INNOVATION AND Chapter One:

ENTERPRENUERSHIP The innovation imperative

INNOVATION MATTERS

oInnovation does make a huge difference to organizations of all

shapes and sizes.

oThe logic is simple: if we don’t change what we offer the world

and how we create and deliver them, we risk being overtaken by
others who do.
INNOVATION MATTERS
oAt the limit it’s about survival, and history is very clear on this
point: survival is not compulsory!
oThose enterprises which survive do so because they are capable
of regular and focused change.
(It’s worth noting that Bill Gates used to say of Microsoft that it
was always only two years away from extinction)
INNOVATION AND
ENTREPRENEURSHIP
oInnovation is the specific tool of entrepreneurs, the means by
which they exploit change as an opportunity for a different
business or service.
oIt is capable of being presented as a discipline, capable of being
learned, capable of being practiced.
oStages of innovation in the life cycle of the organization is
presented next
INNOVATION ISN’T EASY!
Innovation is not easy, since:
oIt involves commercial risk
oIt involves financial risk
oIt needs working day and night
oThere is a possibility of copying at an early stage from second
movers
MANAGING INNOVATION &
ENTREPRENEURSHIP
Successful innovators:
oExplore and understand different dimensions of innovation (ways
in which we can change things)
oManage innovation as a process
oCreate conditions to enable them to repeat the innovation trick
(building capability)
MANAGING INNOVATION &
ENTREPRENEURSHIP
oFocus this capability to move their organizations forward
(innovation strategy)
oBuild dynamic capability (the ability to rest and adapt their
approaches in the face of a changing environment)
DIMENSIONS OF INNOVATION:
One approach to finding an answer to the question of where we could innovate is to use a
kind of ‘innovation compass’ exploring different possible directions. Innovation can take
many forms but we can map the options along four dimensions,
EXAMPLE
Product innovation: A new design of car, a new insurance package for accident-
prone babies and a new home-entertainment system.
Process innovation: change in the manufacturing methods and equipment used to
produce the car or the home entertainment system, or in the office procedures and
sequencing in the insurance case.
Position: Innovation can also take place by repositioning the perception of an
established product or process in a particular user context.
 An originally developed as a glucose-based drink to help children and patients in recovery and
relaunched later as a health drink aimed at the growing fitness market
EXAMPLE
Henry Ford fundamentally changed the face of transportation not because he
invented the motor car (he was a comparative latecomer to the new industry) or
because he developed the manufacturing process to put one together (as a craft-based
specialist industry car-making had been established for around 20 years). His
contribution was to change the underlying model from one which offered a hand-
made specialist product to a few wealthy customers to one which offered a car for
Everyman at a price he could afford. The ensuing shift from craft to mass production
was nothing short of a revolution in the way cars (and later countless other products
and services) were created and delivered.
EXAMPLE
Paradigm innovation – changes in mental models – include the shift to low cost
airlines, the provision of online insurance and other financial services and the
repositioning of drinks like coffee and fruit juice as premium ‘designer’ products.
They involve a shift in the underlying vision about how innovation can create social
or commercial value. The term ‘business model’ is increasingly used and this is
another way of thinking about ‘paradigm innovation’.
EXAMPLE
Paradigm innovation can be triggered by many different things:
oNew technologies,
oThe emergence of new markets with different value expectations,
oNew legal rules of the game,
oNew environmental conditions (climate change, energy crises), etc.
For example, the emergence of Internet technologies made possible a complete
reframing of how we carry out many businesses.
FROM INCREMENTAL TO
RADICAL INNOVATION
Another thing to think about is the degree of novelty involved.
oClearly, updating the styling on our car is not the same as coming up with a
completely new concept car which has an electric engine and is made of new
composite materials as opposed to steel and glass.
oThere are degrees of novelty in these, running from minor, incremental
improvements right through to radical changes, which transform the way we think
about and use them.
…TO COMPONENTS AND
SYSTEMS
PROCESS MODEL FOR
INNOVATION & ENTREP.
