Innovative organisations are evolving

new management models to

capitalise on the exponential power

of computer-enabled people networks

that create value through connecting

intelligence in and beyond their

traditional boundaries. ‘Open source’

software development, using many

minds to develop code, is a popular

benchmark for having generated a

variety of ‘open’ methods.

This masterclass discusses

several approaches to opening wide

organisational doors to tap external

talent for specific needs using what we

call ‘broadcasting innovation’. Each

organisation cited adopted an open

design depicted in Figure one. We close

with specific recommendations on how

to begin a broadcast innovation approach

to meet your organisation’s needs.

Part two will describe how

organisations are creatively using

prediction markets to enhance innovation

and business forecasting.

Deep roots of connected network valueWriting in a Forbes special report on

Networks1, Robert Metcalfe, renowned

computer industry pioneer and inventor

of the Ethernet protocol and Metcalfe’s

Law, noted that a quarter-billion Ethernet

switch ports (wall sockets) were installed

in 2006. It is now more than three decades

since Metcalfe’s Ethernet card solved

his 1973 challenge of how to connect

multiple personal computers in a Xerox

PARC laboratory to allow file sharing.

Card cost has declined from $1,000 a piece

to about $5 and become standard in most

personal computers.

Everyday individuals experience the

impact of reduced connection cost as

they confront overflowing email boxes

with messages from around the globe

and 24/7 time stamps. Their Internet

access provides an over-abundant array of

information sources from which to find

answers for every business question.

Technicians installing Ethernet cable

and wall sockets to enable computers and

people to connect and share information

are visible. Not so apparent but more

significant is how that connectedness

By Jenny Ambrozek and Victoria Axelrod

Broadcasting Innovation: organising to connect intelligenceThis approach reaches beyond the walls of internal networks and ‘crowd sources’ or ‘broadcasts’ research needs to external sources such as commercial, academic and not-for-profit institutions.

Masterclass | Part one

22 Masterclass www.ikmagazine.com

impacts organisations. As open source

software thought leader Simon Wardley

explains: “Ubiquitous and distributed

networks have created low cost

commoditised communication which has

allowed for greater collaboration.”

While individual employees struggle

to sift what is valuable from information

streams, their organisations are

challenged to implement more dynamic

and effective management models to

leverage the complex intersections

of people networks to compete in

a connected world. Broadcasting

innovation is one such approach.

Broadcasting innovationWhat is broadcasting innovation? Why do

it? And how does it work? A close look

at InnoCentive (www.innocentive.com)

provides answers.

In 2001 pharmaceuticals company

Eli Lilly realised the limits to their internal

research and development capability

and decided on a bold initiative. They

would reach beyond the walls of their

internal laboratories and ‘crowd source’

or broadcast their research needs.

InnoCentive, a new Eli Lilly division,

operates as a marketplace by connecting

commercial, academic, and nonprofit

organisations that post challenges

spanning a wide spectrum of industries

and disciplines to solvers.

The solver who submits the solution

best meeting the seeker’s challenge

requirements receives a cash award ranging

from $5,000 to $1,000,000. Challenges

span the physical, computer and life

sciences, engineering/design, chemistry,

math and business/entrepreneurship.

One hundred twenty-five thousand plus

engineers, scientists, inventors, business

people, and research organisations in more

than 175 countries are reached.

While InnoCentive started as an

initiative to extend Eli Lilly’s own research

capabilities by reaching outside its own

laboratories, it now serves as a design

for other companies to do likewise.

Stories abound of InnoCentive network

members solving problems that have

eluded inhouse researchers.

Scott Pegau, Oil Spill Recovery

Institute, Cordova, Alaska describes their

experience posting a challenge regarding

how to get oil to flow in a barge. Twenty-

seven responses were received, four of

which were useful solutions reflecting the

range of experience solvers brought. A

winning prize was awarded. Scott Pegau’s

closing observation that you slap your

head and ask: “Why didn’t we think of

this? We’re glad we asked somebody

else,” reflects the potential power opening

innovation offers.

Research findings into the dynamics

of problem resolution through

InnoCentive reveal why broadcasting

research and development problems

makes business sense with a range of

innovation marketplaces emerging to

support the process. Investigating 166

discrete scientific problems from the

research laboratories of 26 companies

between June 2001 to January 2005

Harvard Business School researcher

Lakhani and colleagues found this open

approach resulted in “a 29.5 per cent

resolution rate for scientific problems

unsolved by R & D laboratories of well

known science-driven firms.”2

The researchers also shed light on why

accessing a larger pool of external talent

works and on other factors in problem

resolution. Success was associated with the

ability to “attract specialised scientists with

diverse scientific interests.” In addition,

“successful solvers created solutions to

problems that were on the boundary

or outside of their fields of expertise.”

Openness worked to “trigger the transfer

and transformation of knowledge from

one scientific field to another. Efficiencies

were gained as solver drew on information

from previously developed solutions.”3

Given InnoCentive’s high profile

success as an open idea marketplace, the

rise of other specific industry focused

open innovation marketplaces is no

surprise. Yet2com brings technology

buyers and sellers together to maximise

investment returns. Eureka Medical

links medical professionals and talented

independent inventors with medical

device and health care product ideas to

innovation seeking companies. Topcoder

allows custom software developers to

compete for opportunities.

