Re-energizing with open innovation

A few months ago, I almost fell out of my chair laughing when I read about a recent technology acquisition made by a major software developer, an acquisition that illustrates how easy it is for large companies to stop innovating — even within their core business — as they get bigger.

What does it mean that this organization with thousands of employees worldwide just acquired a small, entrepreneurial software company with just a few dozen employees that specializes in — guess what? — the exact same area of technical expertise? They expect the merger to – quote — “foster increasing innovation”!

Wouldn’t you expect this global organization to be the world leader in its own core competence? So what does an acquisition like this really mean? It means some world leaders in software development have apparently lost their ability to stay up-to-date, to keep innovating internally.

The solution, it seems, is to turn outside the company for new ideas and “game changing” technology. This is a timely example of the growing need for open innovation, for thinking outside the box.

Why large companies lose their creativity

Having run some pretty big companies myself, I can say with some confidence that the internal cultures of most large organizations are not creative or innovative. Innovation tends to thrive in smaller companies. Why?

For one thing, little companies know they have to innovate or they’ll never get bigger. Second, as companies grow, their focus inevitably shifts away from creating new markets through innovation to protecting market share and “managing” their product lines for cost. They settle for “incremental improvements” instead of searching relentlessly for breakthroughs that could open up whole new business opportunities.

A third reason companies lose their creativity is that, when they get large enough, their CEOs tend to disconnect themselves from the creative process. They spend their time managing the bureaucracy and ensuring compliance with a never-ending load of government regulations. But when the CEO stops participating in the innovation process, how can everyone else in the company possibly see innovation as core to its value? They can’t. So it dies from attrition.

I’m convinced the CEO must begin creating a sustainable culture of innovation throughout the whole organization before the company gets too large. Or if the CEO has already lost touch with the creative process, he or she has to find a way to plug back in. The only way to overcome inertia in an organization is for the senior executive to be the “Head of Breakthrough,” to personally drive innovation from the top down.

Paradigm isn’t actually “small” any more, but it isn’t so large yet that we’ve lost touch with our entrepreneurial roots. We’re in transition. We still have a reputation as an innovator. We’re still capable of thinking outside the box. But I’m concerned about the possibility of losing our cutting edge as we keep growing. I don’t want Paradigm to become complacent. One way to avoid that, I’m convinced, is by investing in open innovation and collaborative, global Web-based communities like InnoCentive.com.

When we post a technical challenge on InnoCentive for a global pool of more than 180,000 registered “solvers” to play with, I’m actually looking for two outcomes — one that’s obvious,and one that isn’t. First, of course, I’m looking for breakthrough ideas from outside of the company, indeed, from outside of the energy industry. Tapping into the collective brainpower of a global community of independent problem-solvers is important because the energy industry is suffering from a shortage of experienced scientists and engineers. This is one way of re-energizing the industry, of supplementing our own, increasingly limited resources. Also, because the solvers on InnoCentive are, in effect, working on spec -- they don’t get a paycheck unless they turn in the most brilliant ideas – you have the chance of accessing a whole different quality of engagement than you get from some of your own employees.

But secondly – and I consider this just as important – I’m looking for a way to hone the cutting edge of innovation inside my own company, a way to create a sustainable culture of innovation as we grow. Do you know how to sharpen a knife, when it gets dull? You rub it against a whetstone, an abrasive substance. It takes a certain amount of friction to keep the cutting edge sharp. When you ask your R&D team to participate in defining and posting critical technical problems on an open innovation exchange like InnoCentive, an interesting thing happens. You heighten the sense of competition necessary to keep everyone sharp. Your smartest innovators start rubbing elbows with bright people beyond the narrow confines of your own walls. They don’t want someone else to have all the fun. So, they try harder

As “Chief Innovation Officer,” you effectively maximize the competitive pressure required to remain creative and innovative. It’s that kind of creativity, intelligence, and passion that we need to re-energize the energy industry today, and tomorrow.

John W. Gibson
President & CEO, Paradigm

Editors’ note: This article is adapted from a presentation delivered to C-level executives at a special conference on innovation held at the U.N. in June 2009.

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