalistsandotherintermediarieshelpsP&G

tousethemutualunderstandingandtrustdevelopedthroughrepeatedinteractionstoacceleratetheoverallinnovationprocess.Thus,theabilitytoidentifyappropriatemechanismstobuildsuchtrustindifferentcontextscancriticallyshape

thesuccessofafirminnetwork-centricinnovation.

MANAGINGDEPENDENCIESBYSTAYINGFLEXIBLE

Bydefinition,network-centricinnovationcreatesdependenciesbetweenthefirmanditscollaborators—dependenciesoninnovationplansofotherpartnercompaniesanddependencies

onthecapabilitiesofexternalinventorsandothersuchentities.Forexample,acompanythatdevelopsasoftwareapplicationtorunonSalesforce.com’sAppExchangeplatformisjoinedatthehipwiththeplatformanditsfuture.Similarly,whenaninnovationcapitalistsuchasEvergreenIPdecidestofocusonaparticularmarket(say,toys)andcatertothe

innovationneedsofaselectedsetoflargeclientfirms,itisineffectcreatingadependencythatlinksitsportfolioofprojectswiththemarketneedsofitsclients.EvenintheJamCentralmodel,whencompaniescommittoaparticularcommunity-ledprojectandstartcontributingresourcesandexpertisetomovetheinnovationforward,theycreatedependenciesthat

mightbelessexplicit,butnolessrelevant.Soitisimportantforafirmtoacknowledgesuchdependenciesandcreatesufficientflexibilityinitsstrategytomanagetheassociatedrisks.

Onedimensionofflexibilityrelatestotheinnovationassetsthatthecompanycontributestotheinnovationeffort.Theabilitytoidentify

alternatedeploymentopportunitiesforsuchassetscanenablethecompanytoreduceormanagethedependenciesonthenetwork-centricinnovationproject.RecallBoeing’s787developmentproject.ManyofthenewtechnologiesbeingdevelopedbytheJapanesefirmsalsoinvolvedeeperexpertisethatthosecompanies208

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couldapplytootherprojects—particularly,theirownindependentinitiativesinaircraftmanufacturing.

Anotherapproachtobringflexibilitytotheinnovationstrategyistoparticipateinmorethanoneinnovationnetwork,ifpossible.Hedgingone’sbetsmightallowacompanytobalancethe

associatedrisksandmanagethetechnologicalandmarketdependencies.Forexample,someofthecompaniesbuildingapplicationsonSalesforce.com’sAppExchangeplatformhaveincorporatedstandardsandarchitecturethatenablethemtoportadd-onsolutionstoothercustomer-relationshipmanagement(CRM)solutionsandtherebyreducetheirrisk.Theobjectiveof

suchanapproachistomanagethe“distance”orsepara-tionbetweenthecompany’sowninnovationgoalsandthegoalsofthenetworkcentricinnovationprojectsitparticipatesin.

Wenowturntothesecondhalfofpreparingtheorganization—operationalreadinessfornetwork-centricinnovation.Westartwiththeprocessesthatareneededto

supporttheinnovationeffort.

PROCESSESTOSUPPORTNETWORK-CENTRICINNOVATION

Whenmostcompaniesdecidetolookoutsideforinnovativeideas,morethanlikelysuchinitiativeswouldstartoutinanad-hocfashion.However,asmoreandmoreresourcesgetcommittedtosuchinitiatives,theneedfor

clearlydefinedprocessessoonbecomesapparent.Unlessbasicprocessesareestablishedtoguideandmanagethecompany’sparticipationinexternalinnovationinitiatives,theorganization’sabilitytoderivereturnsfromsuchactivitiescanbeseriouslyhampered.

Ourdiscussionswithmanagersincompaniessuch

as3M,DuPont,Unilever,P&G,andKodakleadustoconcludethatestablishingprocessesearlyintheevolutionofthefirm’snetwork-centricinnovationinitiativesiscriticallyimportant,asthishelpsbringdisciplinetotheinnovationactivities.Althoughthespecificsofthedifferentprocessesandtheirimplementationdependontheparticularorganizational

context,wepointtosomegenericprocessesthatareneededtosupportnetwork-centricinnovation(NCI).

Themostimportantprocessistheselectionofbusinessareaswithinthecompanythatwouldbemostappropriateforpursuingnetwork-centricinnovationinitiatives.Howshouldthecompanydecideitsnatureandlevelofinvolvement?

Whoshouldmakesuchdecisions?Whatcriteriashouldbeconsideredinmakingsuchadecision?

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AnotherfocusforNCIprocessesshouldbetheselectionofexternalinnovationnetworksand

networkpartners.Itiscriticalthatacompanyhasacoherentsetofpoliciesforselectingitspartners(whetheritisanindividualfirmoraninnovationcommunity)thatitcouldimplementorganization-wide.Largecompaniesmayalreadyhaveestablishedprocessesforselectingpartnersforjointventuresandtechnologyalliances.Forexample,3Mhasasteering

committeethatevaluatesallpotentialcandidateprojectsforexternalcollaborationandselectsthemostsuitablebasedonasetofcriteria,includingtheabilitytodefineparametersforsuccessandrelevancetobusiness.Asthediversityofpartnersincreases,suchprocessesmightneedtobemodifiedtoincludeahostofotherfactorsthatmightnothavebeenofimportanceinone-

on-onepartnerships.Typically,suchprocessesshouldconsiderfactorssuchasthecompany’spriorrelationships,complementarityoftechnology/expertise,andsoon.

Third,processesalsoneedtobeestablishedtoidentifyandmanagetherisksassociatedwithparticipatinginnetwork-centricinnovation

projects.

Participatingincommunity-ledinnovationprojectsposesdifferenttypesofrisksthanparticipatingininnovationnetworksthatthecompanyleads.Forexample,inentertainingideasfromamateurinventorsandcustomers,thereareIP-relatedrisksandcompaniesneedtoinstituteprocessestomitigatetheserisks.Onthe

otherhand,whenparticipatinginanopenprojectsuchasLinuxorTDI,acompanymightallowitsemployeestomakeintellectualcontributions.Differenttypesofrisksareassociatedwiththisscenario.Thusthenatureoftheriskvarieswiththetypeofinnovationproject.Someoftheserisksarelikelytobethosethatthecompanyhasnotfacedbefore.Also,many

oftherelationshipsthecompanycreatesasitpursuesitsnetwork-centricinnovationagendamightrequirecarefulconsiderationofthelegalimplications.Itisagoodideatoinstituteprocessestovetthedifferentprojectsforthelegalissuesinvolved.

Inadditiontotheprecedingareas,processesmightalsobeestablishedtomanage

otheraspectsofacompany’sparticipationincludingsharingknowledgewithexternalpartners,coordinatinginnovationactivitieswithexternalpartners,andmanagingrelationshipswithadiversesetofnetworkpartners.

Theoverallobjectiveoftheprocessinfrastructureshouldbetoenablethecompanytouseauniformyardstickto

monitorandmeasureperformanceintheNCIactivitiesacrossthedifferentbusinessunitsoftheorganizationandtoensurealevelofrepeatabilityinsuchperformance.

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DEPLOYINGTOOLSANDTECHNOLOGIES

Overthepastfewyears,awiderangeoftoolsandtechnologiestosupportcollaborativeinnovationhavebeencreated.Someofthesetoolsfacilitatecommunicationandknowledgesharingamongnetworkmemberswhilesomeothertoolsenablecoordinationandmanagementofcollaborativeinnovationprocesses.

AswesawearlierinthebookinthecaseofBoeinganditsdevelopmentofthe787,theuseofappropriateinformationtechnology(IT)toolscansignificantlyenhancethequalityofcollaborationamongpartnerfirmsandleadtomoreeffectiveparticipationinsuchexternalinnovationprojects.Similarly,intheTDIproject,theWeb-basedinfrastructureprovidedby

thenon-profitorganizationTSLwasinstrumentalinfacilitatingthecollaborationamongthescientistsandotherparticipantsofthenetwork.

IT-basedtoolscanbeusedinfourareasofnetwork-centricinnovation:7

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Theycanbeusedasprocess

managementmechanismstoinstillstructuredproductdevelopmentprocessesandtobringalevelofrigorandstabilitytotheinnovationactivities.Althoughsomeofthetoolsmightimplementgenericandindustry-specificprocessmodels(forexample,theCapabilityMaturitymodelinthesoftwareindustryortheStage

Gatemodelinproduct

development),severalproprietaryprocessmod-

elsalsoexist(forexample,PACE).Thesetoolsandtechnologiesenablenetworkmemberstointegratetheirinnovationprocesseswithoutlosingcontroloverthem.

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Theyfacilitatebasicprojectmanagementfunctions—

scheduling,coordinating,andmanagingresourcesrelatedtoacomplexproject,

whetheritisanOrchestramodelprojectliketheBoeing787oraJamCentralprojectlikeTDI.Someofthesetoolsprovideavirtual“commandcenter”or“warroom”withaccesstoallprojectinformation

throughacommoninterface.

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Theysupportinformationsharingamongthedifferentnetworkmembers.Theyutilizedifferentdataandinformationstandards(forexample,ISO-STEP)tohandledifferenttypesofinformation(including

graphics,audio,video,andsoon).Someofthetoolsalsooffermoreversatilefacilities

capableofcombiningstructuredandunstructuredinformationinreal-time.


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Theyprovidecommunicationsupportrangingfromfacilitiesforacommunityof

innovatorstocometogethertohighlysecureforumsforadefinedsetofpartnerfirmstointeractandsharedocuments.

Althoughthesetoolsandtechnologiescanbeimplementedseparately,therearesomecomprehensivetoolsthatincludemostoftheprecedingfunctionalities.

Forexample,ProductLifecycleManagement(PLM)toolsprovideawiderangeoffeaturesandfunctionalitiestosupportnetwork-centricinnovationprojects,particularlyintheOrchestraandtheCreativeBazaarmodels.Inparticular,functionalitiesrelatedtoprojectresourcemanagement,productplatformmanagement,productdatamanagement,

andcollaborationmanagementassumeconsiderablesignificanceinthenetwork-centricinnovationprojectcontext.

Forexample,intheaerospaceanddefenseindustry,NorthropGunmanusesPLMsolutionstosupportitscollaborativedevelopmentoftheU.S.Navy’snext-generationdestroyer.Theproject,a

goodexampleoftheOrchestramodel,involvesmultiplepartnersandthecompanyutilizesPLMsolutionsfromDassaultSystems(aleadingPLMsolutionsprovider)tosupportitscollaborativedesignanddevelopmentactivities.8Similarly,HermanMiller(theofficefurnituremanufacturer)hasimplementedPLMsolutionstosupportcollaborative

designactivitiesbetweenthecompanyanditspartners(includingcustomersanddealers).9

AlthoughPLMandothersuchtoolsmightvaryintheirfeaturesandfunctionalities,thekeyissuehereishowwellthosefeaturessupportthenetworkmemberstoachievetheoverallinnovationgoals.Themoreintegratedthetoolsarewith

theunderlyinginnovationprocessesinthenetworkandthecapabilitiesofthenetworkmembers,thegreaterthepotentialreturnsfromsuchtools.Thus,thebottomlineforcompaniesistousethesetechnologiestodeviseanintegratedinnovationenvironmentthatembracesthenetworkmembersandbringscoherencetotheiractivitiesandcontributions.

MEASURING“SUCCESS”

Animportantelementofoperationalreadinessistheabilitytoevaluatethecompany’sperformanceandreturnsfromnetwork-centricinnovation.Thisabilitydemandsthecreationofanappropriateportfolioofinnovationmetrics.

Astheoldadagegoes,“Becarefulaboutwhatyou

measure.”Measuringthewrongthingcouldleadacompanydownthewrongpath.Forexample,counting212

THEGLOBALBRAIN

thenumberofpartnersmightgiveafalsesenseoftheintensityofthecollaborativeactivityofthecompany.Similarly,countingthenumberofpatentsproduced

throughcollaborationmightagaingiveawrongpictureofinnovationsuccessbecausepatentsdon’t“paythebills.”Thus,identifyingtherightsetofinnovationmetricsisofutmostimportance.

Network-centricinnovationmetricsdifferinnatureandfocus.Somemetricsaremoregenericandapplytoallmodelsofnetwork-centricinnovation,whileothersare

specifictothemodelthecompanyparticipatesinandtheroleitassumes.Whilesomemetricsaredefinedattheleveloftheinnovationnetwork,othersfocusonthecompanyandreflecttheimpactofthecompany’sparticipationonitsinternalactivitiesandoutcomes.

Table10.1providesaninventoryofthemetricsthatfallintoeachofthese

categories.Notethatthislistofmetricsisonlymeanttoberepresentative,andnotexhaustive.

Table10.1MetricsforNetwork-CentricInnovation(NCI)

Nature/Focusofthe

InnovationMetric

Network-Related

Company-Related

General

Capabilitiesandreputation

DiffusionofNCI-relatedcul-

ofthepartnerfirms

turewithinorganizational

units

Extentoftrustandcommit-

mentamongpartnerfirms

MaturityofNCI-related

processesandsystems

Qualityofvalueappropria-

tionmechanismsinthe

Perceptionofthecompany

network

amongnetworkpartners

NatureofIPrightsmecha-

AwarenessofNCIopportu-

nismsdeployed

nitiesamongdivisional

managers

Extentofcoherenceinfirm’s

NCIinitiatives

Model-specific

Orchestramodel

Extentofinvestments

Marketreachofthe

made/riskassumedbypart-

product/platforms

nerfirms

Timetomarket

Uniquenessofpartnercon-

Extentofriskassumedby

tributions

thecompany

Clarityofproduct/platform

architecture

CHAPTER10•PREPARING

THEORGANIZATION

213

Nature/Focusofthe

InnovationMetric

Network-Related

Company-Related

CreativeBazaarmodel

Sizeandgeographicscope

Numberofideassourced

ofinventornetwork

frominventornetwork

Natureoftieswithinterme-

Numberofnewproducts

diaries(innovationcapitalist)

generatedfromexternal

Extentofideatransforma-

ideas

tion(andriskassumed)by

Costofinnovationsourcing

partners

JamCentralmodel

Numberofmembersinthe

Company’simageinthe

innovationcommunity

innovationcommunity

Turnoverininnovation

Extentofcompany’sinflu-

communitymembership

enceoninnovation

Qualityofinnovation

outcomes

infrastructure

Extentof“learning”

achieved

MODStationmodel

Intensityofactivityinthe

Reachtoneworemerging

innovationcommunity

markets

Diversityofcommunity

Increaseinproduct/platform

membership

lifecycle

Communityinvolvementin

Qualityofrelationshipwith

networkgovernance

communitymembers

Thefirstsetofmetricsrelatestotheoverallnetwork.Thesemetricsallowacompanytoevaluatewhetheritispartneringwiththe“right”networkandmightalsoindicatewhenthecompanymighthavetorethinkitscollaboration

strategy.Forexample,foracompanysuchasDial,Staples,orP&GthatplaystheroleofaninnovationportalintheCreativeBazaarmodel,avaluablemetricwouldbethereachandgeographicscopeofitsnetwork—thenumberofinventorsandintermediariesthatthecompanyhasbeenabletoreachoutto.

Similarly,foracompany

playingtheroleofinnovationsponsorintheJamCentralmodel,ausefulmeasurewouldrelatetothestabilityoftheinnovationcommunity—thenumberofmembersinthecommunityandtheaverage

turnoverinmembership.Suchmeasuresindicatetheoverallqualityofthenetworkandinformonthecurrentandfutureinnovationpotentialof

thenetwork,andthuscouldhelpacompanytocontinuouslyevaluatewhetheritispartneringwiththerightsetofexternalentities.

Thesecondsetofmetrics,whichrelatestotheimpactofthecollaborationonthecompany,indicateshowwellthecompanyisfairingorgainingfromits214

THEGLOBALBRAIN

participationintheinnovationproject.GoingbacktotheCreativeBazaarexample,thenumberofexternalideasenteringacompany’sproductdevelopmentpipelineorthenumberofnewproductsthatcanbetracedbacktosuchexternalsourcesindicatestheclearandthemostdirectimpactofthecompany’s

participationinthenetwork.Similarly,acompanyplayingtheroleofinnovationcatalystmightconsiderthenumberofnewmarketsthatithasbeenabletoexpandasanindicationoftheimpactofitsparticipationinthenetwork.

Someofthecompany-specificmeasurescouldbemoregenericandrelatetotheinternalinnovation

infrastructureorcapabilities.Forexample,anauditofthecompany’sinternalinnovationprocesses—processmaturity—mightindicateitsoverallpreparednesstoidentifyandexploitdifferenttypesofnetwork-centricinnovationopportunities.Similarly,perceptualmeasurescanalsobeusedtounderstandthecompany’soverallperformance.Forexample,

measuresthatcapturethecompany’simageamongnetworkpartnerscouldprovetobeveryusefulinevaluatingandbuildingrelationalandleadershipcompetencies.

Similarly,internalmeasuresthatreflecttheextentofmanagers’awarenessofnetwork-centricinnovationopportunitiesmightindicatetheculturalandbehavioral

issuesthatmightimpactthecompany’sperformanceinnetwork-centricinnovation.

AsTable10.1shows,acompanycanutilizearangeofmeasures.Giventhateachmeasureprovidesauniquevieworperspectiveofsuccessinnetworkcentricinnovation,itisimperativethatacompanyadoptaportfolioofsuchmeasures.Mostimportantly,the

selectionofthemetricsshouldreflectthecompany’sdesiredfocusinparticipatinginnetwork-centricinnovation.

CONCLUSION

Inthischapter,weconsideredmanyoftheissuesthatcompanieshavetocarefullyaddresstopreparetheirorganizationtonavigatethenetwork-centric

innovationlandscape.Table10.2capturesthesedifferentissues.


215

Table10.2DimensionsofNetwork-CentricInnovationReadinessDimensionofReadiness

QuestionstoConsider

OrganizationalReadiness

CultureandMindset

DoesthecompanysufferfromtheWKE

syndrome?Ifso,whatstepshasthesenior

managementtakentoaddressit?Isthe

companycapableof“lettinggo”itsintellec-

tualassetsandcontroltoadvancetheover-

allinnovationagenda?

StructuralArrangements

Howwillthecompanyensurecoherenceto

theNCIactivitiesacrossthe

organization?Is

thereanyoneunitthatwillhavetherespon-

sibilitytoprovidesuchinternalleadershipto

theNCIactivities?

LeadershipandRelationalCapabilities

Isthecompanycapableof

providingleader-

shiptothenetworkpartners,ifrequired?

Howwell-developedisthecompany’srela-

tionalcapabilities?Whatmechanismshave

beeninstitutedwithinthefirmtobuild

andinstilltheappropriatesetofrelational

capabilities?

DependenciesandFlexibility

Whatisthenatureofthelinkagesbetween

thecompany’sinnovationgoalsandthe

goalsoftheinnovation

networkitpartici-

patesin?Isthecompanyawareofthe

natureofdependenciesithaswiththeNCI

initiative?Whatproactivemeasureshasthe

companytakentomanagesuchdependen-

ciesandintroduceflexibilitytoitsinnovation

strategy?

OperationalReadiness

ProcessesforNCI

Hasthecompanyimplementedrepeatable

andmeasurableprocessesrelatedtoitsvar-

iousNCIactivities?Aretheseprocesses

adoptedwidelywithinthedifferentpartsof

theorganization?Isthereanyoneunitor

personresponsibleformaintainingthese

processes?

continues

216

THEGLOBALBRAIN

Table10.2Continued

DimensionofReadiness

QuestionstoConsider

ToolsandTechnologies

Hasthecompanyidentified

andimple-

mentedtheappropriatesetoftoolsand

technologiestosupportitsNCIactivities?

Howwellintegratedarethesetoolsand

technologieswiththeNCIprocesses?How

readilycanthecompanyintegratethese

toolsandtechnologieswiththoseofits

partnerfirms?

MetricsforNCI

Hasthecompanyidentifiedaportfolioof

innovationmetrics

appropriatetothenature

ofitsNCIactivities?Doestheportfolioof

metricsgiveawell-roundedperspectiveof

thecompany’sperformanceinNCIinitia-

tives?Havespecificorganizationalunitsor

rolesbeenestablishedtocollectthedata

relatedtothesemetrics?

Aswenotedinthebeginningofthischapter,ourtaskherehasbeentoidentifytheimportantdimensionsofsuchnetwork-centricinnovationreadiness.Aseachindividualcompanychartsitsownpathinthenetwork-centricinnovationlandscape,itwill

needtoacquiretheparticularsetofresourcesandcapabilitiesthatwouldenableitfollowthatuniquepath.Withthisfocusonorganizationalpreparedness,wecometotheendofourjourneythatwestartedinChapter3,“TheFourModelsofNetwork-CentricInnovation,”bydescribingthelandscapeofnetwork-centricinnovation.

