Markets or Communities? The Best Ways to Manage Outside Innovation - HBS Worki... - The Diigo Meta page

• 24 Jul 09
  

  Nicole Turbé-Suetens

  HBR communities R.Lakhani knowledge

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  Miguel Membrado

  innovation market hbs communities apple openinnovation outsideinnovation

• 22 Jul 09
  

  Lawrence Liu
• 21 Jul 09
  

  Bertrand Duperrin

  According to Harvard Business School professor Karim R. Lakhani, Boeing's approach is an excellent example of how not to manage external innovation. The right way to do it is the subject of an article in the current issue of MIT Sloan Management Review by Lakhani and collaborator Kevin J. Boudreau (London Business School), "How to Manage Outside Innovation" (free registration required).

  innovation market communities boeing collaboration suppliers businessmodel motivation openinnovation crowdsourcing

  • The solution then is to connect with external innovators and invite them to participate with you on your critical problems. Of course, the Internet and the massive reduction in communication and computation costs have made accessing external innovators a much easier task than what was possible 10 or 15 years ago
  • More practically, working with outside innovators does not mean that all the "keys to the kingdom" have to be given away. Instead, firms can become intelligent about selectively revealing core issues in ways that their IP is protected. Firms like Procter & Gamble and IBM have learned to do this—others can learn as well.
  • 3 more annotations...
  • • An important element in P&G's effort was to create an infrastructure for external innovation that would enable the various business units to access the outside world. For established firms, CEO interest and commitment is necessary to make this happen.
    • Boeing failed on two critical counts. One of the key tenets and advantages of external innovation is that you have access to multiple parallel approaches to solve the same problem.
    • Second, my read of the situation from media reports is that Boeing kept a very long arm's-length relationship with suppliers. So problems that came up with various modules were not recognized until much later.
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  Driessen Samuel

  innovation masscollaboration

  • Depending on these factors, the outside innovation might be fed and managed either by creating collaborative communities (think of the open-source software movement), or by using market incentives (Apple's program to draw independent developers to its iPhone/iTouch platform.)
  • The main driver is accessing knowledge that is widely distributed in the world.
  • 7 more annotations...
  • • he first main advantage is the presence of multiple parallel paths to solve an innovation problem. In both markets and communities, external innovators will explore innovation landscapes that are often unknown and unexpected by the organization. A high-performing solution often comes by this type of exploration.
    • The main concerns about working with outside innovators relate to intellectual property and the potential loss of secrecy.
    • • The nature of the innovation problem at hand. Where the firm is in its technology life cycle may drive its choices. Mature technologies are amenable to markets, while nascent technologies can be better developed through communities.
        
      • The motivation of the external innovators. Those motivated by extrinsic rewards like money and career may choose markets. Those motivated by intrinsic motivations like intellectual challenge and identity may prefer community.
        
        
      • The business model embraced by the firm. As soon as a firm decides to open up for innovation, it transforms itself from a strictly product or service business into a platform business. Depending on the type of platform business model (integrated, product, or two-sided), the host firm has a choice about the amount of control it exerts over outside innovators. While markets and communities coexist in all three platform business models, there is a tendency for communities to prefer platforms that exert less control, and for external innovators in markets to trade off tight control for a larger share of the profits.
        

    • Q: Who inside a firm should be involved in making these key decisions regarding external innovation?

      
      
      

      A: This has to be a CEO-level decision. Embracing external innovators does not come naturally to most firms—we don't have a course (yet) on this topic at HBS! But the CEO has to mandate this approach.

    • for sourcing half the innovations from outside P&G
    • Boeing failed on two critical counts. One of the key tenets and advantages of external innovation is that you have access to multiple parallel approaches to solve the same problem.
    • Second, my read of the situation from media reports is that Boeing kept a very long arm's-length relationship with suppliers.

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