Managing Collaborative Business Innovation

Wrote this a few years ago, and just pulled it out for a friend. Thought it would be good to put up here for posterity.

In the 1940s, a company called Haloid took a gamble on a new line of business based on a technology it did not invent. Today it is easy to look back on the introduction of the first xerography machine and credit it with the success of the company which Haloid became – Xerox. But this would be a mistake. Far from being the technology-driven company of its reputation, Haloid focused on the real source of its early success: its business model. In the 1940s and 50s, the idea of an expensive machine that made lots of copies didn’t make sense to a lot of people. So rather than build a business selling machines, Xerox practically gave away the machines and sold metered services. This reduced the risk for early adopters and allowed customers to get addicted to the copying experience one page at a time.

It was an innovative and wildly successful but straightforward move. Xerox hired the skills it needed to execute the strategy and was able to keep its intentions to itself until it made its play.

Thirty years later, two employees from Xerox’s Palo Alto Research Institute, Charles Geschke and John Warnock, left to start a company based on a computer language for displaying graphics and text called PostScript. They initially thought the business would be selling turnkey computer hardware and printers. But by 1983, that business model was not looking good. That’s when they connected with the CEO of another emerging business, Apple Computer’s Steve Jobs. Jobs convinced them to focus on making libraries of typeface fonts and licensing them to computer manufacturers like Apple. Adobe font technology went into the revolutionary Apple LaserWriter, and the computer graphics industry that followed made Adobe’s value about equal to Xerox by 2001. Like Xerox, Adobe’s success is more about business model innovation than the technical inventions alone. The difference between the Xerox and Adobe stories is that Xerox developed and launched its business model essentially on its own, but Adobe’s was born out of collaboration. The business Adobe became was inconceivable until it was combined with the emerging intentions of Apple (and ultimately the personal computer industry) to embrace a novel licensing scheme providing a common standard for how computers display and print.[1]

But that was over twenty years ago. What is happening today makes stories like these just a warm-up act for the main event.

A world-wide survey of seven hundred CEOs in the spring of 2006 showed most companies suddenly refocusing from growing their existing lines of business to fundamentally changing them. Two thirds of CEOs expected severe industry change to force a significant overhaul in their business model. Business model change initiatives rose to one third of innovation planning, and companies that focused on business model innovation significantly outperformed those that focused on product innovation or operational efficiency.[2] Eighty percent of business innovators said that the key to success was working collaboratively with external organizations.

The trends toward business model innovation on one hand and collaborative innovation on the other constitute an historic convergence – collaborative business model innovation – where stories like Adobe’s become the norm, and diverse companies collaborate to create new, hybrid businesses. Virgin Airlines and Volvo strike a deal to combine airplanes and limousines into a door-to-door transportation experience. The host of an online community joins competencies with international bankers to conceive Entropia, an online experience that sidesteps the typical subscription model to become a currency exchange, changing real world money into the community’s virtual credits and vice versa. OneWorld Health merges a traditional pharmaceutical business and a not-for-profit model to address malaria and other diseases that do not generate the financial returns to attract traditional pharmaceutical companies.

In their bestselling book, Blue Ocean Strategy, Renee Mauborgne and W. Chan Kim describe the rise of Cirque Du Soleil. Cirque’s CEO, Guy Laliberte, formed an intention to reinvent the traditional circus. What he created was an entirely new hybrid business model with elements from the circus, street performance, traditional theater, and the corporate event industry. Is Cirque a high-brow theater event or a circus? It is both and more. It requires business competencies outside the field of any one of its sources.

The game changing business models of today are every bit as inventive as the latest technologies. But business models are not usually made from inventions that can be patented and protected so much as they are collections of intentions, which are typically not protected and can be exploited by anyone who discovers them. [3] Consequently, working with outsiders on new business models requires a level of sharing that is well outside the comfort zone of most companies. If the trend toward collaborative business model innovation accelerates, managers will need better tools to deal with it. In particular, innovators will need common standards for sharing their intentions.

From Inventions to Intentions

There is a grey area between early stage research and the market play where intentions start to emerge from new ideas but have not yet become committed strategies. It is the moment when champions begin to muster the willpower to take action but have not yet made specific plans or worked out all the gaps. This is a particularly difficult stage for sharing with outsiders. Open sharing is feasible at the fuzzy front end of technology R&D, where patenting and publishing help disseminate information about new discoveries.[4] Likewise, open sharing is a natural function of the latter market play, where evangelists, marketers and sales people spread the word about the company’s new strategic direction. But at a crucial time when external insights could validate an emerging direction (or nip one in the bud) and when external know-how could make seemingly impossible plans suddenly feasible, we find ourselves often incapable of open sharing.

