The How-Tos of Collaborative Innovation

An interview with Dr. Satish Nambisan, co-author of "The Global Brain"
By Vern Burkhardt
The How-To's of Collaborative Innovation: An interview with Dr. Satish Nambisan, co-author of The Global Brain

By Vern Burkhardt

If you want your company to successfully innovate and remain competitive, then "tapping into The Global Brain is no longer a matter of choice. It is a question of how."

In their book The Global Brain Satish Nambisan and Mohanbir Sawhney define and analyze four ways to collaborate. Then, using examples from real companies, they describe how to choose and pursue the method appropriate for your company and your goal.

If you are trying to solve a problem knowing what questions to ask is crucial. In The Global Brain the authors pose a multitude of potential questions about collaborating outside your company, questions companies really need to ask in order to successfully venture into tapping the global brain. Then they explain how to address these questions.

Also important is an understanding of the obstacles one might encounter in the process, such as internal resistance or outrage. This book describes the common obstacles you can expect to come up against and provides solutions for getting the better of them. Prime among the solutions is the CEO leading the way with an adventurous attitude and a full expectation of success.

Vern Burkhardt (VB): Dr. Satish Nambisan, you organize network-centric innovation into four categories. Even though you stress the need for companies to innovate collaboratively or they will fall behind, I suspect some people will feel they don't have the time to follow all the steps you recommend.

Do you see a potential here for a new business opportunity? Could someone start a company that offers services as a guide or coach to companies that want to enter the arena of network-centric innovation? Are you aware of anyone who is already doing this?

Satish NambisanSatish Nambisan: There are several opportunities. The largest opportunity is for companies that are able to play "innomediary" roles to enable companies to source innovation. In The Global Brain we say this role fits under the Creative Bazaar Model of Network-Centric Innovation. There are quite a few companies that have been launched in the last two to three years timeframe, both in the consumer products sector and the technology sector. There are also a few consulting-type companies that offer advice on how to engage in network-centric innovation practices.

I am not sure what the market is for new consulting firms because as the collaborative innovation and network-centric innovation practices become much more prevalent, the more dominant consulting companies will likely provide these types of services.

VB: One of the benefits of collaboration that you describe is being able to take advantage of the lower cost structure—lower wages—in emerging countries like China and India. With the world changing rapidly and becoming more and more interconnected, do you foresee a time when these cost benefits will disappear? When it will not be cheaper, for example, to manufacture in China?

Satish Nambisan: Yes. I don't think China or India will persist in providing low-cost manufacturing services. In most network-centric innovation contexts there are opportunities to provide niche expertise or capabilities.

For example, in the case of the pharmaceutical industry and drug discovery, many of the clinical trials are being undertaken in India. There are companies that specialize in these clinical trails and they have built world-class niche expertise in that area. It's a combination of low cost and a way of bringing the capabilities needed to provide that kind of service in one geographic area. That is an advantage that is likely to be sustainable.

If it is only based on cost, I don't think that it would be India or China. It will eventually move to some other country that will offer cheaper services in the future.

VB: In essence what we're talking about is an accumulation of a brain trust in an area or a country that will specialize in a niche capability.

Satish Nambisan: Exactly. Much of the focus in my book is on network-centric approaches to innovation, not on manufacturing or production. So it is more about how you can come up with new ideas and designs, develop them and get them to the market efficiently and quickly. Subsequently you might take it to that part of the world where it is cheaper to manufacture or produce it.

VB: In terms of innovation there's no country that has a monopoly, is there?

Satish Nambisan: No. That's why I say companies would be well advised to look at those parts of the world where there are capabilities or innovation expertise in specific areas. While China and India have some big advantages in terms of large talent pools, it is not necessarily just those two countries that companies will turn to in order to take advantage of innovation expertise. It truly is a "global brain."

VB: You talk of China and India as being the most up-and-coming countries as far as opportunities for collaboration are concerned. Many western companies now have their products manufactured in China or outsource their customer service to India. There have been a number of incidents where products manufactured in China have been recalled due to toxic substances being found in them—lead paint on toys and the latest, melamine in milk, eggs and even Cadbury's chocolate.

Do you think these sorts of events will have an effect on the world's willingness to involve China in their business both from an innovation and a delivery point of view?

Satish Nambisan: If you look at the manufacturing industry, that might be true. China is going to go through a steep learning curve in terms of establishing standards for many of their manufacturing activities. Either they clean up their act or they are going to lose some of their business.

