Satish Nambisan

The Global Brain and the Service-Dominant (S-D) Logic

Last week, I gave the keynote address at the 2008 Logic and Science of Service Conference in Hawaii. The conference, focused on service-centered research and sponsored by the IBM Almaden Services Research Center, was co-chaired by Prof. Steve Vargo (University of Hawaii) and Prof. Bob Lusch (University of Arizona).

Steve and Bob are also the authors of an award-winning article on Service-Dominant (S-D) logic of marketing (Journal of Marketing, 2004) that argued for a shift away from the goods-dominant (G-D) logic that has pervaded much of our thinking so far. The foundational proposition of S-D logic is that organizations, markets, and society are fundamentally concerned with exchange of service. Thus, as per S-D logic, service is exchanged for service; all firms are service firms; all markets are centered on the exchange of service, and all economies and societies are service based. A very interesting and thought-provoking perspective!

In preparing for my presentation at the conference, I was struck by how close some of the themes discussed in The Global Brain are to those espoused by the S-D logic – in particular, the role of customers.

As stated in the book and elsewhere in my research work, customers form an important part of the Global Brain, and increasingly firms will co-innovate and co-create value with customers. The S-D logic also embraces the concept of co-creation of value – as Steve and Bob note, “instead of firms being informed to market to customers, they are instructed to market with customers, as well as other value-creation partners in the firm’s value network”. Thus, the focus on collaborative innovation and value co-creation, that is the premise of The Global Brain, underlines the S-D logic too.

The challenge then for companies would be to put together and offer the appropriate set of resources and knowledge to facilitate the right level of involvement of customers in the co-innovation or co-production of the service offerings. Companies who are able to “integrate” the knowledge and the value that is thus co-created by customers (and by other network partners) are likely to see themselves well ahead in the game!

'The Global Brain' and Government Innovation

One of the things that I discovered after writing my book, The Global Brain, was that the public sector (or Government) is not that much different from the private sector in terms of the nature of the innovation and problem-solving challenges it faces. Indeed, in many areas of the government, ranging from education and health care to homeland security and environmental conservation, the nature of the problems has changed drastically—they are increasingly ill-defined or emergent, involve diverse sets of stakeholders, and cross organizational and geographic boundaries.

It has also become evident that the transformational innovation – in business models, operations, and services offered by government agencies – needed to address such problems are unlikely to always originate from within the four walls of the government. Government agencies will need to “look outside” and harness the creative talent and expertise that reside outside their boundaries. In short, the opportunities offered by The Global Brain are as relevant and valuable to government agencies and other public sector organizations as they are to private companies such as IBM, P&G, and Boeing.

I recently completed a research report (sponsored by the IBM Center for the Business of Government) that describes the different roles government agencies can assume in pursuing collaborative innovation with a diverse set of partners including other government agencies (federal/state/local), non-profit organizations, private companies, citizens, and universities.

As I write in my report, the performance of American government in the 21st century will be shaped by how well it adopts such collaborative innovation to harness external resources and creativity in addressing the nation’s most challenging issues.

To download a copy of my report (or to get a ‘free-of-charge’ hard copy), pl. visit the IBM Center for the Business of Government website.

The Global Brain & ‘Virtual Customer Environments’

It is no secret that customers form an important part of the Global Brain. Indeed, customers can be actively engaged in different aspects of innovation and value creation – from the design and development of new products and services to marketing and product support activities.

To tap into the innovative power of customers, in recent years, many companies (including Microsoft, BMW, Ducati, Volvo, and Nokia) have established ‘Virtual Customer Environments’ or VCEs – i.e. technology-based collaboration platforms that incorporate online discussion forums, wikis/blogs, virtual reality tools, and other such technologies to support customer contributions in ideation, design, development, testing, and marketing activities.

Over the last few years, I have been studying how companies can implement and manage such VCE-based initiatives that promote customer co-innovation and value co-creation. One of the interesting issues that I have found from my research work has been that customers’ experiences in such VCEs can have broader and more profound implications — particularly for customer relationship management.