We can break it down to the four key steps we mentioned earlier:
oRecognizing the opportunity
oFinding the resources
oDeveloping the idea
oCapturing value.
PROCESS MODEL FOR
INNOVATION & ENTREP.
Recognizing the Opportunity: The message here is clear: if we are going to pick up
these trigger signals then we need to develop some pretty extensive antennae for
searching and scanning around us – and that includes some capability for looking
into the future.
Finding the Resources: So this stage is very much about strategic choices.
oDoes the idea fit a business strategy,
oDoes it build on something we know about
oDo we have the skills and resources to take it forward?
oIf we don’t have those resources, how will we find and mobilize them?
PROCESS MODEL FOR
INNOVATION & ENTREP.
Developing the Idea: Having picked up relevant trigger signals, made a strategic
decision to pursue some of them and found and mobilized the resources we need, the
next key phase is actually turning those potential ideas into some kind of reality. In
some ways this implementation phase is a bit like making a kind of ‘knowledge
tapestry’, by gradually weaving the different threads of knowledge (about
technologies, markets, competitor behaviours, etc.) into a successful innovation.
PROCESS MODEL FOR
INNOVATION & ENTREP.
Capturing value: Despite all our efforts in recognizing opportunities, finding
resources and developing the venture, there is no guarantee we will be able to
capture the value from all our hard work. We also need to think about, and manage,
the process to maximize our chances – through protecting our intellectual property
and the financial returns if we are engaged in commercial innovation
 INNOVATION AND Chapter Two:
ENTERPRENUERSHIP Social innovation
WHAT IS SOCIAL INNOVATION
oThe word “innovation” typically conjures thoughts of science, technology, and
progress. But, when paired with the word “social,” it takes on a human element.
“Social innovation” becomes the betterment of our existence—progress not for the
sake of prosperity, but for the sake of people
oSocial innovation means a new way of doing things, an innovative element in a
given context. It represents a break with the usual solutions proposed and provides a
creative solution to social and economic problems that cannot be solved by the
market or the State. It thereby improves individual and collective well-being
WHAT IS SOCIAL INNOVATION
oSocial innovation refers to the process of developing and implementing new,
effective solutions to solve social or environmental issues. Whether these come from
national policies, governmental or non-governmental entities, such solutions should
meet current social needs better than it has been done before.
oIt is anything that addresses current social demands better than any efforts
previously implemented to respond to a specific problem.
oSocial innovation lasts long and has a large-scale impact. It can be implemented by
both the government and private institutions.
oHowever, this type of innovation is traditionally done by non-profit sectors.
WHAT IS SOCIAL INNOVATION
Social innovation has many definitions, but at its core it supports people and
organizations to:
oCo-create
oLearn
oAdapt
oScale
more effective solutions to entrenched social problems—making our human and
natural systems more adaptive and resilient
WHAT IS NOT SOCIAL
INNOVATION
oSocial innovation is confused with many different terms — four
of which include social enterprise, corporate social innovation,
social entrepreneurship, and corporate social responsibility
oSocial innovation is not the same as a social enterprise. Social
innovation is an idea, a product, a service, or an approach that
introduces change, outperforms existing solutions, and benefits
society. A social enterprise, on the other hand, refers to the
business model, which means that it optimizes both social and
financial returns.
WHAT IS NOT SOCIAL
INNOVATION
oCorporate social innovation is business and social innovation in
one. Companies that incorporate social innovation into their
commercial activities are referred to as corporate social innovation
or CSI. This may be viewed as a continual strategy that strives to
remedy societal concerns and build on existing approaches.
WHAT IS NOT SOCIAL
INNOVATION
oSocial innovation is different from social entrepreneurship. Instead of focusing on
the solution, social entrepreneurship focuses on the problem. To guarantee longevity
and result, social entrepreneurs think the workarounds should be co-designed with
the community. They don’t depend just on innovation because they understand that
effect is the social sector’s bottom line. They demonstrate implications and desire
scale, making them innovative as well as rigorous in their outlook.
oSocial innovation is NOT corporate social responsibility. Corporate social
responsibility warrants an institution’s activities to be socially ethical and useful.
