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Thursday, April 14, 2005

New Model Of Innovation : Growth Powered By Collaboration

(Via Bill Ives) James Surowiecki writes a brilliant article in New Yorker on new forms of innovation.In 1979, Masaru Ibuka, the co-founder of Sony, asked his engineers to make a portable stereo cassette player that he could take on a plane.In a matter of months, Sony launched the Walkman, one of the most successful products in history, and the story came to epitomize what made the company great: innovation instead of imitation, a dedication to big ideas, and a willingness to pursue its obsessions no matter what others thought.Sony hasn’t produced anything like the Walkman for a long time. Today, Sony is known for floundering into new markets, not for creating them. Companies often become victims of their own mythologies. Sony’s track record of game-changing inventions—the transistor radio, the Walkman, the Trinitron—led it to believe that success lay in self-sufficiency and absolute control. The company became an exemplar of what’s sometimes called the "Not Invented Here" syndrome: if it wasn’t invented at Sony, the company wanted nothing to do with it. "NIH" is an old problem at Sony. The Betamax video tape,flat-screen TVs and DVD recorders,Sony’s online music,digital music players not playing MP3 are all exemplifications of Sony’s desire to control everything - but reality kept it from controlling anything.
In contrast we now see the emergence of new models of innovation and growth powered by collaboration. Although successful companies still invest heavily in research and development, they increasingly collaborate with and borrow from others. Shrinking R. & D. budgets and R&D alliances are the norm. Firms that were once exemplars of going it alone have dedicated themselves to playing well with others. Procter & Gamble now gets more than thirty per cent of its innovations from outside. Pharmaceutical companies rely more and more on partnerships with small biotechs to come up with new drugs. Intel, I.B.M, Apple Computer—all now leverage partnerships and outside help. The trend, is dubbed "open innovation."With so many companies investing so much money and energy in innovation,it’s hard for any one of them to consistently outsmart the rest. And technologies are so complex that it’s impractical for a company to gather all the resources it needs under one roof. The spirit of collaboration extends to customer as Eric von hippel shows in his new book Democratizing Innovation.

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