Being open with outsiders at this sensitive stage is like admitting the general public to an infant’s nursery. The intentions are as yet too fragile. Champions don’t know whether their idea will get internal support, and executives are loath to tip their hand before they commit themselves. Yet this is the very moment when collaborative business innovation must be engaged. Limiting the firm only to internal perspectives on budding directions leads to missed opportunities on one hand and dead-end market plays on the other.

Knowledge of a company’s emerging intentions gives the bearer great power over that organization, power to help and also to do outright harm. Once exposed to Adobe’s basic idea and business model dilemma, Jobs could have developed another graphics language, if he intended, and used it in Apple products instead of collaborating. Patent protection would likely not have stopped this. In many fields, there are so many ways to approach a technical solution that the important thing is not the invention but the general concept. Often the sensitive knowledge is not the technology itself but simply the validation of knowing someone is considering a market play with it. In some cases, firms in developing economies needed only get the vaguest sense of what a prospective partner had in mind to build the offering on their own and start selling it themselves. Advocates cry for uniform intellectual property rules and enforcement in countries like China and India and forget that often what is appropriated would not be considered IP theft in the first place.

Despite its risks, collaborative business model innovation is all about sharing intentions with outsiders. We do this to fill gaps, create win-win opportunities and shape emerging intentions into something more than we would have imagined on our own. But we also risk harmful exposure. It is a delicate game, and historic forces are opening it to a wider range of managers and personnel than ever before. Increased worker mobility, decreased corporate loyalty, and community systems that cross company borders (such as Skype, MSN, and Wikipedia) make it more likely than ever that your deepest inner secrets are going to show up on someone’s internet blog before you have written them down for yourself.[5] In this environment, executives, management and staff need a common framework for knowing when and how to share emerging intentions with outsiders. This is not to stop the flow of knowledge to the outside – that would be like putting a finger in a cracking dam – but to control it and take the most advantage from the inevitable.

Managing Intent

The first step in establishing effective ways of sharing intent is to have good practices for managing it internally to begin with. It is crucial that firms start handling their emerging intentions as rigorously as they handle their inventions. Today’s intellectual property management systems collect and track invention disclosures from initial discovery through patenting and licensing. They now have a new job to do. Where a scientist is trained and required to file invention disclosures, there must also be training and requirements for employees to lodge and track intent. But because intentions are much more dynamic and intangible than inventions, managing them requires creative methods.

A typical invention disclosure first identifies all individuals that contributed to the idea. These are the inventors. Then it requires the inventors to provide an abstract, make claims, describe the assembly or process, and identify all cases of its communication to others.[6] So an invention is composed of several elements, starting with the inventors themselves.

Intentions are also composed of elements, starting with champions. Champions are the ones who complete the statement, “Given the chance, I intend to…” Champions develop a level of dedication toward their intention, which is best described in terms of how much they would give up to pursue it. Nearly all intentions compete for time and attention. Therefore, champions at the very least give up focus on other matters to pursue a specific intention.

In addition to champions, there are stakeholders – supporters and resistors. Stakeholders have something to gain or lose when champions pursue an intention, but they don’t necessarily have to take action or make sacrifices as champions do. Whether stakeholders are active or passive, a well-formed intention identifies as many as possible.

Intentions have one of two types of goals: to overcome a problem or to capture an opportunity. An intention may simply be to capture a new market or overcome a competitive disadvantage. The champions may also be the inventors listed on an associated patent, if they intend to use the technology strategically. Stephen Fodor, inventor of the gene chip, did more than simply invent a revolutionary technology for analyzing gene expression. He also formed an intention to start a company that made and sold gene chip machines. He founded Affymetrix as a spinout of Affymax, the company he was working for at the time. Like Adobe, he evolved a business model through smart collaboration that today combines scientific equipment manufacturing with a consumables business. But he might have formed a different intention that would have led to a business that didn’t sell machines or consumables but rather sold a gene analysis service. Or he might have simply sold the IP to someone else (as many universities try to do) or elected to build the offering within Affymax instead of spinning out. Each of these different business models spring from different intentions.

It’s worth noting that an invention does not always come with an associated intention. A colleague recently filed his 129th invention disclosure at his company. The technology was potentially useful in a wide range of applications. But his intentions stopped with the filing, the monetary reward he received from his company for each patent, and the respect of his peers – at least those who only had 128 filings. It was an invention without an intention. And it sits on the shelf today.