This approach is often divided into four categories: economic responsibility. the
environment, philanthropy, and human rights.
PLAYERS OF SOCIAL
INNOVATION
Developers are the inner core of social innovation initiatives,
initiating and operating the solution. These actors are seen as
being able to translate knowledge about unsatisfactory
circumstances into an innovative idea in order to improve the
situation. Furthermore, these actors have the ability to not only
invent but also to develop and implement the idea in order to make
it a social innovation.
PLAYERS OF SOCIAL
INNOVATION
Promoters of social innovations are involved in social innovation
processes as partners that provide infrastructural equipment,
funding, and connect initiatives to superior policy programs.
PLAYERS OF SOCIAL
INNOVATION
Supporters refer to actors facilitating the spread and diffusion of
social innovations through, for example, dissemination or
lobbying activities.
PLAYERS OF SOCIAL
INNOVATION
Knowledge providers: devoted to actors that provide special
knowledge relevant to spur and enrich the development process.
MOTIVATION OF SOCIAL
INNOVATION
Social innovation is good by itself. But when incorporated with business goals, it
provides financial benefits.
In essence, refining and broadening such initiatives bring long-term business
advantages.
1. Opportunities for business development
Handling emerging issues in the environment and society is beneficial for companies
considering how innovation brings business development.
Organizations often address challenges by modifying their products in service while
taking into account the region’s facilities and limited purchasing power
MOTIVATION OF SOCIAL
INNOVATION
2. Enhanced brand image
Social innovation holds businesses liable for their activities while also making them
more susceptible to the sentiments and perception of the public.
Nowadays, clients want more from companies other than their products and services.
They want to support brands with a culture that aligns with their principles,
convictions, and beliefs.
Organizations can either choose to act on this and gain more supporters or fall far
from the competition by failing to meet contemporary societal requirements.
MOTIVATION OF SOCIAL
INNOVATION
3. Competitive employees
Studies show that employees want to feel a sense of purpose in their careers. They
want to work with meaning and commitment.
As these factors make them more dedicated to their jobs, they become more focused,
resourceful, and innovative.
This is what makes corporate social innovation a tremendous tool for acquiring and
engaging talented and competitive individuals.
MOTIVATION OF SOCIAL
INNOVATION
4. Robust supply chain
Innovating on your supply chain can give you a stabilized approach to getting the
raw resources that you need.
When you progressively address customer requirements, your company’s brand
image enhances, which in turn warms you up as a reliable partner for various
organizations in meeting their needs like supporting small suppliers in the vicinity.
This strategic alliance is what gives you the ability to scale and gain a robust supply
chain.
EXAMPLES
Route for charging e-vehicles. Sweden constructed a route that charges electric
vehicles as they travel. The roadways are inlaid with an electric rail, and e-vehicles
may charge their batteries by dropping a retractable arm affixed to the car’s bottom.
Because the power lies below the surface, the roadways are safe to walk on.
The first 3D community in the world. Mexico began the world’s first three-
dimensional community in the Tabasco region. The houses in this 3D neighborhood
were built to substitute homes created by impoverished locals in an effort to protect
them from earthquakes.
Sun-cleaned water. According to a report issued in a scientific journal called Chem,
scientists found a substance that could eliminate disease-causing germs in the water. It
acts like a magnet in purifying water, removing dangerous germs, pollutants, and
bacteria through a specific photocatalyst and the sunlight.
EXAMPLES
Addressing the gender wage gap. The income difference between men and women is sometimes
attributed to the time away from work that women take to raise kids. However, the advent of paid
paternity leave might lower this substantially by allowing women to stay in the organization as their
husbands look after and tend to their young children alternatively. In Iceland and Finland, men and
women are entitled to equal family leave under the law. Now, other companies — such as Facebook,
Netflix, Spotify, and Etsy — are taking the initiative to provide extensive paid paternity leave.
