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Open Innovation inside the firm: Managing intra-company innovation networks

Currently I am working with one of the world’s largest firms on design principles for inter-company innovation networks.

Along with the rising interest in using Web 2.0 technology inside the company (“Enterprise 2.0”) many companies have embarked on initiatives to “webify” their internal innovation networks. The vast majority of these companies has started some initiatives and through various learning cycles have found what best fits their strategy, organization, processes and culture – which certainly is a valid route to go (see a recent post on the best Open Innovation implementation strategy here).

In this case, the scenario is different,. My client wants to go for a “big bang” implementation approach which requires careful preparation and certainty on what will be done for which purpose and which goals. The key question being discussed is a very exiting one: What are the key design principles that future intra-company innovation networks should be based upon?

It turns out that there are five key dimensions that need to be taken into account.

Key insight, Number One: Innovation networks manifest on five layers

Intra-company innovation activities manifest on five different levels:

  1. At the lowest, most formal level, you’ll find the legal structures that the innovation people are working in (i.e. Corporate structures, country-specific structures and other structures such as dedicated R&D labs)
  2. On top of this you’ll find hierarchical and functional structures, i.e. the org charts
  3. Then, on top of this, you find the specific innovation projects people are working in and the innovation processes that provide governance and performance measurement (e.g. defined Stage Gate processes)
  4. One level above you’ll hit the network layer in which innovation people are more or less formally organized in expert circles, practice groups etc.
  5. And then, on the uppermost level, you’ll find that innovation also is done in a layer with informal links between the key innovators within the firm.

Key insight, Number Two: Innovation networks need to be aligned with R&D structures

In the second level from the bottom, the org chart level, you often find in multi-Business Units firms that from a structural point R&D is organized differently within the Business Units. Some of the key factors for this are:

  • Quality of local input (local talent, local scientific collaboration etc.)
  • Quality of the expected output (cooperation with local customers, market proximity etc.)
  • R&D unit’s efficiency (critical mass, project hand-over, cost issues etc.)
  • Interaction and learning along the value chain (Knowledge transfer and creation)
  • R&D-external factors (tax optimization, local political system’s   reliability, image factors etc.)

These considerations manifest in different models how R&D is structured on a global scale. Obviously, the design principles for for innovation networks need to respect these structural models. As an example, in my client’s case there are four models that can be observed:

  • A more domestic (centralized), organized research and development (‘national treasure’)
  • A geocentric approach with more dispersed research, but with domestic development
  • ‘Global R&D’ with an integrated network of dispersed research and development
  • ‘Polycentric R&D’ with domestic research and dispersed development

Key insight, Number Three: Innovation networks need to respect “Hard facts”

In designing the key principles for future innovation network management one should first look at “hard facts” factors that influence the efficiency and effectiveness of innovation work. Among them are: Size and boundaries, density and integration, intended kind of know-how exchange, flexibility, industry structure, technological maturity, role of industrial / professional associations, tacitness or explicitness of the knowledge shared, formality of content, frequency of contact, outcome in terms of radical or incremental innovation and complexity of innovation.

Key insight, Number Four: Innovation networks need to respect “Soft facts”

Harder to operationalize but at least as important for success are the “soft facts” factors that influence the efficiency and effectiveness of the innovation network, like network members’ or  management’s intention and motivation, cultural diversity, trust, openness and network culture.

Key insight, Number Five: Innovation networks need to respect the corporate context

In designing the principles for future management of intra-company innovation networks the firm’s context needs to be respected. This includes:

  • The firm’s strategic agenda
  • The operative goals that convey the company’s strategy to the single networks
  • The innovation goals as an innovation translation of the strategic goals to the innovation network
  • The company’s culture / the sub-cultures in the business units that provides a general elucidation of the company’s handling of innovation
  • The number of innovation networks to be set up, their respective locus points and their penetration within the organization