BY AMY MULLER AND LIISA VALIKANGAS

Searching for Innovation Opportunities

Mature industries: Exhibit 2 is a framework or opportunity map that we have created to help companies in mature industries identify opportunities from extended innovation. The map is illustrated by reference to the foregoing example of innovation between Home Depot and real-estate developers [3].

To apply the map to a general case, list the core competencies and assets of one potential partner on the vertical axis and repeat for the other potential partner on the horizontal axis. The cells of the resulting matrix should suggest white-space opportunities for various combinations of assets and competencies.

The ability to repurpose assets may, of course, be limited by the nature of specific assets—a manufacturing facility that currently produces glassware might not readily convert to the production of optical fiber. Likewise, a company's competencies may not be transferable to a different context if they draw their strength from the particular character of the company. Nevertheless, as assets and competencies become more intangible and knowledge-intensive, issues of asset-specificity and the embeddedness of competencies should become less problematic.

Exhibit 2:
Opportunity Map in a Mature Industry Context

Emerging spaces: The location of opportunities within an emerging space is unknown. In consequence, companies should pursue search strategies that emphasize low-cost probing and learning to effectively and efficiently cover the space of interest. We acknowledge the difficulty of determining the bounds of this interest space, noting that major innovations often emerge from unexpected sources or have radically different applications from those originally envisioned by their inventors.

One simple search strategy is to look where other companies are already looking for opportunities within an emerging space. Whereas this imitative strategy may create herd-like behavior, companies can benefit from sharing search costs among partners in an extended innovation alliance. (Indeed, evidence of this motivation to share costs abounds among small biotechnology firms, many of which partner with larger and more established pharmaceutical companies in order to gain financing for their research and commercialization efforts. See Table 1 for examples.)

Companies should also consider participation in multiple search parties to explore different locations of the knowledge landscape. In this way, they can escape any myopic tendencies to focus on one area only.

Table 1:
Partnerships between Biotech and Pharmaceutical Companies

Toward the Extended Corporation >>

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