Mixture for growing crops in the desert. Desert Control, a Norwegian business, has devised a
mixture that can be applied over desert sand to allow it to keep water and produce vegetables. To
achieve this outcome, they spray a liquid nano clay combination of water and clay into the sand only
half a meter deep. This method has the potential to improve food supply in harsher regions and fight
desertification.
Eco-friendly concrete alternative. Students from the University of the Philippines pursuing civil
engineering produced a concrete alternative out of glass, fly ash, a common rock found on campus,
and other
EXAMPLES
Edible Forest. Atlanta’s municipal government bought America’s largest edible
forest which spans 7 acres and features over 100 fruit and nut trees that locals may
gather for food and cultivation via planter boxes. Programs like this give low-income
individuals with accessible fruits and vegetables. In the following years, the city
hopes to have 86 percent of its citizens living within half a mile of a fresh food
supply.
Coffee-made car parts. Ford and McDonald’s are collaborating to bioengineer
automobile components out of coffee grounds — an initiative that reuses food waste
and requires less petroleum — resulting in lighter than typical automobile parts.
EXAMPLES
AI trash management. JD.com is assisting residents of Shanghai, China, in
following trash management regulations. People may log in to the app and use it to
take a photo of their garbage. The AI software will then inform them if the rubbish is
recyclable, moist, dry, or toxic.
Energy recycling cell. Hong Kong University researchers have devised a method to
reuse the heat generated by conditioning exhausts, ovens, and computers. They’ve
created a low-cost, customizable energy recycling cell that can turn extra heat into
power for subsequent use.
CHALLENGES OF SOCIAL
ENTERPRENUERSHIP
1. Two Customers. The need to satisfy two entirely different categories of
customers—beneficiaries and funders—makes it more difficult to create tight
feedback loops. Not only are we missing the valuable signal that willingness to pay
provides, but funders may also have idiosyncratic priorities that are at odds with the
optimal path to impact.
2. Enforced Waterfall. Many institutional donors require a detailed design up-front,
followed by implementation that adheres faithfully to that plan. Of course, this is the
opposite of the early testing and fast iteration that are at the heart of lean approaches.
As we know, we’re unlikely to identify the best solution on the first try.
CHALLENGES OF SOCIAL
ENTERPRENUERSHIP
3. Constraint Mindset. In contrast to the Silicon Valley tendency to think big and
aim for “hockey stick” growth, nonprofits tend to plan within the constraints of
available funds or the parameters of a grant proposal. The result is a low-risk,
conservative approach that achieves slow, linear growth at best.
4. Silos. Donors tend to focus on silos—by sector, geography, or demographic—
making solutions that cross such boundaries difficult to deploy. Organizations can
twist themselves into a pretzel to satisfy the divergent requirements placed on them
by each of their funding streams.
CHALLENGES OF SOCIAL
ENTERPRENUERSHIP
5. Tight Overhead. Both individual donors and foundations tend to associate low
“overhead” costs with effectiveness. While we certainly want to avoid waste,
excessive focus on non-program expenses can be short-sighted and prevent
investments that can drive long-term growth such as research & development, staff
training, and productivity enhancing tools.
Beyond the perverse incentives that can arise from donor funding, a number of
additional complexities are inherent to social innovation:
CHALLENGES OF SOCIAL
ENTERPRENUERSHIP
6. Three Hypotheses. In business, we run experiments to validate
the value hypothesis and the growth hypothesis. For social innovation, we also need
to consider a third, the impact hypothesis. That is, does a solution effectively address
the social or environmental problem at hand? To make a meaningful difference, we
need to deliver on all three.
7. Measuring Impact. Quantifying impact is much harder than counting e-
commerce transactions. Some results can take years, or even decades to fully realize.
But, validation doesn’t have to be an all or nothing choice. We can take smaller steps
to reduce risk by testing early indicators for our theory of change.
CHALLENGES OF SOCIAL
ENTERPRENUERSHIP
8. Cultural Barriers. Mission-driven work frequently serves disadvantaged populations whose
needs, cultures, and experiences may be nothing like our own. Thus, our instincts for both
understanding problems and identifying solutions can be misleading. More care must be taken to
bridge cultural divides and inherent power dynamics.