When it comes to innovation, the big questions relate to policies and practices around intellectual property rights management—probably this relates more to China than to India. India is ahead in this because it has a relatively more mature intellectual property rights legal infrastructure. That is probably the key issue that is going to determine the extent to which these two countries are going to be accepted into the global network-centric innovation network.

VB: Are you seeing China as, and it's hard to generalize, moving towards respect for intellectual property and acceptance of international laws about intellectual property?

Satish Nambisan: If you look at the last ten years, you would reach such a conclusion. I think China is steadily moving in that direction. It is still not at the place that would give comfort to many western companies, but they are moving in the right direction.

It is a matter of time rather than willingness. There is a steady push towards getting more discipline and more vigorous intellectual law enforcement. As I previously said, in manufacturing China has started moving towards standardization.

If China doesn't deal with these matters, it runs the risk of losing in both innovation and manufacturing.

VB: And Chinese business people are adaptable.

Satish Nambisan: Right. You see that, for example, in the melamine incident where they have lost a lot of business recently.

I always tell my clients that the best driver of change is a strain on the business. You can read a book about changing business strategies but it is when something starts hurting your business that you start focusing on changing your business practices.

VB: Do you have a theory as to why these blunders are occurring?

Satish Nambisan: It's probably that China hasn't had a country-wide system of production and distribution, so there are no national standards or monitoring. There has been no effort to monitor outputs. They don't have an effective data collection system about what is happening in the food chain. It's when these kinds of things happen that you wake up and begin to put it right.

I understand they are now establishing systems to collect data on quality and other information at different points in the food production and distribution chain and making sure that they can start regulating it. I think they will probably go the way that the US has by way of establishing a federal regulatory board that would have a much clearer view of what is going on in the food chain across China.

VB: A lot of this is about public confidence isn't it?

Satish Nambisan: Yes, definitely.

VB: Federal and state, or provincial, governments have become huge, expensive organizations that people love to criticize for their inefficiencies, high budgets, and even incompetentcies. Are you aware of any government at any level that is venturing into the world of network-centric innovation? Can it work as well for governments as it does for corporations?

Satish Nambisan: Definately. I have studied how network-centric innovation practices can apply to federal, state and local levels of government and have just published an article "Transforming Government Through Collaborative Innovation."

I studied how network-centric innovation practices can apply to federal, state and local levels in the US and there are several examples.

An excellent example is in Toronto, Ontario in Canada. The Toronto Transit Commission has done some exceptional work in playing the role of an innovation seeker by welcoming innovative ideas and solutions from the traveling public—from people who ride the system.

They started with a one-day meeting which was called the Transit Camp and it has become so successful they have expanded the scope. It's now called Metronauts.

The Toronto Transit Commission didn't start with specific problems to be solved, rather it identified broad areas where ideas for reform were being sought. The specific ideas, problems and solutions evolved from the dialogue among the citizens who participated in the Transit Camp and those that fit with the Commission's goals and objectives, were pursued for possible implementation.

Government tapping into citizens' innovative and creative ideas is also happening on wider scale in the US—for example, in preparing to respond to natural and terrorist disasters. There is a group called the "All Hazards Consortium" based in Virginia, Maryland, and the District of Columbia.

It brings together private sector corporations, non-profit organizations, universities and other educational institutions, volunteer citizens, and some government agencies to devise innovative approaches and solutions to address disaster management and emergency preparedness.

That's a perfect example of how network-centric innovation can happen in the public sector and where government acts as an innovation champion.

VB: You talk about how Russia is known as a good source of mathematicians and India for specialists in information technology. Do you think that as collaboration increases worldwide, we will see other countries emerge as "specialists"?

Satish Nambisan: Yes, there are opportunities for that to occur. It might be particularly true for smaller countries. India has diverse capabilities and the talent pool is much wider. But for smaller countries a good way of plugging themselves into the global network-centric innovation initiative would be to develop some very specific expertise and use that to get the regional companies or regional industries plugged into the global network.

VB: Is developing specific expertise usually a conscious decision of a country or is it tied to a group of people who specialize in innovation and a groundswell, tipping-point momentum emerges?

Satish Nambisan: I think it is a mix of both depending on which country and which part of the world.

For example, Ireland has had a history of building information technology expertise, but that was driven largely by the government. If you talk about the clinical trials being run in India, that's something which came about by a few large pharmaceutical companies trying to tap into the local talent pool. There was no government promotion.

In several instances, large private companies' outsourcing initiatives helped smaller companies in India and China with their steep learning curve in a particular field. This helped these smaller companies develop expertise and expand the scope of their value addition. They then became important components of the innovation network.

VB: Do you see some countries, such as the United States, becoming more protectionist in light of what may be perceived as global networks taking away local jobs—especially in light of the current economic challenges?

