|| The art of an innovation collaboration system

39. The art of an innovation collaboration system

As the exhibit “The Four Ways to Collaborate” shows, there are four basic modes of collaboration: a closed and hierarchical network (an elite circle), an open and hierarchical network (an innovation mall), an open and flat network (an innovation community), and a closed and flat network (a consortium).

When you use a closed mode, you are making two implicit bets: that you have identified the knowledge domain from which the best solution to your problem will come, and that you can pick the right collaborators in that field.

When you use a closed mode, you are making two implicit bets: that you have identified the knowledge domain from which the best solution to your problem will come, and that you can pick the right collaborators in that field. 

Innovation mall - Open modes work best when the spread between the ideal solution and the average solution is not big and the consequences of missing out on a much better solution from an elite player are small.

Innovation community - You need ideas from many parties, and the best ideas may come from unexpected sources. » Because you don’t know all possible user requirements, you want to share the costs and risks of innovation with outsiders. » Participating in the network is easy. » The problem is small or, if large, can be broken into modular parts. » You don’t need to own the intellectual property underlying the solution.

Consortium - » You know the knowledge domain from which the best solutions are likely to emerge. » The problem is large and cannot be broken into modular parts. » Having the best experts is important, and you have the capability to pick them. » Contributors won’t participate unless they share power. » The expertise of all participants is needed. » You can share the resulting intellectual property with the other participants.

Another requirement of open modes is that participating in them must be easy. This is possible when a problem can be partitioned into small, well-defi ned chunks that players can work on autonomously at a fairly low cost.

In the hierarchical form, a specific organization has this authority, which provides it with the advantage of being able to control the direction of the innovation efforts and capture more of the innovation’s value. In the flat form, these decisions are either decentralized or made jointly by some or all collaborators; the advantage here is the ability to share with others the costs, risks, and technical challenges of innovating.  Hierarchical governance is desirable when your organization has the capabilities and knowledge needed to define the problem and evaluate proposed solutions.

Designing incentives – both financial and nonfinancial – that attract external collaborators is crucial with any of the four modes of collaboration. Nonfinancial rewards like high visibility in the job market, an enhanced reputation among a peer group, the psychological fulfillment of pursuing a strong interest, and the chance to use solutions in one’s own business can replace or complement monetary rewards. There are no hard rules about which incentives work best with particular forms of collaboration. Although people often associate psychological fulfillment with innovation communities, it can be a powerful incentive in the other modes as well.

Flat modes are also appropriate when collaborators all have a vested interest in how a particular problem is solved and will participate only if they get some say in the decisions.

Developing an effective approach to collaboration starts with a solid understanding of your company’s strategy. What is the business problem you want innovation to solve? Are you (like Alessi) trying to create a distinctive product that breaks boundaries? Are you (like IBM) trying to keep up with larger rivals (like Intel and Taiwan Semiconductor) in an intense technology race? Or are you (like Apple today) looking to broadly expand the applications of your product? Companies must also ask what unique capabilities they bring to the collaborative process. Firms with deep relationships in a space, for example, are much better positioned to exploit an elite circle mode than a newcomer is.