In an article published in the Spring 2008 issue of the MIT Sloan Management Review, I discuss this issue in detail. Customers who have positive experience in VCEs tend to not only participate more in innovation activities but also develop more positive attitudes towards the product as well as the company. And, vice versa!

So what is the key message here? In pursuing VCE-based initiatives, companies should carefully select and implement a portfolio of strategies and practices to enhance positive customer experiences in VCEs, and thereby ensure favorable outcomes in terms of both innovation management and customer relationship management.

More importantly, managers should view their VCE initiatives as an integral part of their overall innovation and customer strategies. For more on this, read the article.

Is India Ready to Tap the Global Brain?

I was recently invited to write an op-ed piece for Mint (the Indian affiliate of the Wall Street Journal) on the above issue. The article was published in the issue dated 24th December 2007. 

As I note in my article, while Indian companies still have a lot of distance to cover before they can assume leadership in global innovation networks, there are several encouraging signs regarding the potential for that. Importantly, the experience they gained during the outsourcing revolution – i.e. from partnering with global innovation leaders such as IBM, Eli Lilly, Intel, HP, and Boeing - may prove to be very beneficial as they pursue efforts to establish and lead their own global innovation networks. 

Here is a link to the full article: Ready to tap the Global Brain?

Knowledge@Wharton Interview

Recently, I was interviewed by Knowledge@Wharton on my new book  - The Global Brain. The interview has first come out in their India Knowledge@Wharton forum - here is a link to the interview.

I believe the opportunities for emerging economies such as India and China to participate in global network-centric innovation is tremendous - a point I make in the interview. And, in the next couple of years, we are going to see rapid growth in the number of new firms created (including innovation intermediaries) in these countries to exploit some of these opportunities. Btw, the opportunities go both ways - companies in US and Europe also can benefit from this, particularly from the increased potential for customer co-innovation in India and China.

From 'Firm-Centric' Innovation to 'Network-Centric' Innovation

There was a conference held last week at the Wharton School on Network-based Strategies and Competencies (organized by Prof. Jerry Wind of Wharton and Prof. Paul Kleindorfer of INSEAD). It was a very interesting conference (some of the best minds in the business were there including C K Prahalad who was the keynote speaker) and a number of important and challenging network-related topics and issues were discussed.

I was one of the invited speakers at the conference and the focus of my presentation was on the challenges companies face while shifting from a firm-centric innovation model to a network-centric innovation model.

The benefits of looking outside for innovative ideas and partnering with external innovation networks – for example, customer networks, inventor networks, academic researcher and scientist networks, etc. – are quite evident to most companies. However, making such a shift from innovation initiatives that are centered on internal resources to those that are centered on external networks and communities – i.e. a shift from firm-centric innovation to network-centric innovation – is quite challenging and complex. 

As recent examples from companies such as P&G, Boeing, Sun, Staples, IBM, and Apple illustrate, such network-centric innovation can take many forms. There are different types of entities that companies can reach out to (including new types of innovation intermediaries) and many different types of relationships and networks that can be developed to harness innovative ideas.

Thus, the point that I emphasized most in my presentation (and which I think resonated well with the attendees) was the importance of a company’s context in evaluating its network-centric innovation strategy.  A company has to develop a deep understanding of the various external innovation networks that exist and relate them to its own unique market and organizational context. Only with such an understanding can it position itself appropriately in the landscape of network-centric innovation.

In short, CONTEXT MATTERS! And, acknowledging that is the first step towards success in network-centric innovation.   

The “Local Brain” and the “Global Brain”

Last week I gave the keynote address at the national summit of R&D and technical directors at Henkel North America. One of the interesting questions that came from the audience related to how companies can find the right balance between its internal innovation capabilities and external innovation opportunities.

This is an issue where companies often make an incorrect assumption: the increased opportunity to leverage the Global Brain (external innovation sources) does not imply investing less in the Local Brain (internal innovation capabilities). It is true that, in the short term, you might be able to substitute internal innovation resources with cheaper external innovation resources, and thus pursue your innovation agenda with lower levels of R&D investments. However, in the long term, your ability to derive returns from external network-centric innovation will depend on the quality of the innovation assets and capabilities that you possess. In general, the greater the value of such internal assets, the greater the potential returns from participating in external innovation initiatives. 