Satish Nambisan: I don't think so. Actually the reverse is happening. For example, the Irish government wants global companies to tap into that country's creativity. So those countries become the preferred destination for global companies if they have the need for a particular type of expertise.

I've done a lot of research in European countries. Most of those countries including the Scandinavian countries are opening up and trying to see how they can fit into global network-centric innovation initiatives.

VB: On the other hand, is world-wide collaboration having any effect on the specialties of companies?

Satish Nambisan: I think so. For example, as I said previously, many large pharmaceutical companies have started outsourcing their clinical trials and have found that smaller companies are able to do these trials in a much more cost-effective manner.

Likewise, in the pharmaceutical industry, the front-end innovation is now largely done by small biotechnology firms. Large pharmaceutical companies provide the capital and so assume some of the risk, but the research work is done by a group of biotechnology companies.

At the back-end of the innovation process, pharmaceutical firms are partnering with companies with special expertise in clinical trials, marketing, and other specialty areas.

VB: They are reducing their ongoing fixed-overhead costs, focusing on their core competencies and using smaller, more nimble companies to do some of their research and development work?

Satish Nambisan: Exactly. Most of the large pharmaceutical companies have realized that their productivity in R & D is very poor and they can't afford to take a lot of risk. So they allow all the biotechnology companies to do the initial research and they buy it from them or they form partnerships. In some cases they might purchase the intellectual property rights outright. They are much more open with R&D compared to five or ten years ago.

VB: They either outsource or, as you said, they buy technology that has already been developed or a combination of that?

Satish Nambisan: Yes, or they form partnerships. In some cases they might have joint ventures where they share the costs and the risks. In other cases the biotechnology company might be advanced in their research and so the pharmaceutical firm may prefer to buy the associated patent or other intellectual property outright or license the rights for its use. There are different models at play.

VB: Do you foresee a time when fewer and fewer people will be employed by one company and instead work on their own providing many companies with their particular field of expertise? Become freelancers?

Satish Nambisan: The opportunity for doing freelance is much more likely with innomediary services, for example.

VB: IdeaConnection operates under that type of model.

Satish Nambisan: The model is one of a broker for companies who are looking for solutions to specific problems. That will mean more opportunities for individuals to freelance their specific scientific expertise and talent.

But I wouldn't say that the traditional company or company structure is going to go away anytime soon. While there are opportunities for freelancers, and those kinds of opportunities are going to increase, there will remain the critical role of integration.

Integration will be done by companies and therefore there will still be a critical role for companies to take those ideas, develop them further, and get them into the market.

VB: When you refer to integration you mean integration of research and innovation from a number of different sources?

Satish Nambisan: Right. There might be a large number of different innovative ideas or expertise that have to be harnessed to create a new product or service. That kind of integration is still done by companies. So, either companies will buy that kind of innovation, or they will provide the commercialization engine to take the idea into the market.

VB: A more philosophical question. Do you think this trend of cooperation between companies and individuals around the globe will help bring about more understanding and respect and thus more peace between peoples and countries?

Satish Nambisan: There is greater awareness and greater willingness to work across cultures.

In the case of Boeing 787 airliner project, many of the partners are companies in Japan, Italy, Canada&mash;from all over the world. Somebody working at Boeing in Seattle has to interface with people in many different cultures—increasingly so.

I tell my students—my graduate students—that when they graduate they are going to work in a world which is very diverse, and they will need to have the appropriate skills and capabilities. It is true for companies too.

Whether it will lead to peace, I don't know. But at least there will be more awareness of one another's culture and one another's business practices and ways of organizing and thinking. It will be a much more open world.

VB: People will have to have a better appreciation and understanding of different people's values and ways of thinking. Diversity should be a positive?

Satish Nambisan: I agree with that, yes.

VB: Could network-connected think tanks innovate humankind's way toward solving major world problems like hunger, poverty, war, intolerance, and global warming? Innovation not for financial profit but for the benefit of humanity and our planet?

Satish Nambisan: I think so.

book cover: The Global BrainWhile The Global Brain is primarily focused on the for-profit world, I have received a lot of inquiries from non-profit organizations. Now much of my research is focused on social innovation and especially on collaborative social innovation. I think the opportunities for network-centric innovation is of a magnitude of one hundred times greater in social innovation than in for-profit innovation. Issues related to healthcare, environment, and energy —those are big issues which require cooperation among different sectors and different countries. Those are the places where we are going to see some radical network-centric innovation models emerging in the next decade or so.

