Monday, March 19, 2007

The Challenge of Creating Innovation Networks

by Scott Weingust
Director, FTI Consulting

This innovation challenge is daunting, with organizations currently expected to innovate not just in products and services but in virtually all functions throughout their organizations. The outcomes of such innovations are the intellectual property assets (patents, trade secrets, trademarks, copyrights, etc.) that provide competitive advantage to their owner. A number of different studies have shown that successful innovation is one of the most pressing challenges that CEOs are facing today.

It is my belief that most organizations’ internal capacity for innovation is increasingly insufficient to meet the demands for competing in today's ever more complex innovation environment. Innovation can no longer be thought of by managers solely as a core internal competency constrained by the assets and resources available within their own organization’s walls. Rather, companies must expand their externally-available innovation resources and relationships. Corporate managers must alter their perspective on sources and methods of innovation and equally consider, without prejudice, both internal as well as external sources of innovation. They must create their own “Innovation Networks” combining internal and external innovation resources (Forrester, “Innovation Networks," June 17, 2004). This new perspective creates an almost limitless capacity for innovation if a company can successfully manage and leverage its Innovation Networks to provide the most efficient blend of internal and external innovation resources.

There are some current examples of companies and other organizations that are systematically making forays outside their organizational walls to identify opportunities for new innovations. Proctor & Gamble, IBM, Kraft Foods, NASA, and many other organizations are embracing the concept of “Open Innovation” (Open Innovation: The New Imperative for Creating and Profiting from Technology Henry Chesbrough, 2003) to assist them to develop their Innovation Networks. For these companies, licensing, co-development, sponsored research, joint ventures and other “partnering” relationships are helping to generate and otherwise provide access to valuable intellectual property that supports new products.

Unfortunately, few companies have the perspective, internal resources, knowledge, and relationships to develop effective Innovation Networks that will achieve its goals, especially when it comes to identifying creative opportunities outside of their core industry or product area.

Based on my experience working with, and knowledge of, organizations that are trying to develop Innovation Networks, the primary challenges for companies are numerous and include:

  • Identifying appropriate sourcing, internal vs. external, for each step in the innovation process
  • Knowing with whom, when, why, and how to collaborate
  • Identifying required skills and areas of invention needed for successful growth
  • Implementing the right structures to build low risk, but high output innovation relationships

But most importantly, organizations will need to shed their “not invented here” cultures to embrace the concept of Innovation Networks and pursue the benefits of leveraging external innovations. This last challenge will require bold leadership that is willing to direct their organizations into uncharted territory that may not initially be supported by many employees who are uncomfortable working so closely with other companies.

Which companies will adjust to today’s new environment and which will remain set in their ways? Which organizations will simply talk about Open Innovation while their competitors spend time and resource developing infrastructure and methodologies to create Innovation Networks? The answer to these questions may very well lead us to understand which companies will emerge as industry leaders in the future.

Scott Weingust. Scott is a Director at FTI Consulting and provides technology and intellectual property management services based out of Chicago. He has spent the last 10+ years providing consulting services for many Fortune 500 and smaller companies, and has helped corporations, universities, and other organizations to create, acquire, manage, protect, and extract value from their intellectual property.


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