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Overcoming the Crisis: "Looking Outside"

The opportunities for companies to "look outside" for innovation are increasing day by day. As we noted previously, the Global Brain is rich and diverse—a large number of innovative firms as well as a large pool of innovative people exist in different parts of the world whose knowledge and creativity can be leveraged by companies. Moreover, new types of innovation intermediaries and new technological infrastructure (for example, the Internet) have made tapping into such global networks of inventors, scientists, and innovative firms easier than ever before. Thus, the imperative for sourcing external innovation is matched by the rapidly expanding horizon of innovation opportunities.

Former Sun Chief Scientist, Bill Joy, noted several years back that "most of the smart people in the world don't work for your company." True enough, but increasingly those smart people in other parts of the world represent a global innovation opportunity waiting to be tapped.

This is mirrored in companies, such as by P&G's recent innovation initiatives. As Tom Cripe, Associate Director of P&G's External Business Development group, recently noted:

  • "We want to grow efficiently. And at the size we are, it's just not possible to do it all yourself. And even if it was it'd be lunacy to attempt it. There are just too many smart people out there. If we have to grow at the rate we want to, we have to add incremental business of billions of dollars ... It took us 100 years to get here and we now have to do in a few years what we did in 100 years. Even if we could, it would be expensive. And so we've been able to increase our innovative output while reducing our spending as a percent of sales because we're multiplying it by all the people we're partnering with. So the reason for 'looking outside' is to grow most effectively by drawing on the very best ideas out there, rather than trying to compete with everybody."13

This message has come through in several other forums, too. For example, the Council of Competitiveness published the National Innovation Initiative report in 2004. This report focused on the implications of globalization for the national innovation agenda for the United States. Among other trends, the committee identified the effective pursuit of highly collaborative innovation as of utmost importance for the U.S. economy. As the report notes, "Innovation itself—where it comes from and how it creates value—is changing:

  • It is diffusing at ever increasing rates.
  • It is multidisciplinary and technologically complex and will arise from the intersection of different fields.
  • It is collaborative, requiring active cooperation and communication among the scientists and engineering and between creators and users.
  • Workers and consumers are embracing new ideas, technologies, and content, and demanding more creativity from their creators.
  • It is becoming global in scope—with advances coming from centers of excellence around the world and the demands of billions of new consumers."14

The key findings of the committee also reflected how the global connectedness and the scale of collaborative innovation will demand the development of a more diverse workforce that is able to communicate and coordinate innovation activities across organizational and geographic boundaries.

Similarly, IBM has been conducting a global conversation on innovation that it calls the Global Innovation Outlook (GIO). The most important finding from IBM's GIO conducted in 2005 and 2006 was that innovation is more global (anyone and everyone can participate without geographical barriers), more multidisciplinary (innovation requires a diverse mix of expertise), and more collaborative (innovation results from entities working together in new ways).15

To enjoy the benefits of such a rapidly expanding horizon of innovation opportunities, companies would need to make a gradual shift from innovation initiatives that are centered on internal resources to those that are centered on external networks and communities—that is, a shift from firm-centric innovation to network-centric innovation. However, the question remains: Will such a shift address the innovation crisis outlined earlier? In other words, will a network-centered innovation strategy deliver gains that are orders of magnitude higher in innovation reach, range, and effectiveness?

To understand the promise of network-centric innovation, we need to consider its foundational theme or premise—namely, the concept of network-centricity. The concept of network-centricity has very deep roots and very broad applicability. Before we discuss how networks can enhance innovation, let us examine how network-centric capabilities are transforming several other domains.

The Power of Network-Centricity

The university that one of us works at has a library with close to 500,000 books on its shelves. Considering the number of students—around 7,500—it is not a large acquisition. However, the library is part of a network of 13 other university libraries in the area—a system called ConnectNY. The total number of books in the ConnectNY network is 10 million. Each member of the ConnectNY network can request books from any other member library, and if the book is available, it is delivered by a private courier (who travels between the different member libraries) within three to four business days. Thus, in effect, by becoming a member of the ConnectNY network, the library has increased its acquisition by twentyfold—from 0.5 million to 10 million.

Consider another simple example—the task of replenishing a vending machine. A service truck can visit each and every vending machine and then find out whether it needs any servicing or not. This method creates inefficiency because there is no way for the person making the rounds to know whether he needs to replenish a specific machine and what exactly the machine is short of. Imagine if the vending machine could "talk" to the service person over an information network and inform him in advance if it was running out of a specific food or beverage item. This is what Vendlink LLP, a N.J.-based vending service company, has done in Philadelphia. It created a wireless network that integrates information from all the vending machines in the area and produces a servicing plan that optimizes the logistics involved.

Even toys can be made smarter after they are connected to a network. In 1997, Fisher Price and Microsoft created the ActiMates Interactive Barney. By itself, ActiMates Interactive Barney is a cute, purple stuffed animal. But the real fun begins when the toy is used with either of two add-on devices: a TV Pack, which adds a radio transmitter to the user's TV/VCR; and a PC Pack, which does the same to a computer. The toy enables children to improve their vocabulary or language skills. The company also created a network from which the "lessons" can be downloaded into the toy. As the child gets older, parents can connect the toy to the network, download the appropriate components, and thereby extend its use.

These simple examples reflect the essence of network-centricity: the emphasis on the network as the focal point and the associated opportunity to extend, optimize, and/or enhance the value of a stand-alone entity or activity by making it more intelligent, adaptive, and personalized. It should be no surprise, therefore, that the concept of network-centricity has permeated many aspects of our contemporary world and daily-life—ranging from warfare and military operations to social advocacy movements. Let us start with network-centric computing.

