Revisiting the Great Innovation Debate

January 2, 2013
Courtesy of Wonderfully Complex's photostream on flickr.

Courtesy of Wonderfully Complex’s photostream on flickr.

An early Skilful Minds post introduced The Great Innovation Debate, focusing on the distinctions between Tom Friedland’s conception that when it comes to innovation the world is flat, and the alternative point of view espoused by Richard Florida that the world is spiky. Meaning that the aggregation of creative people in cities, in proximity to one another, largely drives innovation and economic growth. As our previous post noted, John Hagel added an interesting vantage point on the debate by observing that, “Even though you can participate in innovation from more remote locations, if you want to develop your talent more rapidly than others, you are more likely to be able to do that in a major urban area.” In other words, the debate about innovation is largely a difference of viewpoints on the feasibility of effective collaboration across distributed people who work together to get jobs done. These collective efforts typically exist as cross-functional teams working with business partners, or customers.

The innovation debate was raised again recently when John Hagel and John Seely Brown added substantially to the questions behind it in a post titled, Friedmand vs. Florida and offered some key insights that coincide with key points from the McKinsey survey. The gist of Hagel and Brown’s position goes as follows:

It’s true that globalization has led to increased competition; however, there is also a significant opportunity for companies to access the talent gathering in different spike cities and then connect those people around the world using digital technology infrastructure so that they might leverage the skills of, and learn from, one another. Such a model does not develop overnight; to move from competitors to collaborators, participants must form long-term, trust-based relationships with one another.  When these relationships develop, then firms can connect capabilities across spikes, and ultimately, pursue opportunities for innovation and capability building across spikes.

Consider the following observations from recent research on the importance of proximity in how team members relate to one another. A recent Forrestor report, Making Collaboration Work for the 21st Century’s Distributed Workforce (registration required) noted that most information workers (including Gen Yers) prefer email, telephone conversations, and face-to-face meetings. These preferences appear to result as much from limitations in the available collaboration tools as anything else. The Forrestor recommendations are three-fold:

  1. create the sense of a “shared office” among distributed employees
  2. use tools that follow distributed employees on the go
  3. provide collaboration tools that make the work easier, i.e. are integrated into the work.

I’ll get back to the major challenge among the three outlined in the Forrestor report (creating the sense of a shared office) in a following post. First though it is important to note that the Forrestor report’s findings indicate fundamental differences between the opposing points of view in the debate over innovation by Friedland and Florida, especially as they relate to distributed employees (i.e. people who are not colocated). For example, a recent McKinsey Global Survey of 2,927 executives, Making Innovation Structures Work (registration required), offered two key insights dealing with innovation that merit attention in relation to the topic.

  1. “Companies cannot rely on a single innovation function alone to create successful outcomes, it must be integrated with the entire organization.”
  2. “The functions located near talent or target markets have more market success and meet objectives more effectively than others, though they are less likely than the functions at or near HQ to engage regularly with company leaders.”

The first conclusion relates to the McKinsey report’s overall insight that organizations are more likely to succeed with innovation efforts when those initiatives are integrated with corporate strategy as well as benefiting from the engagement and support of company leadership. It implicitly recognizes the ineffectiveness of organizing innovation efforts that occur in corporate silos, such as innovation centers or research & development labs.

On the other hand, the second conclusion recognizes the constraints faced in organizing innovation efforts among distributed employees. Creating a sense of a shared office, or workspace, is fundamental to efforts attempting to integrate innovation and corporate strategy, especially if the corporate strategy involves social business.

In my thinking, the key to Hagel and Brown’s point is that, as Gunter Sonnenfeld recently observed in a post called Relationship Economics, “relationships are the foundation of the social web, and the basis for the flat, seemingly infinite distribution plane that is the Internet.”  Rather than focus on whether the world is flat or spiky, serious attention is better paid to how enterprises organize collaboration and what limitations place and cultural context impose on that organizational effort to create innovation capabilities. How to organize distributed collaboration and manage the social interactions involved is the topic that requires discussion when these concerns are brought into focus.

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The Great Innovation Debate

October 18, 2005

Tom Friedman has made a literary career from writing about the way globalization changes business and culture. His most recent book, The World Is Flat, in particular makes the point that the playing field in business and innovation is leveling out, becoming flatter as time goes along. Friedman’s points elicited a range of criticisms, but one of the more pointed ones was offered recently by Richard Florida in an essay in The Atlantic Monthly, The World Is Spiky. Florida takes Friedman to task for his claims about the impact of globalization on a range of topics including population concentration, light emissions, patent filings, and citations to scientists. Yet, his most poignant critique is over Friedman’s claims about innovation. Friedman claims that, “In a flat world you can innovate without having to emigrate.” In other words, Friedman thinks that globalization is transforming design and development of services and products just like it has manufacturing and service delivery, i.e. offshore call centers. Florida is not persuaded. Using visualizations of his key topics, he argues,

The world today looks flat to some because the economic and social distances between peaks worldwide have gotten smaller. Connection between peaks has been strengthened by the easy mobility of the global creative class—about 150 million people worldwide. They participate in a global technology system and a global labor market that allow them to migrate freely among the world’s leading cities.

John Hagel jumped into the middle of this debate, attempting to balance out the differences between Florida and Friedman. He sided with Florida’s assertion that urban centers are growing in their attraction to innovators, against Friedman’s implicit point that you don’t have to move in order to participate in innovation. Hagel contends that,

To the extent that Tom believes that cities will become less important as centers of economic growth, I would disagree with him. So I would amend his observation and say that, if you want to innovate and you are not in a major urban area, you might want to emigrate to one of these areas, even in a flattening world. Even though you can participate in innovation from more remote locations, if you want to develop your talent more rapidly than others, you are more likely to be able to do that in a major urban area.

It seems to me though that all three of these very smart people miss an important issue when it comes to innovation. The key question to ask about innovation is what benefit it provides to the businesses that pay for it. You might think Friedman’s point on innovation is correct for no other reason than its cheaper to hire educated staff with technical and creative skills in India and China. No doubt, that is correct. But, cost isn’t the basic concern for organizations that innovate better. It isn’t clear at all that spending less to buy more time from creative people in R&D will change the impact of innovation on business results. The cost and benefit of innovation is more closely tied to the organization of business processes and dialogue with customers than the amount of creative time bought.

A recent study on the top 1000 Global Innovators by Booz, Allen, Hamilton indicates that no statistical relationship exists between the number of patents issued to an organization and its actual business results. Florida’s reliance on patents as an indicator of innovation probably points to a spurious relationship. The report concludes, “when a company is seeking to grow through innovation, it’s more important to develop a robust business model and good cross-functional capabilities than to boost the R&D budget.”

By cross-functional capabilities the authors mean cooperation between R&D, marketing, sales, service, and manufacturing. Concentrating innovative, creative people in urban centers, or leveling out the playing field so that innovators don’t have to emigrate within a country or between countries to work on innovation projects, does not speak to the key issues in designing processes that increase the effectiveness of collaboration. Rather than focus on whether the world is flat or spiky, serious attention is better paid to how global enterprises organize collaboration and what limitations place and cultural context impose on that organization.

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