Inthenextchapter,webroadenourhorizonandconsidertheglobalcontextfornetwork-centricinnovation—specifically,theopportunitiesandpotentialforcompaniesinemergingeconomieslikeIndia,China,RussiaandBrazil,toparticipateinnetwork-centricinnovationandhowlargecompaniescanleveragetalentinemergingeconomiesforinnovation.

P

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GlobalizationandNetwork-

CentricInnovation

Chapter11Globalizing

Network-CentricInnovation:

TheDragonandtheTiger219

Chapter12ConcludingThoughts&Actionsfor

“Monday”Morning…237


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11

GlobalizingNetwork-Centric

Innovation:TheDragon

andtheTiger

Perhapsnocompanyhasplayedamoreimportantroleinmaking

theworldasmallerplacethantheBoeingCompany.Eversincethe

launchoftheBoeing707

long-haulcommercialaircraftin1958,fol-

lowedbythelegendaryBoeing747in1970,Boeinghasenabledbusi-

nesstravelerstocrisscrosstheglobetoconductglobalbusiness.

Boeinghascustomersin145countries,anddespitetherecentgains

madebyAirbus,over75%ofthecommercialaircraftinservicetodayweremanufacturedbyBoeing.

Paradoxically,whileBoeingaircraftflyaroundtheworld,until

recently,theyweredesignedveryclosetoSeattle.Withtheexcep-

tionofafewselected

JapaneseandEuropeanpartners,Boeingdid

muchofthedesignandengineeringforitsaircraftin-house.

EmergingeconomieshardlyshoweduponBoeing’sradarassources

ofengineeringandresearchtalent.Butthissituationbeganto

changewhentheairlineindustrywentintoatailspinfollowingthe

eventsofSeptember11,2001.Boeing’ssalescrashed,anditwas

forcedtocutcosts.Toreducedevelopmentcosts,Boeingbeganto

movesomelow-levelengineeringtaskslike

validation,verification,andtestingtolow-costgeographicareaslikeIndia.

Withthe787Dreamlinerproject,Boeinghasmadedramaticstrides

intakingitsinnovationprocessglobalandtappingintotalentfrom219

220

THEGLOBALBRAIN

emergingeconomies.BoeingisnowinvolvingIndianITfirmsinend-to-endsystemdesignwork—fromsystemsrequirementsdefinition,design,testing,certification,andsupport.Inalandmarkagreementsignedinearly2005withBoeing,HCLTechnologies,anIndianITandengineeringservicescompany,wasselectedto

providediversetechnologiesforthevarious787avionicssystemsincludingtheAirborneCollisionAvoidancesystem,displaysystems,crewalert-ingsystems,proximitywarningsystems,ground-basedsoftwaretools,andtheauxiliarypowerunit.BoeinghasalsopartneredwiththeIndianInstituteofScience,Bangalore,toconductresearchinaerospace

materials,structures,andmanufacturingtechnologies.Thesepartnershipsarenotaboutcost-cuttingandtheydonotinvolvelow-skilledjobs.Theyarepartnershipstodriveinnovation,andtheydemandveryhighlyskilledengineersandaerospacescientists.

Sofarinthisbook,wehavefocusedonthesearchforcreativityoutsidethe

boundariesofthefirm.But,astheBoeingexamplesuggests,theGlobalBrainalsotranscendstheboundariesofgeography.Inparticular,thereisvastuntappedbrainpowerintheemergingBRICeconomiesofBrazil,Russia,India,andChina.Asrecentlyasadecadeorsoago,geographicalbarrierspreventedfirmsoperatingintheUnitedStatesand

WesternEuropefromreachingouttotheglobaltalentpoolincountriessuchasIndia,China,andRussia.Inrecentyears,advancesinInternetandcommunicationstechnologieshavedramaticallychangedthispicture.TheGlobalBraincannowbeaccessedeffortlesslyoverawirehalfwayacrosstheworld.

InthewordsofTom

Friedman,thebest-sellingauthorandtheleadingchroni-clerofglobalization,wenowliveina“flatworld”—aninterconnectedworldwherethecompetitiveplayingfieldisbeingleveledwiththeadvancesofinformationtechnology,bringingemergingeconomieslikeIndiaandChinaontotheworldstage.1Althoughonecangetcarriedawaybythebreathlesshype

ofjour-nalistsandanalystsabouttheriseofemergingeconomies,thereisnodoubtthatnetwork-centricinnovationisrapidlybecomingaglobalphenomenon.

Moreimportantly,companiesintheemergingeconomieshavethepotentialtoplayimportantrolesinsuchglobalnetwork-centricinnovationinitiatives.

Whatarethetrendsdrivingtheglobalizationofinnovation?Whattypesofpartnerscanfirmstapintoastheyseektoglobalizetheirinnovationefforts?WhataretheopportunitiesforcompaniesincountriessuchasIndiaandChinatoparticipateinthevariousformsofglobalnetwork-centricinnovation?Howshouldcompaniesprepareforsuchglobalinnovation

opportunities?Thesearethequestionsthatweconsiderinthischapter.

CHAPTER11•GLOBALIZINGNETWORK-CENTRICINNOVATION:THEDRAGONANDTHETIGER

221

THEDRAGONANDTHETIGER:RISEOFCHINA

ANDINDIA

Almost40%oftheworld’spopulationlivesinChinaandIndia.Thisfacthastwoimportantimplicationsforglobalcommerce.Onthedemandside,thesecountriesareswiftlybecomingthemostimportantmarketsintheworldforawiderangeofproductsandservices.Onthesupplyside,thesecountrieshavealreadybecomethe

mostimportantsourcefortechnicalandscientifictalent.

Let’slookatthesetrendsinturn.

CONSUMERISMINTHEEMERGINGECONOMIES:THEMASSCLASS

Animportanthallmarkofanyrapidlydevelopingeconomyisitsprodigious

appetiteforconsumerproductsandservices.Consumerismhastakenonnewdimensionsinmostoftheemergingeconomies,particularlyinIndiaandChina.

Indeed,ithasledtotheemergenceofanewclassofconsumerthathasbeentermedtheMASSclass:“thehundredsofmillionsofglobalconsumerswhoare

nowunifiedintheirquestforthebestdealsonofferonaglobalscaleinvirtuallyeachB2Ccategory.”2HowbigisthisMASSclass?Considersomestatistics.

Itisprojectedthatby2015morethan800millionpeopleintheBRICcountrieswillhaveanannualincomethatisabove$3,000andby2025,approximately200millionwillhaveanannualincome

above$15,000.Suchprojectionsimplyamassivesurgeindemandforalltypesofconsumerproducts—basicgoodssuchasrefrigerators,airconditioners,cellphones,andTVsetsaswellashigher-pricedbrandedandluxuryproductsrangingfromMercedescarstoArmaniclothesandgoldjewelry.

Thisconsumerdemandisalreadyevident.In2006,

India’smiddle-incomegroupwaspeggedatapproximately260million,representingabout25%oftheoverallpopulation.Thisnumberisexpectedtogrowto628millionby2015.

Thismiddleclassislargelyresponsibleforthecurrent$450billionIndianconsumergoodsmarket(approximately65%ofthetotalGDP).

AnimportantpartoftheIndianconsumerclassistheyoungandeducatedpopulation—peoplelessthan30yearsofageandworkinginknowledge-intensivesectorssuchasinformationtechnology(IT)andbusinessprocessoutsourcing(BPO).Theseyoungandeducatedworkersearninganaverageof$600

amonth—arelativelyhigh

incomeinIndia—mightformthedrivingforceofconsumerisminIndia.Witharound2millionofthesepeoplespendingmorethanabillionandhalfdollarseverymonth,thedemandforofferingsranging222

THEGLOBALBRAIN

fromdesignerjeansandcosmeticstocomputersandcarshaveincreased

exponentially.

Thissurgingdemandforconsumerproductsintheemergingeconomieshascreatedimportantmarketopportunitiesforforeigncompanies.OnecompanythatunderstandstheimplicationsoftheexpandingconsumerismoftheBRIC

countriesisIkea,theSwedish

furnituregiant.ThecompanyhasopenedmegastoresincountriessuchasChinaandRussia.InChinaitself,thecompanyexpectstohaveatotalof10newstoresby2010—inBeijing,Guangdong,andShanghai’sPudongNewDistrict.

Inmanyoftheseemergingeconomies,peoplearealsohungryforinformation,creatingnewopportunities

forWesternmediacompanies,too.Forexample,theIowa-basedmediaconglomerateMeredithCorp.launchedanIndiaeditionofitsbest-sellingwomen’smagazine,BetterHomesandGardens,inearly2007.

Similarly,CondeNastPublicationsInc.,theNewYork-basedmediagiant,hasdecidedtopublishanIndianeditionofVoguemagazine.

TheemergenceoftheMASSclassthusimpliesnewmarketopportunitiesformultinationalconsumercompanies,suchasIkea,P&G,andJ&J—alsocallingforthecreationofnewinnovativeofferingstailoredtothesemarkets.However,thisdemandforinnovation—drivenbytheconsumerismoftheBRICcountries—alsohasaflipside.Therapidlyexpandingbaseofquality-

andtrend-consciousconsumersinIndia,China,andRussiaalsopresentsanotheropportunityforcompanies,onethatisdirectlyrelatedtonetwork-centricinnovation.Specifically,theemergingMASSclassrepresentsalargeandgrowingpoolofinnovatorswhosecreativityandtalentiswaitingtobetapped.

DEEPTECHNOLOGICALANDSCIENTIFICTALENT

Theemergingeconomies,particularlyinIndia,China,andRussia,havealsobecomeadeepreservoiroftechnologicalandscientificexpertiseinfieldssuchascomputerscience,mathematics,biotechnology,medicine,andenvironmentalscience.

ManyoftheWesterneconomiesarefacingtheeffectsofanolderandshrinkingworkforce—arapidlydepletingpoolofscientistsandtechnologists.Ontheotherhand,incountriessuchasIndiaandChina,thenumberofgraduatesintechnicalandengineeringprogramscontinuestoexpandexponentially.


223

Considersomenumberstoputthingsinperspective.Indiahas270universitiesandseveralworld-classengineeringandresearchinstitutions.In2005,India

produced220,000engineerswithfour-yeardegrees,and195,000engineerswiththree-yeardiplomas.InChina,theannualoutputofengineeringinstitutionsiscloseto640,000graduates(ofwhichapproximately350,000arefrombachelor-leveldegreeprogramsandtheremainderfromassociate-equivalentprograms).Bycomparison,U.S.institutionsgraduateonlyabout70,000

engineeringstudentsannuallyandEuropeanUnioninstitutionstogethergraduateapproximately100,000students.3,4

Itis,thus,nowwidelyacknowledgedthatthebalanceofthegloballaborsupplyhasshiftedtotheemergingeconomies.Inthefuture,thisshiftislikelytobecomeevenmoreskewed.Forexample,ithasbeen

projectedthat97%ofthe438millionpeopletobeaddedtotheglobalworkforceby2050willcomefromdevelopingcountries.5Consequently,thecompetitionforsuchglobaltalenthasbecomemoreintense—asWesternmultinationalsaswellasindigenouscompaniesintheseemergingeconomiestrytotapintothesenewsourcesoftalent.

However,itisnotjusttherun-of-the-millengineeringorscientifictalentthatthesecountriesnowpossess.Theyarealsobecomingthesourceofmorespecializedtechnologicalandscientificexpertise.Forexample,Russiahasanabundanceofrocketscientistswhoarecapableofdoingveryhigh-endmathematicswithwiderangingapplications—infinancialandsecurities

industry,softwareindustry,andbiotechnology.Russiaisbecomingarichsourceoftalentinanichearea—complexmathematicsandcomputing.Similarly,witharapidlygrowingtalentbaseforR&Dinmicroprocessors,Indiahasevolvedintoaglobalcenterforhigh-endmicroprocessordesign.

Theimportanceofthiscombinationofbothgeneral

andnichetechnologicalandscientifictalentforWesternmultinationalsisperhapsquiteevident.Forexample,IndiaisalreadyhometoR&Dcentersofmorethan125Fortune500

companies.However,thisvasttalentbasealsoposesimportantopportunitiesforcompaniesintheseverysamecountries—opportunitiesforassuming

importantrolesinglobalnetwork-centricinnovationinitiatives.

NON-PROFITANDNON-GOVERNMENTALORGANIZATIONS

AthirdtrendevidentintheBRICcountriesistherapidemergenceofanewtypeofplayercapableofparticipatingintheglobalinnovationinitiatives—

non-profitandnon-governmentalorganizations.

224

THEGLOBALBRAIN

ThemarketopennessandtheembracingofglobalcapitalismintheBRICcountrieshasalsobeenaccompaniedbythebirthofahostofnon-profitandnon-governmentalorganizations

(NGOs)tochampiontheinterestsofvariedstakeholdersinthesociety.ManyoftheNGOswereestablishedovertheyearstoprotestskewedregionaldevelopmentplansorcorporatepoliciesthatnegativelyimpactcertainsectionsofthesocietyandtopromotesustainabledevelopmentpoliciesandinitiatives.Forexample,NGOs’effortshavefocused

onliabilityinthecaseofoilspills,childlabor,violationofhumanrightsincertainindustries,foodqualitystandards,andsoon.

Overthelastseveralyears,however,manyofthesesameNGOshaveevolvedandadoptedamoreopenagendathatincludespartnershipwithcorporateentitiestopromoteoradvancemutuallybeneficialsocialand

economicgoals.6

Forexample,considertheinitiativespursuedbyHewlettPackard’sEmergingMarketSolutions(EMS)unit.7TheEMSteamlaunchedHP’si-community(inclusioncommunity)programtodevelopandintroduceITsolutionsthatareparticularlyrelevantforemergingmarketsanddirectlysupportsocialand

economicdevelopment.InIndia,thecompanypartneredwithNGOstosupporttheoperationofacommunityinformationcenter(CIC)intheremotetownofKuppaminthestateofTamilNadu.Similarly,inSouthAfrica,thecompanypartneredwiththeInternationalComputerDrivingLicense(ICDL)

Foundation,anNGO,toestablishatrainingand

testingcenterforOpenSourceSoftwareattheMogalakwenaHPi-community.

Similarly,Microsoft’spartnershipwiththeIndianNGOPrathamtodiffusecomputertechnologyinIndianvillages,Nestlé’spartnershipwithNGOsinPerutodistributenutritionallyfortifiedfoodproductstothepoor,and

ABNAMRO’spartnershipwithNGOAccionInternationaltopursuemicrofinancebusinessinLatinAmericaallindicatehowtheconvergenceofthegoalsandobjectivesofcorporateorganizationsandNGOscanleadtouniqueopportunitiesforvaluecreationintheemergingeconomies.AsthenumberandthediversityoftheNGOsintheemerging

economiesincrease,companiesarelikelytofindawiderrangeofsuchpartnershipopportunities—partnershipsthatextendtonetworkcentricinnovationinitiatives,too.

EMERGINGECONOMIESANDNETWORK-CENTRICINNOVATION

OPPORTUNITIES

Thesetrendsevidentintheemergingeconomiestellusaboutthevaluablerolescompaniesinthesecountriescanplayinnetwork-centricinnovation.LetusCHAPTER11•GLOBALIZINGNETWORK-CENTRICINNOVATION:THEDRAGONANDTHETIGER

225

exploresomeofthese

opportunitiesinmoredetailbygoingthroughthefourmodelsofnetwork-centricinnovation.

OPPORTUNITIESRELATEDTOTHEORCHESTRAMODEL

AswediscussedinChapter5,“TheOrchestraModel,”companiescaneitherplayaleadingrole(forexample,platformleader)oran

adaptorroleintheOrchestramodel.Giventhehighlyspecializedexpertiseandcompetenciesevidentinthecompaniesintheemergingeconomies,webelievetheadapterrole(complementor,innovator)promisesthebestopportunityforthesecompaniestoparticipateinnetwork-centricinnovation.

Companiescanleveragetheircapabilitiesinniche

technologyareastomakeuniquevaluecontributionsasacomplementortoaplatform-basedglobalinnovationnetwork.HCLTechnologies,aleadingIndia-basedITservicescompany,providesagoodillustrationofthisrole.

HCLTechnologiesispartofHCLEnterprise,a$2.7billionglobaltechnologybehemothfoundedin1976as

oneofIndia’sfirstITgaragestartups.Thecompanyhasawiderangeofofferings,muchofitrelatingtosoftware-ledITsolutions,businessprocessoutsourcing,andinfrastructuremanagement.AkeypartofitsbusinessfocusesonR&Dservices,particularlyinthesemiconductorsandthetelecomsectors.

Overtheyears,thecompany

hasacquiredconsiderableexpertiseonVLSIandhardwaredesignbyworkingonsystemdesignsolutionsforverticalindustriessuchasconsumerelectronicsandtelecom.Drawingonitsuniqueinternalexpertise,thecompanyrecentlydecidedtofocusonbuildingadd-onandcomplementarysolutionsforIBM’sPowerArchitecture.In2005,thecompanyopenedaPowerArchitectureDesign

Center(thefirstsuchoutsideIBM’sownwalls)thatoffersSystem-on-Chip(SoC)solutionsonthePowerplatformforawiderangeoforiginalequipmentmanufacturers(OEMs).Todothis,thecompanysublicensesIBM’sPowerPC405andPowerPC440embeddedmicro-

processorcores,andthenbuildsonthemtocreate

innovativeofferingstailoredforspecificmarkets.Thus,inthisinitiative,HCL’sfocusistoplaytheroleofacomplementor—bybringingitsuniquetechnologicalexpertiseinsemiconductordesigntoexpandthereachofIBM’sPowerArchitecturetoareassuchasconsumerdevicesandwirelessnetworking.Suchanapproachthatinvolveschannelingspecialized

expertisetoadvancetheinnovationagendaofaplatformleaderisonethatwouldbeofparticularappealtocompaniesintheemergingeconomies.

226

THEGLOBALBRAIN

Similarly,manycompaniesincountriessuchasIndia,Russia,andChinahave

expertiseinnicheareasthatcanbeeffectivelydeployedtoplaytheroleofaninnovatorintheOrchestra-Integratormodelofnetwork-centricinnovation.

Forexample,inthebeginningofthischapter,wedescribedhowHCLTechnologiesplayssucharoleasaninnovatorinBoeing’s787Dreamlinerprojectbycontributing

softwaretechnologycomponents.

Wipro,anIndiantechnologyservicesconglomerate,offersanotherexampleoftheinnovatorrole.Thecompanyhassetupa10,000-strongProductEngineeringSolutions(PES)groupthatoffershigh-endR&Dservicesinnicheareastoclientsinawiderangeofindustries—from

semiconductorandconsumerelectronicstoautomotiveandmedicaldevices.Muchofitsofferingsrelatetoplayingtheroleofaninnovatorbyputtingtouseitsextendedengineeringcapabilities.Forexample,recentlyaU.S.-basedgamingdevicevendorwantedtodevelopahigh-performanceacceleratorchipaspartofitsnext-generationproduct.Insteadofestablishinganin-house

hardwareteam,thecompanytappedintoWipro’sdeepexpertiseinVLSIdesignanditsEagleWisiondesignmethodologythataimstoreduceiterationsinthedesignofsiliconchips.TheclientfirmintegratedWipro’scapabilitieswithitsownproprietaryarchitecturetodefinetheSoC,designit,andtestit.Wipro’sengineerswereabletoproduceazero-defectchipsampleinjust15

months,therebyhelpingtheclientfirmtoreducethecycletimebyfourtofivemonths.8

Stillanotherexampleofsuchanadapterroleisprovidedbythepharmaceuticalindustry.Clinicaltrials—testingnewmedicationsforsafetyandefficacyinhumanpatientstogaintherequiredapprovalsfromgovernmentagencies—formanimportant,

expensive,andtime-consumingphaseinthedevelopmentofnewdrugs.ThepotentialtoleveragespecializedcapabilitiesandexpertiseresidentincountriessuchasIndiainclinicaltrialshaveattractedahostoflargepharmacompanies.Forexample,WyethPharmaceuticalsInc.haspartneredwithAccenture’sLifeSciencesCenterinBangaloreto

enhanceitsclinicaltrials.9AcomprehensiveteamofIndia-basedAccenturelifesciencesexperts—medicaldoctors,PhDs,pharmacists,statisticians,andsoon—workonthedesign,development,execution,andthereportingofclinicaltrialsforclientslikeWyeth.