Sidebar: Searching for Intent

In 1998, I met a Stanford student who had written a paper called “The Anatomy of a Large-Scale Hypertextual Web Search Engine.” The paper described an invention he called the PageRank algorithm. At the time, IBM had published findings on a similar technology, which it called ‘Clever’. Both inventions did essentially the same thing: crawl the World Wide Web, index web pages, and generate better search results based on the number and sources of hyperlink references to each page. We suggested that he come to work for IBM and get a job in research on the Clever team. But he and his colleague had other ideas. They decided to build a web site on their own, something they could afford to do at that early stage in their careers on the back of a little seed money. They intended to create a self-standing resource for organizing the world’s information and making it universally accessible. As the last section of their paper indicated, they also intended to overcome the problem of clutter and conflict-of-interest caused by the dominant advertising driven model of the day’s search engine web sites. [7] For this, they got seed money and collaboration from some of the smartest venture capitalists in Silicon Valley.

In the meantime, IBM remained unclear what to do with Clever. The problem involved a key organizational gap. The researchers working on Clever intended to get the technology used in IBM products and services. But the most obvious market play, to create a web search site, did violence to much deeper IBM intention: avoid direct competition with companies that buy IBM technology – like search engine companies. For a time, spin-offs were discussed, and IBM remained open to licensing Clever. But ultimately the project was orphaned and several IBM researchers wound up working for those two Stanford students, Google’s Larry Page and Sergey Brin. If you believe that Google has changed the world, it is undoubtedly not simply their inventions but their innovative intentions that should be credited.

Beyond the champions themselves, the most important aspect of an intention is the set of gaps standing between what the champions can do and what they want to do. Gaps come in three flavors: technical, commercial, and organizational. A technical gap is the lack of tools, techniques and know-how that would make a plan feasible. This is where an invention connects with an intention to create an opportunity.

Where technical gaps are about the tools, commercial gaps are about the story. The champions must have a compelling story about how their intentions are feasible and how they will have a positive economic impact. This is where the business design is articulated. An intention’s commercial gap can be filled by the presence of another intention. For example, were it not for the intentions of new philanthropic organizations like the Gates Foundation to fund hybrid not-for-profit operating companies, OneWorld Health’s intentions to focus on low-margin drugs would run into a significant commercial gap in their financial story.

Finally, organizational gaps define the social distance between the champions and people with the ability to fill technical and commercial gaps. Organizational gaps also include the problems created by many intentions bumping into each other within firms. In the Google case above, the organizational gap for the Clever team arose because the champions could not overcome a bureaucracy of higher-ranking decision-makers whose own intentions would have been harmed if they had moved forward.

It is tempting to add the notion of resource gaps to the list, because the first thing most champions will tell you is that they need more financial and human resources. But if a champion doesn’t have enough money or people, then something else is wrong. Either the commercial story is not convincing people with money to provide it, or something separates the champions from the people who would give them resources if they heard the story. The former case involves a commercial gap and the latter an organizational gap.

Champions, stakeholders, goals, and gaps: Shared understanding of this short list of concepts and how they interact can be remarkably powerful. Predicting action – and to some degree ultimate success – becomes a matter of weighing the dedication of the champions against the gaps they face. Finding a cure for cancer is a goal that lines up some of the most daunting technical gaps imaginable against a world of scientists and medical champions whose dedication to bridging those gaps is equal to the task. Given enough time, the smart money is on the champions. On the other hand, the negligible challenge of creating a search engine web site was too much for the biggest computer company in the world even though it had the technology and marketing muscle to trump Google’s entry with hardly more than a few months’ work. The Clever project champions’ desire to get their technology used was not equal to the task of overcoming IBM’s organizational gaps.

Every company collects and manages intellectual property in different ways. Likewise, there is no single way to manage intentions. There are methods that attempt to gather written-down intentions, but each of these runs into a gamut of problems. It helps to piggy-back intention management on activities that are already required and accepted. In some companies, the best that can be done is to add intention details to the invention disclosure process. A common related activity that extends beyond inventors would be employees lodging their key performance indicators (aka, personal business commitments). Many firms have deployed online portals for employees to manage their performance commitments, their vacation schedules, their 401k, and other details. If the portal asks the right questions when the employee is filling out performance commitments, that information is a ready-made set of employee-driven data on emerging intentions. In order for this to work, though, there must be an opportunity for the employee to list not only what they commit to do but what they would intend to do if given the chance – even if they know it is outside their current responsibilities. And for this to work, the option to lodge these intentions anonymously is crucial.

