Discovery and Innovation in the Global Knowledge Economy

The emerging knowledge economy will reconfigure the role of discovery in innovation in some surprising ways. First, a couple corollaries:

• For most of the history of mankind, information has been scarce, and an important way that people innovated was through discovery. In agrarian and industrial economies, it was extremely important to discover new ways to transform raw materials in order to create new products. Since people lived in relative isolation compared to today, there was significant duplication of discovery efforts in pockets around the world.
• The pervasive TCP/IP network (i.e. Internet), combined with accelerating adoption of modern architectural approaches (i.e. service-oriented architecture) and messaging (Web services and XML) is unlocking the world’s data/information as a dizzying pace. It’s a cliché that we have too much information, and this trend shows no sign of abating. Moreover, software tools for automating the management of information are improving all the time. Of course, this development gives people an unprecedented ability to collaborate—on everything.

In the knowledge economy, discovery gets leveraged, pervasively and instantaneously. Discovery will remain extremely important to creating value, but I’m going to argue that it will play a cameo role in the hyper-innovation knowledge economy: crucial but supporting.

Anyone attending innovation conferences and seminars will tell you about a persistent refrain emanating from enterprises with world renowned laboratories: they roll out patents at a torrid pace, but commercialization of the discoveries remains a consistent frustration. Very few of their patents create business value. This is true irrespective of industry or country.

The commercialization process will be the innovation mother lode, from electronic gadgets, to pharmaceuticals to space lichens. Commercialization means making a new discovery relevant to customers and creating a process to fabricate (if product), service and introduce it to customers, in an efficient way. These are all areas in which groups of inter-connected knowledge workers, collaborating at an unprecedented level, can achieve a quantum leap in value creation.

But there’s a catch. Companies must reorganize themselves, in structure, attitude and habit. Large industrial enterprises have traditionally managed risk by controlling variables. Because they have large tightly coupled structures, they must constrain change within the limits that their structures can accept. Structural realities and limitations have imprinted employees with formal processes and methodologies.

Does this sound like fast-moving, dynamic spontaneous energy that can be focused on fulfilling customers’ whims? Exactly.

Transforming how the employees of a global enterprise interact to create value is a daunting task, but it’s eminently doable. Some of the secrets are encapsulation, delegation, collaboration and abstraction. In brief, encapsulation enables activity to be differentiated and organized within “pods,” which operate without external micro-management. Pods have specialized competencies and are responsible for producing something, but the approach they take is up to them, which gives them the freedom (and responsibility) to create and innovate. Of course, pods collaborate with other pods to get something done. This structure is very flexible. Pods can exist anywhere in the world, inside or outside the company.

Delegation is a concept that everyone’s familiar with, but it bears mention that, when one pod asks for a service to be performed, it specifies what it needs and when it needs it, and relevant pods respond and organize themselves to get it done. Delegation does not focus on specifying how the job is to be performed because the how is encapsulated within the pod that said that it could provide the service.

Management needs to become a brain.

Now, abstraction. In command/control environments, management typically gives literal (that is, not abstract) direction for what gets done—and often how things get done. This approach can theoretically be workable in relatively static environments in which change is slow. In the hyper-dynamic knowledge economy (and I postulate that we’re still in the initial stages of acceleration), management can’t know the optimal process to get something done because capabilities and conditions are changing too fast. In the self-organizing world, requests are made in standardized formats, and pods respond in standardized formats, so that communication is pervasive and consistent. Pods know what their specialties are and what services they perform. They only respond to appropriate requests.

It bears mention that this is roughly how the human body is organized: the brain doesn’t instruct lymph nodes on how to fight a disease or muscle cells how to deal with lactic acid. It just receives and sends messages, and only cells that are relevant to that particular message respond. This is a way that enables the body to excel in a tremendous range of activities and circumstances. The brain would be overwhelmed if it had to micro-manage all the body’s systems and how they did their work.

Having been closely involved with enterprise transformations for years, I realize that this proposition will be difficult for enterprises, but the rewards will be many (they include survival ,^). Moreover, the journey can be iterative—it need not be a big bang—the new can coexist with the old as it replaces it.