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.   

Comments

[Christine Flanagan]

Hello Satish - I would add that in addition to context, constraints also matter. I had the fortunate opportunity of interviewing Larry Huston who is the former VP of Innovation at P&G and the father of the Connect + Develop business model. Under Larry's tutelage, P&G now sources 50% of its innovation externally. (Feel free to email me and I can send you the link to the article.)

According to Huston, it's rare for a consumer to come up with a product idea that P&G's research and development team haven't already considered. So the value of the external network is not in coming up with a new idea—it's about solving important consumer problems. The onus is on P&G to be exceedingly clear about the conditions and parameters of a particular problem so their network of problem solvers can get to work. To do that, the company collaborates with organizations and individuals around the world, systematically searching for proven technologies, packages and products they can improve, scale up, and get to market fast. The company is very clear on what they're looking for and how value gets created. Without proof of concept, they don't move forward.

Here at the Business Innovation Factory we're developing the language, case studies and metrics around what it means to deliver value in a network-centric environment. (Larry Huston is actually one of our research advisors.) We believe that championing collaborative innovation through experimentation leads to an understanding of the practices involved in institutionalizing network-centric innovation.

P.S. I'm really looking forward to digging into your book - it reflects so much of what we're doing.

[Satish Nambisan]

Hi Chris: Yes, I agree. In the network-centric innovation framework in my book, one dimension relates to how constrained the innovation space is - i.e. whether it is well defined or emergent. The innovation context of individual companies may fall anywhere within such a continuum. And, their network partnership strategies would depend on that.