Regular innovation events of various kinds are an accepted part of the culture in some firms and can be a means for collecting large sets of intentions. A variety of online tools that are available for managing these events could be modified to collect intentions as well. IBM’s WorldJam, for example, started as an online internal idea “festival” and has now been extended to include partners, customers and other external parties.

All methods must be painstakingly tailored for an organization’s unique culture, and even then they only paint part of the picture. The very best managers and executives use their sense of small moves occurring throughout their organization as a key indicator of emerging intent. They give employees from the top to the bottom of the company specific levels of autonomy and see what they do with it. This can be formalized into venture funds, incubators, programs like Royal Dutch Shell’s Gamechanger and IBM’s Extreme Blue initiatives. Or they can be as limited as a $1000 discretionary travel budget. The key is ensuring that the trend data from all these sources get to the right decision-makers.

Java

In the mid-1990s, individual programmers, first-line managers and enthusiasts from companies ranging from GE to Citibank began attending conferences on a new industry strategy, an open programming language called Java. The notable thing about this was that in the early days, Java was not a strategy at all. The company that invented the language, Sun Microsystems, took a long time itself to recognize Java for the industry changing innovation it was. The massive movement – there are at least three million Java programmers today – seemed at first to self-organize. There was no clear leadership, hardly an agenda, and no real money from any of the major players, including Sun.

But using miniscule travel budgets and spare time, sometimes even using personal funds, thousands of employees from hundreds of companies began showing up at Java gatherings. Smart companies that respected employee intentions tracked the small moves, saw the direction things were heading, and got behind Java while others found themselves backpedaling as the wave swept over the IT industry. The collective power of these front-line employees caused the fiercest of competitors – Microsoft, Apple, Sun, IBM and many others – to work collaboratively, at first with virtually no executive involvement or legal agreements. Several of these firms went on to spend hundreds of millions contributing to a technology that was invented and controlled by their rival, Sun Microsystems.

Framing things in terms of intent can be a powerful way to build new business models, make decisions about which ones to pursue, and better articulate why others are not pursued. It provides a common framework for finding connections across industry silos, highlighting champions and their dedication to specific goals, and making it easier to see where gaps provide opportunities for outside intentions to connect. It is also a way to engage collaborative business innovation while better managing how information is revealed to others.

Sharing Intent

There are three seemingly unsolvable problems with collaborative business innovation. The first problem involves needing to know in advance whether another party truly has the insights, resources and capabilities to fill the gaps in your intentions. The second is needing to know before even sharing your identity whether the other party is likely to take the knowledge of your intentions and use it against you. The third, and by far the most difficult, is in understanding beforehand how the other party’s intentions will change given knowledge of your own.

Companies deal with these problems mainly through informal means. As the case of Cirque Du Soleil illustrates, some industries handle informal methods of collaborative business innovation better than others. Laliberte was innovating in an entertainment industry that has a long tradition of free-agents cobbling themselves together in novel ways for finite projects. He was able to select the different competencies he needed from the pool of free talent and quickly get them on the same team. Informal conversations with industry friends to explore his emerging intentions could be conducted mainly with independent individuals with no sense of divided loyalty between their friendship and an employer. The presence of free-agency in industries like entertainment is a key factor in sharing intentions across boundaries and forming innovative businesses quickly.

Affymetrix has effectively used its Board to forge relationships with companies far from its core business, such as Hewlett Packard. These relationships over time have helped them overcome gaps in their strategic intention to become ‘the Intel of biochips.’ Others have effectively used consultants not only to identify new intentions but also execute them.

Sidebar – The Octopus Business Model

Anyone who has traveled on mass transit in Hong Kong since 1997 would have run across an odd looking terminal sporting the name ‘Octopus.’ The Octopus system uses wireless smart cards from Sony to allow travelers to store money and pay turnstile fares without even taking the card out of their handbag or pocket.

In 1996, a hodgepodge of transit authorities in Hong Kong – trains, ferries, busses – decided to install the cards as a payment system for all forms of Hong Kong transportation. This touched off a series of highly kinetic, highly disruptive changes. First, the Sony card filled the technical gap in an intention to bring the city’s various transit authorities together in a coordinated framework. Today, Octopus Cards Limited, which runs the system, is a joint venture of the major transit organizations in Hong Kong, including MTR, KCR, KMB and CityBus. Insiders say that Hong Kong’s transit players were often at odds and uncoordinated before the move to Octopus. Now they are organized and coordinate through the crucible of the Octopus system. Each of them employs a different kind of business model, each has subtly different intentions, but they connect at this point into something bigger, more profitable, and more useful for commuters.

