Executive Thought Leadership

The Case for Community-Based Innovation

Traditionally, many companies have relied on their internal R&D organizations to fuel innovation. Today's rapidly changing business environment requires companies to augment these efforts by engaging the communities that care about the company to identify and capture new innovation.

Many of today's most innovative companies have adopted a collaborative innovation strategy, one that taps the creativity, ingenuity, and knowledge of their employees, customers, vendors, partners, suppliers, analysts.

Where do innovative ideas come from? According to PricewaterhouseCoopers:

• 46 percent originate from customers, suppliers, or market intelligence
• 29 percent originate from employees
• 11 percent from specialists
• 5 percent from competitors
• 9 percent from R&D

Clearly the path to innovation can be widened by inviting the world of potential innovators to innovate with you. After all, if two heads are better than one, why would you ignore the thousands or millions of people using and talking about your products?

Embracing Community-Based Innovation

Innovation requires two basic ingredients: curious, passionate, and thoughtful people, and freely flowing information. Both of these ingredients abound on the Internet, in the forums and communities spontaneously growing up around your company and products.

Effectively tapping into these communities requires a top-down commitment to adjusting the way your company and everyone in it relates to each other and the external world. Here are four ways to encourage this more community-based approach to innovation, based on Cisco's experience and reinforced by findings from leading research and consulting groups, including Forrester Research and the Boston Consulting Group.

1. Create opportunities for information sharing, connectivity, and collaboration. Companies whose employees spend most of their time interacting are among the top value creators. The first step for most companies is to ensure that their enterprise network connects as many people, in as many places, to as much information as possible.

Connectivity helps ensure that ideas travel not just from top to bottom, but in all directions between and among customers, suppliers, and partners. Increased connectivity creates opportunities for spontaneous innovation.

2. Turn passive customers into active collaborators. Businesses traditionally regard customers as passive recipients of innovation. But consumers are smart and well informed, with instant access to information about your products and your competitors' products. They are brimming with ideas and eager to share them, if you are willing to listen. Rather than rely on traditional focus groups and surveys, use Web-based tools like blogs, forums, and social networks to engage customers in a less formal environment.

When Cisco was interested in acquiring Linksys, our home networking division, we found the best place for doing due diligence was in online message forums. We learned who Linksys customers were (early technology adopters), what they thought of the company and its products, and most importantly, why they had selected Linksys to create the first home networks. Since the acquisition, we have returned to these forums for advice on improving the Linksys product line.

3. Create, encourage, and reward communities of interest. Customers are not the only source of knowledge. Expertise tends to reside in individuals and is very context specific. Smart people can be found in trade or technical associations, academic institutions, user groups, and consultant organizations. It's in your best interest to become an active partner in these communities, not just getting advice and assistance but giving it yourself in at least equal measure. Make your employees understand who the people in these communities are and the value they can provide to your company.

4. Become an innovation broker. The world's large corporations spend some $400 billion on R&D investments, yet 60 percent of C-level executives are unhappy with their return. One response is to use the Internet to restructure and retool your company so it can successfully finance, broker, manage, and champion innovation that comes from internal or external sources.

The Innovation Imperative

Global competition and an accelerated business cycle make it imperative for companies to enlist their external communities to efficiently collect and evaluate ideas and transform them into innovation. The path to greater innovation lies not in spending more or assigning more people, but in extending your hand to potential innovation partners, whoever and wherever they may be.