One good example is a non-profit venture that involves both US and China. I believe it is called JUCCCE. Its purpose is to promote green initiatives in buildings in China.

When new buildings are constructed in China they want them to be as green as possible. That's a really great initiative, because much of the construction boom today is happening in China and the more buildings that are green, the better it is for everybody in the world.

JUCCCE brings together private companies, non-profits, and government agencies and applies many of the principles of network-centric innovation that I describe in my book.

VB: That's encouraging. In the discussion around global warming, for example, people in other parts of the world, such as North America, may feel powerless to address the problem of climate change, because the major growth in carbon emissions into the atmosphere is related to the incredible economic expansion—building coal-fired power plants in China and the forecasted phenomenal growth in the number of privately-owned vehicles. JUCCCE-type of initiatives should help generate a worldwide focus on climate change or other major social issues?

Satish Nambisan: I think so. It becomes ultimately the responsibility of all the people in the world to find solutions, not just China. Most of these issues will not be solved by private companies alone or by government agencies alone, which is why collaboration among private sector, public sector, and non-profit sector is so necessary. Social innovation is going to happen in these three sectors.

Network-centric innovation principles are the key to solving some of the really big issues related to global warming and other large-scale environmental issues.

VB: It sounds like you hold a lot of hope for the leadership of non-profit organizations. Is that true?

Satish Nambisan: Yes. There are several examples that I have come across in the last four or five months in which non-profit organizations have taken increasingly more enlightened perspectives and roles. The term "leadership" is not to suggest control but more of championing and providing the platforms for different sets of people and institutions to come together. That's where the action is going to be in the coming decade.

VB: What effect do you think the current world financial crisis will have on network-centric innovation?

Satish Nambisan: I think it will make the need for network-centric innovation much more acute. The automobile sector in the US is spiraling downward because of the financial crisis. Even the financial sector is affected and the banks are finding that they are all inter-dependent and what affects one affects all.

There will be much more focus on innovation that is collaborative in nature, even in the financial sector. Network-centric innovation allows individual companies to reduce the risk they assume in their innovation.

The financial crisis provides the most incentive for companies to follow network-centric innovation so they can reduce the risk. At the same time, they can pursue innovation in an aggressive way.

VB: Are you seeing early signs of that actually occurring—more and more collaboration? In the financial area there appears to be an emerging world-wide collaboration in trying to deal with the problem.

Satish Nambisan: That is a good example. We'll see how effective they are. Presumably there will be a learning curve. Most of the countries and most of the companies have so far worked alone so the realization that they have to come together to solve these problems will be difficult.

VB: What effect do you think network-centric innovation could have on the current world financial crisis?

Satish Nambisan: We are moving from problems that were isolated to problems that are being shared by a wide set of entities across the world. It has the potential to affect how well we can manage and resolve this crisis.

VB: Are you surprised at the rapid pace at which the governments have stepped in to address the crises facing the financial institutions?

Satish Nambisan: To some extent it might be that the implications are so huge that the national governments decided they needed to step in and are probably the only institutions that have the financial muscle to solve some of these issues, at least in the short-term. I don't know about the long-term solution.

To a large extent the reason governments have got involved is that there is much more outcry from citizens, from the people. So rather than leaving it to the companies to solve these problems on their own, governments decided to deal with the issues directly.

VB: The ease of world-wide communication and impact of the media probably puts pressure on governments to take action rather than take a more laissez-faire attitude that might have happened in say 1928 or 1929.

Satish Nambisan: Definitely. There is much more communication about the stock markets around the world. So that has brought a sense of urgency.

Probably only the governments can address those kind of issues at such a fast pace. Private companies don't have the mechanisms for the required short-term solutions.

VB: You say a key message for senior managers is "Promote experimentation and reward reasoned failure!" How do you describe "reasoned failure"? And how would you go about rewarding it?

Satish Nambisan: There is increasing need for tolerance of risk. It has to be managed risk.

Take examples of companies that have not allowed their riskier projects to go ahead. There are several reasons but one of the reasons is that in many companies the churn rate, the turnover rate, among senior managers is very high—typically their tenure is not more than two years. They may be reluctant to take risks that may affect their careers and performance pay incentives. The result is some companies' senior managers don't promote experimentation. Experimentation is going to be critical for private sector companies and for the public and social sectors to find solutions to key problems.

Especially with companies, there are some yardsticks to measure the results of risk. Somebody said "a failure is an opportunity to learn." That is very much true with companies. If a company doesn't have any failures something is wrong with it because it isn't learning anything new.

