Saturday, July 22

It's official, its mainstream & its called Crowdsourcing

Open source paradigm now moves beyond building software, to building anything or atleast many things. Check out Crowdsourcing

Something business will clearly have to look closely at and see what it means for them and how to leverage it.

Invention & Innovation

Invention is the development of a new device, process or method. Innovation is when the invention succesfully meets a market opportunity.

From the mythical days of lone inventors Ben Franklin, Wright Brothers, Edison, Alexander Bell etc. to mammoth R&D labs of large corporation like Xerox, IBM a single entity whether an individual or corporation could "innovate" if it owned the invention.

But things are changing as barriers to acquiring knowledge across the globe fall, ability of anybody anywhere to create new connections, new knowledge and hence "invent" constantly rises. Invention always a stochastic process is not something large R&D even with billions of dollars can now hope to control and own.

As Chesbrough points out "the old 'closed innovation' model-vertically integrated research-and-development departments that develop technology in-house for the sole use of their corporate parent-is becoming obsolete "

“Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively. [This paradigm] assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to advance their technology.”

Invention is not the sole domain of a few subject matter experts, scientists, or technical folks; users and customers are also participating as individuals and more importantly co-create their experiences as part of communities.
P&G gets this phenomenon and is captured in its Connect & Develop Innovation Model

Open Source movement in software is the most visible example of this paradigm. Ron Goldman & Richard P. Gabriel's book "Innovation happens elsewhere" explore this phenomenon. But their book should have been more appropriatly titled "Invention happens elsewhere, but Innovation (hence profits) should happen here"

So how should firms and their R&D departments respond and see this paradigm as an unprecedent opportunity to deliever superior experience to their customers.

Coming up...stay tuned...

Thursday, July 6

Appropriating value from innovations in IT Services

Over next couple of posts, I would like to explore the subject of extracting value from innovation in IT services industry. I believe this is an extremely interesting problem.

In summary:

Unlike pharmaceuticals, biotech, microelectronics, chemicals; IT Services industry structure provides a “weak” appropriability regime for innovation. Patents, copyrights, secrecy etc. do not provide effective models to protect innovation from imitation by clients, competition and/or software application vendors.

In addition IT services firms rarely possess any “special” synergistic superior complementary assets for extracting value, rather it's salesforce that is "partner-led" or high touch account managers have very limited reach and associated overhead costs makes wider selling & marketing very costly & difficult.

Obviously I am ignoring innovations where value extraction can be achieved by spinning of subsidiaries, selling or licensing the innovation. In most cases R&D and innovation plays a critical role of signaling superior capabilities to prospective and current clients, thus playing a critical role in “premium rate justification”

Hence in general I believe IT services firms will move towards an “open innovation” paradigm by leveraging open source based business models to extract value out of technology innovations.

Monday, July 3

It's not the method(-ology or tools), it's the mindset

On a recent roadshow I had the opportunity to visit and talk about innovation & research to IT leadership teams of some of the biggest/well-known corporations in US. Sadly most enterprise IT folks viewed innovation as mere application of new technologies, widgets etc. i.e SOA, BPM, Mobility. IT management practices in itself are rarely viewed as a source of innovation or catalyst to "business innovation".

Successful examples of truely innovative companies like Wal-Mart, Dell, Toyota, Progressive (Refer to HBR article "Deep Change: How operational innovation can transform your company") exemplify how IT can be exploited to achieve breakthrough business impact. IT leaders are supposedly in a unique position to champion this form of operational innovation. They have the broad top-management org-wide view of strategy, in addition are connected intimately with the nuts and bolts of key organizational & operational processes. Unlike HR or accounting leaders who might be constrained by their functional views & reach within the organization, IT managers have the resources and relationships to affect broad change and innovation. I have always held the view that IT function can be as good a breeding & training ground for general management leaders as finance, marketing functions.

YET, IT leaders are struggling to gain credibility, struggling to go beyond organizational cultures that devalues information technology. Worse many have abdicated the responsibility and instead of stepping up to the leadership challenge, view themselves primarily as a support/enabler function.

I believe it is this dangerous self-perception of IT as merely a support function that leads to some very dangerous trends of bureaucratic procedures, obsession with new technologies, us vs. them divide. Even the some of the popular industry language perpetuates this mindset i.e. "busines-IT alignment", as-if business (them) & IT (us) are different in the first place. Nobody talks of "business-marketing" or "business-finance" or "business-accounting" alignment.

IT leaders clearly have to step up and view themselves NOT as just supporting operational processes, but step up and show leadership in achieving operational innovation through effective & innovative IT management.