Network-Centric Computing

In the field of computer science, the shift from host-centric computing to distributed or network-centric computing has relatively old roots. The concept of distributed computing, pioneered by David Farber in the 1970s at the University of California,16 evolved into what is now called network-centric computing or grid computing.

Grid computing relates to the ability to pursue large-scale computational problems by leveraging the power and unused resources of a large number of disparate computers (including desktop computers) belonging to different administrative domains but connected through a network infrastructure.17 The essential idea behind grid computing is to solve computing-intensive problems by breaking them down into many smaller problems and solving these smaller problems simultaneously on a set of connected computers. The parallel division of labor approach can result in very high computing throughput, often more than a supercomputer. Further, this throughput can be achieved at a cost that is significantly lower by exploiting the relatively inexpensive computing resources available at remote locations. And the network-centric computing architecture also is far more flexible, because remote users can decide moment-to-moment how much computing power they need. The promise of grid computing—high computing power combined with low cost and high operational flexibility—is spurring many applications in commercial as well as non-commercial contexts, including financial modeling, weather modeling, protein folding, and space exploration.18

Network-Centric Warfare

Network-centric warfare (NCW) is a relatively new theory or doctrine of war developed primarily by the United States Department of Defense.19 This emerging theory indicates a radical shift from a platform-centric approach to a network-centric approach to warfare.

The basic premise of NCW is that robust networking of geographically dispersed military forces makes it possible to translate informational advantage into warfare advantage.20 Higher levels of information sharing among the units enhance the extent of "shared situational awareness." In other words, through information sharing, every unit—from infantry units to aircraft to naval vessels to command centers—"sees" the sum of what all other units "see." This shared awareness facilitates self-synchronizing forces, virtual collaboration, and other forms of flexible operations. The value proposition for the military is a significant reduction of combat risks, higher order combat effectiveness, and low-cost operations.21 Although there is still significant debate about how soon and to what extent the benefits of NCW can be realized, several countries, including Australia and the UK, have embraced the basic tenets of network-centric warfare.

Network-Centric Operations

The term network-centric operations (NCO) was originally applied to the field of logistics and supply chain management in business enterprises. The term "value nets" or "value networks" has also been used in this context. However, more recently, NCO has gained a broader interpretation and is often used interchangeably with NCW in the defense and military areas.

In the supply chain management context, NCO signifies establishing dynamic connections between the enterprise, suppliers, customers, and other partners to deliver maximum value to all the entities concerned.22 It involves integrating enterprise information systems (for example, ERP and CRM systems) with external partners' systems and processes to enhance the information flow and "sense and respond" capabilities. Whereas traditional supply chains emphasize linear and often inflexible connections, network-centric operations or value nets focus on establishing varied, dynamic connections that deliver both efficiency and agility to the enterprise. Supply chain–focused software companies such as SAP, i2 Technologies, and IBM have adapted these concepts to create applications that support such network-centric supply chain operations.

Network-Centric Enterprise

The concept of network-centric enterprise (NCE) owes its origin to the concept of business ecosystems and virtual organizations. It involves establishing an "infostructure" that connects the different partners in a company's business ecosystem and supports the different value creation processes. As such, the concept of NCE is also closely related to NCO.

Companies such as Wal-Mart, Cisco, and Toyota have considerable experience in deploying and operating such a network-centric enterprise. For example, Cisco has evolved its organization into what it calls the "Networked Virtual Organization" (NVO) in its manufacturing operations.23 Similarly, Toyota has used the NCE model to improve its just-in-time inventory management. The NCE (or NVO) model has three core tenets.24 First, it puts the customer at the center of the value chain and emphasizes the need to respond rapidly to customers' needs. Second, it calls for the enterprise to focus on those core operations or processes where it adds most value and to outsource or turn over all other operations to multiple partners. Finally, the model requires significant process, data, and technology standardization to enable real-time communication and synchronization across organizational boundaries. Overall, the network-centric enterprise model implies significant strategic and operational agility for an enterprise, thereby enhancing its ability to thrive in highly dynamic markets.

Network-Centric Advocacy

The concept of network-centricity is also becoming evident in the domain of social advocacy movements. Social advocacy groups have realized that the basic tenets of network-centricity can be adopted to enhance the reach, speed, and overall effectiveness of social movements.25

Network-centric advocacy (NCA) signifies a critical shift from the direct engagement and the grassroots engagement models of social advocacy to a more network-centered model wherein the individual participates as part of a coordinated network.26 In NCA, individuals and groups that are part of the network rapidly share information on emerging topics and identify "ripe campaign opportunities." The ability of the network to scale up in terms of resources, expertise, and overall level of public support brings sharpened focus and enhanced visibility to the campaign. Network-centric advocacy provides several advantages: speed of campaign, ability to pursue multiple campaigns with few resources, and ability to rapidly abandon losing efforts. All this brings an element of unpredictability that lowers the ability to counter such social campaigns effectively.

We summarize the promise of network-centric concepts in Table 1.1. These examples suggest that, although the concept of network-centricity has found considerable application in diverse domains, all these applications have a common thread in terms of outcomes—greater power, speed, flexibility, and operational capabilities delivered at a lower cost using diverse resources that are spread out geographically. These benefits are the very ones we seek as we examine the appeal of network-centricity in the domain of innovation.

Table 1.1. Evidence of Network-Centricity in Different Domains







Distributed or grid computing

More computing throughput at lower cost




More combat power with fewer, lower-cost units

Supply chain mgmt.

Linear chains

Value nets

Higher "sense-and-respond" capabilities

Business enterprise

Stand-alone organization

Virtual or networked organization

More strategic and operational agility

Social advocacy

Direct engagement

Network-coordinated engagement

More effective campaigns with fewer resources

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