A lack of experimentation inhibits companies from moving into new areas. That's what I meant by that particular statement. Failure is something which is contextual depending on the industry, the market, and the type of company. The company needs to define what is reasonable—it depends, to some extent, on degree of tolerance for risk and ability to cover the costs of failure. For example, the oil industry will be different from the microchip industry in that respect.

VB: So reasoned failure is permitting risk, a reasonable amount of risk, and understanding that there will be failures, but you're doing it in a reasoned way and not expecting a 100% success rate.

Satish Nambisan: Right. Another important thing is being conscious of the opportunity to learn—what did you learn from this failure? The project might have failed but you get a return on investment which is the new knowledge that is created from the experimentation. That knowledge might be used someplace else. You may not have achieved the project goal but you learned something new which might be useful in some other context.

VB: Or as Edison might have said when doing an experiment, "well that's one more thing we now know won't work."

Satish Nambisan: Exactly. So at least we won't repeat it.

VB: You are an Associate Professor of Management and Strategy at the Lally School of Management. I presume you teach about network-centric innovation. How do your students respond to this knowledge?

Satish Nambisan: I am teaching courses in this area, but it might be a little too early for me to tell how they have used it. One thing I can tell you is that if I had taught this course say ten years ago, it likely would have been very difficult.

The students I teach today are people who have grown up in the Facebook and Wikipedia era. They are very comfortable with collaboration so I don't need to teach them how to collaborate. They know because they grew up in this culture. They understand the essential concept behind collaboration, so it is much easier for me.

I also do a lot of executive education. When I teach much more senior people in executive education—people in their 40s and 50s‐there are a lot of things that I have to really emphasize about collaboration, even in my case studies, because there are certain things which they have learned over years of experience which work against collaboration.

With my graduate and undergraduate students it is different. The generation that is graduating now is much more favourably oriented to what we're talking about with network-centric innovation. I think you'll see when they become mid-level managers of companies, they will become the collaboration engines for solving many of these issues that we've talked about.

VB: And they see that there are business opportunities and career opportunities through this collaborative approach.

Satish Nambisan: Very much so. One of the courses I'm currently teaching has students from all over the Institute—students from biotechnology, engineering, information technology, architecture, and business management. There are students doing PhD, MS, and MBA degrees and others doing MF degrees in architecture. What is most interesting is that opportunities for network-centric innovation exist in all the different disciplines.

Architecture is very traditional in its approach, at least in the US. But it's changing and these students think differently than what is currently practiced in the industry. They are much more open. They have a lot of new ways of thinking and I think that's going to be the major contribution of this coming generation.

VB: You're optimistic about the future with the coming generation?

Satish Nambisan: Very much so. Like I said, we don't need to teach them how to collaborate. That they know because they have come up from their teen years. They are very comfortable with diversity. They are very comfortable with people's culture and also divergent thoughts and ideas. So I think the only thing that is missing is to teach them about innovation.

VB: You identified in The Global Brain the four models of network-centric innovation. Are there any thoughts you have about the four models that you would like to share?

Satish Nambisan: The key idea is that there are different ways of network-centric innovation. Companies may have an initiative or idea they want to further develop through innovation. It is important for companies to decide which of the four models we describe is the best fit for them.

By describing the four models we tried to define the landscape. A good understanding of all the four models is recommended before companies start exploring the opportunities in network-centric innovation.

VB: Since you finished writing your book have you become aware of any exciting new developments or events in the area of network-centric innovation?

Satish Nambisan: Well I have come across a lot more examples. Like I said earlier, there are more companies that are doing these innomediary roles. Many companies have emailed me saying they are doing a very similar role in different sectors.

Probably the most exciting discovery for me relates to the opportunities for network-centric approaches in social innovation. I have re-oriented much of my current research to focus on network-centric innovation opportunities in the public and non-profit sectors for solving critical social problems. That's what I am most excited about right now.

VB: And that's where we can look forward to future publications and books from you in this area?

Satish Nambisan: Definitely.

VB: Are there any questions that I should have asked you but didn't?

Satish Nambisan: No, I think you were pretty comprehensive.

VB: Thank you very much. I've very much enjoyed our conversation.

Conclusion: From The Global Brain: "rapidly decreasing product life cycles, decreasing internal innovation productivity, and global competition—together are creating a Red Queen effect in innovation." The Red Queen effect being when you have to run faster and faster just to stay in the same place.

Satish Nambisan is an acclaimed researcher, thought-leader, and consultant in the fields of technology and innovation management, technology strategy, product development, strategic alliances and interfirm networks. He has held executive positions at Unilever Plc and currently is Associate Professor of Technology Management & Strategy at the Lally School of Management, Rensselaer Polytechnic Institute.

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