Shortly after the Octopus system was being used widely by Hong Kong travelers, a new set of players appeared. These people had nothing to do with transit. They were grocers, coffee shops, soft drink vendors, even charities. Their novel intention: use the system to make it easier to pay for their products and services. Before long Octopus transaction terminals were proliferating all over Hong Kong. Park ‘N Shop, 7-Eleven, Starbucks, McDonalds and Circle K all use the Octopus system. As of 2005, the transactions on the system had risen to a daily sum of HK$50 million (about US$6 million). More importantly, and largely thanks to the non-transit vendors using the Octopus system, consumers were storing larger and larger amounts on their cards. When large numbers of people store large sums of money with a single organization, you no longer have a transit authority. You have a bank.

The Hong Kong transit authorities employed a wide variety of consultants and contractors on the Octopus project, and this proved to be important. The insight that there was an opportunity to add banking to the Octopus business model was not necessarily obvious. Fortunately, there were experts still around on contract who knew the banking business from other consulting projects, and they saw the opportunity when it appeared. Octopus applied for a banking license in January, 2003.[8]

Today, Octopus makes more on the interest and investments they manage from unspent stored money of card users than on operating trains and ferries alone. Their economic model – their very business concept of how they make money and the competencies they must maintain to stay in business – is fundamentally different from where they started in 1996 as a group of transportation managers. Is Octopus Cards Ltd. a bank or a transit authority? It would likely not compete well against the incumbents as a pure-play bank, and it would be unlikely now to strip the banking model from its transit business. It is a hybrid.

Because Octopus had consultants with external insights, capabilities and resources already working on the smart-card project, they were able to identify, explore and execute their intentions without having to tip their hand to the other obvious source of know-how – competing Hong Kong banks.

The trouble with using consultants for the purpose of exploring emerging intentions is that they are expensive to retain solely for this reason. Also, the general practice of consulting firms is to avoid inadvertently passing knowledge between clients for fear of creating a conflict of interest. It happens, but in many cases it is not supposed to happen. There is no question that retained consultants, law firms, and merchant bankers are a major conduit for the private sharing of intent between legally separate organizations. But it still relies heavily on serendipity, unspoken agreements, and personal trust relationships. It would be unlikely to see the following line on a consulting firm’s brochure: “We provide you with access to the internal secrets of our other clients.”

Public trust

Ironically, leaking intentions privately to individual advisors or small cadres like one’s consultants or Board can sometimes be more dangerous than sharing them openly. Executive Board members are notoriously loose-lipped within their personal networks. It is partly what one looks for in a Board member. On one hand, we want them to keep our secrets. On the other, we want them to tell people they trust about what we want to do. But the problem with this is three-fold. First, this limits the set of intentions only to those where senior executives are champions or advocates, and Harvard’s Clayton Christensen has well argued that this set of intentions is inevitably watered down from sources toward the middle and bottom of the org chart. Second, if the Board member errs and confides privately in someone who then uses the information to move against you, you may never know until it is too late. Third, if only a small cadre know that the intention is yours, then if someone else appropriates the information and makes its move in the market first, the public will generally believe that it was their idea, not yours.

A lot of people knowing your intentions can be a better move. I made the point earlier that if Steve Jobs had intended, he could have taken the general idea of PostScript from Adobe and made his own independent solution without them. But he didn’t. Did Warnock and Geschke just get lucky? Not exactly. By the time Steve Jobs met with Adobe there was a large community in the Bay Area who mutually knew and supported both Steve and the Adobe team. As the record of email between Bay Area computer enthusiasts at the time has shown, many people in the community knew generally what Adobe’s intentions were. Making off with Adobe’s ideas would have had consequences in the community of support that Jobs now relied upon. Even if he had decided after seeing Adobe’s technology that the right strategy for Apple was to appropriate it, he would have had to find a way to make good for Warnock and Geschke.

The community of trust, not Adobe’s intellectual property, helped ensure fair play. In the end, Jobs not only collaborated with Adobe, he bought 5% of the company as part of a partnership deal that gave the budding firm a strategic leg-up and improved its appearance for future financing rounds. Perhaps Silicon Valley should be seen not simply as a venture capital led knowledge-brokering network as some have suggested, but rather as a community that uses social consequences to impose constraints on what people do with information that is openly shared. In this view, venture capitalists are not just knowledge-brokers. They are more importantly a key arbiter of fair use. If your company is funded (or seeks funding) by any member of the tight-knit VC community and you use others’ knowledge in a way that the greater community feels is inappropriate, you are likely angering people whose VCs know your VCs. For this to work, though, the greater community must know what your intentions are – or at least the rumor mill must be circulating them. No wonder so many hybrid business models from eBay to Google come out of Silicon Valley and choose to suffer the incredible cost of maintaining headquarters there.