Similarly,SIROClinphamisanIndianCRO(contractresearchorganization),

establishedin1996,thatoffersafull-suiteofspecialistservicesinclinicaltrialstocatertoglobalbiotechnologyandpharmaceuticalcompanies.10Itleveragesitsstrongcapabilitiesinclinicaltrialstoplugintothedrugdevelopmentprojectsoflargepharmacompaniesandhelpthemacceleratethedevelopmentprocessaswellasreducethedevelopment

costs.InthecaseofWyeth,itspartnershipwithAccenturehelpedthecompanyreducetheaveragetimetoprepareCHAPTER11•GLOBALIZINGNETWORK-CENTRICINNOVATION:THEDRAGONANDTHETIGER

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clinicaltrialreportsfromsixmonthstoafewweeks—each

daysavedtranslatesintoasavingsofabout$1millionindevelopmentcost.

OPPORTUNITIESRELATEDTOTHECREATIVEBAZAARMODEL

Rapidlyincreasingconsumerismintheemergingeconomiesholdstwoimplicationsforcompanies—oneveryobviousandthe

otherlessobvious.First,itisveryevidentthattheMASSclassisdrivingthedemandforinnovativeproductsandservices;thatis,innovativeofferingsthataretailoredtofittheneedsoftheemergingmarkets.Second,theincreasingnumberofknowledgeableandarticulatecustomersinthesemarketsalsoindicatestheconsiderablepotentialforcompaniestosource

innovativeideasfromtheseverysamemarkets.Thissecondimplicationmightbelessobvioustoday,butmayhavefar-reachingsignificanceinthefuture.Cost-effectiveinnovationscreatedinemergingeconomiesmightfindahomeinthemarketsofthedevelopednations.Letusexaminethisimplicationinmoredetailandunderstandtheopportunitiesthatthis

presentstocompanies.

TheMASSclassincountriessuchasIndiaandChinahasattractedahordeofWesterncompaniestothesemarkets.However,someoftheearlyinitiativesofthesefirmsendedupasfailuresthatonfurtheranalysisindicatealackofunderstandingofthemarketneeds.Forexample,considerKellogg’sfirstforayintotheIndianmarketin

1995withitsCornFlakesproduct.Despiteawell-knownbrandnameandareasonablypricedproduct,theresultswerequitedis-appointing.Saleswerelessthan20%oftheinitialtarget.Whatwentwrong?Thecompanyoverlookedasimplefact.Indianspreferhotmilkintheircerealandaproductmadeforcoldmilkwasnotveryappealing.Itwasonlywhenitrealizedthis

andrevampeditsproductthatKelloggfoundsuccessintheIndianmarket.

Theseandothersuchexamples(forexample,McDonald’sintroductionof

“MaharajaMac,”andsoon)indicatetheneedforcompanies—bothforeignanddomestic—tocarefullyunderstandtheuniqueneedsoftheseemergingmarkets

andtoinnovatebeforetryingtopushproductsandbrandsthathavefoundsuccesselsewhere.Theseexamplesalsoindicatethecriticalimportanceofthevastanddiversesetofcustomerinnovatorsinthesemarketswhoseideasandinsightscanbetappedtocreatethenewofferings.Further,ideassourcedfromsuchcustomers(andamateurinventors)mightevenhavewider

appealtoothermarkets.

Thisopportunityhasimportantimplicationsforlargecompaniesthatmightplaytheroleofaninnovationportal.Forexample,inIndia,companiessuchas228

THEGLOBALBRAIN

HindustanLeverLimited(aUnileversubsidiaryinIndia),theTataGroup,andReliance

Industrieswithlong-termpresenceandwell-developedbrandimageinthelocalmarketsareparticularlywellsuitedtopursuesuchopportunities.

Thesecompanieshavethecapabilitiesandtheinfrastructuretoseekoutinnovativeideasandtechnologiesfromindependentinventorsandcommercializethemforlocal

aswellasglobalmarkets.

However,aswesawinChapter6,“TheCreativeBazaarModel,”tobeaneffectiveinnovationportal,largecompaniesneedthehelpofsmallercompaniesthatcanplaytheroleofinnovationintermediaries.Intermediariessuchasideabrokersandinnovationcapitalistscansourceinnovativeideasfrom

inventornetworks,mediatetheinteractionswithlargecompanies,andaddvaluetotheinnovationprocess.UnliketheNorthAmericancontext,intheemergingeconomiesveryfewsuchentitiesexist,andassuch,webelievethispresentsapromisingopportunityforsmallcompaniestoplayaroleinnetwork-centricinnovation.

ConsiderIdeawicket,aNewDelhi-basedinnovationintermediarylaunchedinearly2007.Theyoungcompanyfocusesonplayingtheroleofanideabroker—

itallowsindependentinventorstoposttheirinnovativeideasonitsWebportalandthenprovidescompanies(subscribers)accesstothoseideas.Astheinventornetworks

establishedbycompaniessuchasIdeawicketexpand,theopportunitiesforcompaniestotapintosuchconsumercreativityintheemergingeconomieswillalsogrow.

Smallfirmsthatalreadyplaycomplementaryactivitiesinthisspace—marketresearchfirms,innovationconsultingfirms,andsoon—mightalsobeuniquelypositionedto

assumesuchintermediaryrolesgiventheirknowledgeofthecustomersinthesecountries.Theywouldneedtodevelopdeeperrelationshipswithcustomernetworksandwithamateurinventors,andaswedescribedindetailinChapter6,theycangainseveralinsightsfromtheexperienceofU.S.-

basedinnovation

intermediariessuchasBIG,EvergreenIP,andIgniteIP.

Thepromiseofsourcinginnovationextendsbeyondtheconsumerproductsectortotechnology-basedproducts,too.Forexample,considerthesoftwareindustryinRussia.Withsomanysmallsoftwarestartupsandhighlysophisticatedtalent,thereareboundtobeanumberofinnovativeproduct

andtechnologyideasthathavenotprogressedduetolackofcommercializationexpertiseandresources.InnovationintermediariesthatareabletoseekoutsuchideasandbringthemtotheattentionofglobalsoftwarevendorsmightbeabletopursueaveryusefulandprofitablebusinessinIPplacement.Suchanopportunityisnot,however,limitedtothesoftware

industry.Technology-basedCHAPTER11•GLOBALIZINGNETWORK-CENTRICINNOVATION:THEDRAGONANDTHETIGER

229

industriesrangingfromenvironmentalmanagement,energy,andtelecomtomedicaldevicesandaerospacearealsoprime

contextsforlaunchingsuchIP

placementbusinesses.

OPPORTUNITIESRELATEDTOTHEJAMCENTRALMODEL

Aswenotedpreviously,oneofthehallmarksoftheemergingeconomiesisthelargenumberoftechnologistsandscientists

invariedfields.Thisvastscientificresourcepresentsnumerousopportunitiesforcommunity-ledinnovationinitiativesthatarefocusedonsolvingproblemsuniquetotheemergingeconomies.Infacilitatingandsupportingsuchcommunity-ledinnovationinitiatives,companiesaswellasnon-profitorganizationscanplayaveryvaluableroleasinnovationsponsors(for

example,byprovidingaccesstovariedresourcesincludingcomputingcapacity,knowledgebases,innovationtools,infrastructure,andsoon).

ManyoftheissuesthatcountriessuchasIndiaandChinafacerelatetoprovidingbetterinfrastructuretotheirvastpopulation—fromdrinkingwatertohealthcareand

education.Mostsuchissuesdemanduniquesolutions—

solutionsthatleveragelocalresourcesandcapabilitiesinacost-effectivemanner.

ManyNGOsandothersuchagenciesareinvolvedinaddressingthesechallenges.However,astheseentitieshaverealized,thecriticalfactorinaddressingsuchchallengesisnotjustthe

availabilityoffinancialortechnologicalresourcesbuttheingenuityandinnovativenessthatcanbeharnessedfromthe

“community”inordertocomeupwithnovelsolutions.Thus,thekeytaskistofashiontherightenvironmentforthecommunitytocometogetherandcontributetowardsuchinnovativesolutions.

C.K.Prahalad’srecentworkfocusedonthepartnershipsbetweencorporateorganizationsandNGOsinemergingeconomiestodevelopnewbusinessesaimedatthemarketsatthe“bottomofthepyramid.”11WebelieveNGOsandcompaniescanextendsuchpartnershipstonetwork-centricinnovationinitiativesbysponsoringandsupportingsuchcommunityinnovation

initiativesthatmighthavebothsocialandeconomicgoals.

Inassumingsucharoleasinnovationsponsor,bothNGOsaswellascorporateentitieswouldneedtobringuniquecapabilitiestoadvancethecommunity-basedinnovationagenda.NGOscanbringtheirextensivereachintothecommunitythatfacesthe

particularissueandislikelytobenefitfromtheinnovation.Theycanalsobringsignificantcredibilitytotheinnovationinitiative,230

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therebyappealingtoandattractingthecommunitymemberswhoarelikelytocontributetotheinnovation.Ontheotherhand,corporate

organizationscanbringparticularexpertiseandtechnologiestoorganizeandfacilitatethecommunityinteractions.Theycanalsobringcapabilitiesthatwouldsupportthedevelopmentandtheimplementationoftheinnovation.

RecalltheTropicalDiseaseInitiative(TDI)discussedinChapter7,“TheJamCentralModel.”Oneoftheproject

ideasintheTDIrelatestoadiseasecalledChagas—ahumantropicalparasiticdiseasethatplaguesSouthAmerica.

Becauseitisahighlylocalizeddiseaseandonethatdoesn’thavethesamevisibilityas,say,malaria,itdoesn’tattracttheattentionandfocusofresearchersworldwide.ThisisasituationwhereNGOsandcorporate

organizationscouldstepintohelpsponsororsupporttheinnovationactivities.Forexample,NGOsincountriesaffectedbythisdisease(forexample,Venezuela)wouldbewellpositionedtoreachouttotheaffectedcommunitiesandhelpclosethegapbetweentheresearchersparticipatingintheTDIandthesecommunities.

Pharmaceuticalcompanies,ontheotherhand,cansponsororchampionsuchresearchinitiativesbyprovidingaccesstorelatedproprietarydatabasesormakingavailableparticularresearchtoolsortechnologies.

Withadiversesetofissuesandchallengesbeingtakenupbysuchcommunity-ledinnovationinitiativesinthe

emergingeconomies,theopportunitiesforcompaniesandNGOstoassumetheroleofinnovationsponsorandpartnerwithoneanotherarealsolikelytobeequallydiverse.

OPPORTUNITIESRELATEDTOTHEMODSTATIONMODEL

Finally,technologyandinnovationplatformsthat

havebeen“opened”upforcommunity-basedinitiativesalsopresentuniqueopportunitiestosmallcompaniesintheemergingeconomiestoparticipateasinnovatorsintheMOD

Stationmodelofnetwork-centricinnovation.

Manysmallcompaniesinthesecountriespossessvaluableexpertiseinoneor

morenicheareasthatarerelatedtosuchtechnologyplatformsandcancontributetotheinnovationinitiatives.Forexample,asyousawinChapter8,

“TheMOD(“MODification”)StationModel,”someoftheinnovatorparticipantsinSun’sOpenSPARCinitiativearesmallcompaniesbasedinEurope.

Similarly,considerSugarCRM—theCalifornia-basedcompanythatofferscommercialandopensourcesolutionsinthecustomerrelationshipmanagementarea.Apartfromthecommercial(proprietary)versionofitsflagshipCRM

solution,thecompanyalsooffersanopensourceversion(SugarOpenSource)CHAPTER11•

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thatdependsonthecontributionsoftheglobalsoftwaredevelopmentcommunity.TheSugarCRMcommunityhasgrowntomorethan7,000externalcontributors,manyofthem

intheemergingeconomies.Communitymemberscancontributetothecoreopensourceproductitselfortheycancontributetotheadd-onmodulesandotherextensionstotheopensourceproduct.Suchadd-onmodulesandextensionsenhancethereachandcapabilitiesofthecoreproduct—forexample,portingtheproducttootherplatformsandlanguages.Smallfirms(aswellas

individuals)intheemergingeconomieshavebeeninstrumentalinmakingtranslationoftheSugarCRMopensourceproductintomorethan40differentlanguagesaroundtheworld,therebyfacilitatingeasieruseoftheproductincountriessuchasIndia,China,Russia,andKorea.Inmanycases,thesecontributorshavenotonlygainedvisibilitybutalsoattractedadditional

consultingandserviceprojectsfromcompaniesusingtheSugarCRMsolutions.

SuchexamplesindicatethepotentialfortechnologyfirmsincountriessuchasIndiaandChinatoplugintosuchglobal“open”innovationnetworksandgarnerglobalvisibilityandexposurethatmightinturnleadtootherinnovation

opportunitieswithmoredirecteconomicreturns.

GLOBALINNOVATIONNETWORKSWITH“CHINDIA”ASAHUB

Indiscussingglobalizationofnetwork-centricinnovation,ourprimaryfocushasbeenonunderstandingthespecificrolesandnetwork-centricinnovationopportunitiesforcompaniesintheemerging

economies,suchasIndiaandChina.However,thereissomethingdeeperandbroaderatwork.Wearewit-nessingaglobalrestructuringofresearchanddevelopmentactivitiesincorporations,resultinginthecreationofglobalinnovationnetworks.NolongerisR&DgeographicallyconfinedtoRedmond(inthecaseofMicrosoft),Tokyo(inthecaseofSony),orMunich(in

thecaseofSiemens).Globalcorporationsarecreating“centersofexcellence”withinspecificgeographiesthattakeadvantageofinnovation-relatedcapabilitiesthatcanbesourcedlocallyandberelevanttolocalmarkets.Thesegeographicallydistributedcentersofexcellence,createdincollaborationwithanetworkoflocalpartners,canthenbe

stitchedtogethertocreateaglobalnetworkofinnovation.

Thecomputerindustryoffersanexcellentexampleoftheseglobalnetworksinaction.Inthelaptopcomputermarket,name-brandmanufacturerssuchasHP,IBM,andApplehaveforsometimereliedonglobalinnovationnetworkstodesign(yes,design!),develop,andmanufacturetheirproducts.Thecaseof

QuantaComputerillustrateshowsuchnetworksevolveandoperate.

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QuantaComputerisaTaipei-basedcompany,establishedin1988,thatspecializesinthedesignanddevelopmentoflaptop/notebookcomputers.12Thecompany

hasa3,500-strongin-housedesignandengineeringteamthatchurnsoutfullyfunctioningprototypesofnewlaptop/notebookcomputermodels.Theobjectiveisnottodesignthenextradicalproduct.Instead,thefocusisondesigninganddevelopingthenextversionofthelaptoporthenotebookcomputer.Clientfirms,whichincludelargeU.S.computervendors,chose

theirmodelsfromtheseprototypesdesignedbyQuanta.Afterthemodelispickedbyaclientfirm,Quantawillalsomanagethemanufacturingandlogisticsactivities.Thecompanydoesn’tdothemanufacturingitself.Instead,itparcelsoutthejobtoanetworkofmanufacturers,mostofthembasedinChina.Byleveragingitsdesigncapabilitiesandby

establishingandcoordinatingsuchaglobalinnovationnetwork,Quantahasbeenabletobecometheworld’slargestoriginaldesignmanufacturer(ODM)fornotebookcomputers.

Increasinglythismodelisemerginginotherindustries,too—notably,inconsumerelectronics,pharmaceuticals,andtheautomotiveindustry.OfficeMax,thethird-largest

officeproductsretailerintheUnitedStateswithannualsalesof$9billion,isagoodillustrationofaglobalinnovationnetworkinaction.13

OfficeMaxhasembarkedonanaggressiveprivatelabelstrategyinanefforttodifferentiateitselffromcompetitorslikeStaplesandOfficeDepot.Privatelabelproductscommandmuch

highermarginsthannationalbrands,becausetheretailerdoesnothavetopaythebrandpremiumfornationalbrands.

Traditionally,privatelabelproductsaresoldprimarilyonpriceandarelabeledwiththeretailer’sbrand.OfficeMaxwasnoexception.Mostofitsprivatelabelproductswereimitationsofnationalbrands,mostwere

sourcedfromoverseassupplierswhoservetheentireindustry,andalmostallofthemwerelabeledwiththeOfficeMaxstorename.ButOfficeMaxwantedtodosomethingdifferent.Itdecidedtocreateanewbrandfromthegroundup,andtocontroltheentireprocessfrominceptionthroughdesignandproduction.ThewayOfficeMaxwentaboutthisprocessillustratesthe

powerofglobalinnovationnetworks.

TherewerethreeactorsintheprojecttocreateOfficeMax’sfirstdesign-basedprivatelabelbrand,TUL—aselectionofnewpremiumModernist

design–inspiredpensanddry-erasemarkers.OfficeMaxprovidedtheexpertiseinmerchandising

andretailing.ThesecondactorwasGravityTank,aChicago-baseddesignconsultingfirmthatOfficeMaxhiredtoprovidetheexpertiseincustomerinsights,industrialdesign,andbrandidentity.GravityTankconductedethnographicresearchobservingavarietyofexternalofficeworkers,CHAPTER11•GLOBALIZINGNETWORK-CENTRIC

INNOVATION:THEDRAGONANDTHETIGER

233

talkingwithofficemanagerswhoboughtstationerysuppliesinbulk,andspeakingtostoreclerksandcustomersalike.Thisresearchledtotheinsightofcreatingalineofwritinginstrumentsthatwouldservethegoalof“everyday

premium”—instrumentsthatwouldbeanexpressionofpersonalityandwouldcreatethepersonalattachmentthatpeoplefelttowardsveryexpensivefoun-tainpenstothelower-endrollerballpens.ThethirdsetofactorswastheChinesecompanieswhowereexpertsatlow-costhigh-qualitymanufacturingandlogistics.OfficeMaxandGravityTankcommunicatedtheuniquedesignand

identityoftheTULlinetothesuppliers,whowouldotherwisehavecreatedlook-alikepenswithidenticalpartsthattheyselltoallretailers,withtheonlydifferencebeingtheretailer’slogoemblazonedontheside.

AcombinationoftheretailingskillsofOfficeMax,thedesignskillsofGravityTankandthemanufacturingskillsofChinesesuppliers

allowedOfficeMaxtocreateaproprietarybrandthathasbecomeastrongdifferentiatorforthem,becauseitisdesignedanddevelopedbytheretailer,andisavailableexclusivelyatOfficeMaxstores.Thisexampleshowsthepowerofnetwork-centricinnovationintheglobalcontext.AstheOfficeMaxcaseshows,globalizingnetworkcentricinnovationnotonlytakes

advantageofthenetworkpartners’differentialinnovationcapabilitiesandtalent(asintraditionalNCI),butalsooftheirlowercoststructureduetothegeographiclocation.Ineffect,themodelillustratesthepotentialfor“globalresourcearbitrage”innetwork-centricinnovation.Thebenefitsofresourcearbitragecaneitherbemillionsofdollarsinproduct

developmentsavingsand/orweeksandmonthsshavedfromtheproductdevelopmenttime.

Asthequality,diversity,andthesophisticationofR&DservicesavailablefromIndiaandChinarapidlyincrease,wearelikelytoseemoreandmoreglobalnetwork-centricinnovationinitiativescenteredonserviceofferings.Forexample,bytheendof

2007,fully31%ofglobalR&DstaffwillbeinIndiaandChina.14

Similarly,accordingtoarecentstudybyBoozAllenHamiltonandNASSCOM

(India’ssoftwareindustryassociation),Indiacouldcaptureasmuchas25%to30%oftheworld’sengineeringservicesmarket,whichwouldmean$50

billioninservicesrelatedtoengineering,design,andR&D.15AndChinaisnotfarbehind.

AlloftheseexamplespointtotheincorporationofIndia-China(or“Chindia”16)asanimportanthubinglobalinnovationnetworks,aswellasanincreasingefforttointegratethecomplementaryR&Dandengineeringservicesfromthesetwo

countriestocreateinnovativeofferingsrapidlyandcosteffectivelyfortheglobalmarket.

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PREPARINGFORTHESEGLOBALOPPORTUNITIES

Manyofthetrendsandtherelatedopportunitiesthatwe

havediscussedtillnowareunfoldingrightnowintheseeconomies.Theinterestingquestionthenis,howshouldcompaniesprepareforsuchglobalinnovationopportunities?

InChapter9,“DecidingWhereandHowtoPlay,”andChapter10,“PreparingtheOrganization,”wediscussedindetailthevariousissuesrelatedtoorganizational

preparednessfornetwork-centricinnovation.Alltheseissuesassumerelevanceintheglobalizationcontext,too.

