5 Lessons for the Innovative Firm in the 21st Century

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Note: this is the second of several posts covering topics discussed at the TopCoder Open Innovation Summit, which featured presentations by Dean Kamen, Karim Lakhani, and Nick Donofrio. The first article examined lessons on the importance of culture for innovation.

“After the Industrial Revolution, workers were segregated in factories, where specialized facilities took advantage of new technologies and of the economies of scope and scale that those technologies made available.” – Glenn Reynolds, aka Instapundit, in Army of Davids.

The large firms we have today grew up for the most part with Industrial Revolution management. They were designed to navigate in a world where they needed to marshal large amounts of capital to take advantage of economies of scale, and they took advantage of that world to reign supreme over the business world for much of the 20^th century. Within the software and high tech world the beginning of a disruption has been seen over the last thirty or so years. Today many of the Goliaths were recently Davids: Microsoft, Apple, Google, and Facebook all were under dogs, until they weren’t.

Here are 5 key lessons from the TCO Innovation Summit your company should know about the evolved business environment of the 21^st century.

Lesson 1: Interconnected, Instrument, and Intelligent

The world we live in is already interconnected through the Internet’s ubiquitous reach. It’s being instrumented everyday in more and more ways. Intelligence is around the corner. Companies that innovate in the 21^st century will leverage the data from an instrumented and interconnected planet to create wisdom.

As Russell Davies, Head of Planning for Olgivy & Mather points out:

The next technological leap – whether we call it the Internet of Things, Web 3.0 or Ubicomp (that’s ‘ubiquitous computing’ to you and me) – will be about getting the web off the screen and embedded in the things of your everyday life.

That’ll be most exciting when it’s not the expected stuff like consumer electronics, air quality monitoring or the dreaded internet fridge. It’ll be bottom-up innovation, when we stick some intelligence and connectivity in our salt cellars, our picture frames and our hats. Not because we have an overwhelming reason to do so but because we might as well, because it’s getting easier.

The good news is that the same changes engage the bottom-up inventors, they also enable companies to solve life and death problems – like providing clean water and a better environment. Regardless of your market, figure out how your product adds value to an interconnected, instrumented, and intelligent world.

Lesson 2: Invention isn’t Enough

For the front end of innovation invention is not enough. In fact not only is invention not enough to deliver innovation, it’s often a distraction. Time spent looking for a cool thing to do instead of solving the problem at hand. Invention is a tool of last resort. Repurposing existing technology is often a better solution.

Law of Accelerating Returns

For the back end of innovation the 21^st century will lessen the impact of chasing incremental gains. Much of what made the tech giants of the 20^th century was delivered by pushing technology improvements, i.e. sustaining innovation, in IT and communication. Firms cannot expect the expensive R&D alone to keep them ahead of the field. Innovation across all areas – Product and Services, Process, Business Model, Management System, and Societal – requires change above all else. The firm that brings in new technology, but not the change required for the technology to matter doesn’t innovate, and the firm that doesn’t innovate dies.

Lesson 3: Leadership over Management

“Management is doing things right, but leadership is doing the right things.” – Peter F. Drucker

As discussed in the last post, management can be an inhibitor for innovation. In an environment where new technology alone is not the answer and its pursuit may even be a mistake – you better be doing the right things. Leadership that people chose to follow is critical for the larger firm, which aligned with Karim’s study of TopCoder, where self-selection remains a powerful force in achieving quality and cost effective outcomes.

Lesson 4: The New People Power

People are more likely to produce the extreme outcomes required for innovation when they self-select. That’s part of the reason leaders must attract followers and cannot rely on forcing them. Further more in the interconnected world we’re finding out that collaboration (and the reasons it happens) are not what we thought. Bringing ten guys in suits to a meeting might have worked in the 1950s, but it doesn’t cut it in the 21^st century.

Where will these people come from – they are often socially marginalized, they are usually experts, but not in the problem field. Somewhat counter intuitively they are generalists too, with interests that spread beyond their specialization. It’s one of the reasons why we believe hyperspecialization will lead to more innovation, not less.

Lesson 5: Open, Collaborative, Multi Disciplinary, and Global

The final point tied the first four together – we’re entering an age where innovation requires a foundation that’s Open, Collaborative, Multi Disciplinary, and Global. If you want to succeed in that environment – you must master the first four lessons.

Looking to Open Innovation and development through Community to shift how your company gets work done and innovates? Start with this paper and understand 3 steps that can get you there faster.