Executive to executive networksInnovation marketplaces like InnoCentive

are one emerging management model for

transforming innovation in organisations.

Others are realising the benefits of

facilitated human networks to tap

expertise among their stakeholders,

especially partners and customers.

Avaya, a $4bn Fortune 500 company

formed as a spin off from Lucent in 2000

designs, builds, deploys and manages voice

based applications including call centers

for other major corporations worldwide.

In a highly competitive and rapidly

changing industry, Avaya found they were

unable to meet the sophisticated needs of

their customers through their traditional

sales force.

Their response to the challenge was

creating Avaya’s Customer Councils

to support executive to executive

relationships to generate partnered

solutions. Mark Bonchek with Tapestry

Networks (that coined the term the

‘power to convene’) designed the

networks. Now CEO of the Truman

Company, Bonchek says for a twenty-first

century CEO or senior leader, the power

to convene is job one - in particular,

recognising the power to convene those

who have both a stake in the challenge

and the knowledge to contribute.

Senior executives have a unique

capability to draw peers together to

address challenges to their industries that

one alone might not be able to do, or

to form new networks where none had

existed in the past to benefit all. It is a

new network which Sean Maloney, EVP

and chief sales and marketing officer of

Intel, created demonstrating the power to

convene. Starting in 2002, Maloney began

an arduous task of bringing together

the industry players to lay the basis for

WiMAX, what will soon eclipse WiFi.

Each of the key players he convened

over five years, including Intel, has a

unique business stake in seeing WiMAX

come to fruition.

23www.ikmagazine.com Masterclass

“Intel was looking for something

that would prompt consumers to buy

new computers running its chips. Sprint

needed an edge to set it apart from

larger rivals Verizon and AT&T. Mobile

handset maker Nokia wanted to expand

into providing communications services.

And Samsung Group wanted to get into

the networking equipment business. The

interests of these four companies resulted

in a pooling of patents and money to

create the WiMAX phenomenon.”4

Large global brand enterprises are not

alone in adopting executive-to-executive

networks to tap the best talent and

expertise to address business problems.

The Bordeaux Energy Colloquium

was created specifically to assemble the

voices of various industry constituents

in dialogues regarding the deregulated

marketplace. Hosted annually, the

Colloquium addresses the current issues

and obstacles facing the creation of

competitive energy markets by tapping

expertise on both side of the Atlantic.

As an invitation-only organisation,

invitations are sent to high-level

representatives of each sector involved in

deregulating the energy market including

utilities, grid operators, generators,

industrials, financers, regulators, legal

experts and environmental specialists.

The Colloquium operates in the spirit

of “action research.” It offers industry

experts an opportunity to step back

from day to day issues and focus on the

changing dynamics of the deregulating

energy market place. Kimberly Samaha,

director, explains the mindset changes

required and network value:

“Embracing a new paradigm shift in

the energy industry towards sustainability

requires fundamental realignments of

business philosophies and practices.

Reaching into the diversity of global

energy executives allows the Bordeaux

Energy Colloquium to harness the

power of social networks in what we

call our Energy Plexus. In essence,

executives nominate other executives to

join us in projects and discussions in our

on-line communities and at our annual

Colloquiums. This intersection of people

and purposeful action enables us to have

a collective and powerful voice in shaping

the creation of our energy future.”

Truman Company’s Mark Bonchek

outlines the essentials for creating

effective executive-to-executive networks

beginning with structure that is “critical

to a successful network or community on

multiple levels because they establish the

conditions for trust, candor, collaboration

and action.”

Elements include:

1. Criteria for determining who is in the

network;

2. The set of formal obligations among

the participants;

3. Informal norms of behaviour that

help generate a sense of identity and

culture within the network;

4. Explicit purpose for the network with

mutual accountabilities.

Distributed leadership mindset Leaders seeking innovative management

models must look beyond the well-lit

cases. Two recent books Mobilizing Minds

by Lowell Bryan and Claudia Joyce5 and

Gary Hamel’s The Future of Management,6

reinforce the need to connect the

intelligence of highly talented creative

individuals where value and competitive

advantage will be created in the future.

Enabling human networks has already

provided enormous ‘profit per employee’

gains for the most successful companies,

yet innovative management is not yet in

the DNA of most companies. Strategy

is still a top down process, and as

Hamel points out, “the top can hold the

organisations capacity to change hostage

to their own personal willingness to

adapt and change.”7

Neither Hamel nor Bryan takes on

the issues of wealth redistribution which

needs to occur if we are to adopt their

performance metric – return on capital

(ROC) or profit per employee (PPE).

Compensation and reward are two of

the last sacred cows of the twentieth

century that must be addressed to achieve

innovative management and adoption of

peer-to-peer networks.

