Last Updated Apr 2, 2010 8:59 PM EDT
New applications of open-innovation principles allow progressive companies to enhance not only their products but also their core internal business processes.
Over the past decade, open innovation has begun transforming the way global companies develop new products, as executives increasingly recognize the benefits of exposing internal R&D to outside ideas. Now, some organizations are going even further by applying open-source thinking to improve a range of core business processes. Aided by rapidly changing technology, these leaders are looking outside the gates to develop faster and better solutions to a variety of strategic, operational, and organizational problems.
Such companies have resorted to a practice called knowledge brokering, a systematic approach to seeking external ideas from people in a variety of industries, disciplines, and contexts and then of combining the resulting lessons in new ways. Most of these people are happy to share their experiences free of charge. Like best-practice benchmarking, knowledge brokering aims to find—not invent—world-class answers to problems. But it goes beyond benchmarking and other traditional approaches of where and how companies search for information and how they use it. A closer look at the way forward-looking organizations use knowledge brokering to improve their business processes offers practical lessons for companies of all stripes and suggests how senior managers must adapt to thrive in a digital era characterized by increased collaboration.
Open innovation is changing the face of product development as more and more organizations find clever ways to use Web-based technology to pair internal "seekers" with external "solvers."1 We believe the same holds true for process innovation. Nearly any activity a company undertakes—from hiring employees to running global supply chains to setting strategy—involves processes. Since business processes are generally more similar than different across companies, there should be rich opportunities for collaboration. Moreover, the rise of Web-based social-networking sites means that the collective know-how of millions of managers is more accessible than ever. Couldn't executives tap into this wealth of experience for insights, just as they might use a search engine for anything else?
Knowledge brokering offers companies an analogous capability. Pioneered by product designers in companies such as the design consultancy IDEO, it is grounded in the adage that the best source of new ideas is old ideas.2 Creative product designers can take a subassembly (say, a hinge or a motor) from an existing product and apply it in a completely new context. We've observed companies using processes in much the same way. They do so by forming project teams that initiate conversations with knowledge brokers—people willing to discuss their experiences to serve the teams' needs—and then combine the external ideas with internal ones to improve these companies' business processes.
Over the past four years, we've studied the use of knowledge brokering among more than 50 teams at ten multinational companies in industries such as banking, consumer goods, high-tech products, shipping, engineering, retailing, and utilities. Each team used this approach to devise an innovative solution to a project assigned by senior management in areas including strategic planning, supply chains, sales and marketing, corporate social responsibility, and HR. When surveyed afterward, team members unanimously agreed that knowledge brokering increased the effectiveness of their projects—and two-thirds said it did so "greatly." On average, it helped the teams design new processes twice as quickly as they would have expected to do by using conventional techniques.
- To read the full article on The McKinsey Quarterly, click here »