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Network-Centricity and Innovation

To apply a network-centric perspective to innovation, we formally define network-centric innovation (NCI) as an externally focused approach to innovation that relies on harnessing the resources and capabilities of external networks and communities to amplify or enhance innovation reach, innovation speed, and the quality of innovation outcomes.

Network-centric innovation features principles that are analogous to the examples we mention from other domains. We define these principles in the next chapter. But first, let us look at the evidence of the power of networks to enhance innovation in a variety of industries and markets.

Perhaps the most celebrated example of networked innovation is the Open Source Software (OSS) movement, and its most famous product is Linux, the fast-growing open source operating system that was developed and is continually enhanced by a networked community of software developers. The first release of Linux Kernel, version 0.01, was in September 1991, and it consisted of 10,239 lines of code. By April 2006, version 2.6.16.11 had been released with a whopping 6,981,110 lines of code. In this 15-year period, thousands of programmers spread across the world contributed to the development and release of more than a hundred versions of the Linux Kernel. In fact, within one year—from early 1993 to early 1994—15 development versions of the Linux Kernel were released. Such a rapid release schedule is unheard of in the commercial software world, and it reflects the innovative power of the global Linux community.

A more formal comparison of the development effort between Red Hat Linux version 7.1 (a distribution version) and a similar proprietary product was done in 2001.27 Red Hat Linux 7.1 contained more than 30 million source lines of code and reflects approximately 8,000 person-years of development time. If this version were developed in a proprietary manner (that is, inside an organization such as Microsoft or Oracle) in the United States, it would have cost approximately $1.08 billion (in year 2000 U.S. dollars).

To provide further evidence of the awesome power of such innovative communities, consider Red Hat Linux version 6.2, which was released just a year earlier in 2000—it had only 17 million lines of code and represents 4,500 person-years of development effort ($600 million in comparative cost). Thus, version 7.1 was approximately 60% more in terms of size and development effort. In one year, the open source community's innovative contributions increased two orders of magnitude—an impossible feat in a conventional proprietary software development initiative.

The creative power of networks and communities is being felt in other domains, too. Consider the community-based encyclopedia called Wikipedia. This online encyclopedia was launched in January 2001, and through the collaborative efforts of tens of thousands of contributors, it swiftly became the largest reference site on the Internet. As of July 2007, Wikipedia had more than 75,000 active contributors working on more than 7,704,000 articles in more than 250 languages. Debate is ongoing regarding the reliability and accuracy of Wikipedia (for example, a peer-reviewed study published by the prestigious journal Nature found that Wikipedia is comparable to the hallowed Encyclopedia Britannica in terms of accuracy,28 while other studies have shown just the opposite). What is undeniable, however, is the creative power of the community that feeds Wikipedia's exponential growth.

Another example is the world of open source or citizen journalism. The first open source newspaper is OhmyNews—a South Korean online newspaper established in February 2000. The majority of the articles in the newspaper are written by its readers—a community of approximately 41,000 citizen reporters. As a citizen newspaper, OhmyNews exercised considerable influence during the South Korean presidential elections in 2002.29 An International edition (in English) of OhmyNews was launched in February 2004 with 1,500 citizen reporters from more than 100 countries.

Global networks are also turbo-charging scientific research in the life sciences and material science industries. A well-known example of an electronic R&D network is InnoCentive, a global community of scientists that helps large companies seek solutions to their R&D problems by sourcing solutions from scientists around the world. InnoCentive maintains a community of scientists, in fields as diverse as petrochemicals and plastics to biotechnology and agribusiness, from approximately 170 countries. To understand the power of this network, consider the case of Eli Lilly, which had an R&D problem in the area of small molecules that its internal R&D organization had spent more than 12 person-months of work and failed to solve. Eli Lilly posed the problem on the InnoCentive Web site in June 2003. In less than five months after posting it on InnoCentive, Eli Lilly had a solution in hand—a retired scientist based in Germany had found a solution that had eluded Eli Lilly's internal team of researchers.30 Through InnoCentive, Eli Lilly had effectively increased its reach to approximately 30,000 scientists and researchers who were members of the InnoCentive forum. Other examples from InnoCentive and similar "Innomediaries" suggest that the innovative power of communities can translate into orders of magnitude improvements in innovation speed, cost, and quality.

Perhaps no other company illustrates the power of network-centricity as well as P&G. The company's aggressive partnership with external innovation networks has translated into highly commendable results. R&D productivity has increased by nearly 60%, innovation success rate has more than doubled, and the cost of innovation has fallen significantly.31

These and other scattered examples of the creative power of the Global Brain have encouraged more and more companies to reorient their innovation initiatives to a more collaborative, network-centered approach. However, as most CEOs and senior managers would readily admit, harnessing this innovative power is something that is "theoretically easy" but "practically hard to do."32

Let us briefly examine these broad challenges now.

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