9. Market & Policy Failures. Social change is most needed when both markets and
governments have failed. This can require working across sectors, establishing missing channels,
and addressing multiple forms of injustice—far beyond the scope of a typical product or service.
10. Responsible Experimentation. The Silicon Valley attitude of “move fast and break things”
must be more carefully considered when working with marginalized populations. To handle risks
responsibly, it becomes even more important to start small.
 INNOVATION AND Chapter Three:
ENTERPRENUERSHIP Sources of Innovation
WHERE DO INNOVATIONS
COME FROM?
KNOWLEDGE PUSH
One obvious source of innovation is the possibilities which emerge as a result of
scientific research.
From the earliest days curious men and women have experimented and explored
the world around them
NEED PULL
When an unfulfilled need is present and someone comes up with an idea to fill that
need.
Note that these two are often related.
 Frequently a new technology enables a previously unfulfilled need to be fulfilled.

Need-pull innovation is particularly important at mature stages in industry or

product life cycles when there is more than one offering to choose from – competing
depends on differentiating on the basis of needs and attributes, and/or segmenting
the offering to suit different adopter types
NEED PULL
NEED PULL…..PROCESS
INNOVATION
Making an existing process work better (Total quality management, business
process re-engineering, Six Sigma, Lean Management, etc)
Of course needs aren’t just about external markets for products and services –
we can see the same phenomenon of need pull working inside the business, as a
driver of process innovation.
Once again we can see the pattern – most of the time such innovation is about
‘doing what we do better’ but occasionally it involves a major leap.
NEED PULL…..PROCESS
INNOVATION
NEED PULL…..PROCESS
INNOVATION
It’s also important to recognize that innovation is not always about commercial
markets or consumer needs.
There is also a strong tradition of social need providing the pull for new products,
processes and services.
A recent example was the development of innovations around the concept of
‘micro-finance’
NEED PULL….. WHOSE
NEEDS?
When considering need pull as a source of innovation we should remember that one
size doesn’t fit all.
Differences amongst potential users can also provide rich triggers for innovation
in new directions.
Disruptive innovation – a theme which is often associated with entrepreneurs
working at the fringes of a mainstream market and finding groups whose needs are
not being met.
NEED PULL….. WHOSE
NEEDS?
It poses a problem for existing incumbents because the needs of such negligible
groups are not seen as relevant to their ‘mainstream’ activities – and so they tend to
ignore them or to dismiss them as not being important.
But working with these users and their different needs creates different innovation
options and sometimes what has relevance for the fringe begins to be of interest
to the mainstream.
Clayton Christensen, in his many studies of such ‘disruptive innovation’, shows
this has been the pattern across industries as diverse as computer disk drives, earth-
moving equipment, steel making and low-cost air travel.
NEED PULL….. WHOSE
NEEDS?
This pattern is essentially one of disruption – the rules of the game changed
dramatically in the marketplace with some new winners and losers.
Low-cost airlines, for example. Here the original low-cost players didn’t go head to
head with the national flag carriers who offered the best routes, high levels of service
and prime airport slots – all for a high price. Instead they sought new markets at the
fringe – users who would accept a much lower level of service (no food, no seat
allocation, no lounges, no frills at all), but for a basic safe flight would pay a much
lower price.
NEED PULL….. WHOSE
NEEDS?
As these new users began to use the service and talk about it, so the industry grew and
came to the attention of existing private and business travelers who were interested in
lower cost flights at least for short-haul, because it met their needs for a ‘good enough’
solution to their travel problem. Eventually the challenge hit the major airlines who
found it difficult to respond because of their inherently much higher cost structure even
those, which set up low-cost subsidiaries, found they were unable to manage with the
very different business model that low-cost flying involved.
Low-end market disruption of this kind is a strong threat – think what a producer in
China might do to an industry like pump manufacturing if it began to offer a
simple, low-cost ‘good enough’ household pump for $10 instead of the high-tech high-
performance variants available from today’s industry at prices 10 to 50 times as high.
