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March 8, 2013

Farming It Out Without Giving Away the Farm

Posted by Sanjay Dalwani (View Profile | View All Posts) at 8:57 AM


"Now don't get me wrong. I like innovation; just not too much of it." That's what I imagine I would hear if I were a fly on the wall of certain corporate headquarters these days. Large companies that once zealously guarded their technological innovations are now opening the floodgates of access to such technology.  Yet, they're grappling with just how wide they should throw open those floodgates. Indeed, it's a delicate balance: If there's too little innovation on the part of your collaborators, you're pretty much out the game. But if they take what you gave them and innovate too much, they stand to take control of the very technology you once called your own.

There's an egalitarian aspect to today's technology that makes a 15-year-old (if, say, he were to design a killer app) to be as potent a force in the marketplace as a 100-year-old corporation with tens of thousands of employees. Those venerable firms are realizing that it pays to play nice with an up-and-coming generation of innovators. But these companies certainly don't want to give away the store, either. 

Last year I read an interesting article in the MIT Technology Review that featured the delicate balancing act that AT&T is currently undergoing. Those of us over a certain age remember that Bell Labs was synonymous with innovation. During the mid-20th century, the subsidiary of Ma Bell was a prestigious place for the best and brightest to innovate and invent. And the fruits of that research were patented and closely guarded by the company that ran those laboratories. How times have changed! The article highlights a push by AT&T to encourage freelance innovators to design applications using its data. That's because the center of the tech universe doesn't lie within the big conglomerates anymore. First came the Internet and, later, mobile. These transformations gave consumers more influence in deciding what they wanted and how they wanted to use it. Smaller companies and even lone programmers are now where a lot of that innovation action lies.

According to the MIT article, there was a certain amount of irony connected to the transformation of AT&T. If you recall, they were the sole provider of Apple's first iPhone. Only six years ago, the assumption was that it benefited the company to be the exclusive provider of telephony. But then AT&T watched Apple open its platform to millions of app designers. They learned a thing or two about the new reality of the tech universe. Developers had written some 600,000 apps for the new iPhone.

No doubt it's a bit of a culture shock for the company that gave birth to Bell Labs to throw open its vault to outsiders. Yet that's just what AT&T is doing by outsourcing some of its product innovation. The goal, according to the MIT article, is that the company will maintain a healthy relationship with the larger ecosystem of technology innovators and collaborators who are an integral part of today's marketplace.

Business isn't the only place that's changing its tune. Even government is getting into the act: New York City's mayor, Michael Bloomberg, is allowing developers to utilize the city's data to come up with innovative new apps that serve the public. It helps, of course, that before he became mayor, Mr. Bloomberg was himself an innovator in the information world. He knows fully well the influence one person can have on an entire industry.

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