Another important aspect of the Silicon Valley rumor mill is that it lays down a set of unspoken rules that serve to maintain credibility in spite of changing intentions. Emerging intentions are subject to a high degree of change. All the business innovation examples in this article involved change from what the champions originally thought their intentions were to what they became in the end. An intention circulating through the rumor mill tags it to the original champions – for later use when claiming credit – while implicitly embracing the likelihood that either nothing will come of it or that the champions will go in a completely different direction without notice. In a market play, the public does not take kindly to companies that introduce offerings only to withdraw them shortly afterwards or that frequently go off in tangents.

What this shows is that a community of trust, using powerful but largely unwritten cues and standards of conduct, can at least partially overcome the three ‘unsolvable’ problems of collaborative business innovation. In the Adobe case, the community brought Jobs, Warnock and Geshke together, because there was a shared sense that they could help each other. This overcame the typical problem many firms have of needing signed non-disclosure agreements up-front but not knowing enough about each other in advance to warrant the effort. Most of the secrets were already out in the open, and yet only as unofficial ‘whispers.’ The community also helped ensure that those with the ideas – Warnock and Geschke in this case – got credit for them by keeping track of sources through the rumor mill. This is slightly more formalized in open source software communities, but the principal is the same.[9] And whether they consciously realized it or not, Warnock and Geschke were protected by the community of trust, which helped reduce the chance that Jobs’ benevolent intentions would reverse after being exposed to the details of Adobe’s internal information.

This works in the Bay Area and other communities, which have traditionally been defined geographically. It also highlights one perspective on why we sometimes run into trouble when sharing between communities of trust, such as a Bay Area firm that wishes to explore partnerships in China. The curbing power of social consequences is similar to gravity. It drops off dramatically with distance. If the arbiters of social (and economic) consequence are not shared, the parties must fall back on the inefficiencies of legal methods. The good news long term is that, of course, the world is getting smaller, and global communities of trust are springing up. Use of online communities backed by global players can socialize ideas while ensuring that everyone knows where those ideas came from.

Nine Options

As the trend toward collaborative business innovation intensifies in most industries, informal methods become problematic. Relying solely on informal methods for sharing intent means managers must wait for serendipity and hope that chance connections do not result in catastrophic exposure of unprotected information. The lack of common practice makes the entire affair inefficient, risky and slow when the intensity around sharing increases.

A company that has a good handle on its intentions is already in better shape to deal with these problems than most. Intentions that are tracked can be managed and routed. Decisions can be made about which intentions will be shared and in what ways. But most importantly, managers that have a handle on emerging intentions can operate at a finer level of granularity, choosing to share elements rather than whole intentions. A manager can authorize employees to share openly a specific technical gap while keeping the actual goals of the intention internal until specific opportunities present themselves.

Managers and individual champions also can utilize more channel options for how different intentions are shared. Today there is an all-or-nothing attitude in many organizations toward sharing unprotected information: share with no one outside or put it on a web site for everyone to see. Managing an intention well requires being able to decide between the following nine options for any element of an intention:

For the individual champion

· Keep it to myself privately

· Share it with a select group of people inside the firm

· Share it with my manager

For the champion in concert with management:

· Share it with select executives

· Share it with everyone in firm

· Share it with external advisors (Board, consultants, intermediaries)

· Share it with select external organizations with whom we have a sharing agreement

· Share it with select organizations with whom we don’t have a formal agreement

· Share it publicly (via crowdsourcing systems, web sites, the press, etc)

In this way, a firm can decide to share an intention’s technical gap publicly on the web but only share its identity, the specific opportunity, and its level of dedication toward capturing it with specific external organizations.

In some cases, employees can attend tradeshows and socialize the gap, even post it in public forums like Eli Lilly’s Innocentive.com web site, without tipping the company’s hand. Automation and good management practices can help avoid mistakes in the process, but just being able to provide simple guidelines helps avoid the gross leaks that already happen as employees interact informally with colleagues, the press, web blog writers, and other outsiders. Sharing a technical gap is usually more actionable than sharing lists of general topics of interest, and they tend to help people think out of the box on how to help solve them.

A summit was held recently between the senior research managers of a semiconductor firm and a biotech company to see if there were opportunities to collaborate. After a day of canned powerpoint presentations and vague discussions about already well-publicized research projects, there was a brainstorming session that went something like this:

“We’re looking into nanotechnology. Are you doing anything in that?”

“No, we aren’t working on nanotechnology, but we have a project on the role of cytokines in oncology. Do you have anything in that?”