Companiesfirstneedtocarefullyexamineanddecidewhatspecificinnovationroletheycanplayinsuchglobalnetworksgiventheiruniqueresourcesandcapabilities.Wehighlightedsomeofthemorerelevantrolesfor

companiessituatedintheemergingeconomies.Managersneedtoexaminetheappropriatenessofsuchrolesandunderstandtheunderlyingissuesandchallenges.Forexample,aswediscussedinChapter9,companiesthatareexploringthepotentialtoplayadaptorrolesneedtoexaminetwokeyissues.Oneisdeterminingthenatureoftheconnectionbetweena

company’sspecializedcapability(thatis,itscontribution)andthenetwork(ortheinnovationplatform).Thesecondconsiderationinevaluatingtheadapterroleshouldbethepotentialtoacquireadditionalexpertisefromtheirinteractionswithothernetworkmembers—inotherwords,whatisthelearningopportunity?Thisissueisparticularlyimportantforcompaniesin

theemergingeconomiesasparticipationinglobalnetwork-centricinnovationinitiativesmightpavethewayfortheacquisitionofnewcapabilitiesanddiversificationofofferings.

Pluggingintotheglobalnetwork-centricinnovationinitiativesrequiresmorethanjusttechnicalorengineeringexpertise.Italsorequiresorganizationaland

managementcapabilitiesthatenablethecompanytooperateeffectivelyinthenetworkandtoappropriatethevaluegenerated.InChapter10,wediscussedtherelatedissuesrangingfromorganizationalcultureandstructuretoinnovationprocessesandtechnologies/tools.Theseissuesassumerelevancehere,too.

Forexample,considerrelationalskills.Manyofthecompaniesintheemergingeconomiespossesslimitedcollaborativeexperience,particularlywithregardtoparticipatinginlargeinnovationnetworksthatcrossnationalboundaries.

Mismanagingthechallengesrelatedtoregionalculturalissuescouldimpedeacompany’ssuccessin

participatinginanetwork-centricinnovationinitiative.

Thus,companiesneedtoinvestconsiderabletimeandresourcestodevelopappropriaterelationshipmanagementcapabilities.


235

Similarly,manyofthesmallercompaniesmightalsolackformalinternalinnovationmanagementsystemsandprocessesandmightbefacedwithsteeplearningcurvesassociatedwithparticipationinlarge-scalecollaborativetechnologydevelopmentprojects.Aswediscussedinearlierchapters,

harmonizationoftheinnovationprocessesacrossthenetworkmembersisimportantandassumesgreatersignificancewhensuchnetworksareglobalinscope.Alloftheseissuesindicatetheneedtocarefullyidentifytherequisitecapabilitiesappropriatetotherole(describedindetailinChapter10)andtodevelopthem.

CONCLUSION

MuchhasbeenwritteninrecentyearsabouttheburgeoningimpactofcountriessuchasIndiaandChinaontheworldeconomy.Forexample,a2004

GoldmanSachsreport17projectedthattheBRICeconomies’shareofworldgrowthwouldrisefrom20%in2003tomorethan40%in

2025.Thesamereportalsoprojectedthattheirtotalweightintheworldeconomy(expressedasashareoftheglobalmarketcapitalization)wouldrisefromapproximately10%in2004tomorethan20%in2025.Suchpredictionshelptounderlinethepathofrapidgrowthanddevelopmentthatthesecountriesareon.However,whatisperhapsevenmoreevidentrightnow

istheimpactofthesecountriesonglobalinnovation.

Inthischapter,weoutlinedthedifferentwaysinwhichglobalnetwork-centricinnovationinitiativescouldincorporatethecapabilitiesandexpertiseresidentintheemergingeconomies.Thespecificimplementationofthesedifferentinnovationrolesmightevolveoverthe

yearsascompaniesexperimentwithdifferentbusinessmodels.However,onefactremainscertain—emerging

economies,ledbyIndiaandChina,willbecomecentralplayersincreatingglobalnetworksofinnovationincomingyears.


C

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A

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12

ConcludingThoughtsand

Actionsfor“Monday”

Morning…

Westartedthisbookbyoutliningtheinnovationcrisisthatmany

companiesarefacingasaresultofdecliningR&Dproductivityontheonehand

andthequickeningpaceofcompetitionontheother

hand.CompaniessuchasDell,Kraft,andMerckaregrapplingwith

theinnovationcrisis.Whilethesehigh-profilecompanieshavegot-

tenalotofpressbecausetheyhavefallenonhardtimes,theinno-

vationcrisisisnotlimitedtoafewlargecompanies.Indeed,

companieslargeandsmallacrossawiderangeofindustriesarefac-

ingsimilarproblems.

Isyourcompanyfacinganinnovationcrisis?Askyourselfthefol-

lowingquestions:

■

Haveyouseenasteepincreaseinnewproductdevelopment

costsinrecentyears?

■

AreyouseeingadeclineintheproductivityofR&D

dollars

spentbyyourcompany?

■

Areyoufacedwithshrinkinglifecyclesforyourproducts?

■

Areyourproductsgettingcommoditizedfasterthaninthe

past?

■

Isyourcommercializationcostfornewofferingsatleast

twicethatofthebest-in-classcompetitor?

237

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THEGLOBALBRAIN

■

Isyourconcept-to-commercializationtimeatleasttwiceaslongasthebest-in-classcompetitor?

■

AreyoufacedwithunfamiliarcompetitorsfromChinaandIndiawho

havesignificantlylowerdevelopmentandmanufacturingcoststhan

yourcompany?

■

Areyoufindingitmoredifficultandmoreexpensivetohirehigh-qualityengineeringandscientifictalent?

■

Areyoufindingthat,evenwithabiggernumberofprojectsinyourpipeline,youarenotabletodeliverenough“hit”productstothemarket?

■

Overall,areyoufindingthatyourinnovationprocessisnotuptomeetinginvestorgrowthexpectations?

Ifyouanswered“yes”toamajorityofthesequestions,welcometotheinnovationcrisis.YouarejoiningtheranksofcompanieslikeMotorola,whichhasseenthepriceofitswildlypopularRazrphoneplummetfromahighof$500whenthephonewasintroducedinNovember2004,to$200inmid-2005,andfinallytolessthan$50bytheendof2006.Inthelastquarterof2006,Motorola

sold48%moreRazrphonesthanintheyear-agoquarter,butitsrevenuesstillfell.Tostemtheerosion,Motorolaintroducedafollow-upproductcalledtheKrzr,butthiswasseenasanincrementalproductthatgotcommoditizedevenfaster.Theresult—theveryfutureofMotorolaisatstake.RemembertheRedQueeneffectthatwedescribedinChapter1,“ThePowerof

Network-Centricity”?ThisisanexampleoftheRedQueeneffectinaction.

OrperhapsyourcompanyislikeGeneralMotors,whichoffersthelowest-pricedcarintheUnitedStates,the$10,560ChevroletAveo,whileanIndianautocompany,TataMotors,isworkingonacarthatitaimstosellfor$2,500.

The“people’scar,”beingdevelopedwiththeingenuityofIndianautomotiveengineersandthedramaticallylowerdevelopmentcostsinIndia,mightrivaltheFordModelTortheVolkswagenBeetleasabreakthroughinaffordabilityandberesponsibleforbringingmillionsofnewcustomersintotheautomobilemarket.1Althoughthetinyand

underpoweredTatacarmightneverbesoldintheUnitedStates,TataMotorswillcertainlylearnvaluablelessonsitcanputtouseincreatingcheapercarstargetedatWesternmarkets.Thisisthefaceofglobalcompetition.

Themultipledimensionsoftheinnovationcrisis—cost,timetomarket,quality,creativity—combineto

createamultipliereffectthatcanjeopardizeyourcompany’sfuture.Tosecureitsfuture,youneedtolookoutsideyourfirmforideas,technologies,andproducts.YouneedtoharnessthepoweroftheGlobalCHAPTER12•CONCLUDINGTHOUGHTSANDACTIONSFOR“MONDAY”MORNING…

239

Braintoimprovethereach,increasethespeed,andreducethecostofyourinnovationprocess.Youneedtochooseandimplementnetwork-centricinnovationmodelsandrolesthataremostappropriateforyourcompany.

ThecoreargumentofourbookisthattappingintotheGlobalBrainisnolongeramatterofchoice.Itismorea

questionofhow,ratherthanwhether,acompanyshouldpursueanetwork-centricinnovationstrategy.Thissenseofcrisisiswhathasstokedexecutivemanagement’sinterestinnetwork-centricinnovationinitiatives,evidencedintheurgentcallforactionissuedbyseveralhigh-profileCEOs.

TheCEOiswhoshouldbegin

thejourneytowardsnetwork-centricinnovation,soitisfittingthatweconcludethebookbyfocusinginthischapterontheroleoftheCEOincommunicatingasenseofcrisistotheorganizationandevangelizingorbuildingthefaithinnetwork-centricinnovationinitiatives.

Wetakeastepbackbyreflectingonsomeofthe

corethemesandpracticesthatunderlienetwork-centricinnovation—themesandpracticesthatreflecttheinsightsandthewisdomdistilledfromexperiencesofthefirmsandthemanagersthatwehaveinteractedwithwhileresearchingthisbook.Someoftheseexperiencesweresuccesseswhereasothersendedinfailure.Assuch,theycapturepracticesthatcansignificantly

advanceacompany’sinnovationinitiativeaswellasthosethatmightremovepotentialbarrierstosuccess.

EVANGELIZEAND“BUILDTHEFAITH”

AthemethathassurfacedrepeatedlyinourdiscussionswithmanagersacrosscompaniesandindustriesisthecentralroleoftheCEOin“buildingthefaith”

intheorganizationaboutlookingoutsidetheorganizationforideasandpartneringwithexternalactorsandcommunitiestofurtherthefirm’sinnovationagenda.

Inmanylargecompanies,thishastakentheformoftheCEOsettingoutexplicitgoalsrelatedtonetwork-centricinnovation.CompaniessuchasDuPont,

P&G,Staples,andIBMcometomind.Insomeofthesecases,theCEO’sgoalshavegottenwidervisibilityinthebusinesscommunity.

However,asthephrasebuildthefaithindicates,theCEO’srolegoesbeyondjustsettinggoalsrelatedtohowmuchinnovationshouldbesourcedfromoutsideorhowmuchnewrevenueshouldbegeneratedfromnetwork-

centricinnovationinitiatives.CEOsneedtochampionanewsetofbeliefsthatmightinitiallybeperceivedashereticalandgeneratestiffinternalresistance.Often,240

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internalresistancecomesfromseniormanagers—peoplewhohavethepowerandthemotivetosabotage

theinitiatives.

OvercomingthisinternalresistanceiswhatSamPalmisano,theCEOofIBM,hadtodowhenits“GlobalInnovationOutlook”(GIO)wasconceivedinearly2004.TheideathatIBMwouldopenitstechnologyandbusinessforecastingprocessestoabroadsetofclientsandpartnersseemedhereticalandattractedplenty

ofresistancewhenitwasfirstproposed.DavidYaun,thevicepresidentforcorporatecommunicationatIBM,recallsinitialresponserangedfromcommentsthatridiculedthevalueoftheideatosuggestionsthattheteambehindtheGIOwoulddamageIBM’scredibilityandbrandimage.2Somemanagersfeltthat“Wealreadydothis,”whileothersopined,“Whatyou’redoing

isverydangerous.Iwon’tstandforit.”Oneexecutive“forbid”theteamfromcontacting

“myclients”andaseniorresearcherwasevenmorecaustic,notingthat,“Myjobistopreventyoufromembarrassingourchairman.”

Palmisanoplayedacrucialrolein“pushing”theorganizationtoacceptthese

initiatives.HestronglyendorsedtheinitiativeandgavetheGIOteamtheirmarchingorders.HepushedthemtoslashtheproposedtimeforimplementingtheGIOinitiativefrom18monthsto5months,andsuggestedtotheteamthat,ifatanytimetheyfeltcomfortablewiththeirprogress,thentheirapproachwaswrong—inotherwords,theywouldbeplayingittoo

safe.Toovercomeinternalobjections,hesteeredawayfromamandate.Instead,hegavetheteamflexiblefunding,freedomtoexperiment(andfail),andmostimportant,constitutedanexecutivesponsorboard(includingsomeoftheoriginalskeptics)tosteertheinitiative—ineffect,givingthemapersonalstakeinitssuccess.Thisapproachsignaledtheseriousnessof

theinitiativeinthechairman’sperspective,andwentalongwayinshapingthethinkingoftheorganizationintherightdirection.TheIBMexperienceillustrateshowaCEOhastobethe“swordandtheshield”foropeningupthecompany’sinnovationeffortsandshiftingtoamorenetwork-centricapproach.

Anotherdimensionof

buildingthefaithisprovidingtherightperspectivefortheorganizationtoviewexternalinnovationopportunities.TheevangelizationeffortsinitiatedbytheCEO’sofficeshouldalsoincorporateabroadoutlineofquestionsthatmanagersneedtoconsiderinembarkingonnetwork-centricinnovationinitiatives.Forexample,whatarethebroad

parametersonwhichtheorganizationiscommittingitselftoexplorenetwork-centricinnovationinitiatives?Aretherecertainmodelsofnetwork-centricinnovationthattheorganizationwillnotpursue?Istheorganizationgoingtopartnerwithnon-traditionalpartners(forexample,non-profitorganizations,individualinventors,andsoCHAPTER12•

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on)?Howmuchcontrolandinfluenceistheorganizationwillingto“letgo”ofintheseinitiatives?Willthisapproachbebroadlyappliedorlargelylimitedtothosebusinessdivisionsinneworemergingmarkets?

Addressingsuchquestionsearlyhelpsmanagersevaluatetheextentoforganizationalcommitmentonnetwork-centricinnovationaswellasunderstandthe

“hows”andthe“whys”thatunderliesuchcommitment.Asonemanagerputittous,“Goalsareimportant.However,wehavelotof‘goals’floatingaroundinour

companyatanyonetime.Soonemoresetofgoalsisnotgoingtobeveryuseful.Whatweneedisaframeworkoramentalmodelforustoapproachthisissueuniformly.AndIbelievethatitisthejoboftheCEOtoprovidethisframework.”

Inshort,publicannouncementsoforganizationalaspirationsregardingnetwork-centric

innovationisonlyonepart(perhapsthemorevisiblepart),butthemoreimportanttaskfortheCEOistosetoutthebroadapproachinawaythatreallyhelpsbuildthefaithoftheorganizationinexternalinnovationinitiatives.

“ENGAGE”THEENTIREORGANIZATION

Aswehaveseeninexploring

thefourmodelsofnetwork-centricinnovation,theopportunitiesforleadingorparticipatinginnetwork-centricinnovationcanemanatefromdifferenttypesofexternalentities—individualinventors,innovationcapitalistsandothersuchintermediaries,customers,technologypartners,suppliers,non-profitorganizations,andsoon.Further,thesedifferent

externalentitiestypicallycomeintocontactwithdifferentpartsoftheorganization—

marketing,R&D,businessdevelopment,procurementandsoon.Assuch,itisimportantto“engage”theentireorganizationintheefforttoidentifyandevaluatethedifferentnetwork-centricinnovationopportunities,evenifthereis

oneunitassignedwiththeresponsibilitytocoordinatethedifferentinitiatives.

Thefirststepinengagingtheorganizationistogetthemessageaboutnetworkcentricinnovationouttoeverycorneroftheorganization.AlthoughthisstepcanpartlybeaccomplishedbytheCEO’sevangelizationefforts,theseeffortsneedtobe

supplementedwithamoreextensiveinformationcampaign.Forexample,inthecaseof3M,thisjobhaslargelybeentheresponsibilityofitscorporateR&Dunit.AsRobertFinnochiaro,3M’scorporatetechnicaldirectortoldus,“Ourtaskinthelastcoupleofyearshasbeentocomplementtheworkdonebyourseniormanagementandtogeteverybodyinthe

organization,particularlyallofourbusinessdivisionsandtheirlocalR&Dunits,onthesamepage.”

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Anotherapproachtodrivebroaderengagementistodeploythenetwork-basedstrategyinsideyourorganizationfirst.WhenIBM

soughttopromoteitsInnovationJaminitiative—an“onlinebrainstormingsession”tominenewandinnovativebusinessideasandopportunities—itconductedthefirstJamexperimentin2003byinvolvingitsownemployees.Theobjectiveofthis“ValuesJam”wastoidentifythecorevaluesoftheorganizationandtodevelopaconsensusaroundthecorevalues.Afterthe

firstJamwasdeemedsuccessful,IBMrefocusedtheJamoninnovation,callingittheInnovationJam,andexpandedtheparticipantstoincludeitsecosystempartners—customers,suppliers,andsoon.TheobjectiveofthesecondInnovationJam,conductedin2006,wastoidentifyemergingtechnologytrendsinthekeymarketsthatmatteredtoIBM.Inthenext

round,IBMexpandedtheboundariesfurtherbyfocusingtheInnovationJamonspecificindustriesandaudiences.Forexample,inMarch2007,itconductedanInnovationJamfocusedontheautomotiveindustrycalledtheAutomotiveSupplierJam.ThisinitiativebroughttogetherindividualsfromsupplierorganizationsaswellasfromOEMs,government,academia,

industryassociations,andothersaffiliatedwiththeautomotivesuppliersegment.Morethan2,000peoplefrom150organizationsand17countriesparticipatedintheAutomotiveSupplierJamontopicslikeprogramlifecycleprofitability,creatinganinnovativeculture,andembracinggreentechnologies.

IBM’sapproachis

reminiscentoftheoldadage,“Charitybeginsathome.”Inbroadeningtheengagementwithnetwork-centricinnovation,startingfromtheinsideisbestby“openingupinside”before“openingupoutside.”Thisinside-to-outsideapproachallowsthediffusionofthevaluesassociatedwithnetworkcentricinnovationbroadlyanddeeplyacrosstheorganization.

Gettingbuy-infromtheentireorganizationrequiresnotjustgettingthemessageout,butmoreimportantly,buildingthe“capability”forthemanagersinthedifferentfunctionalunitsand/orbusinessdivisionstorecognizepromisingnetwork-centricinnovationopportunitiesandto“connectwith”andshareinformationwithotherorganizationalunitsthatcanactonthose

opportunities.

Ifsuchacapabilityiscreated,thenwhereversuchopportunitiesmightarise—

whetheritisthemarketingfunctionortheglobalprocurementunit—theorganizationwillbeabletoidentify,evaluate,andpursuethemwithoutskip-pingabeat.Ideally,everymanagerandeveryfunctionshould

becomea“personalportal”intotheexternalworld,constantlyscanningtheenvironmentforexternalinnovationopportunities.

Thus,in“buildingthefaith”and“engagingtheorganization,”thekeyquestiontoaskis,“Isyourorganizationwiredfornetwork-centricinnovation?”

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EXPERIMENT!EXPERIMENT!—AROUNDVALUECREATION

ANDVALUECAPTURE

Animportantthemethatwehavegleanedfromour

discussionswithmanagersistheneedforcontinuedexperimentation—aroundvaluecreationaswellasvaluecapture.Aswesuggestedinourexaminationofthenetwork-centricinnovationlandscape,severalpartsofthisterrainarestillnotwellpopulatedandmanyoftheinnovationrolesarenewandill-defined.Thisbeingthecase,youarenotlikelytofindexplicit

guidelinesonhowtopursuenetwork-centricinnovationinitiatives.Therefore,youhavetobewillingtoexperimentandtomakemistakes.

ConsidertheCreativeBazaarmodel.CompaniessuchasP&G,Dial,andStapleshaveallexperimentedwithdifferentapproachestoconnectwithindividualinventors.Forexample,

whereasDiallaunchedacompany-hostedcompetitiontodirectlyconnectwithindividualinventors,Staplesusedanintermediarytodothesame,andP&Goptedtodealmostlywithvalue-addinginnovationcapitalists.Ineachcase,thecompaniesdidn’thaveaclearunderstandingofhoweverythingwouldworkoutandwereessentiallyexperimentingwiththe

differentapproaches.Astheirinitiativesprogressed,theylearnedwhatworkedandwhatdidn’tandtheyadaptedtheirstrategiesappropriately.

Inthepharmaceuticalindustry,companiessuchasMerckandPfizerarerealizingtheimportanceofexperimentationintheirinnovationmodelsandprocesses.AswedescribedinChapter7,“TheJamCentral

Model,”alternatemodesofdrugdiscoveryhaveledtonewcontextsforsuchexperimentationforpharmaandbiotechcompanies—contextsthatinvolvenon-traditionalpartners(forexample,non-profitssuchasTheSynapticLeap)andinnovationoutcomesthatlackclarityonvalueappropriationandsharing.Despitethenatureofsuchunpavedroadsandthe

associateduncertainties,pharmacompaniesareforgingaheadbypursuingdifferentnetwork-centricinnovationinitiativesandaddressingtheissuesasandwhentheycomeby.

