Network Innovations Explained

In today’s hyper-competitive, digitized, knowledge-and-innovation-driven, high-velocity business environments, it is challenging for firms to stand alone and rely solely on their internal resources to gain sustainable competitive advantage. Even large firms, generally considered resourceful, are increasingly finding it difficult to nurture and deliver transformational innovation. 

This new reality necessitates a shift from traditional value chain structures to more fluid, dynamic, and robust collaborative ones where businesses are strongly and creatively connecting into robust knowledge networks meant for co-creating and co-sharing.  

What is Network Innovation? 

Network innovation, also known as open innovation, is an organizational structure in which independent entities become dynamic partners with the hope of delivering transformational innovation that translates to greater profitability and preventing disruption from new market entrants. 

The intent for network innovation is pretty straightforward: connect organizations in a manner that breaks barriers imposed by formal organizational structure, thus ensuring that each of the partners is better able to discover, aggregate, synthesize and codify new knowledge to accelerate internal innovation. 

Think of network innovation as a market-driven adoption of outside-in management that goes beyond simply observing competitors’ and customers’ needs. 

Benefits of Network Innovations 

By leveraging network innovations, your business stands to benefit in a number of ways. These include: 

  • Accelerated information and knowledge flow throughout the organization 
  • More breadth and depth to your company’s competency landscape 
  • More efficiency in collecting, synthesizing, and ultimately leveraging constantly emerging information 
  • A larger pool of insights and catalyst actions that could potentially bring positive impact to your organization 

It is important to point out that while open innovation is mostly used as a means of searching and identifying external sources of innovations, it can be equally beneficial when applied at the later stages of the innovation process. Overall, network innovation holds an important place in the entire innovation management cycle. 

When done right, your business should be able to leverage a partner’s processes, technologies, channels, and overall, all beneficial resources, which should supercharge your business innovations. 

Here are a couple of examples of companies that have undergone this shift from the traditional inward-focused approach to innovation. 

Connect and Develop at Procter and Gamble 

The case of Procter and Gamble is a great example of network innovations. In the late 1990s, Procter and Gamble, under CEO Alan Lafley, discovered that their R&D productivity had leveled off and that the corporation’s innovation success rate was wanting. Further pressured by step competition, flattening sales, and lackluster, Procter and Gamble sought out multiple partnerships with smaller entrepreneurial firms, university labs, individuals, and key players such as IBM, Cisco, Eli Lilly, and Microsoft. The goal was to have at least 50% of innovations coming from outside the company. By 2006, more than 35% of new products had elements that originated from outside of Procter and Gamble. 

Effectively, Procter and Gamble moved from a ‘connect and develop’ framework to an innovation process that leveraged the principles of open innovation. 

Among the successes of this new ‘connect and develop’ model were the corporation’s Crest Whitestrips products, Olay Daily Facials, and Bounce, the fabric-softening product. 

Other than mobilizing rich linkages between people with intrinsic knowledge of its global operations, Procter and Gamble integrated this change in innovation into its day-to-day operations. Procter and Gamble used extensive networking methods, including the use of an internet site dubbed ‘Ask me’ to link over 10,000 experts from across the globe. On the site, contributors volunteer ideas and help identify problems that different units can pick up and hopefully work on.  

General Electric’s Ecomagination Project

General Electric is an American multinational conglomerate that operates in multiple sectors, including renewable energy, manufacturing, power, and aviation. In 2005, GE launched the Ecomagination project that saw the conglomerate embrace crowd-sourced innovation and collaborative problem-solving. The result was the ability to build more efficient machines that produce cleaner energy, reduce greenhouse gas emissions, clean water, and cut its footprint. This acceleration in the invention was made possible by leveraging a global network of thinkers, inventors, and industry leaders. 

10 years on, Ecomagination has been able to build over $200 billion in revenues. Additionally, GE has brought on additional partners, including Masdar, Walmart, Total, MWH, Goldman Sachs, BHP Billiton, Intel, and Statoil. 

LEGO Ideas 

After successfully avoiding bankruptcy in 2003, LEGO, the Danish toy company, sought effective means of improving innovation. This new strategy had to align with customer demands and help LEGO regain its glory as a global leader in toy innovation. 

LEGO’s full-on adoption of network innovations didn’t come until 2017 when the company was facing stiff digital competition, and its revenue was declining at a rate of 8%. Its turnaround lay in leveraging its expansive customer base. The goal was to generate customer feedback on a small scale which was done in partnership with Future Lab. To take it a step further, the toy company launched LEGO Ideas which has since generated hundreds of suggestions. As of this year, LEGO has announced a total of 41 sets, 33 of which have been produced. In hindsight, LEGO Ideas is considered groundbreaking in the toy industry and is proof of the benefits a business could leverage from network innovations. 

Market Examination First

These examples provide powerful templates for what network innovations should look like. However, most of the clients that end up seeking out help with network innovations want to jump right into building a strategy. Too many clients approach innovations without having a game plan that positions them for success. Often they take the strategies that have worked in the past and try to execute these better. These unsystematic efforts to create growth lead to random and often disappointing results. 

It would therefore seem that the challenge in open innovation is less about understanding the concept and willingness to adopt the approach and more about a lack of structure. For instance, a question that most clients will simply not focus on is what markets to go for and why. 

How to Collaborate with the Right Network 

Evidently, collaborative innovation networks require structure if you are going to achieve the best engines to drive innovation. 

Here are steps you ought to follow if you are to collaborate with the right network. 

1.    Examine Your Core 

To collaborate with the right network, the first thing to do is examine your core capabilities and set boundaries on what your company is willing and not willing to do. Your organization might have one or more organization-wide competencies, for instance, design capabilities or automated workflows and processes. 

By examining these, it helps you showcase your organization’s unique positioning and gives your business the competitive advantage you’ve been seeking. 

After identifying these, it is important that you develop and nurture these as it furthers your competitive advantage. This is important, seeing as in collaborative innovations, you need to clearly define your value proposition for your partners. 

2.    Understand the Long-term Opportunities 

After reviewing your core capabilities and finding your competitive advantage, it is best that you assess and acknowledge the value of the collaboration at multiple levels. By being armed with information on the long-term opportunities that you could leverage from the network innovations, you should be better equipped to scout and attract the appropriate partners. 

3.    Conduct Scenario Analysis 

To achieve organizational and cultural readiness, it is best that you conduct a scenario analysis. A scenario analysis is examines future events by taking into account serval alternative outcomes and implications.  You can create strategic management scenarios to understand the environment in which your products and services are consumed.  This is done by asking questions like:

  • What is the issue we are trying to assess?
  • How far is our timeline in which we’re trying to predict?
  • What are the major external factors likely to impact our scenarios?
  • What are the key internal drivers that we need to address?
  • What are the risk involved?

Based on the scenarios that you create; you’ll have to examine your role and how this will input your strategy.  Lastly, collect the necessary data, technology, and skills to develop and maintain these scenarios.

Given today’s global innovation arms race, your business needs to explore a business model that realizes the value potential of network innovations. Specifically, your business needs to appreciate the fact that innovation has evolved beyond the boundaries of single firms.  

Symmetri Consulting, has experience with diverse companies to pave a clear path to explore new growth opportunities and deliver business value.  We can help you manage your ideas, provide the right business model, build consistencies, and speed to market.  Ask us how.

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