THE ROLE OF ‘EMERGING
MARKETS
On a global scale there is growing interesting in what have been termed the
‘bottom of the pyramid’ (BoP) markets.
C.K. Prahalad who argued that 80% of the world’s population lived on incomes
below the poverty line – around $2 a day – and therefore did not represent
markets in the traditional sense. But seeing them as a vast reservoir of under-
served needs opens up a significant challenge and opportunity for innovation
Solutions to meeting these needs will have to be highly innovative but the prize is
equally high – access to a high-volume low-margin marketplace.
THE ROLE OF ‘EMERGING
MARKETS
For example realized the potential of selling its shampoos and other cosmetic
products not in 250ml bottles (which were beyond the price range of most BoP
customers) but in single packets. As G. Gilbert Cloyd, Chief Technology Officer,
Procter & Gamble commented in a Business Week interview, ‘. . . We’ve put more
emphasis on serving an even broader base of consumers. We have the goal of serving
the majority of the world’s consumers someday. Today, we probably serve about 2
billion-plus consumers around the globe, but there are 6 billion consumers out there.
That has led us to put increased emphasis on low-end markets and in mid- and low-
level pricing tiers in developed geographies. That has caused us to put a lot more
attention on the cost aspects of our products . . .’
TOWARDS MASS
CUSTOMIZATION
The trouble is that markets are not made up of people wanting the same thing –
and there is an underlying challenge to meet their demands for variety and
increasing customization.
This represents a powerful driver for innovation – as we move from conditions
where products are in short supply to one of mass production so the demand for
differentiation increases.
There has always been a market for personalized custom-made goods – and
similarly custom-configured services, for example, personal shoppers, personal
travel agents, personal physicians.
TOWARDS MASS
CUSTOMIZATION
But until recently there was an acceptance that this customization carried a high
price tag and that mass markets could only be served with relatively standard
product and service offerings.
However a combination of enabling technologies and rising expectations has
begun to shift this balance and resolve the trade-off between price and
customization.
‘Mass customization’ is a widely used term which captures some elements of this.
TOWARDS MASS
CUSTOMIZATION
Mass customization is the ability to offer highly configured bundles of non-price
factors configured to suit different market segments (with the ideal target of
total customization, i.e. a market size of one), but to do this without incurring cost
penalties and the setting up of a trade-off of agility versus prices.
Of course there are different levels of customizing – from simply putting a label
‘specially made for . . . (insert your name here)’ on a standard product right through
to sitting down with a designer and co-creating something truly unique. T
 INNOVATION AND Chapter Four:
ENTERPRENUERSHIP Exploiting Networks
NO MAN IS AN ISLAND…
Innovation is not a solo act but a multiplayer game.
Whether it is the entrepreneur who spots an opportunity or an established
organization trying to renew its offerings or sharpen up its processes, making
innovation happen depends on working with many different players.
This raises questions about team working, bringing the different people together in
productive and creative ways inside an organization
But increasingly it’s also about links between organizations, developing and making
use of increasingly wide networks.
NO MAN IS AN ISLAND…
Smart firms and solo entrepreneurs have always recognized the importance of
linkages and connections –
 Getting close to customers to understand their needs
 Working with suppliers to deliver innovative solutions,
 Linking up with collaborators, research centers, even competitors to build and
operate innovation systems.
NO MAN IS AN ISLAND…
In an era of global operations and high-speed technological infrastructures
populated by people with highly mobile skills, building and managing networks
and connections becomes the key requirement for innovation.
 It’s not about knowledge creation so much as knowledge flows.

Networking is important right across the innovation process – from finding

opportunities, through pulling together the resources to develop the venture, to
making it happen and diffusing the idea – and capturing value at the end of the
process.
THE SPAGHETTI MODEL OF
INNOVATION
•When we discuss our innovation programs, we tend to talk about processes and
frameworks, which is fine, and it explains our goals well. But we should not forget
that this is not what actually happens. A process diagram is not how innovation
occurs. Instead, it’s more like a big mess of spaghetti, with each strand
representing a connection.