Thesameexperimentationmindsetwasvisibleinmanyoftheothercompaniesandindustrieswestudied.Inmanycases,notonlyweretheapproachesnotclearto

thecompaniesthemselves,buttheywerealsofacinganumberofquestionsfromtheirnetworkpartners,too.Forexample,whenSunlauncheditsOpenSPARCinitiative,itfacedabarrageofquestionsfromthecommunitymembersregardinginnovationgoalsandprocesses,IPrightsmanagement,valuecapture,andsoon.AsDaveWeaverofSunputsit:“Tobevery

frank,wehadn’tthoughtaboutmanyoftheseissuesthememberswereraising(inthe244

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community)andsoitwasalotoflearningforus—firsttounderstandtheissuesandthentocomeupwithanswersthatwouldbeacceptabletoall.”

Experimentationdoesnotmeanpursuingrolesthatdon’tmakebusinesssenseforthecompany.Ontheotherhand,itindicatesthewillingnesstopursuethoserolesthatmakegoodbusinesssensebutwhosedetailsarenotveryclearattheoutset.Itimpliestheneedtokeepanopenmindregardingtheinitiativesoastocontinuouslyadaptandevolvetogettheprocesses

andthegovernanceright.

Thekeymessageforseniormanagers:Promoteexperimentationandrewardreasonedfailure!

LOOKBEYONDTHEIDEA—ESCAPINGTHEVALLEYOFDEATH!

Oneissuethatcameuprepeatedlyinourdiscussionswithmanagersistheneedto

haveend-to-endcapabilitiestoreallybenefitfromnetwork-centricinnovation.

Muchoftheexcitementaboutexternallyfocusedattentionhasbeenfocusedongettingnewideastofeedthefuzzyfront-endoftheinnovationfunnel.Butyoucannoteatideasforlunch!Ideasthatcannotbeconvertedintocommercializedproductsand

servicesareoflittleuse.Whentheinnovativeideasarebroughtinfromoutside(whetherfromamateurinventorsorcustomersorpartners),theyneedtobeshepherdedthroughthedevelopmentandcommercializationprocessinorderforthecompanytobenefitfromthoseideas.Executivespointtothe“valleyofdeath”thatseparatesideationfrom

commercialization,whereideasget“lostintransition”becausethecommercializationresourcesaren’talignedwiththeideationanddiscoveryinitiatives.Wefindthatthisisacommonproblemwhensourcinginnovativeideasfromtheoutside,owingtothefactthatoftennonaturalhomeexistsinabusinessunitforexternallysourcedinnovation.

Crossingthe“valleyofdeath”requirestwothings:asetofstructured,formalprocessesthatintegrateexternalandinternalactivitiesandacommittedprojectchampion.3

AsweemphasizedinChapter9,“DecidingWhereandHowtoPlay,”preparingtheorganizationfornetwork-centricinnovationinvolvespayingcloseattentionto

processesforintegratinginternalandexternalinnovationactivities—forexample,processesthatbridgethegapbetweenideationandexecution.Manyofthecompaniesthatwestudieddidnothaveclearlydefinedprocessestoensurethattheproductvisiondevelopedaroundtheexternallysourcedideaiscommunicatedwelltoandacteduponeffectivelybythe

peopleresponsibleforCHAPTER12•CONCLUDINGTHOUGHTSANDACTIONSFOR“MONDAY”MORNING…

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developmentandcommercialization.Suchprocessesshouldspecifyhowtheprojectwillevolveandbecomepartofthecompany’sregularlyfunded

developmentandcommercialactivities—thatis,howtheprojectwillattractresourcesfromestablishedbudgets,whatdecisionprocessesandcriteriawillbeusedforprojectapprovalandevaluation,andsoon.Asthemanagerswetalkedwithnoted,lackofsuchprocesscouldleadtopoortransitioningfromideationtoexecution,withmajorimplicationsonthe

innovationsuccessitself.

Creatingclearorganizationalresponsibilitiesforcommercializationofexternallysourcedinnovationincollaborationwithbusinessunitsisalsoimportant.

Assigninginformalchampionsforeachprojectisonewaytogo,ascompaniessuchasDial,Unilever,andso

onhavefound.Such“champions”serveasthedrivingforceingettingtheprojectacrossthevalleyofdeathbyowningthe

“businesscase”associatedwiththeidea,bynetworkingandconnectingpeopleacrosstheideation-executiondivide,andnegotiatingtoacquireappropriateorganizationalresourcesandcapabilities.

Thus,beforelaunchingnetwork-centricinnovationinitiatives,takingastepbacktore-examineorre-evaluateyourback-endproductdevelopment

processesandcapabilitiesisagoodidea.Doyouneedtorevampthemtoadapttothenewapproachesthatyouareadopting?Doyouneedtoinvestinnewback-endcapabilities?Doyouneedto

createneworganizationalroles?Andremember,dependingonthemodelofnetwork-centricinnovationandtherolethatyourcompanyplaysinit,thenatureoftheseback-endprocessesandcapabilitiesmightvary.

MANAGETHENETWORK“PUSHES”AND“PULLS”

Organizationsembarkingon

network-centricinnovationinitiativeshavetoacknowledgeoneimportantfactor—dependencies!WetalkedaboutthisearlierinChapter10,“PreparingtheOrganization.”However,itisworthrepeatingtheimportantrolethatdependenciesplayinsuchinitiatives.

Anorganization’sabilitytomanagethe“pushes”andthe

“pulls”experiencedinitsinteractionswiththenetworkmemberscanbecomeveryimportantinensuringlong-termsuccess.Managingthesenetworkforcesmightconsumesignificantorganizationalresources.DecisionsandactionsundertakenbypartnersmightdisruptorforcechangesininternalR&Dplans.Theymightcreatenewcentersofresistanceswithindifferent

partsoftheorganizationtowardnetwork-centricinnovationitself.Particularly,ifdependenciesexistbetweenafirm’sexternallyorientedprojectsanditsotherinternalinnovationprojects.

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Suchdependenciescanexist

inthedifferentmodelsofnetwork-centricinnovationthatwediscussed.Forexample,intheOrchestramodel,smallercompaniesthatpartnerwithplatformleaderssuchasMicrosoft,Intel,andSalesforce.comoftenfeelpulledindifferentdirectionswhenthemarketpositioningandstandardsofthecomplementarytechnologytheypossessstartdivergingfromthoseofthe

platformastheplatformevolves.Similarly,assomeofBoeing’sJapanesepartnersdiscoveredovertime,theirowninternalplans(forexample,pursuinglong-termplanstobestandaloneaircraftmanufacturers)mightattimesbeinconflictwiththedecisionsmadebythelargerpartner.

Insomeinstances,thelargerfirmmightneedtotakecare

ofsuchdependencies.Forexample,asIBMstartedcollaboratingwithOpenSourceSoftwarecommunities,itsoondiscoveredthatwhathappensintheOpenSourcearenahasimportantimplicationsonitsotherproducts/services.Someofthesecouldbedecisionstoabandoninternalinnovationeffortsincertainareas—forexample,notpursuingthedevelopmentof

proprietarysolutionsthatcompetewiththeApacheHTTPstack.Someofthemcouldberedefininggoalsandstrategies—forexample,modifying/adaptingdevelopingplanssoastoleveragetheevolutionoftheLinuxplatform.

Thekeymessagehereisnottoloseawarenessofthenatureofdependenciesthatyourfirmwillbegettinginto

whendecidingtopursuenetwork-centricinnovationinitiatives.Suchawarenesscanserveasatriggertoreexamineperi-odicallythecompany’sinternalinnovationgoalsanddecisionsanditsparticipationinthenetwork-centricinnovationinitiative.Thisisimportanttomakesurethatdisruptiveforcesthatoriginateinexternalnetworksdonotderailyour

company’sinnovationagenda.

WEARMORETHANONE“HAT”—BUT,CAREFULLY!

InChapter9,wediscussedhowsomeofthelargecompanieshavestartedplayingmorethanoneroleinnetwork-centricinnovation.Forexample,IBMhasbecomebothaplatform

leader(initsPowertechnology)andaninnovationsponsorinsomeoftheOpenSourceSoftwarecommunities.Similarly,SunhasstartedfocusingonplayingtheroleofaninnovationcatalystintheOpenSPARC

initiative,inadditiontobeingtheplatformleaderinitscoreserverbusiness.

Whenfirmswearmultiple“hats”innetwork-centricinnovation,theycantakeamorebalancedapproachtoexternalinnovationactivities.Forexample,acompanycantakealeadroleincertaininitiativesandatthesametimeplayaCHAPTER12•CONCLUDINGTHOUGHTSANDACTIONSFOR“MONDAY”MORNING…

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moresupportiveroleinsomeotherinitiatives.Thediversityofrolescanreducetheoverallriskinvolvedinexternallyorientedinnovation.Italsofacilitatestheacquisitionofknowledgeor“learning”fromamorediversesetofpartnersaswellasamorediversesetofinnovationactivities.

However,amultiplicityofrolesimposesadditionalcostsforthecompany.Forexample,aswediscussedinChapter9,“DecidingWhereandHowtoPlay,”differentrolescallfordifferenttypesofresourcesandcapabilities.Ascompaniespursueaportfolioofinnovationroles,thediversityofcompetenciesandinfrastructurethatmightneedtobeestablishedtosupportthoseroleswill

increase.

WhileformanyofthelargecompaniessuchasP&G,DuPont,3M,andIBM,theresourceimplicationsmightnotbetoocritical,forsmallercompaniestheseissuesmightbeofparticularsignificance.

Thus,theattractionofa“multi-player”strategyhastobetemperedwiththelikelydemandforadditionalorganizationalresourcesand

capabilities.

REALLOCATE(NOTDECREASE)YOURINNOVATIONDOLLARS!

Innovationnetworksandcommunitiesindicatetheconsiderablepotentialthatexistsoutsideofafirmtoenhanceitsrateandqualityofinnovation.Whencompaniesconsiderthispotential,thereisatendency

toassumethattheycanreducetheirinvestmentininternalR&D.Akeymessagefromcompaniesthathavebeensuccessfulinpursuingnetwork-centricinnovationis,reallocate—

notdecrease—yourcompany’sinnovationinvestments.

Intheshortterm,companiesmightbeabletosubstitute

internalresourceswithexternalresourcesandmaintaintheirinnovationagendawithlowerlevelsofR&Dinvestments.Butitisnotlikelytoworkinthelongterm.Remember,yourabilitytoderivereturnsfromnetwork-centricinnovationisgoingtodependontheinnovationassetsandcapabilitiesthatyoubringtothenetwork.

Thegreaterthevalueofsuchinternalassets,thegreaterthereturnsfromparticipatinginthenetwork.

Thus,participationinnetwork-centricinnovationdoesn’timplymakinglowerinvestmentsinthecompany’sinnovationpursuits.However,itmightleadtodifferentchoicesforthoseinvestments.Forexample,somecompanies

mightinvestmoreindownstreamprocessesandcapabilitieswhereasothersmightinvestmoreinupstreamcapabilities.Reallocationofinvestmentprioritiesshouldreflecttherole(s)thecompanyhasdecidedtopursueinnetworkcentricinnovation.

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Decreasingthecompany’sinnovationbudgetonlylowerstheoverallcapabilityofthecompanytoparticipateinnetwork-centricinnovationandlimitsitsabilitytoexploitthepotentialofexternalnetworksandcommunities.

DON’TFORGETTOMAKEMONEY

Theflipsideoftheeffortsto

encourageandbuildtheorganization’sfaithinnetwork-centricinnovationistheresponsibilityfortheseniormanagementtoletthecompanyknowthatattheend,theinnovationinitiativeshavetocontributetoorganizationalgrowth—whetherintheshorttermorinthelongterm.

AsourexamplesofcompaniessuchasIBMand

Sunshowed,evenpartneringwithinnovationcommunitiessuchasopensourcecommunitiesshouldbebasedonsoundbusinesslogic.Manyexternalinnovationopportunitiesmightlooktempting,especiallyformanagerswhowanttodemonstratetheircommitmenttotheCEO’scallforactiononnetwork-centricinnovation.Insuchacontext,underliningtheneed

fornotabandoningtherigorwithwhichdecisionsaremadetopursueexternalinnovationopportunitiesisequallyimportant.

Asonemid-levelmanagerinalargeconsumerproductcompanytoldus,oncethereissignificantbuzzintheorganizationaboutpartneringwithexternalinventornetworksandcommunities,thereisatendencyforthe

network-centricinnovationinitiativetobecomeanendinitself.Thisbecomesmoreevidentwhenmetricssuchas“numberofideassourcedfromoutside”and“numberofexternalpartners”gainhighervisibilitythanthosethatreflecttherealimpactofnetwork-centricinnovationinitiativesonfirmgrowthorrevenues.

Seniormanagerscanagain

takeaverykeyroleinemphasizingtheneedtolinkallnetwork-centricinnovationactivitieswiththecompany’soverallgrowthobjectives.Thus,whenSunopensupitsSPARCarchitectureandpursuestheOpenSPARCinitiative,itkeepsitsfocusonthenewmarketsthatarelikelytoopenupforitscoreproductsandservicesasaresultoftheinnovationactivitiesofthe

OpenSPARCcommunity,evenifitisinthelongerterm.

Thelessonforseniormanagersistomakesurethattheexcitementregardingnetwork-centricinnovationopportunitiesisgroundedinthecompany’srevenueandprofitgoals.

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ACTIONSFOR“MONDAY”MORNING

WestartedourjourneybyexploringthepoweroftheGlobalBrainandbypaint-ingapictureofthelandscapeofnetwork-centricinnovation.Ourjourneyhas

alsotakenusintoamoredetailedanalysisofthevariedopportunitiesandtheresourcesandcapabilitiesthatcompaniesneedtodeveloptotakeadvantageofsuchopportunities.Ourprimaryobjectiveinthisbookhasbeentoprepareyou,thereader,tobeabletopositionyourcompanyasaplayerintherichanddiverselandscapeofnetwork-centricinnovation.

Nowthatyouhavegainedadeepunderstandingofnetwork-centricinnovation,itistimetochartyourcompany’sownpathinthisinitiative.Wehaveasimplemantraforthis:ThinkBIG,StartSMALL,ScaleFAST.

DialInc.providesagoodcasestudyofhowthismantracanplayout.

THINKBIG!

Itisimportantthatyouconsidertheentirecanvasofnetwork-centricinnovationandapplyawiderperspectivebeforestartingtotunneldowntospecificopportunities.Thinkingbigmeansensuringthatyouareabletodevelopacoherentstorythatconnectsallofyourinnovationinitiatives—evenifsomeoftheseinitiativesemergeorevolveovertime.Thisiswherethe

CEO’sroleinprovidingthe“perspective”becomesimportant.

WhenDialfirststartedthinkingofexploringexternalinnovationsources—thatis,goingbeyonditstraditionalsourcessuchassuppliersandpartneringwithindependentinventors—thecompanydidn’tfocusononespecificinitiative.

Instead,itsapproachwasto“thinkbig”andfocusonthevaluesuchexternalsourcingcanbringtotheorganizationinthelongterm.TheCEOandexecutivemanagementcommunicatedtotheorganizationtheirstrongcommitmenttonetwork-centricinnovationbyestablishinganindependentorganizationalunit—theTechnologyAcquisitiongroup—toorchestratesuch

efforts.Themessagewasclear—thecompanyisbuildingthefoundationforthevariousnetwork-centricinnovationinitiativesthatarelikelytoevolveovertime.

STARTSMALL!

Afteryouhavedevelopedabroadperspectiveforyourcompanytoviewnetwork-centricinnovationopportunities,itisalso

equallyimportanttostartwith250

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aninitiativethathasmanageablescopeandwhosereturns(orresults)willbeclearlyevident.Forexample,doyouhaveaparticularproductmarketorcustomersegmentwhereyoucanlaunchyourfirstnetwork-centricinnovationinitiative?

Orcanyouisolatetheinitiativetoaparticulargeographicallocationorbusinessdivision?

Creatinga“cleanroom”foryournetwork-centricinnovationstrategysoastoevaluateandlearnfromyourfirstinitiativeisagoodidea.Suchanapproachcanalsohelpyouearnaquick“win”thatcanthenbeusedtopropelotherinitiatives.

InthecaseofDial,the“cleanroom”wasasimpleWeb-basedinitiativecalledQuestfortheBestthatthecompanylaunchedtostartconnectingwithindependentinventors.Theinitiativedidn’tinvolveextensiveinvestmentsininfrastructureorinvolvealargenumberoforganizationalmembers.Whileitwasarelativelysmallprogram,itwasveryinnovative.Dialwasthefirst

consumerproductcompanytoestablishsuchaprogramthatinvolvedinteractingdirectlywithindependentinventorsandinventorassociations.Theresultsfromthisprogramwereverypositive(severalideasenteredthecompany’sdevelopmentpipeline),andtheprogramservedasa“proofofconcept”forthecompany’sbroadernetwork-centricinnovationstrategy.

SCALEFAST!

Whenyouhavefoundsuccessinthatfirstinitiative,don’tforgettocelebratethewin.However,moreimportantly,don’talsoforgettotakethingstothenextlevelby“scalingfast.”

Setamoreambitioussetofobjectivesfortheinitiative,engagethedifferentpartsoftheorganization,andinvest

extensivelyindevelopingtheorganizationalcapabilitiesthatwouldhelpyouachievethoseobjectives.Yourabilitytorapidlyengagetheentireorganizationintheinitiativewillhelpittotakerootwithinthecompanyandattractmoreorganizationalresourcesandcreativetalent.Itwillalsohelpgeneratemoreinitiativesfromthedifferentpartsoftheorganization.

GoingbacktoDial’sexample,thescalingoftheinitiativeoccurredrightafterthefirstinventorcompetition.Dialformalizedtheinitiativeandcalledit

“PartnersinInnovation.”Theinteractionswithindependentinventorsweremadetobeonacontinuousbasisandexpandedtocoverallpartsofthecompany’sproductportfolio.

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ThecompanyalsorapidlyscaledtheprogramtobeglobalinnaturebyestablishinglinkageswiththeR&Dgroupofitsparentcompany,theHenkelgroup.

Withthisexpandedreach,theentireHenkelGroupofcompaniesbecamepotentialcustomersforideassourcedfromU.S.-basedinventorsbyDial’stechnologyacquisitiongroup.Thecompanyfollowedthiswithaglobalcompetition,calledtheHenkelInnovationTrophy,whichDial’stechnologyacquisitiongroupisdrivingonbehalfofallHenkelcompanies.Thistime,the

focusforexternalsourcingisnotjustU.S.-basedinventorsbutindependentinventorsanywhereintheworld,andthetargetforplacingtheinnovativeideasisnotjustDialbuttheentireHenkelgroup.Trulyglobalscaling!

Thusthemoralofthestoryhereis—“thinkbig”andmakesuretherightperspectiveisadopted,“startsmall”togetthatquick

result,and“scalefast”torapidlyengageandinvolvetheentireorganization.

Wehopethat,asyouputdownthisbook,youcanbegintakingthefirststepsinapplyingtheideasandconceptsthatwehavetalkedabout.ThisistheREAL

journey—thejourneytopursueorganicgrowthbyharnessingthecreativepower

oftheGlobalBrain.Goodluckonthisjourney!


References

INTRODUCTION

1.“ExpandingtheInnovationHorizon,”IBMGlobalCEOStudy2006

(http://www-1.ibm.com/services/uk/bcs/html/bcs_landing_ceostudy.

html);accessedonAugust15,2006.

2.Forexample,seeNambisan,S.“DesigningVirtualCustomer

EnvironmentsforNewProductDevelopment:TowardaTheory,”

http://www.1.ibm.com/services/uk/bcs/html/bcs_landing_ceostudy.html

http://www.1.ibm.com/services/uk/bcs/html/bcs_landing_ceostudy.html

AcademyofManagementReview(2002),27(3),392–413;Nambisan,S.andR.Baron.“InteractionsinVirtualCustomerEnvironments:

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Management,”JournalofInteractiveMarketing,(2007),21(2),42–62.

3.SeeSawhney,M.andE.Prandelli,“CommunitiesofCreation:

ManagingDistributedInnovationinTurbulentMarkets,”CaliforniaManagementReview(2000)24–54.

4.Sawhney,M.,E.Prandelli,andG.Verona,“ThePowerofInnomedi-

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5.ManagementToolsandTrendsSurvey,Bain&Co.,2005.