Thus, the focus should not be on decreasing your company’s innovation budget but on finding the right balance between internal and external innovation efforts. As discussed in my new book, The Global Brain (Wharton School Publishing, 2007), finding such a balance might require you to reallocate your innovation dollars – perhaps emphasizing downstream rather than upstream product development capabilities and processes – but always keeping in mind the specific role your company has decided to pursue in external network-centric innovation. The bottom line here? In your eagerness to pursue the opportunities posed by the Global Brain, do not forget to make the right investments in your Local Brain!

A brief intro to my new book, The Global Brain

In this blog I will briefly describe what this new book is all about. 

Most managers are aware of the vast creative potential that lies outside their company boundaries – customers, suppliers, independent inventors, academic researchers, innovation intermediaries, and a host of other external entities that constitute the Global Brain. However, tapping the Global Brain for innovative ideas is easier said than done. There is still very limited understanding of the landscape of such external network-centric innovation or how exactly companies should take advantage of the dizzying array of opportunities to partner with external actors.

This book is to help companies address this “execution gap” in network-centric innovation. Here are a few key questions that this book addresses: What are the different approaches or models of network-centric innovation? How should companies evaluate and select the most appropriate approach vis-à-vis its particular industry and market context? How should a company prepare for network-centric innovation? What types of organizational capabilities and competencies would be needed? How should a company integrate its internal and external innovation processes? What benefits can be expected and how can they be measured? What are the implications of global network-centric innovation for companies in emerging economies such as India, China, and Brazil?

As I often tell my executive audience, each company has to find its own path to successfully pursue externally-focused innovation. What works for a P&G or an IBM may not work for your company. So it is up to you – the innovation executive – to systematically analyze the network-centric innovation opportunities out there and to identify, prepare for, and pursue those opportunities that make most sense in your company’s particular industry/market context. I hope this book will help you in getting started on this effort.

The Global Brain

I have not blogged for quite a long while - Well, it has been almost a year since my last blog! But I think I have a good excuse! - I have been working on a new book on network-centric innovation.

My new book The Global Brain: Your Roadmap for Innovating Faster & Smarter in a Networked World will be published by the Wharton School Publishing at the end of this month. The official book website is at: http://www.theglobalbrain.net.

The next few months are bound to be quite exciting -- I will be traveling quite extensively from October 2007 onwards - speaking engagements at companies, universities, etc. as well as promoting my book at various other forums. And, I hope to blog regularly during this period - reflecting on my interactions and experiences as well as to engage you - my reader - in a dialog on The Global Brain, network-centric innovation, innovation capitalist, etc.

More later ....

Social Networking - "A Passing Fad" or "Here to Stay"?

There is an ongoing debate in the blogoshphere on the permanence of the Social Networking phenomenon. Is it a fad or is it here to stay? The debate was fired off by Ryan Carson in his article "Why I dont use social software". In his blog on the Wired forum, Michael Calore provides a brief summary of this debate.

I believe that the community-based activities that underlie the social networking sites (the so-called Web 2.0 platforms) are here to stay. While the nature and the intensity of these activities might change or evolve over time (based on the enabling tools and technologies), the basic human motivations that drive such activites are not likely to change - whether those motivations are simple hedonic factors (e.g. having some fun) or more complex socio-psychological  factors (e.g. the need to influence others through one's ideas; the need to be regarded as an expert, the need to belong to a community, etc.).

Research done by people like Yochai Benkler, Josh Lerner, etc. have shown the importance of these motivating factors. In my own research work on Online Customer Communities (or Virtual Customer Environments), I have found considerable evidence for both these sets of factors. In addition, I have also found that the 'opportunity to learn' is another critical motivating factor.

Thus, as long as these simple human factors remain relevant, social networking sites would continue to exist (and even flourish!). Of course, it is "different strokes for different people" - and that would explain the diversity of the social networking sites that we see out there now.