Life in the flat world requires innovation in how organisations interact with their customers, suppliers, partners and communities. No one organisation has the talent, the resources, or the time for the continual innovation the global marketplace requires. Like the opening of the commercial playing field to more players and forms of collaboration, the innovation processes within organisations are opening themselves to their stakeholders and the broader world. Organisations are learning to focus on their strengths and to complement them with expertise and resources from outside their borders. In the process they are finding that their view of what constitutes innovation, the implications it has on the structure of their organisations and how they go about their work is transformative.
As Henry Chesborough, one of the leading scholars of open innovation describes it, open innovation is at its simplest, “ideas in and ideas out.”[i] It creates permeability in the organisation so that ideas from outside can enter and those from inside may take flight outside the organisation. At the other end of the spectrum Sam Palmisano, Chairman and CEO of IBM, believes that “real innovation is about more than the simple creation and launching of new products. It is also about how services are delivered, how business processes are integrated, how companies and institutions are managed, how knowledge is transferred, how public policies are formulated – and how enterprises, communities, and societies participate in and benefit from it all.”[ii]
In the vertically integrated organisation that characterised the industrial age, innovation was what happened in a company’s test labs. Some of these famous labs, including AT&T’s Bell Labs, IBM’s Watson Research Center, and XEROX’s PARC, are responsible for the very inventions which have helped to engage more and more people in economic activity and bring about today’s flat world. These storied research labs also help perpetuate the myth that innovation is the province of the solo scientist toiling away in his/her lab in pursuit of true knowledge and discovery.
Ideas in and ideas out is a concept equally applicable to any organisational structure or activity. Innovation today is a mix of product/service innovation, operational innovation, business model innovation, and management innovation.
· Management innovation – Innovation in how the resources available to an organisation are put to use in pursuing opportunities or controlling risks
· Business model innovation – Innovation in the structure and/or financial model of the organisation
· Operational innovation – Innovation that improves the efficiency and effectiveness of core processes and functions
· Product and service innovation – Innovation in the products and services the company offers to meet its customers’ needs
Organisations are complex, adaptive systems and as such an innovation in one aspect of it has implications for other elements. A holistic view of innovation is required to embrace the opportunities the flat world presents. To be successful, a company can no longer focus on designing the next hot product and the next when customers find its customer service processes to be abysmal. It is the organisation as an entity which must innovate – and innovate everything about itself. Innovating one’s business model requires a concurrent innovation in the way the organisation is managed. This element is often forgotten and as seen in some of the examples presented throughout this paper, it is often the reason for failure when the organisation opens up to external influences.