CHAPTERONE

1.“World’sBestInnovatorsAre‘SixTimesMoreSuccessful’inGettingBetterProductstoMarketFaster,

UGSChairman,CEOandPresident

TonyAffusoTellsFellowAutomotiveIndustryLeaders”(http://www.

prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/

10-12-2005/0004166925&EDATE=);accessedonAugust15,2006.

http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/10-12-2005/0004166925&EDATE=



253

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2.TheblueprintforsuchlargecorporateR&Dlabsfocusedonbasicscientificresearchcanbetracedbacktoareporttitled,“Science,TheEndlessFrontier”

writtenbyVannevarBush,

scienceadvisortoPresidentFranklinRoosevelt,inthefinalyearofWWII.Foraninterestingdiscussionofhowcorporationshavestartedshiftingtheirfocusfrom“research”to“development”anditsimplicationsfortheirinternal“templesofinnovation,”see“OutoftheDustyLabs,”TheEconomist(March3,2007),74–76.

3.Source:FactStat

http://www.mergerstat.com/new/indexnew.asp

MergerStat(http://www.mergerstat.com/new/indexnew.asp).

4.“WorldClassTransactions:InsightsintoCreatingShareholderValuethroughMergersandAcquisitions,”KPMG,2001;“WhyMergersFail,”MatthiasM.Bekier,AnnaJ.Bogardus,andTimothyOldham,McKinseyQuarterly,2001,No.4;

“There’sNoMagicinMergers,”DavidHenry,BusinessWeek(October14,2002)pp.60.

5.AsreportedinIBMGlobalCEOStudy2006;Bain&Co.,CEOSurvey2005.

6.“Sony’sRevitalizationintheChangingCEWorld,”HowardStringer’sremarks,CEATEC,Tokyo,October4,2005

http://www.sony.com/SCA/speeches/051004_stringer.shtml

(http://www.sony.com/SCA/speeches/

051004_stringer.shtml);accessedonAugust15,2006.

7.QuotefromChapter2ofThroughtheLookingGlassbyLewisCarroll,TheMILENNIUMFULCRUMEdition©1991.

8.KraftR&DfiguressourcedfromthepresentationmadebyJeanSpence,executive

http://www.sony.com/SCA/speeches/051004_stringer.shtml

vicepresident,KraftonMay10,2005,aspartofKraftInvestorDay(http://media.

corporate-ir.net/media_files/nys/kft/presentations/kft_050510e.pdf);Alsosee“At

Kraft,AFreshBigCheese,”AdrienneCarter,BusinessWeek,June26,2006

(http://www.businessweek.com/investor/content/jun2006/pi20060626_973843.htm).

http://media.corporate-ir.net/media_files/nys/kft/presentations/kft_050510e.pdf

http://media.corporate-ir.net/media_files/nys/kft/presentations/kft_050510e.pdf

http://www.businessweek.com/investor/content/jun2006/pi20060626_973843.htm

9.ThetermistakenfromtheRedQueen’sraceinLewisCarroll’sThroughtheLookingGlass.TheRedQueeneffectwasoriginallyproposedbytheUniversityofChicagopaleontologist,LeighVanValen,in1973toexplaintheconstantevolutionaryarmsracebetweencompetingspecies.

10.DaveBaylessisaprincipalandco-founderof

EvergreenIP.TogetmoredetailsonDave’ssimulation,viewhisvideoblogathttp://www.evergreenip.com/

presentations/redqueen/redqueen.html;accessedonJuly5,2007.

11.“KraftLooksOutsidetheBoxforInspiration,”TheWallStreetJournal,June2,2006.

12.“ResearchStirsUp

http://www.evergreenip.com/presentations/redqueen/redqueen.html

http://www.evergreenip.com/presentations/redqueen/redqueen.html

Merck,SeeksOutsideAid,”TheWallStreetJournal,June7,2006.

13.Source:Authors’interviewwithTomCripeonMarch30,2006.

14.“InnovateAmerica,”NationalInnovationInitiativeReport,CouncilonCompetitiveness,Dec.2004.

REFERENCES

255

15.“IBMGIO2.0Report”2006(http://domino.research.ibm.com/comm/www_

innovate.nsf/pages/world.gio.html#).

16.DavidJ.Farber;K.Larson“TheArchitectureofaDistributedComputerSystem—

AnInformalDescription,”

http://domino.research.ibm.com/comm/www_innovate.nsf/pages/world.gio.html

http://domino.research.ibm.com/comm/www_innovate.nsf/pages/world.gio.html

TechnicalReportNumber11(Sept.1970),UniversityofCalifornia,Irvine.

17.Foster,Ian;CarlKesselman.TheGrid:BlueprintforaNewComputingInfrastructure.MorganKaufmannPublishers.ISBN1-55860-475-8.

18.ExhibitAforthisisperhapsprojectSETI—the

SearchforExtraterrestrialIntelligence.ThegeneralobjectiveofSETIistodetecttheexistenceof“intelligent”transmissionsfromdistantplanets.Thisisnotatrivialtaskandrequiressignificantcomputingpowertoanalyzethevastamountoftelescopicdatagathered.TheSETI@Home,launchedbyU.C.–BerkeleyinMay1999,involvesutilizingthepowerofhomecomputerslinkedto

theInternettoanalyzesuchradiotelescopicdataandcontributetowardtheSETIgoals.AnyindividualcanparticipateinthisprojectbydownloadingandrunningtheSETI@Homesoftwarepackage,whichthenrunssignalanalysisona“workunit”ofdatarecordedfromthecentral2.5MHzwidebandoftheSERENDIPIVinstrument.Theanalysisresultsareauto-matically

reportedbacktoUC–Berkeley.Morethan5.4millioncomputerusersinmorethan225countrieshavesignedupforSETI@Homeandhavecollectivelycontributedmorethan24billionhoursofcomputerprocessingtime(currentsta-

tisticsonSETIretrievedfromhttp://seticlassic.ssl.berkeley.edu/totals.htmlonJuly

http://seticlassic.ssl.berkeley.edu/totals.html

5,2007).

19.Network-CentricWarfare(NCW)isalsocalledNetwork-CentricOperations(NCO)insomemilitaryquarters.IntheU.K.,itisreferredtoasNetworkEnabledCapability.ViceAdmiralArthurCebrowskioftheU.S.Navyisoftenreferredtoasthe“Godfather”ofthenetwork-centricwarfareconcept.

OthernotablecontributorstothedevelopmentofthisconceptincludeDr.DavidS.Alberts,whoproposedtheuniversalcommandandcommunicationstheorybyintegratingtheconceptsofinformationsuperiorityandnetwork-centricwarfare,andJohnJ.

GarstkaoftheOfficeofForceTransformationintheUnitedStatesDepartmentof

Defense(U.S.DoD).

20.“NetworkCentricWarfare,”DoDReporttoU.S.Congress,July27,2001(report

availableathttp://www.dod.mil/nii/NCW/).

21.SeeNetworkCentricWarfareDavidAlbert,JohnGarstka,andFrederickStein,CCRP,2ndEdition,1999.

http://www.dod.mil/nii/NCW/

22.“TheFutureofSupplyChainManagement:Network-centricOperationsandtheSupplyChain,”TerryTucker,Supply&DemandChainExecutive2004

(http://sdcexec.com/article_arch.asp?article_id=7285).

256

THEGLOBALBRAIN

http://sdcexec.com/article_arch.asp?article_id=7285

23.ForadetaileddescriptionofCisco’sexperienceandtheconceptofNVO,seeNetReadybyAmirHartmanandJohnSifonis,McGrawHill,1999.

24.“TheNetworkedVirtualOrganization:ABusinessModelforToday’sUncertainEnvironment”JohnSifonis,iQMagazine,March/April2003.

25.SeveralWebsitesandblogsexistonthetopicofnetwork-centricadvocacy.Oneof

thebetteronesishttp://www.network-centricadvocacy.net/.

26.“Network-CentricAdvocacy,”MartyKearns,retrievedonAugust20,2006from

http://www.network-centricadvocacy.net/

http://activist.blogs.com/networkcentricadvocacypaper.pdf.

27.Wheeler,DavidA.“MoreThanaGigabuck:EstimatingGNU/Linux’sSize”(July29,

2002):(http://www.dwheeler.com/sloc/redhat71-v1/redhat71sloc.html),retrieved

onAugust16,2006.

28.“InternetEncyclopedias

http://activist.blogs.com/networkcentricadvocacypaper.pdf

http://www.dwheeler.com/sloc/redhat71-v1/redhat71sloc.html

GoHeadtoHead,”Nature,438(December15,2005):900–901.

29.“OnlineNewspaperShakesUpKoreanPolitics,”HowardFrench,TheNewYorkTimes,March6,2003.

30.SawhneyM.,E.Prandelli,andG.Verona.“ThePowerofInnomediation,”MIT

SloanManagementReview

(2003),44(2),77–82.

31.Huston,L.andN.Sakkab.“ConnectandDevelop:InsideP&G’sNewModelforInnovation,”HarvardBusinessReview(March2006).

32.IBMGlobalCEOStudy2006.

33.LetGotoGrow,LindaSanfordandDaveTaylor,

PrenticeHall,2005.

CHAPTERTWO

1.Seehttp://www.ornl.gov/sci/techresources/Human_Genome/home.shtml.

2.See“CommunitiesofCreation:ManagingDistributedInnovationinTurbulentMarkets,”M.SawhneyandE.Prandelli,CaliforniaManagementReview(Summer2000):

http://www.ornl.gov/sci/techresources/Human_Genome/home.shtml

4294,24–54.

3.Seethe“Coase’sPenguin,or,LinuxandtheNatureoftheFirm,”Y.Benkler,YaleLawJournal,112(Winter2002–2003).AlsoseeTheWealthofNetworks,YochaiBenkler,MITPress(2006).

4.Visithttp://wearesmarter.orgformoredetailsonthisproject.

http://wearesmarter.org

5.AmoreformaldefinitionoftheOpenSourcehasbeenofferedbytheOpenSource

Initiative(seehttp://www.opensource.org/docs/definition_plain.php).

6.Sawhney&Prandelli,2000,pp.28.

REFERENCES

257

http://www.opensource.org/docs/definition_plain.php

7.ThetermOpenSourcehasbeenattributedtoChristinePetersonoftheForesightInstitute.Formoreinformationonthestorybehindit,visit“HistoryoftheOSI”

athttp://www.opensource.org/docs/history.php.

8.Visithttp://www.opensource.org/.

http://www.opensource.org/docs/history.php

http://www.opensource.org/

9.Source:http://www.Sourceforge.net(asofSeptember2006).

10.ForanextensivelistoftheseOpenSourceapplications,visithttp://en.wikipedia.

org/wiki/Open_source.

11.ThedefinitioncomesfromJamesMoore’s1996book,TheDeathof

http://www.Sourceforge.net

http://en.wikipedia.org/wiki/Open_source

http://en.wikipedia.org/wiki/Open_source

Competition:LeadershipandStrategyintheAgeofBusinessEcosystems,HarperBusiness.HisearlierrelatedHBRarticlewas“PredatorsandPrey:ANewEcologyofCompetition,”HarvardBusinessReview(1993).

12.See“ConstellationStrategy:ManagingAllianceGroups,”byGomes-Casseres,Benjamin,IveyBusinessJournal(May

2003).AlsoseeGomes-Casseres,B.,

“CompetitiveAdvantageinAllianceConstellations,”StrategicOrganization,Vol1

(3)(August2003):pp.327–335.

13.Gomes-Casseres,B.,“GroupVersusGroup:HowAllianceNetworksCompete,”

HarvardBusinessReview(July–August1994):pp.62–74.

14.Foranexcellentreviewofthisstrategy,seeGawerandCusumano’sbook,PlatformLeadership,HBSPress(2003).

15.SeeO’Reilly’sarticleathttp://tim.oreilly.com/articles/paradigmshift_0504.html.

16.Foradiscussionofthe

http://tim.oreilly.com/articles/paradigmshift_0504.html

eraoffermentandtechnologycycles,see“TechnologicalDiscontinuesandDominantDesigns:ACyclicalModelofTechnologicalChange,”

P.AndersonandM.Tushman,AdministrativeScienceQuarterly(1990):35,604–633.

17.Authors’interviewwithIrvingWladawsky-Bergeron

April7,2006.

18.Seehttp://www.infoworld.com/article/05/12/14/HNnovellibm_1.html;alsosee

YochaiBenkler’sbook,TheWealthofNetworks,whereonpp.47,hegivesagraphofIBM’srevenuegrowthfromopensource–relatedservices.

19.Sawhney,M.,Verona,G.,andE.Prandelli,

http://www.infoworld.com/article/05/12/14/HNnovellibm_1.html

“CollaboratingtoCreate:TheInternetasaPlatformforCustomerEngagementinProductInnovation,”JournalofInteractiveMarketing(2005):4–17.

20.“StaplesTurnstoInventorsforNewProductIdeas,”WilliamBulkeley,TheWallStreetJournal(July13,2006;B1).

21.InterviewwithJevin

Eagle,seniorvicepresident,StaplesBrands(June2006).

22.Authors’interviewwithDr.RobertFinocchiaro,technicaldirector,3M(onJuly26,2006).

258

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CHAPTERTHREE

1.VisittheprojectWebsiteathttp://www.aswarmofangels.com/.

2.SeetheWikipediaentryonCurrentTVformoredetails:http://en.wikipedia.org/

wiki/Current_TV.

3.“UncleAlWantsYou,”EastBayExpress(Jan.26,2005):http://www.

http://www.aswarmofangels.com/

http://en.wikipedia.org/wiki/Current_TV

http://en.wikipedia.org/wiki/Current_TV

http://www.eastbayexpress.com/issues/2005-01-26/news/feature.html

eastbayexpress.com/issues/2005-01-26/news/feature.html.

4.Visithttp://www.current.tv/.

5.“HackThisFilm,”JasonSilverman,Wired(January2006):http://www.wired.com/

wired/archive/14.01/play.html?pg=2.

http://www.eastbayexpress.com/issues/2005-01-26/news/feature.html

http://www.current.tv/

http://www.wired.com/wired/archive/14.01/play.html?pg=2

http://www.wired.com/wired/archive/14.01/play.html?pg=2

6.Seethearticle“MODFilms”ontheCreativeCommonsWebsite:

http://creativecommons.org/video/mod-films.

7.http://modfilms.com/.

8.Morley,E.andA.Silver,“AFilmDirector’sApproachtoManagingCreativity,”

HarvardBusinessReview

http://creativecommons.org/video/mod-films

http://modfilms.com/

(March–April1977):59–70.

9.ForamorerecentarticleonbusinesslessonsfromHollywood,see“Hollywood:ABusinessModelfortheFuture?”CharlesGrantham,SIGCPRConference(2000)ACM.

10.http://www.echochamberproject.com/.

11.Thisisdefinitelyavery

http://www.echochamberproject.com/

limitedandbriefconceptualizationofthecore/peripherynetwork.Formorerigorousdefinitionanddiscussionoftheimplications,see

“ModelsofCore/PeripheryStructure,”S.BorgattiandM.Everett,SocialNetworks1999,21,375–395.

12.Asnotedin,“MeasureforMeasure:Exploringthe

MysteriesofConducting,”JustinDavidson,TheNewYorker(Aug.21,2006):pp.60–69.

13.“Orchestra:AUsersManual”byAndrewHugill,http://www.mti.dmu.ac.uk/

~ahugill/manual/.AlsoseetheWikipediaentryforOrchestra:http://en.wikipedia.

http://www.mti.dmu.ac.uk/~ahugill/manual/

http://www.mti.dmu.ac.uk/~ahugill/manual/

org/wiki/Orchestra.

14.See“CallandResponseinMusic”athttp://en.wikipedia.org/wiki/Call_and_

response_%28music%29.

15.SeetheentryforjamintheOnlineEtymologyDictionaryathttp://www.

etymonline.com/index.php?search=jam&searchmode=none.

http://en.wikipedia.org/wiki/Orchestra

http://en.wikipedia.org/wiki/Call_and_response_%28music%29

http://en.wikipedia.org/wiki/Call_and_response_%28music%29

http://www.etymonline.com/index.php?search=jam&searchmode=none

http://www.etymonline.com/index.php?search=jam&searchmode=none

16.Mod(or,touseitsfullname,ModernismorsometimesModism)—alifestyle-basedmovement—reacheditspeakintheearlytomid-1960s.PeoplewhofollowedthisREFERENCES

259

lifestylewereknownasMods,andweremainlyfoundinSouthernEngland.

Consider,forexample,theTVseries,TheModSquad,whichappearedinthelate

’60s.The1979filmQuadrophenia,basedonthe1973albumofthesamenamebyTheWho,celebratedtheModmovementandpartlyinspiredaModrevivalintheU.K.duringthelate1970s.Formoreonthismovement,readMod,aVeryBritish

PhenomenonbyTerryRawlings,(2000)OmnibusPress.

CHAPTERFOUR

1.See“TheKeystoneAdvantage”M.IansitiandRLevien,HarvardBusinessSchoolPress(2004):pp.94.

2.See“ThePowerofInnomediation”Sawhney,M.,E.Prandelli,andG.

Verona.MIT

SloanManagementReview(Winter2003):77–82.

3.FortheseandotherexamplesregardingIDEO’sroleastechnologybroker,seeAndrewHargadon’sbook,HowBreakthroughsHappen,HBSPress(2003).

4.See“AGeneralTheoryofNetworkGovernance:

ExchangeConditionsandSocialMechanisms,”CandaceJones,WilliamHesterly,andStephenBorgatti,AcademyofManagementReview22(4)(1997):911–945.Inadditiontothis,thereisasignificantamountofresearchdoneinthemanagementareaonthebroadtopicofnetworkgovernance.

5.Davenport,T.H.,&Prusak,

L.InformationEcology:MasteringtheInformationandKnowledgeEnvironment(1997):NewYork:OxfordUniversityPress.AlsoseeM.Alavi.“ManagingOrganizationalKnowledge”inFramingtheDomainsofIT

Management(2000):PinnaflexEducationalResources,Cincinnati,OH.

6.FormoredetailsonIntel’s

complianceworkshop,seePlatformLeadershipbyA.

GawerandM.Cusumano,HBSPress(2002):pp.57–60.

7.SeeInkpen,Andrew.“Learning,knowledgemanagementandstrategicalliances:Somanystudies,somanyunansweredquestions.”InCooperativeStrategiesandAlliances,ContractorFJ,LorangeP

(eds).2002.Pergamon:London;267-289.

8.ForamoredetaileddescriptionofIPanditshistory,see“IntellectualProperty—

TheGroundRules”byJamesConleyandDavidOrozco,KelloggSchoolofManagementTechnicalNote7-305-501(August2005).

9.SeeTheEconomicsandManagementofIntellectualPropertybyOveGrandstrand,EdwardElgarPublishing,MA(2000).

10.FormoreonClarkFoamsandthesurfboardindustry,read“BlackMonday:WillSurfingEverBetheSame?”TheNewYorker(August21,2006):36–43.

11.

http://creativecommons.org/.

260

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CHAPTERFIVE

1.Thebaseplane(787-8)cancarry200passengersonroutesupto8,300nauticalmileswhilethelargerversion(787-9)cancarry250passengersonroutesupto

http://creativecommons.org/

8,500nauticalmiles.Ashorter-rangeversion(787-3)withcarryingcapacityofupto300seatswillbeoptimizedforroutesofaround3,500nauticalmiles.

2.Thefirstorderforthe787wasplacedbyAllNipponAirways—for50787s.Theorder,valuedataround$6billion,isthesinglelargestlaunchordereverinBoeing’s88-yearhistory.Asof

October2006,29customershaveplacedordersforatotalof420airplanes(ofwhich377arefirmorderswortharound$52billion).

3.Boeinganditspartnersconductedextensiveresearchfortwoyearspriortotheofficialprojectlaunchin2004toinvestigatepotentialmaterialsandtodemonstratetheeffectivenessofcompositemanufacturing

technology.Thenewmaterialsanddesignisalsosupposedtoallowthequietesttakeoffsandlandingsinitsclass,therebyprovidinganaddedenvironmentalbenefit.

4.Bothenginesaredesignedtoprovidethe55,000to80,500poundsofrequiredthrust.Theimprovedenginedesignwoulditselfcontributearound8%ofthe

increasedefficiencygainsattributedtothe787.

5.“Boeing,Boeing,Gone?”byWilliamSweetman,PopularScience(June2004):pp.97.

6.“ASmartBet,”BoeingFrontiers(June2003).

7.“SharingtheDream,”BoeingFrontiers(August2006).

8.Asquotedin“Boeing’sDiffusionofCommercialAircraftDesignandManufacturingTechnologytoJapan,”byDavidPritchardandAlanMacPherson,SUNYBuffalo,

(March2005):www.custac.buffalo.edu/docs/OccasionalPaper30.pdf.

