Forget everything you know about the way we do business. Mass collaboration is revolutionizing the corporation, the economy, and nearly every aspect of management. In this seven-part series, co-authors of Wikinomics: How Mass Collaboration Changes Everything, due out Jan. 2, explain new business models that will empower the prepared firm and destroy those that fail to adjust
The late-19th century chemist and microbiologist Louis Pasteur famously said that chance favours the prepared mind. The same could be said of innovation. Companies face tough dilemmas every day for which there is a uniquely prepared mind somewhere in the world that possesses the right combination of expertise and experience to solve that problem.
Conventional wisdom says firms should seek to hire such people and retain them within their boundaries. After all, such uniquely prepared minds outside your company can be illusive.
But today, thanks to the Web, a new marketplace for ideas, innovations, and uniquely qualified minds is changing everything.
Consumer goods giant Procter & Gamble is a perfect example. Until recently, P&G was notoriously secretive, and about as closed as a company can get. It didn't look outside its walls for anything, and it certainly didn't let anyone look in.
In early 2000, the company had a near-death experience. Its business lines were weakening and revenues and profits were down. The stock price had tumbled, and Wall Street was screaming. Something had to be done.
Putting more money into internal R&D wasn't attractive -- it's innovation success rates were flat-lining. So chief executive officer A. G. Lafley and innovation chief Larry Huston led the company on an ambitious campaign to restore P&G's greatness by sourcing up to 50 per cent of its new innovations from outside the company. Many company veterans concluded Mr. Lafley and Mr. Huston were mad. At the time, P&G had an army of over 7,500 world-class researchers, so why, they asked, would the company choose to look externally for great ideas?
Mr. Huston put it this way: "Most mature companies have to create organic growth of 5 per cent to 7 per cent year in, year out."
Relying on internal capabilities to produce that growth rate may have worked when P&G was a $25-billion (U.S.) company, he argued. But today it's worth $70-billion. Organic growth of 6 per cent for example, is the equivalent of building a profitable new $4-billion business every year.
In addition to broadening and deepening its own proprietary networks, P&G searches for innovations in Web-enabled marketplaces such as InnoCentive, NineSigma, and yet2.com. These combined efforts led to hundreds of new products on the market, some of which turned out to be hits. In the process, Mr. Lafley and his managers like Mr. Huston transformed a lumbering consumer products company into a limber innovation machine. In fact, five years after the company's stock collapsed in 2000, P&G has doubled its share price and now boasts a portfolio of 22 billion-dollar brands.
Today P&G is a leader among thousands of companies that participate in what we call "ideagoras" where millions of ideas, innovations, and uniquely qualified minds change hands in something akin to an eBay for innovation.
Companies that move now can leverage a global pool of talent, ideas, and innovations that vastly exceeds what they could ever hope to marshal internally.
P&G figures that for every top-notch scientist inside its labs, there's another 200 outside who are just as good. That's a total of 1.8 million people whose talents it could potentially tap into.
Indeed, if you're a retired, unemployed or aspiring scientist, a new world of opportunity awaits you. Some 100,000 scientists from 175 countries have already registered with InnoCentive, a visionary matchmaking system links experts to unsolved R&D problems, allowing these companies to tap the talents of a global, scientific community without having to employ everybody full-time. Launched as an e-business venture by U.S. pharmaceutical giant Eli Lily in 2001, the company now provides on-demand solutions to innovation-hungry titans such as Boeing, Dow, DuPont, and Novartis.
For smart companies, the old notion that you have to motivate, develop, and retain all of your best people internally is becoming null. Of course, you'll still need great internal talent. But increasingly, you should assume that many of the best people reside outside your corporate walls. With an eBay for innovation, however, a massive reservoir of talent would be a few clicks away.
Don Tapscott is CEO of New Paradigm, a technology and business think tank, and the author of 10 books about information technology in business and society, including Paradigm Shift, Growing Up Digital.
Anthony D. Williams is an author and researcher with experience in the impact of new technologies on social and economic life.He is vice- president and executive editor at New Paradigm.
Don Tapscott