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BY AMY MULLER AND LIISA VALIKANGAS
Introduction
rying
to get outside the box? Sometimes the box is your company. But companies
can extend their search for innovation beyond the corporate boundary and
even beyond the industry boundary.
Such so-called extended innovation, we suggest, increases the potential to explore new business opportunities in both mature and emerging industries. Indeed, past research has shown that a desire to innovate and learn within an extended network of industry partners has already motivated several alliances in the biotechnology industry (Powell, 1996).
Today's industries are increasingly technology- and knowledge-based. Product development cycle times grow ever shorter. And waves of new entrants such as Home Depot, Southwest Airlines, Kia, and South Beach lay continual siege on incumbents such as Sears, United Airlines, General Motors, and Coca-Cola. In response to these changes, companies do seem to increasingly recognize the need for greater innovativeness. For example, we note radical innovation processes such as GameChanger in Royal Dutch/Shell, EDS Innovates in EDS, and NTRI (non-traditional innovation) in Baxter International. However, these innovation processes are all predominantly inward-looking. Considerable opportunities lie also in extended innovation.
We suggest that, to ensure survival in an era of discontinuous change, companies need to introduce the same variety of innovative thought inside the organization as exists outside. No single firm can command the capacity for this breadth of innovation. However, the capacity for such innovation may derive from the connections between two or more firms in an alliance or network. Moreover, we believe that traditional notions of an industry's boundaries unnecessarily deter productive innovation [1]. In contrast, non-traditional notions of cross-industry collaboration can stimulate innovation.
For example, consider this challenge to the traditional notion of the computer industry's boundaries: IBM recently entered into biosciences with its investment in supercomputing for the study of protein folding. And, as an example of cross-industry collaboration, Motorola has forged partnerships with NEN Life Sciences Products, Orchid Biocomputer, and the Mayo Clinic among others to explore biochips and DNA arrays for applications in life sciences.
This article further explores possibilities for such extended innovation in two industry contexts: mature industries in which the competitive structure has long remained unchanged or is highly consolidated; and emerging spaces in which the competitive structure and industry dynamics have yet to crystallize.
Within mature industries, the industry structure reflects past opportunities. For example, corporate boundaries reflect judgments about where companies have identified their most lucrative business opportunities, including which business processes to outsource. Within emerging industries, in contrast, the industry structure remains in flux until companies have pinned down clearly sustainable business opportunities.