Innovate...or Outsource?
The recent (June 2007) issue of the Harvard Business Review had two insightful articles on the topic of innovation – one titled ‘A Buyers Guide to the Innovation Bazar’ by Mohanbir Sawhney, Professor at North Western University's Kellogg School of Management and Satish Nambisan, Associate Professor at Rensselaer Polytechnic’s School of Management and Technology; the other titled ‘The Innovation Value Chain’ by Morten T Hansen, Professor at INSEAD and Julian Birkinshaw, Professor at the London Business School (Read the articles here – you may need a subscription).
What struck me from a detailed reading of both the articles is that innovation is no longer a loosely defined, ‘skunk-works’ activity confined to grubby R&D departments within Companies! There is a rigorous structure and discipline to harnessing innovation for tangible business benefits, especially among large and successful Global Corporations. There have been some blogs written about structured innovation on this site as well.
Sawhney and Nambisan postulate a structured framework for seeking out innovative ideas or products and managing them. The framework is, in their words, an ‘External (innovation) sourcing continuum’ which helps an organization choose from raw ideas at one end and market-ready products at the other; the strategic options along the continuum are moderated by trade-offs along four well established parameters - cost, risk, breadth of choice (of new ideas) and time to market.
I think this is a fresh perspective on innovation – that it can be systematically sourced from outside, optimally managed to fit a particular organization's product/ market strategy and closely aligned to specific business goals. The concept of a ‘marketplace’ or an e-bay for ideas is gaining popularity and firms are harnessing the power of networks (in some measure driven by the Internet); Procter & Gamble and Salesforce.com have prospered through idea networks and exchanges.
While it is easy to conclude that networks ‘dis-intermediate’ and reduce the friction involved in commercializing innovation, there is scope for ‘re-intermediation’. Sawhney and Nambisan argue that specialized intermediaries like the ‘invention capitalist’ and ‘innovation capitalist’ are emerging to complement traditional venture capitalists.
My view is that organizations need to develop and champion an internal ‘innovation capitalist’, to borrow from the authors’ lexicon above! The internal innovation capitalist will help breathe more life into raw ideas submitted by employees; it will add flesh and blood through deep dives on specific areas – market potential, segment attractiveness/ profitability, scalability, step-jump in revenues etc. – and help in mitigating some of the risks involved in commercializing such ideas.
The second article by Messrs Hansen and Birkinshaw does an elegant job of structuring the innovation value chain as an end-to-end process, from idea generation through conversion and diffusion. They offer a methodical, almost tool-kit like approach to identify organizational deficiencies across the innovation value chain. And like Sawhney & Nambisan, they incorporate the external sourcing of ideas into their value chain. There is also a list of ‘best seller’ publications on the innovation process, mapped to each element of the value chain in the article!
The internal innovation capitalist is a vital link in an organization’s innovation value chain - a great catalyst as well as a conduit for harnessing the power of new ideas. As the concept evolves, the innovation capitalist entity should broaden its charter to channel external ideas and manage the outsourcing of innovation. Ultimately, it is a healthy concert of in-breeding and external ideas that will make a difference.
As Victor Hugo said ‘Nothing else in the world...not all the armies...is so powerful as an idea whose time has come’; if Hugo were around in today’s age and times, he would probably have added a corollary to his adage – ‘Nothing should stop a good idea at the gates of the organization’!
More power to the innovation capitalist and the vast universe of ideas out there!
Comments
lets outsource and then innovate
Posted by: sushant | June 18, 2007 11:26 AM
Outsourcing 'innovation' (if I've understood it right) seems to be a good idea, till such time there is proper control over the entire process...
Outsourcing has reached a level where today there are only few things which is part of your core business- Strategy & Governance- everything else is something to be outsourced, even Marketing and Sales, I feel (only a few would agree!)
It looks like the world of business would one day become a 'network of outsourcers and consumers' (or has it already become?) and we will have only 2 kind of species – ‘Outsourcers’ and ‘Consumers’
Posted by: Benil George | July 16, 2007 12:10 PM