Seeing that the two groups were unwilling to engage each other beyond reciting general topics of interest, one frustrated attendee turned to a colleague and said, “We brought the wrong people. We should have sent the interns.” His point is a good one. The mid-level research managers and executives had a lot of things working against them when it came to sharing intent. If a senior executive indicated a direction, it would have been taken by the other company as a signal of an imminent market play. If instead the companies had trained junior employees in common standards for sharing intent, they could have had a much more open dialogue; emerging intentions articulated by an intern are less likely to be taken as a signal of an imminent market play. Sophisticated organizations team low-level employees with senior executives whenever summits with outside firms are called. This was a notable feature of collaborative work on Java even after it matured into a strategic platform with executive support.

With collaborative business innovation accelerating, automation tools, formal standards and innovative sharing regimes are springing up everywhere. Informal communities of trust continue to serve us well, but if there is a way to increase efficiency and reduce the occurrence of inappropriate leaks and missed opportunities — ‘ships passing in the fog’ – then it is worth the effort in this economic environment to try them.

To date, formalizing knowledge management and innovation practices has a dubious history. As one observer put it, “Innovation tends to disappear when you look straight at it.” The level of complexity involved in trying to manage innovation even in a single firm can be overwhelming. Trying to collaborate across companies on top of this is so insurmountably difficult that it is amazing it happens at all. While stories of open innovation are few, stories of failed collaborations are many. Consequently, the market for collaboration tools has focused heavily on the low hanging fruit:

a) Solutions deployed strictly inside a single company;

b) Public crowdsourcing solutions.

The necessary next step is an integrated solution that allows the management and tracking of all nine sharing options through a single portal. Companies like Palo Alto-based Tacit, which have already deployed knowledge management solutions inside many companies and are now deploying public solutions like Illumio.com, are in a good position to bridge the gap and cover the middle ground of external-but-private sharing.

Illumio, in particular, deserves mentioning, because it addresses at least one of the unsolvable problems of collaborative innovation – knowing whether someone else has useful knowledge before you reveal yourself to them. The Illumio idea is to create a community of free agents who have willingly indexed their personal hard drives and made the information searchable to anyone else who also has the Illumio software. Users type questions into a Google-like field, and Illumio, via the internet, uses its index from everyone else’s computers to determine who might have relevant information. It then ranks candidates and sends a private message to each asking if they would like to answer the question. Only those who say yes are then revealed to the person asking the question. Illumio says that participants’ hard drive information is only used to point someone with a question to someone who might have the answer, and that the actual information is never directly exposed to anyone else.

This can work well in a world of free-agents, particularly among the privacy-deprived generation who are growing up using community sites like MySpace.com and peer-to-peer systems like Skype. However, employees of most companies will not likely be allowed to put Illumio on their corporate computers any time soon. This is a notable gap, because many of the experts one would hope to connect with already work for someone else who would not allow participation in such a public system. Tacit’s corporate solution does much the same thing Illumio does, only within single companies. Finding a way to bridge Tacit’s internal corporate systems to Illumio’s crowdsourcing public system could lead to greater collaborative business opportunities for companies.

Sidebar: Lessons from the Antipodes

Following the publication of a 2002 HBR article on the problems of innovation management, the Australian Government teamed up with industry players and ran a landmark commercial experiment designed to test a formalized intention-sharing network. Funded with millions from government and industry and employing a dozen staff for over two and a half years, it was possibly the largest real-world study in collaborative business innovation ever mounted. In the scheme, a non-profit organization was set up to employ dedicated specialists called ‘trusted intermediaries’ who were deployed on a part-time basis inside companies, government research institutes and universities. Companies as big as IBM, Johnson & Johnson, and Canon, and as small as a 15 person biotech startup paid significant fees to participate and fund the cost of the intermediaries’ salaries. The job of the intermediaries was to operate as go-betweens, recording the internal intentions of each organization, logging these in a shared database, and seeking opportunities for the parties to collaborate. Hundreds of emerging intentions, along with nearly as many inventions, were recorded, indexed and tracked for up to two years.

It was a radical approach: collecting confidential corporate secrets from many firms into a single database and trusting a group of people working inside them with complete access to each other and all the data. And while a far flung network of innovation experts operating across both corporate and political borders with direct access to everyone’s secrets is an unlikely proposition at scale, the commercial experiment generated invaluable data on how formal sharing networks operate and how trust develops between community players.