•For any innovation to happen, it requires strands from areas such as product,
marketing, legal, and finance to all come together to realize it.
•Strands from outside the organization are increasingly vital to our ability to
innovate. Our job, as innovation leaders, is to weave more and more of these
connections together.
THE SPAGHETTI MODEL OF
INNOVATION
THE SPAGHETTI MODEL OF
INNOVATION
Innovation and entrepreneurship are evolving – from a world of centuries ago
which saw the sole inventor/entrepreneur as the key player through one in the last
century in which major corporations came to dominate the landscape to today’s
picture, which is becoming massively networked, globally distributed and
connected via communication and information-processing technologies which
enable a very different approach.

Networking is not simply being the coming together of different people and
organizations, successful networks have what are called emergent properties –
the whole is greater than the sum of the parts
THE SPAGHETTI MODEL OF
INNOVATION
We’re drowning in knowledge spaghetti. Something like 1,500 billion dollars is
spent every year on R&D around the world. This means that no matter what we do
ourselves, we are barely scratching the surface of what is actually happening outside
the organization, in all kinds of adjacent and potentially related areas.
GENERATION OF INNOVATION
Networking of this kind is something which Roy Rothwell, foresaw in his pioneering
work on models of innovation which predicted:
A gradual move away from thinking about (and organizing) a linear
science/technology push or demand pull process to one which saw increasing
interactivity.
At first, this exists across the company with cross-functional teams and other
boundary-spanning activities.
Increasingly, it then moves outside it with links to external actors.
The ‘fifth generation’ innovation is essentially the one in which we now need to
operate, with rich and diverse network linkages accelerated and enabled by an
intensive set of information and communication technologies
INNOVATION GENERATION
TYPES OF INNOVATION
NETWORKS
As we’ve suggested, innovation has always been a multiplayer game and we can
see a growing number of ways in which such networking takes place.
At its simplest networking happens in an informal way when people get together
and share ideas as a by-product of their social and work interactions.
But we’ll concentrate our attention on more formal networks which are
deliberately set up to help make innovation happen, whether it is creating a new
product or service or learning to apply some new process thinking more effectively
within organizations.
TYPES OF INNOVATION
NETWORKS
Being in an effective innovation network can deliver a wide range of benefits. These
includes
Getting access to different and complementary knowledge sets,
Reducing risks by sharing them,
Accessing new markets and technologies and
Otherwise pooling complementary skills and assets.
Without such networks, it would be nearly impossible for the lone inventor to bring
his or her idea successfully to market.
TYPES OF INNOVATION
NETWORKS
Entrepreneurs’ Networks
Bringing different complementary resources together to help take an opportunity
forward.
Often a combination of formal and informal, depends a lot on the entrepreneur’s
energy and enthusiasm in getting people interested to join – and stay in – the
network.
Networks of this kind provide leverage for obtaining key resources but they can
also provide support and mentoring, for example in entrepreneur clubs.
TYPES OF INNOVATION
NETWORKS
Internal Cross-boundary and Communities of Practice
Formal – and informal – networks of knowledge and key skills within
organizations which can be brought together to help enable some opportunity to be
taken forward.
Essentially like entrepreneur networks but on the inside of established
organizations. May run into difficulties because of having to cross internal
organizational boundaries
TYPES OF INNOVATION
NETWORKS
Internal Cross-boundary and Communities of Practice
Communities of practice
These are networks which can involve players inside and across different
organizations – what binds them together is a shared concern with a particular
aspect or area of knowledge.
They have always been important but with the rise of the Internet there has been an
explosion of online communities sharing ideas and accelerating innovation.
 ‘Offline’ communities are also important (e.g. the emergence of ‘fab-labs’ and
‘tech-shops’ as places where networking around the new ideas of 3D printing and the
‘maker movement’ is beginning to happen).
TYPES OF INNOVATION
NETWORKS
Clusters and ‘Collective Efficiency’ in Innovation
‘The trouble with small firms isn’t that they’re small, it’s that they’re isolated!’