9.Source:“CustomersGetanUpdatefromBoeing,”YvonneLeach,Boeing

http://www.custac.buffalo.edu/docs/OccasionalPaper30.pdf

Frontiers(February2005).

10.“JustPlaneGenius,”BusinessWeek(April17,2006).

11.“Firm,Toned,andTaut,”LoriGunter,BoeingFrontiers(November2005).

12.SeeDominicGates“Boeing787:Partsfromaroundtheworldwillbeswiftlyintegrated,”The

SeattleTimes,September11,2005.

13.Pritchard&MacPherson(2005).

14.Fingleton,E.“Boeing,Boeing,Gone:OutsourcedtoDeath,”AmericanConservative(January24,2005).

15.E-mailinterviewwithScottStrode,vicepresident

ofairplanedevelopmentandproduction,Boeing(March2007).

REFERENCES

261

16.Boeing’ssloganforthe2016visionis“Peopleworkingtogetherasaglobalenterpriseforaerospaceleadership.”Boeingexplicitlyacknowledgesin

thisvisionitsroleaslarge-scalesystemsintegratorasacorecompetence.

Seewww.boeing.com/vision.

17.Ibid.

18.“Boeing:NewJet,NewWayofDoingBusiness,”CIOInsight(March6,2006).

19.“TheEvolutionofCreation,”DebbyArkell,

http://www.boeing.com/vision

BoeingFrontiers(March2005).

20.“Boeing’sDiffusionofCommercialAircraftDesignandManufacturingTechnologytoJapan,”DavidPritchardandAlanMacPherson,StateUniversityofNewYork,Buffalo(March2005).

21.“SharingtheDream,”BoeingFrontiers(August

2006).

22.“WingsAroundtheWorld,”AdamMorgan,BoeingFrontiers(March2006).

23.“TheEvolutionofCreation,”DebbyArkell,BoeingFrontiers(March2005).

24.“OutsourcingU.S.CommercialAircraft

TechnologyandInnovation,”DavidPritchardandAlanMacPherson,StateUniversityofNewYork,Buffalo(April2004).

25.“WaywardAirbus,”BusinessWeek(October23,2006).

26.EADS(2003EuropeanAeronatuciDefenceandSpaceCompany)EADSN.V.

FinancialYear2002:www.financial.eads.net/docredozuk4.pdf.

27.CIOinsightarticle.

28.Gartnerreport,2006.

29.“Salesforce.com’sNewGamble,”CNET(July26,2005).

30.“Salesforce.comBuysintoGoogleAdWords,”CNET(August21,2006).

http://www.financial.eads.net/docredozuk4.pdf

31.Author’sinterviewwithAdamGross,vicepresidentofdevelopermarketing,Salesforce.com(November2006).

32.“EnvoxPhonelinkNowAvailableonSalesforce.com’sAppExchange,”CRMToday(October11,2006).

33.Author’sinterviewwithAdamGross,vicepresident

ofdevelopermarketing,Salesforce.com(November2006).

34.“Salesforce.comStrivesfortheOn-DemandApex,”DanFarber,ZDnet(October8,2006).

262

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35.“Salesforce.comCooks

UpOn-DemandProgrammingLanguage,”StaceyCowley,

CRN(October92006):http://www.crn.com/sections/breakingnews/

breakingnews.jhtml?articleId=193105561&cid=CRNBreakingNews.

36.“SalesforceStrivesfortheOn-DemandApex,”ZDNet(October9,2006).

http://www.crn.com/sections/breakingnews/breakingnews.jhtml?articleId=193105561&cid=CRNBreakingNews

http://www.crn.com/sections/breakingnews/breakingnews.jhtml?articleId=193105561&cid=CRNBreakingNews

37.“Salesforce.comLaunchesAppExchangeIncubator,”CRMToday(October10,

2006):http://www.crm2day.com/news/crm/120085.php.

38.ForadetailedcasestudyofIntelandMicrosoft’splatformstrategies,seePlatformLeadershipbyAnnabelleGawerandMichaelCusumano,HBS

http://www.crm2day.com/news/crm/120085.php

Press(2003).

CHAPTERSIX

1.SeetheP&GConnect+DevelopWebsite:http://pg.t2h.yet2.com/t2h/page/

homepage.

2.SeetheP&GWebsite:http://submitmyideatopg.com/submitmyidea/.

3.See“ThePowerof

http://pg.t2h.yet2.com/t2h/page/homepage

http://pg.t2h.yet2.com/t2h/page/homepage

http://submitmyideatopg.com/submitmyidea/

Innomediation,”Sawhney,M.,E.Prandelli,andG.Verona.MIT

SloanManagementReview(Winter2003);and“ConnectandDevelop,”Huston,L

andN.Sakkab.HarvardBusinessReview(March2006).

4.Authors’interviewwithDebraPark,DialCorporation

onMarch24,2006.

5.“InventingBetterOutletforInventors,”ScottKirsner,BostonGlobe(October17,2005).

6.Seehttp://ww2.wpp.com/Press/2006/20060906_1.html.

7.VisitPDGathttp://www.pdgevaluations.com/index.php.

8.IntellectualVentures:

http://ww2.wpp.com/Press/2006/20060906_1.html

http://www.pdgevaluations.com/index.php

http://www.intellectualventures.com/default.aspx

http://www.intellectualventures.com/default.aspx.

9.“IVMovesfromMythtoReality,”VictoriaSlind-Flor,IntellectualAssetManagement(August/September2006),Issues19,29–34.

10.Ibid.

11.InterviewwithStephanJMallenbaum,JonesDay,NY(March6,2006).

12.InterviewwithJohnFunkonMarch1,2006.

13.InterviewwithDavidDuncaninJune2006.

CHAPTERSEVEN

1.Source:November2005NetcraftWebServerSurvey.

2.Touiller,O.,OlliaroPL.“DrugDevelopmentOutputfrom1975to1996:What

ProportionsforTropicalDiseases?”InternationalJournalofInfectiousDiseases(1999)3:61–63.

REFERENCES

263

3.WHOWorldHealthReport,2004.

4.“CanOpenSourceR&DReinvigorateDrug

Research?”BernardMunos,NatureReviewsDrugDiscovery(September5,2006):723–729.

5.Ibid.

6.WilliamJorgensen,“TheManyRolesofComputationinDrugDiscovery,”Science(2004):1813:1818.

7.Visitwww.openscience.org.

http://www.openscience.org

8.Authors’interviewwithAndrejSali,StephenMaurer,andArtiRaiinNovember/

December2006.

9.Visithttp://thesynapticleap.org.

10.Author’sinterviewwithGingerTayloronNovember15,2006.

11.Source:International

http://thesynapticleap.org

http://www.hapmap.org/

HapMapsiteathttp://www.hapmap.org/.

12.“OpenandCollaborativeResearch:ANewModelforBiomedicine,”ArtiRai,IntellectualPropertyRightsinFrontierIndustries:BiotechandSoftware(AEI-

BrookingsPress,2005):http://eprints.law.duke.edu/archive/000000882/.

13.Copyleftisageneral

http://eprints.law.duke.edu/archive/000000882/

methodformakingaprogramorotherworkfree,andrequiringallmodifiedandextendedversionsoftheprogramtobefreeaswell.See

http://www.gnu.org/copyleft/.

14.“Avatar-BasedMarketing,”PaulHemp,HarvardBusinessReview(June2006).

http://www.gnu.org/copyleft/

15.Visithttp://www.myvirtualband.com/.

16.Visithttp://bioitalliance.org/.

17.“RedmondFormsBiotechAlliance,”RedHerring(April4,2006).

CHAPTEREIGHT

1.http://steampowered.com/status/game_stats.html.

http://www.myvirtualband.com/

http://bioitalliance.org/

http://steampowered.com/status/game_stats.html

2.ZviRosen,“Mod,Man,andLaw:AReexaminationoftheLawofComputerGameModifications,”Chicago-KentJournalofIntellectualProperty(2005).

3.http://www.opensparc.net/opensparc-charter.html.

4.Authors’interviewwithDavidWeaver,ArchitectureTechnologiesGroup,Sun

http://www.opensparc.net/opensparc-charter.html

Microsystems,inDecember2006.

5.http://www.opensparc.net/opensparc-guiding-principles.html.

6.http://www.opensparc.net/ca_policy.html.

264

THEGLOBALBRAIN

http://www.opensparc.net/opensparc-guiding-principles.html

http://www.opensparc.net/ca_policy.html

7.http://www.opensolaris.org/os/.

8.“EnterpriseOpenSource”bySimonPhipps(November2006):Line56.com

(http://www.line56.com/articles/default.asp?ArticleID=8034).

9.VisitMapprathttp://mappr.com/.

10.Visitthe

http://www.opensolaris.org/os/

http://www.line56.com/articles/default.asp?ArticleID=8034

http://mappr.com/

ProgrammableWeb(http://programmableweb.com/mashups)foralisting

ofallmashups.

11.“Mix,Match,andMutate,”BusinessWeek(July25,2005):http://www.

businessweek.com/magazine/content/05_30/b3944108_mz063.htm.

CHAPTERNINE

http://programmableweb.com/mashups

http://www.businessweek.com/magazine/content/05_30/b3944108_mz063.htm

http://www.businessweek.com/magazine/content/05_30/b3944108_mz063.htm

1.Authors’interviewwithIrvingWladawsky-BergeronApril7,2006.

CHAPTERTEN

1.“ConnectandDevelop:P&G’sNewInnovationModel”byLarryHustonandNabilSakkab,HarvardBusinessReview(March2006):84(3).

2.Authors’interviewwith

TomCripe,March3,2006.

3.Basedonauthors’interviewwithDr.RobertFinnocchiaro,3M,onJuly26,2006.

4.“ResearchStirsupMerck,SeeksOutsideAid,”TheWallStreetJournal(June7,2006).

5.Authors’interviewwithKodakexecutives—Gary

Einhaus(DirectorofResearchLabs);KimPugliese,(HeadofExternalAllianceGroup),andRichardMarken(DirectorofExternalRelations)—inJune2006.

6.Weed’slawisattributedtoJeffWeedman,vicepresidentofEBDatP&G.

7.Nambisan,S.“InformationSystemsasaReferenceDisciplineforNewProduct

Development,”MISQuarterly,27(1),1–18.

8.“NorthropGunmanCIOTalksCollaborativeCADandDataManagement,”

ManufacturingBusinessTechnology(February2005):23(20),pp.38.

9.Alsosee“BuildingCollaborativeInnovationCapability,”byMorgan

Swink,ResearchTechnologyManagement(March2006):49(2),pp.37–47.

REFERENCES

265

CHAPTERELEVEN

1.SeeTheWorldisFlat:ABriefHistoryoftheTwenty-firstCentury,ThomasL.

Friedman(2005).

2.http://www.trendwatching.com/trends/MASS_CLASS.htm.

3.Source:www.nasscom.in.

4.http://www.nationalacademies.org/.

5.“TheRiseoftheMulti-PolarWorld,”AccentureReport(2007):(http://www.

http://www.trendwatching.com/trends/MASS_CLASS.htm

http://www.nasscom.in

http://www.nationalacademies.org/

http://www.accenture.com/Global/Research_and_Insights/Policy_And_Corporate_Affairs/ExecutiveSummary.htm

accenture.com/Global/Research_and_Insights/Policy_And_Corporate_Affairs/

ExecutiveSummary.htm).

6.SeeJebBrugmannandC.K.Prahalad.“Co-creatingbusiness’snewsocialcom-pact,”HarvardBusinessReview(February2007):80–90.

7.http://government.hp.com/content_detail.asp?contentid=363&agencyid=



http://government.hp.com/content_detail.asp?contentid=363&agencyid=0&mtxs=home-pub&mtxb=B1&mtxl=L1

0&mtxs=home-pub&mtxb=B1&mtxl=L1.

8.“WiproPlugsR&DServiceintoInnovationNetworks,”NaviRadjou,ForresterResearch(July2005).Alsovisithttp://www.wipro.com/pes/index.htm.

9.“HowAccentureOne-UppedBangalore,”BusinessWeek(April23,2007).

http://government.hp.com/content_detail.asp?contentid=363&agencyid=0&mtxs=home-pub&mtxb=B1&mtxl=L1

http://www.wipro.com/pes/index.htm

10.http://www.siroindia.com/.

11.Forexample,JebBrugmannandC.K.Prahalad.“Co-creatingBusiness’sNewSocialCompact,”HarvardBusinessReview(February2007):80–90.AlsoseeC.K.Prahalad’sbook,TheFortuneattheBottomofthePyramid,WhartonPublishing(2005).

12.“InnovationShipsOut,”

http://www.siroindia.com/

CIOMagazine(January15,2005).

13.“TheRevengeoftheGeneric,”BusinessWeek(December27,2006)andpersonalinterviewwithMichaelWinnick,co-founderofGravityTank.

14.“Innovation:IsGlobaltheWayForward?”Insead&BoozAllenHamiltonStudy,2006.

15.Source:NASSCOM(www.nasscom.in).

16.OneofIndia’sleadingeconomists,JairamRamesh,coinedtheterm“Chindia”andwroteabookonthepotentialcooperationbetweenIndiaandChina.SeeMakingSenseofChindia:ReflectionsonChinaandIndia,IndiaResearchPress,NewDelhi(2005).BusinessWeeklatermadethisterm

http://www.nasscom.in

morepopulargloballybylaunchingaspecialissueonthistopic(issuedatedAugust22,2005).

17.“TheBRICsDream,”GoldmanSachsReport2006;

http://www2.goldmansachs.com/insight/research/reports/report32.html.

266

THEGLOBALBRAIN

http://www2.goldmansachs.com/insight/research/reports/report32.html

CHAPTERTWELVE

1.“TheIncredibleStoryofTataMotorsandtheRs.1-LakhCar,”RobynMeredith,Forbes(March30,2007).

2.BasedonapresentationmadebyDavidYaunattheKelloggInnovationNetworkmeeting,Almaden,CA(March2007).

3.Alsosee,“Moving

TechnologiesfromLabtoMarket,”StephenMarkham,Research-TechnologyManagement(Nov/Dec2002):31–42.

INDEX

A

AppliedBiosystems,155

appropriabilityregime,80

Accenture’sLifeSciencesCenter,226

architects,69-70

ActiMatesInteractiveBarney,19

architectureofparticipation,38

ActiveWorld,147

ASF(ApacheSoftware

activities

Foundation),140

adapters,71

AutomotiveSupplierJam(IBM),242

agents,72-73

awareness,37

architects,69

adapters,71

B

addressablemarket,185

advocacy,22-23

balancedapproachtoinnovative

agents,72-73

activities,246-247

AirborneCollisionAvoidance

balancedportfolioofsourcing

system,220

mechanisms,188

AirbusA380megajumbo,97

Bayless,Dave,15

AIX,IBMasplatformleader,195

Benioff,Marc,101

AleniaAeronautica,90

Benkler,Yochai,31

allianceconstellation,34

Benoiff,Marc,42

alternatedeployment

BigIdeaGroup(BIG),121-124

opportunities,207

Bingham,Dr.Alph,198

AmylinPharmaceuticals,155

BioITAlliance,155

AnnualAcademyofManagement

biomedicalresearch,145-146

Meeting,3

Blair,Michael,89

Apachedevelopment,139-141

Boeing787Dreamlinerproject

ApacheSoftwareFoundation

globalizationofinnovation,219

(ASF),140

Orchestra-Integratormodelof

Apex,102

network-centricinnovation,

AppExchange,43

87-98

AppExchangeCentralBusiness

bookpublishing,ascommons-based

Incubator,108-109

peerproductionmodel,31

AppExchangeforum,100-101

BPO(businessprocess

AppExchangenetwork,103-104

outsourcing),221

governanceofAppExchange,

Bradley,Jean-Claude,144

105-106

Broomall,Vern,92

on-demandtechnologyplatform,

102-103

267

268

THEGLOBALBRAIN

buildingfaithinorganization,239-241

continuumofinnovationsourcing

businessecosystems,34-35

mechanisms(CreativeBazaar

businessprocessoutsourcing(BPO),221

model),114-136

Bye,Kent,55

contractresearchorganizations(CROs),226

ContributorAgreement(CA),168

C

conversions,MODStationmodel,158-159

copyrights,80,160

CA(ContributorAgreement),

168

core(networks),58

CATIA(V5),93

CouncilofCompetitiveness,National

CenterforResearchinInnovationand

InnovationInitiativereport,18

Technology,3

CounterStrike,65,159

centersofexcellence,231-233

CreativeBazaarmodel,62-63,113-114

centralization,58

continuumofinnovationsourcing

certification,105

mechanisms,114-136

challengestoinnovation,26-27

globalizationopportunities,227-229

China,221-224

ideascouts,BIG(BigIdeaGroup),121-124

CIC(communityinformationcenter),224

rolesinnetwork-centricinnovation,

Cisco,4,22

187-190

citizenjournalism,25

CreativeCommonsAttributionLicense,167

ClarkFoams,80

CreativeCommonsinitiative,81

Clark,Gordon“Grubby,”80

Cripe,Tom,17,135,199

co-marketing,Salesforce.com,107

crisisininnovation,14,237-239

Coase,Ronald,30

limitsofinternallyfocusedinnovation,

CollaborativeDrugDiscovery,155

15-17

collaborativeexperience(P&G),203

opportunitiestoovercome,

17-19

CollaborativeMolecularEnvironment,155

powerofnetwork-centricity,19-26

collaborativeprojects,67

“RedQueen”effect,14-15

collectivesanctions(governance

CRM(CustomerRelationshipManagement)

mechanism),77

market,42,101

Collins,Mike,121

CROs(contractresearchorganizations),226

commons-basedpeerproductionmodel,31

crowdsourcing,1

communicationsupport,ITtools,211

culturalchallenges(innovation

communitiesofcreation,1

opportunities),26-27

communityinformationcenter(CIC),224

CurrentTV,53

companionplanting,70

customercommunities,DucatiMotor,39-40

companycontext,47

customerpartners,Boeing,89

competencies,ICs(innovationcapitalists),

CustomerRelationshipManagement(CRM)

127-133

market,42,101

complementors,186-187

complianceworkshops(Intel),78

componentdevelopers,186-187

D

computationaldrugdiscovery,142

DassaultSystems,93,211

computergamingindustry,MODStation

decentralizednatureofdecisionmaking,153

model,158-162

DellInc.,12,15

computing,network-centric,20-21

DELMIA,93

conceptualization,89

dependencies,245-246

CondeNastPublicationsInc.,222

dependencymanagement,207-208

Connect+Developinitiative(P&G),27,114

detaileddesignphase,developmentofthe

ConnectNYnetwork,19

Boeing787,90-91

Consumerism,MASSclass,

221-222

DEV(DeutscherErfinderverband),120

contextualizationchallenges(innovation

DevelopandRefinecompetency

opportunities),27

(innovationcapitalists),131

continuumofcentralization,58

developernetworks,42-43

INDEX

269

development

EurekaRanch,4,130

Apache,139-141

EvergreenIP(EIP),4,124-125

Boeing787,89

executionchallenges(innovation

Dial,4

opportunities),27

PartnersinInnovationinitiative,

experimentation,243-244

117-121,250

ExternalAllianceGroup(Kodak),203

QuestfortheBest,250

ExternalBusinessDevelopment(EBD)

TechnologyAcquisitiongroup,249

group(P&G),17,135

dimensionsofnetwork-centricinnovation,

externalincubators,115

56-59

externalinnovationnetworks,209

direct-to-consumerbusinessmodel,15

ExtraFox,54

distributedinnovation,3

Dreamliner(787)project

F


Finnochiaro,Robert,241

Orchestra-Integratormodel

of

firm-centricinnovation,4

network-centricinnovation,87-98

first-personshooter(FPS)games,159

DucatiMotor

FisherPrice,19

ascustomercommunityexample,39-40

formalmechanisms

knowledgemanagement,77-78

AppExchangegovernance,105-106

Duncan,David,136

innovationnetworks,76

DuPont,4

forms,network-centricinnovation,38,44

customercommunities,39-40

E


Eagle,Jevin,41

electronicR&Dmarketplaces,44

EagleWisiondesignmethodology

implicationsfororganizational

(Wipro),226

capabilities,46

eBay,77

implicationsforrangeofinnovation,45-46

EBD(ExternalBusinessDevelopment)

implicationsforrisksandreturns,46-47

group(P&G),17

inventornetworks,41

EchoChamberProject,55

OSScommunities,39

EIP(EvergreenIP),124-125

FPS(first-personshooter)games,159

electronicR&Dmarketplaces(3M),44

Friedman,Tom,220

ElekSen,72

FujiHeavyIndustries,90

ElekTex,72

Funk,John,135

Elements,MODStationmodel,171-173

emergentnatureoftheinnovationgoals,152

G

emergingeconomies,224

gatednetworkapproach(governance

consumerismandtheMASSclass,221-222

mechanism),76

opportunitiesrelatedto

GeneralPublicLicense(GPL),81

CreativeBazaarmodel,227-229

GentooLinux,166

JamCentralmodel,229-230

geographicallydistributedcentersof

MODStationmodel,230-231

excellence,231-233

Orchestramodel,225-227

Geospiza,155

Emini,Emilio,200

Gillette,Walter,89,93

EMS(EmergingMarketSolutions),224

GIO(GlobalInnovationOutlook)(IBM),18

engagementoftheentireorganization,

GlobalCollaborationEnvironment

241-242

(Boeing),93

ENOVIA,93

GlobalInnovationOutlook(GIO)(IBM),18

enterprise,network-centric,22

globalpartners,Boeing,88,93-94

EnterpriseEdition(JavaEE),169

globalizationofinnovation,15,219-220

enterpriseinformationsystems,21

ChinaandIndia,221-223

envisionanddirectinnovation

emergingeconomies,224-231

(architects),69

270

THEGLOBALBRAIN


ideascouts,72,121-124,189-190

excellence,231-233

IdeaExchange,106-107

preparingforopportunities,234-235

ideationto

commercialization,244-245

GNUGeneralPublicLicense(GPL),81,161

Ideawicket,228

goals,network-centricinnovation,36

identificationofrisks,209

Goodrich,90

IDEO,72

governance,75-77

IgniteIP(IIP),4,125

AppExchange(Salesforce.com),105-106

Ikea,222

OpenSPARCInitiative,166-167

incentivesformodding,160-162

GPL(GeneralPublicLicense),81,161

inclusioncommunity,224

granularityofinnovationtasks,38

independentsoftwaredevelopers(ISV),103

GravityTank,232

India,221

gridcomputing,20-21

consumerismandtheMASSclass,221-222

Gross,Adam,102

emergenceofNGOs,223-224

growth,questforprofitable

growth,12-14

technologicalandscientificexpertise,

222-223

H

INdTV,53

informalmechanisms

Half-Life,MODStation

model,65,159-160

AppExchangegovernance,105-106

Hanson,Matt,52


HaplotypeMapping(HapMap),146

informationsharing,ITtools,210

hardsynergies,M&Adeals,13

informationtechnology(IT)tools,210-211

HCLTechnologies,225

infrastructure,OpenSPARCInitiative,

HenkelInnovationTrophy,120

166-167

HenkelKGaA,117

infrastructureservices(adapters),71

HermanMiller,PLMsolutions,211

InnoCentive,4,25,44,198

HewlettPackard,155,224

innovation,1.Seealsonetwork-centric

HGP(HumanGenomeproject),29,146

innovation

hierarchy-basedproduction,30

challenges,26-27

HindustanLever,228

crisis,14-26,237-239

history,network-centricinnovation

distributedinnovation,3


firm-centric,4

modesofproduction,30-32

innovationcapitalists(ICs).

