Other people's ideas: fostering innovation by 'connecting' versus 'inventing'

Did you know that most of your best ideas are likely to be found outside your company or organization -- and that there are ways to tap into this innovation?

Consider this example of a seemingly intractable problem -- the Exxon Valdez oil spill from 1989. As many as 80,000 barrels of oil remained on the floor of Prince William Sound because the oil has been frozen by sub-arctic temperatures, making it difficult to pump to the surface. The experts were stumped.

The Oil Spill Recovery Institute, established by Congress after the spill, turned to a company called InnoCentive, which solves problems by "throwing them out to the world and seeing what comes back" -- with financial rewards offered. Dwayne Spradlin, president and CEO of InnoCentive, explained how his seemingly unorthodox methodology helped clean up Prince William Sound at the recent University of Pennsylvania Wharton School conference on network innovation.

InnoCentive issued a $20,000 challenge to its network of 175,000 "solvers" from 200 countries around the world in 2007. As Spradlin described it, "after three months, a construction engineer from the Midwest came up with the winning answer, surmising that vibrating the oil could keep it in a semi-fluid state, in the same way cement is kept flowing while it is poured into a form. Modify the drilling equipment, vibrate the oil and you'll be able to pump it, he suggested. It worked."

Such is the power of collaborative thinking, which fosters fresh ideas and innovation from both inside and outside the organizational walls. In my last post, I described Andrew McAfee's latest work in the power of collaboration, and discussed the new capabilities available to encourage building a brain trust within the enterprise. Such capabilities can be developed outside of the enterprise as well, tapping into rich veins of expertise and fresh thinking to problems and opportunities.

"What we're talking about is moving from inventing to connecting," Larry Huston, managing director of 4iNNO in Cincinnati, Ohio, and former vice president of knowledge and innovation at Procter & Gamble, said at the conference, detailed in the latest Wharton newsletter.

While network innovation is a promising approach with unlimited potential, conference speakers also pointed out that it's often difficult for companies to network and open up to innovation from outside sources. In fact, a majority of partnerships fail. Changes in corporate culture are often needed, and this is not an overnight process.

A study of CEOs released a couple of years ago by IBM Global Services supports the ideas put forth at the Wharton conference. In the survey of 750 global CEOs, IBM found that successful companies are becoming more inclined to rely on outside sources for innovation. A large majority, 76 percent, ranked business partner and customer collaboration as top sources for new innovations. By contrast, only 14 percent intend to rely on internal R&D as sources of innovation. In fact, internal R&D only ranked eighth as a source for new product ideas. The study also finds that better-performing companies were 30 percent more likely to rely on outside collaboration to drive innovation than slow-growth companies.

CEOs responding to the IBM study saw the biggest roadblocks to innovation as "unsupportive" corporate culture and limited funding (cited by 35 percent in each case). Also on the top 10 list of obstacles are "inflexible infrastructures" (14 percent) and "insufficient access to information" (12 percent).

At the Wharton conference, Wharton management professor Harbir Singh, a conference organizer co-director of Whaton's Mack Center, said the challenge is being able to leverage "the extended enterprise" without shifting too much focus away from the core needs of the firm. "In order to be successful in the extended enterprise world, you have to invest in alliances and network capabilities," Singh said.

Alliances between companies may give rise to multi-facted relationships as well. In the technology sector, for example, I've seen companies fight to the death on one level -- such as competing on operating systems -- but form partnerships on other levels. This is called "coopetition."

Harvard Business School professor participant Ranjay Gulati says this hybrid relationship blurs the lines between companies, resulting in a lot of questions such as "'Who am I? Who are we, the firm? Who is 'us'? Who is 'them'? Who are we competing with? Who are we not competing with? Who are the good guys and who are the bad guys?'"

Conference speaker Larry Huston relayed his experience at Procter & Gamble with innovation. P&G's "Connect and Develop Strategy" involved hundreds of outside partners in research and development. The strategy presumed that for every scientist at P&G, there were at least 200 outside the company who could do similar work. Huston reported that P&G saw more than $10 billion in revenue from more than 400 new products -- most of which were created in collaboration with outside partners. "What we fundamentally did was redefine our organization as 1.8 million people," said Huston. "What you're doing is building an unbelievable infrastructure to innovate with other people's ideas."

This post was originally published on Smartplanet.com