A powerful point: we know that small firms have lots of advantages in terms of
focus, energy and fast decision making.
But they often lack resources to achieve their full potential.
This is where a concept the economists call collective efficiency comes in – the
idea that you don’t have to have all the resources under your own roof, only to know
where and how to get hold of them.
Working with others can get you a lot further.
TYPES OF INNOVATION
NETWORKS
Supply Chain and Improvement Networks
‘Supply chain learning involves building a knowledge-sharing network;
Good examples can be found in the automotive, aerospace and food industries,
Often involve formal arrangements like supplier associations.
For example, Toyota has worked over many years to build and manage a learning
system based on transferring and improving its core Toyota Production System across
local and international suppliers.
TYPES OF INNOVATION
NETWORKS
Breakthrough Technology Collaborations
One area where it makes sense to collaborate is in exploring the frontiers of new
technology.
The advantages of doing this in network fashion include reduced risk and
increased resource focused on a learning and experimental process.
This is often found in pre-competitive R&D consortia which are convened for a
temporary period during which there is considerable experimentation and sharing
of both tacit and explicit knowledge
TYPES OF INNOVATION
NETWORKS
Learning Networks
Another way in which networking can help innovation is in providing support for
shared learning: learning networks.
A lot of process innovation is about configuring and adapting what has been
developed elsewhere and applying it to your processes,
For example in the many efforts which organizations have been making to adopt
world-class manufacturing (and increasingly service) practice. While it is possible
to go it alone in this process, an increasing number of companies are seeing the value
in using networks to give them some extra traction on the learning process.
TYPES OF INNOVATION
NETWORKS
Managed Open Innovation Networks
The logic of open innovation is that organizations need to open up their innovation
processes, searching widely outside their boundaries and working towards managing
a rich set of network connections and relationships right across the board.
Their challenge becomes one of improving the knowledge flows in and out of the
organization, trading in knowledge as much as goods and services.
Great in theory – but what it implies is that firms need to raise their game around
finding and forming relevant connections and networks, and in building high-
performance relationships with which to enable innovation.
NETWORKS AS PURPOSEFUL
CONSTRUCTIONS
Building networks involves three steps:
1. Finding
2. Forming and
3. Performing
NETWORKS AS PURPOSEFUL
CONSTRUCTIONS
The ‘finding’ stage is essentially about setting up the network. Key issues here are:
 Providing the momentum for bringing the network together and clearly defining its purpose.
 It may be crisis triggered, for example perception of the urgent need to catch up via adoption of
innovation.
 Equally, it may be driven by a shared perception of opportunity, the potential to enter new markets or
exploit new technologies.
 Key roles here will often be played by third parties, that is network brokers, gatekeepers, policy
agents and facilitators.
NETWORKS AS PURPOSEFUL
CONSTRUCTIONS
‘Forming’ a network involves building a kind of organization with some structure
to enable its operation. Key issues here are about trying to establish some core
operating processes (about which there is support and agreement) to deal with:

Network boundary management. How the membership of the network is defined

and maintained.
Decision making. How (where, when, who) decisions get taken at the network
level.
Conflict resolution. How conflicts are resolved effectively.
NETWORKS AS PURPOSEFUL
CONSTRUCTIONS
Information processing. How information flows among members and is managed.
Knowledge management. How knowledge is created, captured, shared and used
across the network.
Motivation. How members are motivated to join/remain within the network.
Risk/benefit sharing. How the risks and rewards are allocated across members of
the network.
Coordination. How the operations of the network are integrated and coordinated.
NETWORKS AS PURPOSEFUL
CONSTRUCTIONS
Finally, the ‘performing’ stage is about operating the network and allowing it to
evolve.
Networks need not last for ever.
Sometimes they are set up to achieve a highly specific purpose (e.g. development of
a new product concept), and once this has been done the network can be disbanded.
In other instances, there is a case for sustaining the networking activities for as long
as members see benefits.
This may require periodic review and ‘re-targeting’ to keep the motivation high.