Aachh... Thomas beat me to the punch with his piece on John Hagel's Institutional Innovation post. The thesis of which is...
In thinking about innovation, executives would be well served not to
focus exclusively on finding talented product design maestros or even
process design experts, but rather creative institutional designers who
can challenge and re-think their existing institutional arrangements
from the ground up....
...In a world where profitable growth is the key to value creation,
companies need to find ways to sustain and amplify the rewards of
innovation. To do this, executives will need to expand the scope of
innovation well beyond product and process to a much broader terrain –
institutional innovation.
What do I mean by institutional innovation? It redefines roles and
relationships across independent entities to accelerate and amplify
learning and reduce risks. The next generation of institutional
innovation will seek more productive ways to connect with talent
wherever it resides and build relationships that foster and focus
learning rather than taking the walls of the enterprise as a given.
Institutional innovation in the twentieth century focused on
creating scalable institutions through standardized product design and
design of business processes to cost-effectively serve mass markets. In
the twenty first century, the focus of institutional innovation will
shift to foster scalable learning across institutions.
And Thomas is right, you really do need to read the whole post. If institutional innovation in the 21st Century drives scalable learning, then one of the foundations of scalable learning will be social networking. Why social networking? Well, lets take a look at the Design principles Hagel lays out for institutional innovation. These include:
Diversity. As Scott Page
and others have persuasively suggested, new insight and learning tends
to increase with cognitive diversity.
Relationships. It is not enough to have
cognitive diversity. By itself, cognitive diversity often breeds
misunderstanding and mistrust, seriously limiting the opportunity for
people and institutions to learn from each other. Long-term trust
based relationships, on the other hand, make it easier to engage in productive friction
Modularity. When activities are tightly
specified and hard-wired together, the opportunities for
experimentation and tinkering are very limited. Segmenting people and
activities into discrete modules with well-defined interfaces can help
to create much more space and opportunity for distributed innovation
and learning.
Federated decision-making. To encourage
distributed innovation and learning, it is helpful to distribute
decision-making into self-governing units while at the same clarifying
dispute resolution and escalation protocols to ensure that prompt
action can be taken across business units when required. If structured
appropriately, these dispute resolution mechanisms can become fertile
grounds for productive friction that in itself drives learning.
Reputation mechanisms. As relationships
scale, it becomes harder to develop a clear view of the full range of
experience and expertise available to address challenging problems.
Reputation mechanisms can play a vital role in enhancing findability
but also help to reinforce incentives to participate and contribute.
Feedback loops. More broadly, there is
enormous value to investing in performance measurement systems and
structuring performance feedback loops so that participants can reflect
on their practices and focus their efforts to improve performance.
Incentive structures. Focusing narrowly on
near-term cash incentives undermines the ability to build trust and
foster learning. By expanding incentives to include talent development
and capability building, institutional innovators have the potential to
turn zero sum games into positive sum games
Now social networking alone obviously cannot instantiate these design principles into the heart and soul of an organization but it sure can help foster viral spread of these principles in an enterprise. Especially the principles of Relationships, Federated Decision-making, Reputation mechanisms and Feedback. These design cornerstones are today actively supported by social networking solutions and can be comprehensively supported in the enterprise Social Network implementations.
SAP for instance uses social networking and other systems internally for Reputation mechanics and Feedback. Other "20th century" systems are in place for incentives and federated decision making but here we need pure institutional design work to radically enhance the state of these institutional cornerstones. The Business ByDesign launch is a perfect opportunity for SAP teams to introduce Federated Decision Making for instance and we as a team have been discussing it. But we'd love to get some of these other large change issues on the table.
Charlie Wood writes a thoughtful piece on why Apple (AAPL) doesn't face the classic Innovator's Dilemma posed by Clay Christenson in which:
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