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Why driving innovation means sharing your data

May 23, 2008

Typically, organizations outsource projects or jobs for others to manage. These associated networks and activities are often kept outside the company purview; more an adjunct to the business than a central component.

Author Thomas Friedman defines outsourcing as one of the top ten “flatteners” – influencers that have made the global marketplace much smaller and more interconnected.¹

But lately, outsourcing has morphed into something deeper.

Many companies are now integrating collaborative networks of partners right into the business proper. For some, this shared approach has strategic and competitive advantages, especially when it comes to innovation.

Mozilla: open source, open participation

Take Mozilla, a fast-growing internet company. The company’s Firefox browser currently controls 15 percent of the U.S. market. It is a significant Microsoft rival, but how it runs its business is very different.

In this case, the company leverages the power of the many to build better software and increase market presence. It does that by sharing responsibility for product development with a larger open-source community.

Some core operations are managed centrally, but beyond that, the decision-making process is highly distributed both inside and outside the business.

“Our mission is about…building participation. We do that by setting up frameworks where people can get involved in a very decentralized fashion,” says Chairman and former CEO Mitchell Baker.²

Delegating control through “cocreation”

The McKinsey Quarterly calls this kind of model “cocreation,” where companies harvest the talents and skills of people outside corporate boundaries. The idea is to delegate control to outsiders who work together in networks – which is possible thanks to the internet and other open-source technologies.

“By distributing innovation through the value chain, companies may reduce their costs and usher new products to market faster by eliminating the bottlenecks that come with total control.”

Read our interview with Don Tapscott

McKinsey also suggests that around 12 percent of all labor activity in the U.S. could be “transformed by more distributed and networked forms of innovation.”³

Boeing: Tapping the network

Harvard Business Review says that investing in and managing a collaborative model can significantly help the bottom line.

Boeing is an example. To develop the 787 Dreamliner aircraft, the organization has collaborated with over 50 partners in more than 130 locations.

“From the start, Boeing’s aim was to leverage advanced capabilities from this network, not replicate partners’ skills.”

That is, rather than trying to become the expert in everything, the company leverages the skills and knowledge of other partners who “already possess leading-edge capabilities.”

In effect, the diverse skill set of Boeing’s in-house workforce is no longer the differentiator.

Instead, its success is “increasingly tied to its ability to orchestrate and integrate the efforts of hundreds of global partners.”⁴

A coherent program

The key difference in these instances is that collaboration is not a series of stand-alone or arms-length activities. It is instead a coherent program.

In some cases, companies may even elect a chief collaboration officer to orchestrate the initiative as part of an overall company strategy.

The focus is on figuring out “new skills and organizational arrangements to make collaboration work,” says HBR.

McKinsey takes much the same view: “As more and more sophisticated work takes place interactively online and new collaboration and communications tools emerge, companies can outsource increasingly specialized aspects of their work and still maintain organizational coherence.⁵

People and processes

To that end, HBR suggests companies invest in several crucial areas to build a successful integrated model.

For one, people-oriented activities like training and evaluation have to evolve.

The onus is on soft skills such as communication, where managers find ways to orchestrate teams that create value through interaction – people who may in some cases be from very different cultures.

Collaborative processes are also important. It’s about figuring out what strategies and activities work best when it comes to managing distributed teams with different strengths and working methods.

Integrating platforms

Just as critical is a set of common tools and standards for sharing consistent data. A common information platform “allows dispersed teams to work together seamlessly.”⁶

Without it, projects could be saddled with crippling delays or costly errors. HBR cites the case of the Airbus flagship A380 aircraft. The development effort was delayed by two years, at a cost of billions of dollars.

Why? Various partners on the project used different versions of the design software. It resulted in “300 miles of wiring and 40,000 connectors that did not fit together.”

Connecting the data

A reliable, consistent information platform can help mitigate the risks associated with highly distributed decision-making.

The challenge is integrating the data up and down the line – from internal applications to data systems operated by each partner, often dispersed across the globe.

Business intelligence goes beyond ERP and other data aggregation systems to provide this next level of integration.

People gain insight into issues, wherever they occur.

Dashboards and scorecards provide highly visual information for real-time monitoring of projects and operations.

Analysis lets managers explore current issues to understand the cause and impact of results.

And with reporting, management can share key updates and information across portals and extranets.

Contingency planning

Finally, enterprise planning allows managers and partners to forecast and model the effects of different scenarios together. They can analyze things like project trends or team performance and project them forward.

If a worst-case event happens, management has the flexibility and contingency plans in place to reduce the impact of issues or stoppages.

Summary

Companies are increasingly tackling broader and more complex partnering relationships.

The potential for innovation, new product development, and cost containment is great.

But the potential for costly errors or delays also increases exponentially as management and responsibility stretch further across the network.

A common information platform can help mitigate the risks. It gives everyone visibility into what’s happening here and now right across the value chain.

The result is a more effective collaborative model, fewer surprises, and a greater likelihood of reward.

Find Out More Cognos Performance 2008: Call for papers Related reading: Don Tapscott on The Wiki Workplace

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Sources

¹ Thomas L. Friedman, The World is Flat: A Brief History of the Twenty-first Century, Farrar, Straus and Giroux, New York, 2006.

² Lenny Mendonca and Robert Sutton, Succeeding at open-source innovation: An interview with Mozilla’s Mitchell Baker, The McKinsey Quarterly, January 2008.

³ James Manyika, Roger Roberts, Kara Sprague, Eight business technology trends to watch, The McKinsey Quarterly, December 2007.

⁴ Alan MacCormack and Theodore Forbath, Learning the Fine Art of Global Collaboration, Harvard Business Review, January 2008.

⁵ Manyika, Roberts, Sprague, Ibid.

⁶ MacCormack, Forbath, Ibid.