SeeICs

OpenSourceconcept,33-35

(innovationcapitalists)

Homeworld2,160

innovationcatalysts,160

HumanGenomeproject(HGP),29,146

MODStationmodel,173-

174,192-193

OpenSPARCInitiative,164

I

InnovationJaminitiative(IBM),242

i-community(HewlettPackard),224

innovationmetrics,211-214

IBM,4


GIO(GlobalInnovationOutlook),18

innovationportals

InnovationJaminitiative,242

asCreativeBazaarmodelinnovationrole,

leveraginginnovationnetworks,27

187-189

asOSScommunityexample,39

Dial,119

portfolioofinnovationroles,194

innovationsponsors

PowerArchitecture,225

asJamCentralmodelinnovationrole,

Powerchipinnovationalliance,59

190-192

ICDL(InternationalComputerDriving

TDI-TSLnetwork,144

License)Foundation,224

innovationsteward,TDI-TSLnetwork,143

ICs(innovationcapitalists)

innovationtransformation(agents),73

CreativeBazaarmodel,116-117,124-136

innovators

EvergreenIP(EIP),124-125

asMODStationmodelinnovationrole,193

IgniteIP(IIP),125

OpenSPARCInitiative,164

ideahunts,122-124

TDI-TSLnetwork,144

INDEX

271

IntacctCorp.,71


Integrators,asOrchestramodelinnovation

knowledgetransfer(agents),72

role,185-186

knowledge-basedtasks,R&Dprocess,142

Intel,78

knowledge-managementmechanisms,85

intellectualproperty.SeeIPrights

Kodak,203

management

Kraft,16

IntellectualVenturesLLC(IV),123

Interknowlogy,155

L–M

internalevangelism,134

Lafley,A.G,199

internalincubators,115

leadership

internalresources,186

organizationalreadinessfor

internallyfocusedinnovation,limitsof,15-17


InternationalComputerDrivingLicense

structureofnetworkleadership,57-59

(ICDL)Foundation,224

learningpotential,adapterrole,187

InternationalHapMapproject,146

Lenovo,15

InventionQuest(Staples

Inc.),41

licensingscheme(GPL),81

inventornetworks,StaplesInc.,41

LindenLab,149

inventors,partnerships,117-121

linkingmembers(agents),72

IPrightsmanagement,79-82

Linux,24

computergames,160-161

Logitech,72

innovationcapitalists,132


M&A(mergersand

acquisitions)deals,13

TDInetwork,145

management

ISV(independentsoftwaredevelopers),103


IT(informationtechnology)tools,210-211

intellectualpropertyrights,132

networks,74-82

J–K

risks,supportprocesses,209

mantraforinnovation,249-250

Jailbreak,160

Mappr,170

JamCentralmodel,64-65,139-141

Marketcompetency(innovationcapitalists),

biomedicalresearch,opendatabases

132-133

approach,145-146

market-basedproduction,30

elementsof,151-154

market-readyproducts,114


Mashupmovement,170-171

largecompanies,154-156

MASSclass,consumerism,

221-222


Maurer,Stephen,141

190-192

mechanisms,sourcinginnovation,114

SecondLife(virtualrealityworld),146-150

mediation,agents,72-73

TropicalDiseaseInitiative,141-145

Merck,17

Jansen,Kathrin,200

MeredithCorp.,222

JavaEE(EnterpriseEdition),169

mergersandacquisitions(M&A)deals,13

JavaME(MicroEdition),169

Merwin,130

JavaSE(StandardEdition),169

Metaverse(virtualrealityworld),146

jointdevelopmentphase,developmentof

metrics(innovationmetrics),211-214

theBoeing787,89-90

MicroEdition(JAVAME),169

Joy,Bill,17

Microsoft

Jung,Edward,123

ActiMatesInteractiveBarney,19

KawasakiHeavyIndustries,90

BioITAlliance,155

KelloggInnovationNetwork(KIN),3

Miller,David,166

Kellogg’s,227

mindsetchallenges(innovation

Kieden,109

opportunities),26-27

Kim,Peter,17,200

MitsubishiHeavyIndustries,90

KIN(KelloggInnovationNetwork),3

MODFilms,53

272

THEGLOBALBRAIN

MODStationmodel,65-66,157-158

network-centricinnovation(NCI),4,23-26,

computergamingindustry,158-162

29-30,51-54,67-68

elements,171-173

balancedapproachtoinnovative


activities,246-247

innovationcatalysts,173-174

buildingfaithinorganization,239-241

Mashupmovement,170-171

companycontextconsiderations,47


contributionto

organizationalgrowth,248



192-193

engagementoftheentireorganization,

modders,160

241-242

models,network-centricinnovation,59,

experimentation,243-244

193-194

forms,38

choosingmostappropriatemodel,179-184

customercommunities,39-40

CreativeBazaarmodel,62-63,113-136,


187-190,227-229

electronicR&Dmarketplaces,44

JamCentralmodel,64-65,

139-156,

implicationsfororganizational

190-192,229-230

capabilities,46

ModStationmodel,65-66,157-174,

implicationsforrangeofinnovation,

192-193,230-231

45-46

Orchestramodel,60-62,85-111,185-187,

implicationsforrisksandreturns,

225-227

46-47


inventornetworks,41

MODification(MOD)Stationmodel.See

OSScommunities,39

MODStationmodel

globalization,219-220

modularityoftheinnovation

system,38

ChinaandIndia,221-224

Moore,James,34

emergingeconomies,224-231

Morley,Eileen,54


Mulally,Alan,87

excellence,231-233

MVB(MyVirtualBand.com),150-151

preparingforopportunities,234-235

Myhrvold,Nathan,123

historicalandphilosophicalrootsof,30-35

ideationtocommercialization,244-245

N

implicationsforinnovationroles,73-74

landscapeof,55-59

NationalInnovationInitiativereport

mantraforinnovation,249-

250

(CouncilofCompetitiveness),18

members,68-73

natureofthecollaboration

models,59

infrastructure,153

CreativeBazaarmodel,62-

63,

TheNatureoftheFirm,30

113-136,187-190,227-229

NCA(network-centricadvocacy),22-23

JamCentralmodel,64-65,139-156,

NCE(network-centricenterprise),22

190-192,229-230

NCI(network-centricinnovation).See

ModStationmodel,65-66,157-174,

network-centricinnovation

192-193,230-231

NCO(network-centricoperations),21-22

Orchestramodel,60-62,85-111,

NCW(network-centricwarfare),21

185-187,225-227

networkgovernance,75-77

networkmanagement,74-82

networkmanagement,74

organizationalandoperationalreadiness,

IPrightsmanagement,79-82

197-198



networkgovernance,75-77

leadershipandrelationalcapabilities,

networkpartners,Boeing,91

205-207

network-centricadvocacy(NCA),22-23

lettinggoofinnovationprocess,

network-centricenterprise

(NCE),22

200-202

managementofdependencies,207-208

structureoftheorganization,202-205

INDEX

273

supportprocesses,208-209


toolsandtechnologies,210-211

combiningwithotherSuninitiatives,169

WeKnowEverything(WKE)

communitygovernanceand

syndrome,199-200

infrastructure,166-167

positioningfirmininnovation

communitymembers,164-166

landscape,178

IPrightsmanagementandvalue

analysisofindustryandmarket

appropriation,167-169

characteristics,179-184

operationalreadiness,197-198

portfolioofroles,194-196


requirementsofinnovationrole,179,


184-194

toolsandtechnologies,210-211

principlesof,35-38

operations,network-centric,21-22

reallocationofinnovationinvestments,

Orchestramodel,60-62,85-86

247-248


network-centricoperations(NCO),21-22

Orchestra-Integratormodel,86-98

network-centricwarfare(NCW),21

Orchestra-Platformmodel,86,100-111

NetworkedVirtualOrganization(NVO)


(Cisco),22

185-187

NGOs(non-profitandnon-governmental

Orchestra-Integratormodel,86-88

organizations)

comparisonswithA380and

emergenceofinBRICcountries,223-224

Boeing777projects,98

globalizationofinnovation,229-230

strategy,88-96

NIH(NotInventedHere)syndrome,199

Orchestra-Platformmodel,

86

NineSigma,44

criticalelements,109-111

NorthropGunman,PLMtools,211

Salesforce.comandAppExchangeforum,

NotInventedHere(NIH)syndrome,199

100-101

NVO(NetworkedVirtualOrganization)

AppExchangenetwork,103-104

(Cisco),22

governanceofAppExchange,105-106

on-demandtechnology

platform,

O

102-103

Salesforce.cominitiatives,106

O’Reilly,Tim,38

AppExchangeCentralBusiness

objectives

Incubator,108-109

AppExchange,104

co-marketingandvalue

network-centricinnovation,36

appropriation,107

ODMs(originaldesign

manufacturers),232

IdeaExchange,106-107

OEMs(originalequipment

partneralliances,107-108

manufacturers),225

organizationalcapabilities,implicationsof

OfficeMax,232-233

network-centricinnovation,46

OhmyNews,25

organizationalengagement,241-242

on-demandsoftware,101

organizationalgrowth,248

on-demandtechnologyplatform,102-103

organizationalreadiness,197-198

opendatabasesapproach,145-146

leadershipandrelationalcapabilities,

openmarketinnovation,1

205-207

OpenSourceconcept,25

lettinggoofinnovationprocess,200-202

filmmaking,33

managementofdependencies,207-208

hardware,33

structureoftheorganization,202-205

intelligence(OSINT),33

WeKnowEverything(WKE)syndrome,


199-200

opensourcecurriculum,33

originaldesignmanufacturers(ODMs),232

OpenSourceDevelopment

Lab(OSDL),155

originalequipmentmanufacturers

OpenSourceSoftware(OSS)movement,4,

(OEMs),225

24,33,39

OSDL(OpenSourceDevelopmentLab),155

OpenJavainitiative,169

Osher,John,116

OpenSolarisproject,169

274

THEGLOBALBRAIN

OSINT(opensourceintelligence),33

principles,network-centric

innovation,35

OSS(OpenSourceSoftware)movement,4,

architectureofparticipation,38

24,33,39

creationofsocialknowledge,37

sharedawarenessandworld

view,37

P

sharedgoalsandobjectives,36

processmanagementmechanisms,210

P&G(Proctor&Gamble),4

Proctor&Gamble.SeeP&G(Proctor&

Connect+Developinitiative,27,114

Gamble)

EBDgroup,collaborationhistory,203

ProductDevelopmentGroup(PDG)LLC,122

ExternalBusinessDevelopmentgroup,135

ProductEngineeringSolutions(PES),

innovationinitiatives,17

Wipro,226

leveraginginnovationnetworks,27

ProductLifecycleManagement(PLM)

portfolioofinnovationroles,

195

tools,211

SpinBrushproduct,115

profitablegrowth,12-14

Park,Debra,117

projectmanagement,ITtools,210

partialconversions,65,158

partneralliances,Salesforce.com,107-108

PartnersinInnovation(Dial),117-121,250

Q–R

partnerships

QPong,160

DialCorporation,117-121

Quake,159

innovationcapitalists,124-127,133-136

qualityrating,105

patentedtechnology,computergames,160

QuantaComputer,232

patents,80

QuestfortheBestcontest(Dial),118,250

PCPack(ActiMatesInteractiveBarney),20

PDG(ProductDevelopmentGroup)LLC,122

R&Dprocess,drugdiscovery,142

Perens,Bruce,33

Rai,Arti,141

periphery(networks),58

RAMP(ResearchAcceleratorforMultiple

PES(ProductEngineeringSolutions),

Processors),166

Wipro,226

RavenSoftware,161

philosophicalroots,network-centric

rawideas,114

innovation

Raymond,Eric,33


reachofthemechanism,

sourcing


innovation,114

OpenSourceconcept,33-35

reallocationofinnovationinvestments,

Pickering,Thomas,88-91

247-248

platformleaders,185-186

RedHatLinux,24

platformmonitoring,105

“RedQueen”effect,14-15

PLM(ProductLifecycleManagement)

ReducedInstructionSetArchitecture

tools,211

(RISC),162

PlugFests(Intel),78

Reines,Scott,200


relationalcapabilities

positioningfirmininnovationlandscape,178

innovationcapitalists,132

analysisofindustryandmarket

organizationalreadinessfor

characteristics,179-184



RelianceIndustries,228

requirementsofinnovationrole,179-194

reports,NationalInnovationInitiative


(CouncilofCompetitiveness),18


reputationalsystems(governance


mechanism),77


ResearchAcceleratorforMultiple

PowerArchitecture(IBM),195,225

Processors(RAMP),166

PowerArchitectureDesignCenter(HCL

reverseflowmodel,134

Technologies),225

RISC(ReducedInstructionSet

Powerchipinnovationalliance(IBM),59

Architecture),162

INDEX

275

risk

SOC(SystemOnaChip)design,163,225

identificationandmanagement,209

socialknowledge,37

innovationarchitecture,186

socialmechanisms,76

mitigation,114

softsynergies,M&Adeals,13

risksandreturns,implicationsof

softwareasservice,101


softwaredevelopment,142

roadshows(BIG),121

SolarisOS,169

roles,network-centricinnovation,184-194

space,innovationspace,180


SPARCarchitecture,OpenSPARCInitiative,


162-164


combiningwithotherSuninitiatives,169


communitygovernanceand


infrastructure,166-167

rule-basedtasks,R&D

process,142

communitymembers,164-166

IPrightsmanagementandvalue

S

appropriation,167-169

SPARCstation1,162

Salesforce.com

specializedknowledge(adapters),71

AppExchangeforum,100-106

SpinBrushproduct(P&G),115

asdevelopernetworkexample,42-43

StaplesInc.,4,41

initiativesasplatformleader,106-109

StarAlliance,34

Sali,Andrej,141

Stephenson,Neal,146

Samsung,commoditization,15

Stonecipher,Harry,87

Sanctuary,54

StrategicBusinessUnit(SBU)level,179

SangerInstitute,69

Strategies,Boeing’snetwork-centric

Sargent,Ron,41

innovation,88-96

SBU(StrategicBusinessUnit)level,179

Streiff,Christian,99

ScalableProcessorArchitecture.SeeSPARC

Strode,Scott,92

architecture

structure

Schistosomiasisproject,144

innovationspace,56-57

ScienceCommonsinitiative,81

networkleadership,57-59

scientificexpertise,emergingeconomiesof

organization,202-205

IndiaandChina,222-223

Submit&Winsweepstakes(Dial),118

ScrippsResearchInstitute,155

SugarCRM,230

SecondLife(SL).SeeSL(SecondLife)

SunMicrosystemsInc.,155

SeekandEvaluatecompetency(innovation


capitalists),128-130

portfolioofinnovationroles,195

787BoeingDreamliner

project



ASwarmofAngels,52

Orchestra-Integratormodelof

TheSynapticLeap(TSL),144


SystemOnaChip(SOC)design,163,225

Shaffer,Steve,92,94

sharedawareness,37

T

sharedgoals,36

sharedworldview,134

TaiwanSemiconductorManufacturing

Silver,Andrew,54

Company(TSMC),71

SimplyRISC,165

Tata,15

SIROClinpham,226

Taylor,Ginger,143

SL(SecondLife),146-147

TDI(TropicalDiseaseInitiative),141-144

behavioralnorms,149-150

TDI-TSLnetwork,144-145

networkandplayers,148-149

TeamFortress,159

Smith,Dan,95

TeamReaction,160

snifftest,129

technologicalexpertise,emerging

SnowCrash,146

economiesofIndiaandChina,

SNPconsortium,146

222-223

276

THEGLOBALBRAIN

technologies,operationalreadinessfor

valuechain,ICs(innovationcapitalists),127


DevelopandRefinecompetency,131

TechnologyAcquisitiongroup(Dial),

Marketcompetency,132-133

117,249

SeekandEvaluate

competency,128-130

technologybrokers,72

valuecreation,243-244

tendingtheinnovationnetwork

valuenets,21

(architects),70

valuenetworks,21

3M,4,44,199

ValveCorporation,HalfLife,65,159

timetomarket,114

VendlinkLLP,19

Todd,Mathew,144

venturecapitalists,115

tools,operationalreadiness

for

ViewerCreatedContent(CurrentTV),53


VizXLabs,155

totalconversions,65,159

VoughtAircraftIndustries,90

Toyota,22

tradesecrets,80,160

W–Z

trademarks,80,160

Walmart,22

transactioncosts,30

Warfare,network-centric,21

triggerandcatalyze

innovation

TheWatch,54

(architects),69

WeAreSmarterThanMe,31

TropicalDiseaseInitiative(TDI),33,

WeKnowEverything(WKE)syndrome,

141-144

199-200

trust-basedenvironment,Boeing,94-96

Weaver,David,166

TSL(TheSynapticLeap),144

web-deliveredsoftware,101

TSMC(TaiwanSemiconductor

WebSphere,IBMasplatformleader,195

ManufacturingCompany),71

Weed’slaw,207

Turner,Dr.Merv,200

WellcomeTrust,69

TVPack(ActiMatesInteractiveBarney),20

Wikipedia,24

Williams,Brandon,133

U–V

Williamson,Oliver,30

U.K.-basedWellcomeTrust,69

Wipro,226

UbuntuLinux,166

WKE(WeKnowEverything)syndrome,

UIA(UnitedInventorAssociation),119

199-200

UltraSPARCT1,163

Wladawsky-Berger,Irving,39,191,201

Unilever,4

worldview,37

UnitedInventorAssociation(UIA),119

Worldcraft,160

WyethPharmaceuticalsInc.,226

valueappropriation,180


Salesforce.com,107

valuecapture,243-244

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ReferencesIndex

ABCDEFGHIJ–KL–MNOP

Q–RSTU–VW–Z