The way companies innovate is changing

Nicholas Donofrio, IBM’s executive vice-president of innovation and technology, is too smart to be simply following in the footsteps of other failed IT prognosticators such as Thomas Watson and Bill Gates when he says something as apparently dumb as “There’s no such thing as the next big thing” (in a widely reported March 15 interview with ZDNet Asia). In some sense he is right. More importantly, CxOs should be paying attention to his real message: The nature of successful innovation – the life-blood of an enduring company – has changed.

We make the mistake of thinking that big, so-called “disruptive” innovations are different in type than the myriad other not-so-disruptive innovations. Power laws rule, and power laws tell us that the outcomes of some phenomenon that produces massive change will follow predictable distributions. There will indeed be once-in-a-century earthquakes, but their cause is the same as that of everyday seismic events. And there will indeed be a succession of “next big things,” Mr. Donofrio’s claim notwithstanding, but there’s no reason to suppose that there is some secret sauce that creates them.

So focusing on the magic bullet that leads to the next big thing is plain dumb. You’re much better off working on the fundamental structure of innovation for your company so that the whole distribution of success shifts, and the likelihood of seeing the creation of a significant disruptive innovation goes up.

But what would this mean? IT has, bit by bit, eroded earlier models of innovation (i.e., those based on the two guys in a garage or the genius mindset) by making collaboration easier: The potential scale of collaboration can now be huge. The pace of innovation is rapid – you can either be part of this new model or fail.

IBM, which by any traditional measure such as number of patents issued, has been far and away the most innovative company in the world, has recognized the weaknesses of the way it innovates, and has been telling us what the remedies are. First, focus on beefed-up collaboration tools, especially those such as blogs and wikis that allow grass-roots, guerrilla innovation to flourish. Second, soften the boundaries of the corporation to allow collaboration with external organizations to occur more easily. Third, use the intellectual capital of others rather than isolate yourself. This is solid thinking from a large company perspective. It’s a recognition that in an uncertain, changing environment hierarchical, closed organizations don’t work very well – they can neither sense what’s going on adequately nor respond quickly by comparison with more fluid forms of organization. For an IT organization that wants to align itself with more effective modes of innovation, this means (mostly) embracing new approaches to knowledge management, data mining and support for extended communities of practice, and moving into the strange collaborative territory of folksonomy, not taxonomy. Big or not, the next important thing for sustained competitive advantage will be a strategic competency for innovation.

Tim Warner is an independent strategy consultant, focusing on the intersection of IT developments and business strategy.

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