Learning Journey to Silicon Valley: Open Innovation - "You Can't Ride Two Horses with One Behind"

Woody Allen's aunt Rose may have put the challenge of innovating within a large institution best when she said, "Woody, you can't ride two horses with one behind".

You may be thinking the San Francisco air has gotten to my head. After all, what do horses, the World Bank, innovation and behinds have in common?

Well, it took me some time to piece together, but John Danner, an insightful and experienced Senior Fellow at Berkeley's Lester Center for Entrepreneurship and Innovation, helped shed some light.

We were sitting together over lunch with Prof. Tapan Parikh (very cool) and John Danner talking about innovation, organizational change and large institutions. John, who has an impressive history of advising and managing both large, complex organizations like the organization that manages California's electricity grid, as well as emerging startup ventures, introduced the notion of Open Innovation as the key for large-scale innovation.

"Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology” [1] In other words, large organizations can no longer rely solely on their own research to keep up with the newest developments. Instead, they need to bring in outside sources and partners who can interact with their employees around innovative solutions.

To drive the point home, imagine you are in a box. The box is large, spacious, comfortable and you've been living there contently for the past decade or so. All of the sudden a voice from beyond orders you to get out of the box. You're first reaction may be to say, "What box?" You've been living there so long that you'd forgotten it was a box - not to mention how you would get outside? It's hard to imagine yourself out of the box you are in by yourself.

For this reason, organizations, especially large ones, are building platforms, mechanisms and spaces where outside sources, clients, employees and even competitors quickly build on each others' ideas to create needed solutions. For example, Nike's GreenXchange program has opened its intellectual property to the outside and Proctor & Gamble predicts 50% of its growth will come from ideas from the outside. [2] Their own open innovation platform is called Connect+Develop.

The advantage of the open innovation approach is that it lets you interact with the risk-takers without sacrificing a large organization's environment of consistency, predictability and management. As John so aptly put it, "You can't ride two horses with one behind." Large organizations are good at providing needed stability. In the the World Bank's case this comparative advantage may be the 3F's that John mentioned: Forum, Funding and Focus. Big organizations however, are not good at taking the big-risks that are necessary for innovation. For this reason we should be looking at how we can partner with the entrepreneurs and leading research institutions to spur our own innovation.