Tuesday, May 23, 2006

How much reuse can you get from relationships in a Creation Net?

A lot of people are talking about Creation Nets for Open Innovation. John Seely Brown wrote a good paper on it, and may have coined the term. Mike Docherty has a posting on it on his great blog series on “Five Key Strategies for Making Open Innovation Work for You”. It makes sense to a certain extent, but what I don't get is whether Open Innovators are actually able to leverage Creation Net relationships across open innovation initiatives. How much reuse can you really expect to get from relationships you’ve built in a Creation Net in the pursuit of breakthrough innovation?

A hypothetical scenario: Say a company openly innovates over a period of 2 years and goes to market with 4 innovations. Say two of them are breakthrough innovations (Mike Docherty’s definition) where a startup created the product, soup to nuts. We’re talking about outright acquisitions of the startups with complete innovations. Say the other two open innovations were inventions of the parent company that leveraged 1 key component each from external sources. All 4 are hailed as Open Innovation success stories, with 4 pieces of technology sourced externally.

So would you expect that, of the 4 pieces of technology, they would have come from 1, 2, 3, or 4 different sources (companies, universities, or other types of organization)?

Based on all the support for Creation Nets, you would think the 4 technologies would have come from 1 or 2 of the external partners. That’s a leverage ratio of 100% to 300%, from the perspective of the main character in our hypothetical scenario. Here’s my equation:

Creation Net Leverage Ratio = (# technologies - # suppliers) / # suppliers
My intuition tells me it would be more like 33% leverage, with one supplier supplying at most 2 of the 4 technologies. In a larger sample size I would expect the leverage ratio to drop considerably—again, just my intuition.

What goes through my mind in thinking about how much leverage to expect is thinking about how a Creation Net begins to look like Closed Innovation when they are operated for even a short period of time. Instead of one company with all of the creative minds sequestered from the rest of the world, you get a group of companies with creative minds sequestered from the rest of the world. Where’s the new thinking? Where’s the access to new information? How do you keep a Creation Net innovative?

So you might consider how to make Creation Nets and conclude they have to have some process of renewal, some access to new information, some way to bring new companies into the fold. But doesn’t that just become one big universal Creation Net? Isn’t that right back where we started, a world of independent companies trying all to do business with each other? What is the point of setting up relationships in that case, they’re not going to be reused.

Another conclusion might be that a company sets up a Creation Net to fuel an exchange of information and that once it’s set up, the Creation Net is no longer about breakthrough innovation (again Mike Docherty’s definition), it’s about incremental innovation. You can get a higher degree of supplier leverage from a formed Creation Net but the results go toward your incremental innovation activities. To get the breakthroughs, don’t you have to go back to the well? Don’t you have to search for new partners to bring into the Creation Net?

If so, there’s always going to be a search problem, a problem of how to find lead users, researchers, suppliers, inventors, and experts you want to meet at the Fuzzy Front End.

It’s interesting to note that if we’re beginning to be able to operationalize incremental innovation through best practices such as Creation Nets, then that part of innovation is no longer part of the Fuzzy Front End. The FFE can get smaller and smaller as we figure out how to operationalize more and more of it. Maybe future generations will scratch their heads in wonderment that we ever had trouble innovating.


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