Why absorptive capacity matters in our innovation strategy
We grow through what we know. Put simply that’s at the heart of the innovation equation. Innovation is creating value from ideas – commercial or social. It’s a journey which starts with an input of knowledge. Whether we’re a start-up growing from a flash of insight in the shower or a glimpse of gold from the laboratory we’re building on knowledge. If we’re a giant corporation with a formal R&D empire, thousands of men and women in white coats beavering away in front of screens or amongst gleaming glassware, it’s the same story. Knowledge opening up possibilities.
It’s not confined to the commercial world; these days public sector agencies and not for profit NGOs are just as keen on finding ways to grow their impact and efficiency through applying new knowledge – innovation.
And it's not just technology – innovation is all about knowledge spaghetti, weaving different strands together to create value. We can grow through new knowledge about markets, about different needs, about new regulations which open up different pathways and close down others. Wherever we look, new knowledge creates opportunities.
But where do we get that knowledge from? We can try to do it all ourselves, investing in knowledge creation through various forms of research. That model served us well in the past; many of the things we take for granted today can trace their origins back to the giant research laboratories set up a hundred or more years ago by far-sighted companies and the odd government or two. Think of a world without the big corporate labs like those founded by Bell, Philips, Xerox or the Big Pharma companies and you’d have to remove mobile phones, information technology, blockbuster drugs and our daily fix of audio-visual entertainment from the mix.
But do it yourself knowledge creation has several limitations – it’s expensive, time consuming and risks being self-referential. We eventually end up exploring around what we know, losing the chance of breakthrough innovation. It’s also a wasted opportunity if we fail to look outside for new knowledge. As Bill Joy of Sun Microsystems memorably put it, ‘not all the smart people work for you’. No organization can cover all the bases and in a world where we are spending around $2trillion each year on R&D around the world we’d be crazy to believe otherwise. We need to look outside for new knowledge to bring to the party.
The whole story of the ‘open innovation’ revolution is one of learning to manage knowledge flows – into and out from our organizations. The game shifts from knowledge creation to knowledge trading, working out new ways to find and access new external knowledge. It levels the playing field; now small can be beautiful as long as the small enterprise in question is connected. Knowledge networking is the key – and we’ve spent the last twenty five years (since the publication of Henry Chesbrough’s book gave us a label for it) trying to work out how to ‘do’ open innovation.
There are plenty oof different roads but they all lead to the same destination. New external knowledge could come from a think-tank informing the public sector about novel approaches. Or it could be user innovators coming up with prototypes for social innovations. Or watching and learning from competitors. Or mining patents for new insights. Or recombinant innovation, borrowing ideas from other worlds.
Making use of external knowledge, drawing in something new to meld with what we have lies at the core of innovation strategy. We grow through what we know.
But.
All of this rich opportunity depends on a key question – how can we access and deploy new knowledge from outside? Spoiler alert – it’s not simply a matter of going shopping.
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