Organising for open innovationOpen innovation marketplaces and

stakeholder networks reveal the benefits of

sharing business problems for successful

resolution. They also indicate the common

elements needed to successfully implement

these new models for connecting

intelligence in organisations. Throwing

open organisational doors does not

24 Masterclass www.ikmagazine.com

Networks

OpenInnovation

Control

Collaboration Process & Tools

Hierarchy

Open Innovation Increases As Direct Control Decreases

bablabl bla

bablabl bla

bablabl bla

bablabl bla

bablabl bla

bablabl bla

bablabl bla

bablabl bla

bablabl bla

bablabl bla

bablabl bla

bablabl bla

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Figure 1: Open innovation increases as direct control decreases.

Masterclass 25

happen overnight, but it does require

leaders who recognise the value of

tapping external and divergent views.

Figure one indicates that organisations

whose cultures have high control needs

are less likely to embrace open or

broadcast innovation approaches.

Creating value through connection and opennessLook no further than Procter &

Gamble’s Connect and Develop initiative

for evidence of the potential value

and what it takes to operate broadcast

innovation. It is a human networks

ecosystem inspired by new CEO A.G.

Lafley’s 2000 challenge to reinvent

P&G’s business innovation model and

achieve 50 percent of innovations from

outside the organisation.

Connect and Develop leverages an

internal team of globally distributed

technology entrepreneurs weaving links

between potential outside solution

providers (suppliers and researchers)

to the development needs within

P&G business units. It includes

collaboratively working with suppliers

and co-creating new technologies and

products. It taps external networks

including NineSigma, and YourEncore

for solutions to specific challenges

and uses Yet2Com as an intellectual

property exchange.

Larry Huston, managing director,

4iNNO, then vice president of Innovation,

describes the positive business impact of

reaching beyond P&G’s internal research

and development facilities for innovation:

“Using this programme, along with

improvements in product cost, design and

marketing, R&D productivity increased

by nearly 60 percent. Innovation success

rate more than doubled while the cost of

innovation fell.”

Starting PointsWhether your initiative to connect

intelligence and broadcast innovation

uses an ideas marketplace, executive-to-

executive network, or other initiatives as

elements in an innovation ecosystem, pay

close attention to the following:

1. Business Driver – Begin with a clearly

understood business issue or challenge

tied to strategic direction with high-

level executive support.

2. Success and Measurements Defined –

Be clear on what success will look like

in the organisation and the metrics

gathering to demonstrate.

3. Structure – Define the process

through which open innovation

will be conducted.

4. Ground Rules – Ensure consensus

on agreed collaboration protocols

to enable trusted exchange among

participants.

5. Co-Create – Admit that all the

answers do not lie within the

established organisation and solutions

can emerge through collaboration and

sharing.

6. Diversity – Engage diverse talent and

experiences, especially from fields far

from the traditional disciplines for

addressing a particular issue.

7. Incentives – Adopt relevant rewards

and understand the potential of

non-monetary incentives such

as recognition and satisfaction

from success.

8. Architect Participation – Ensure the

best minds are engaged, paid attention

and respected to ensure ongoing

active involvement.

9. Idea Circulation – Include an

infrastructure that supports

dynamically capturing and sharing

insights and knowledge created

through collaboration to serve as

business fuel.

Openness, sharing, and actively engaging

outsiders in problem solving requires

significant mindset and practice changes

for traditional organisations. Leaders have

a sanctioned right to convene. However,

a growing body of experience indicates

an impact of the interactive Web is

potentially empowering each individual,

in every enterprise, with the power to

convene. A connected world leaves

organisations no option but to explore

open models or be left behind.

For Part 2, see the February issue

of Inside Knowledge. For additional

information contact Jenny Ambrozek at

jenny@sageway.com.

Jenny Ambrozek is founder of SageNet LLC, US,

a consulting practice. Victoria Axelrod is a recognised

leader in organisational strategy and implementation.

Sources1. Metcalfe, Robert, “It’s All in Your Head”

Forbes Special Report, May 7, 2007,

http://www.forbes.com/free_

forbes/2007/0507/052.html

2. Lakhani, Karim R., Lars Bo Jeppesen,

Peter A. Lohse, and Jill A. Panetta,

“The Value of Openness in Scientific

Problem Solving,” Harvard Business

School Working Paper, No. 07-050, 2007,

http://www.hbs.edu/research/facpubs/

workingpapers/papers0607.html#07-050.

3. Id.

4. Edwards, Cliff and Moon Ihlwan, ìThe

Road To WiMAX,î Business Week,

September 3, 2007.

http://www.businessweek.com/

magazine/content/07_36/b4048401.

htm?chan=search

5. Bryan, Lowell and Joyce, Claudia,

Moblizing Minds: Creating Wealth From

Talent in the 21st Century Organization,

McGrawñHill, New York, 2007.

6. Hamel, Gary and Breen, Bill, ìThe Future

of Management,î Harvard Business

School Press, 2007.

7. Id.

“This intersection of people and purposeful action enables us to have a collective and powerful voice in

shaping the creation of our energy future.”

www.ikmagazine.com