Q&A: Driving innovation at the 'edge' of the enterprise

Companies need to reach out to get ahead, say the authors of a new book

By Thomas Hoffman

May 9, 2005 12:00 PM ET

Computerworld - Most companies are structured to try and run their operations efficiently and squeeze as much profit as possible from each transaction. But emerging competitors in Asia are turning those concepts upside down, according to John Hagel III and John Seely Brown, co-authors of the new book The Only Sustainable Edge (Harvard Business School Publishing).
Recognizing that their wage rate advantages might be short-lived, smart companies in places like China and India are instead focusing on how they can create new business capabilities for customers and leverage IT to partner with specialized suppliers, according to Hagel and Brown.
The authors spoke with Computerworld late last week about the changing business landscape they're seeing.

As you point out in the beginning of the book, most companies are structured to try to run efficiently, not to drive innovation. For companies to flip this, they'd need to make some pretty wrenching changes to their operating models, yes?
Brown: The first step here is to move from a very closed view of innovation to a more open innovation model where there are suppliers and other people around the world that are at least as talented as people within our organization. By doing so, we can ask such questions as, "How can we tap into their innovation?" and "What do we want to consider to be our distinctive edge?" and "How can we work with these people and extend our own capabilities?"
Hagel: I would certainly accept that it's a challenge. In order to get better faster, you need to do that in partnership with other companies. No matter how many smart people there are in your organization, there are a lot more smart people outside that you could work with.
One of the things we tried to do in the book is provide a path for companies to make this transition [and] develop those relationships to get better faster and develop capabilities faster. We think there's a way to do this in a pragmatic evolution.


John Seely Brown

Brown: If you look at what we're doing with computer architectures, we can take advantage of loose connections and coordinate processes and practices with other organizations. From a technical point of view, we now have SOA and virtualization architectures and this whole notion of social software. Organizations can now examine how this folds into SOAs to support long-lived conversations, as opposed to short-lived transactions.

What are examples of some companies that are doing this effectively now?
Hagel: One company that we profile extensively is Li & Fung

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