Sunday, October 26, 2008

Innovations and Networking Value

With over 96% of innovations failing, and the top two areas to yield innovation results are: 1) Business Model Innovation and 2) Networking.

What is the signficance of networking(Value Networks) to support Innovation and Growth? First, let's define what is a value based network.

A Value network is a complex set of social and technical esources. Value Networks work together via relationships to create social goods (public) or (economic value). This value takes the form of knowledge and other intangibles and/or financial value. Value networks exhibit interdependence. They account for the overall worth of products and services. Companies have both internal and external value networks. External facing networks include customers or recipients, intermediaries, stakeholders, complementors, open innovation networks and suppliers. Internal value networks focus on key activities, processes and relationships that cut across internal boundaries, such as order fulfillment, innovation, lead processing, or customer support. Value is created through exchange and the relationships between roles.

For firms to leverage the external creative potential, they need to shift their focus from firm-centric innovation to network-centric innovation. Nambisan & Sawhney in their Book The Global Brain describe network-centric innovation 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.

The underlying concept of network-centric innovation is 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. In the context of innovation, such network-centricity helps individual innovation partners to enhance the value of their contributions, and in turn, the overall innovation outcome.

In The Global Brain, the authors also describe four defining principles of network-centric innovation: shared goals, shared “world-view”, social knowledge creation, and architecture of participation. These four principles are consistent with the historical roots of network- centric innovation in the Open Source movement and in the concept of Business Ecosystems.

Another must read book on Innovation is “Innovation to the Core: A Blueprint for Transforming the Way Your Company Innovates” by Peter Skarzynski and Rowan Gibson.) According to Peter Skarzynski and Rowan Gibson, one of three critical preconditions for making breakthroughs happen is maximizing diversity. A lot of discussion is going on in corporate circles these days about ethnic, racial, and gender diversity. If it’s not a big deal in your own company or geographic region yet, chances are it soon will be. Compliance with government legislation and political correctness are not the only issues driving this new push for diversity. It’s also very much about the globalization of business. It’s about the need to understand and leverage the rapidly changing demographics of customers, markets, and employees around the world. Luke Visconti, partner and cofounder of Diversity Inc magazine, says, “If you want to compete globally, you have to understand that 80% of the globe isn’t white and 50% isn’t rnale.” That’s a big reason why a string of global companies-from PepsiCo to P&G to GE-have made it a strategic priority to diversify and globalize their leadership teams.

However, what is really crucial in the composition of innovation teams is not just the ability to connect various genders, races, cultures, and ethnicities; it’s the ability to connect people with different skill sets, capabilities, and perspectives.

In summary, Innovation relies on network intelligence or the collective wisdom of key stakeholders.
Social mediated toolkits like Igloo provide the new beginnings of corporate networking tools that can finally make the visions of knowledge management a stronger reality as the toolkits are shifting to enable rapid creation of teams to share in ways we only dreamed of.

Of course, the will to share and reward or cultural systems need to be in place, although many gaps on this front, I am encouraged by the open and transparency of the Gen X and Y's in their willingness and speed to collaborate.

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