STRENGTH IN NUMBERS: WHY YOUR FIRM SHOULD KNOW HOW TO COLLABORATE

by Charles Snow 

Normally, we think of firms competing against one another; however, a growing number of successful companies are working together to find solutions to common challenges. For instance, Innocentive uses a global network of millions of problem solvers to help companies overcome R&D business challenges that they can’t overcome themselves. Several member firms of Blade.org have together developed an innovative computer server application for the Asian Art Museum in San Francisco, California. Along with major research universities and the national governments of six countries, IBM is using its “collaboratories” to develop solutions to such complex problems as electricity distribution on the island of Malta and traffic congestion in Moscow, Russia. Lego helps entrepreneurs start their own businesses by providing a toolkit featuring its famous building blocks. My M&M’s web site enables chocolate lovers to design their own candies just as NIKEiD allows sports enthusiasts to design their own shoes.

All of these firms – and many more around the world – are using some form of collaborative innovation to expand and improve their business. In knowledge-intensive industries like biotechnology or computers, the ability to collaborate is a must because the knowledge base required to innovate is complex, growing, and widely diffused. But even in less dynamic industries, collaboration can be useful to firms for a variety of reasons, including lowering the costs of product development, starting new businesses, retaining customers, and building brand equity.

Collaborative innovation has many faces, but the process usually occurs in one of three ways. Perhaps the most visible form is called open innovation. Open innovation is represented by crowd-sourcing, or the Innovation Jams that are held periodically within the IBM Corporation, or indeed any approach that relies on the law of large numbers to obtain ideas, some of which may prove to be valuable. As the title of a New York Times science article aptly puts it, “If You Have a Problem, Ask Everyone.” This spirit of openness is evident in a growing number of organizations today, and technologies for obtaining external knowledge and information are widely available. Another form of open innovation is seen in the case of open-innovation company Innocentive. Here, collaboration is not based on the law of large numbers but rather on attracting the specific knowledge and skill sets needed to solve specific problems (called “challenges”). This more targeted approach actually is semi-open innovation, and skill in the framing of challenges is important to finding the right kinds of problem solvers.

The second type of collaborative innovation is user-driven innovation, sometimes referred to as customer co-creation. In the lead-user method, customers who are at the leading edge of practice and who expect to benefit from the co-creation of products and services work closely with producers to develop next-generation products. By working collaboratively with lead users, producers learn how new products can be designed and rolled out to larger markets. Another user-driven approach is user communities. Such communities develop around particular products or companies, often using a platform provided by the producer firm to contribute ideas and components involving a major product. Apple’s app communities are one example. Lastly, some firms provide toolkits for their customers, which allow them to customize products to suit their needs and desires. Lego and Nike are well-known mass customizers. Current experimentation with user-driven innovation is around social media such as Facebook and Twitter.  

The most recent and, arguably, the most sophisticated form of collaborative innovation is that demonstrated by collaborative communities of firms. Firms in a collaborative community form networks, which cooperate on innovation projects that result in new products (such as Blade.org in the computer server market) or in the lowering of operations costs (for instance, the Kalundborg Industrial Symbiosis in Kalundborg, Denmark). As an organizational form, a collaborative community is especially useful for small and medium-size enterprises that cannot afford to host their own internal R&D activities or to buy them from external sources. Successful collaborative communities are those that have been designed with three core elements in mind: (1) actors who have the values and capabilities to self-organize; (2) commons, sets of resources shared by community members; and (3) protocols, processes, and infrastructures that enable large-scale, multi-actor collaboration.

There are reasons why companies may not embrace the growing use of collaborative innovation. Collaboration involves barriers – some explicit, others less so – that must be overcome if innovation is to succeed, both within and across organizations. Some firms prefer to innovate alone, maintaining complete control of their resources and processes, and keeping all of the returns. Other organizations view the process of collaborative innovation as overly time-consuming, its costs exceeding its benefits. Yet other organizations are reluctant to develop the ability to collaborate with others – sharing ideas, knowledge, and technologies – because they are fearful that their resources may be exploited or even stolen. Firms and organizations that do not explore the potential of collaborative innovation, however, do so at their peril. Each passing year brings more successful examples of collaborative innovation, and the opportunity costs of lagging behind can be large.