1. Dr. Iris Berdrow Bentley College, Harvard Summer School

2. Student: Where is my Lincoln brief?? Professor: Would you believe my puppy ate my homework? The next Dilbert cartoon:

3. Tonight’s class: Readings Networks Learning, communication and innovation Controlled versus open learning Communication, organization structure and innovation Wrap Up

4. “Linking Knowledge & Innovation for Competitive Advantage” LearningKnowledgeInnovatingInnovation Competitive advantage Divergent Exploration focus Cost = cost to get and stay smart Need to know how to explore Need infrastructure to facilitate exploration Convergent Exploitation focus Cost = cost to apply knowledge in the marketplace, i.e., commercialize the innovation Need to know how to exploit Need infrastructure to facilitate exploitation Return via the market Strategic alignment Phase 1 Phase 2 Strategic alignment between P1 & P2 leads to competitive advantage. C.A. leads to higher returns. Thus how well we do P1 & P2 and the alignment will lead to higher returns. Source: Global Innovation Assessment Project, McDonough, Berdrow & Zack, 2007. © Do not copy without permission.

5. Channels of Innovation Individual level: Novel idea based on intuition (the visionary) Trial and error experimentation (Edison) Group level: Combining and leveraging existing ideas in new ways to solve new problems Brainstorming Organization level: R&D facilities, think tanks (make strategies) Innovation networks, Alliances, Open source (partner strategies) Mergers & acquisitions (buy strategies)

6. Learning within organizations What are the internal processes by which new knowledge is created, integrated and institutionalized into products, services and processes? Source: M.M.Crossan & I.Berdrow. 2003. Organizational Learning and Strategic Renewal. Strategic Management Journal, V.24(11), p.1087.

10. Learning across organizations What are the processes by which new knowledge is created, integrated and institutionalized across organizational boundaries? Source: Berdrow, Iris. 2003. “Complex Learning Partnerships: Creating the Connections In International Alliances.” A.F. Buono, editor Enhancing Inter-Firm Networks and Interorganizational Strategies (Volume 3), Research in Management Consulting: Information Age Publishing, Greenwich, Ct: pp 117-136.

11. INDIVIDUAL GROUP ORGANIZATION DEVELOPING LEARNING CAPABILITIES ASSIMILATION OF LEARNING IMPACT ON CONTINUED LEARNING Organization A Organization B Partnership Learning within Organizations Learning across Organizations Learning Origin Learning Target Figure 1: Learning Matrix

12. Controlled versus Open Learning Organizations choose between make, co- create or buy strategies of innovation. What are the pros and cons of creating innovations in-house versus through an open peer development system?

13. The Lone Wizard or the Masses What is the contribution of Open Source? On May 22, 1997, a little- known software programmer from Pennsylvania named Eric Raymond presented a paper at a technology conference in Würzburg, Germany. Titled “The Cathedral and the Bazaar.” Traditionally, sophisticated programs had always been “built like cathedrals, carefully crafted by individual wizards or small bands of mages working in splendid isolation.” An open source project, in contrast, was the product of a large and informal community of volunteers who in aggregate “seemed to resemble a great babbling bazaar of differing agendas and approaches.” Raymond coins Linus’s Law, after Linus Torvalds, Linux’s founder and presiding genius. “Given enough eyeballs, all bugs are shallow.” The Ignorance of Crowds by Nicholas G. Carr 05/31/07, enews Strategy+Business.

14. Benefits & Limitations of Open Source Systems 1. Diversity of skills and experience 2. Diversity of agendas and perspectives 3. Requires little coordination among workers 4. Works best when labor is donated or partially subsidized

15. Cathedral versus Bazaar CATHEDRAL A MODEL OF INVENTION BAZAAR A MODEL OF OPTIMIZATION Find and fix problems Collect and categorize information Engaging customers to harness insights and increasing loyalty Origination of ideas that lead to products Perfecting the fit and finish of products

16. Effective use of peer development systems IDEA GENERATION PEER DEVELOPMENT EXPERT TEAM Torvalds’ hierarchy of talented software programmers to help manage the contributions. Linus Torvald, founder and presiding genius of Linux Public contributions to the refinement of Linux

17. SOURCES OF INNOVATIVE IDEAS Within organizations Visionaries, Wizards R&D Labs New Leadership Across organizations Networks Alliances Outside organizations Peers Customers Competitors Industry

19. Organization & Architecture of Innovation: Managing the Flow of Technology by Allen & Henn, 2006: Butterworth-Heinemann. What is the relationship between innovation, communication and organization structure?

20. Arguments Managers should realize that they have both organizational structure and physical space available to them when planning the innovation process. Most frequently, the best source of new technical ideas for product development engineers is a colleague in the same organization.

21. Innovation Process CONCEPTDEVELOPMENTENGINEERING Stages of Innovation Number of People Involved

22. Communication Distance between people Probability of Communication

23. Communication Probability of Face-toFace Communication Probability of Telephone Communication

24. What have we learned? Innovating requires learning Learning requires communication Organization structure and physical space can impact learning, communication and hence, innovation.

25. Tomorrow Mr. Christopher LaFarge Bank of America