If there is one lesson from the Adobe case, it is that communities of trust work. Forging deep, long-term personal relationships between your employees and the employees of other companies is good, particularly if they are all well educated in how to share – and not share – intent. In the Australian experiment, dedicated innovation experts hired from the outside replaced researchers and managers at the intersection between firms. The best intermediaries, of course, would be employees with deep knowledge of your business and its capabilities who are also good at embracing new ideas. Getting those employees outside the box of a single company and accessing deep knowledge and experience inside other firms is where managing intent becomes especially important.

Australia’s leading scientific institution, CSIRO, runs an ongoing exchange program where their researchers are sent into companies like Proctor & Gamble as internal resources working on specific projects. AMD conducts a similar practice, even with potential competitors. For some industries, this is old hat. For others, it is a radical approach. In general, collaborative teams of various sizes and durations appear to be forming more often across multiple companies in many industries.

The next-generation set-top game console from Sony, the Playstation III, is a result of joint team made up of several hundred employees from IBM, Toshiba and Sony. The project itself is exploring a new business model for them, where each company lets go of a part of its traditional role and relies on the others. IBM microelectronics division becomes a specialist in chip design but hands over chip production to Toshiba. Sony drives the end product, the Playstation device, but all three players work like a single firm on the whole project from chip design through to end product. The joint team is housed in Austin, Texas in an IBM facility that had to be walled off from the rest of the campus and put behind special badge access. Extensive overheads, in the form of education of each employee about what not to share and dedicated staff that tracked shared information throughout the project, was required. In spite of the restrictions, collaborative teams like this one have the benefit of forging lasting personal relationships between the firms, which can lay the foundations for communities of trust between the firms over time even after the project is over.

One of the lingering problems with this approach has to do with fiduciary responsibility. Consider the case of Mary, an employee of one company working inside another firm on a joint project. Unless there are very rigid access controls and enforced restrictions on what is discussed on team – which itself can have a negative impact on the collaborative spirit of the project – Mary can easily find herself exposed to information that was not explicitly covered in the initial non-disclosure agreement. Most of the time, this is harmless enough, but sometimes the information can constitute a significant opportunity to Mary’s firm but also be potentially harmful to the host company if shared. Technically, Mary’s responsibility is first to her primary employer, leaving no doubt what she should do: share the strategic information with her home manager. In practice, it becomes a moral quandary that tests the individual’s personal sense of ethics and leads to unpredictable decisions.

One of the things the Australian experiment pioneered was a modification to the employment contract that addresses this problem directly by explicitly agreeing that all information shared with joint project team members constitutes a commons. Under these terms, Mary and her colleagues are required not to share information they may acquire from each other without prior approval from the source of the information. This makes it somewhat safer to disclose information to the shared employee and promotes a deeper culture of trust.

Beyond dedicated project teams, the rise of insourcing as a staffing model for all kinds of employees presents an opportunity to form long-term persistent communities of trust. Companies insourcing marketing, business development, legal, and research staff in the same way they have acquired contract administrative staff for years is on the rise. One of the unique things about insourced staff is that they report both to the client firm as a contract employee and to the agency that supplies them. That means there is a legally responsible party at the intersection of all the clients who get their staff from the same agency. This creates a legal bridge and an extra layer of accountability that can help when the opportunity to share information between firms arises. As this way of acquiring talent matures, firms may also consider insourcing as a way to build some or all of their joint project teams. This is particularly useful when tacit information will likely bleed outside the boundaries set by explicit non-disclosure agreements.

Given the costs and complexities of sharing intent across legally separate entities, the rise of collaborative business innovation presents new potential advantages to conglomerates. The most important thing in identifying hybrid business model opportunities and then exploiting them is having wide diversity in the people to whom you have direct access. Johnson & Johnson for example is an organization of over one hundred thousand people with deep knowledge in everything from metal forging to the behaviour of DNA. J&J consists of 230 companies operating in a wide range of fields including baby products, drug delivery, medical devices, animal health and pharmaceuticals. Every employee of these operating units is legally able to share knowledge with every other J&J employee to a much wider extent than employees of two companies operating independently. The importance of this becomes obvious with products like J&J’s drug eluting arterial stent, which is part drug and part medical device. It requires pharmaceutical business competencies for handling the FDA and clinical trials on one side and medical equipment competencies on the other for providing a hands-on sales force that trains surgeons and assists with operations.

The techniques described here may help with sharing intent across companies, but they all exact costs in time, money, and effort. A highly diverse conglomerate has at least the opportunity to outpace others by eliminating some of the costs associated with protecting oneself from legal outsiders while also trying to share with them.

Unfortunately, this highlights a problem that persists in most large organizations and is well beyond the scope of this writing to address. Even when people can share information with each other legally, they often don’t.

Peter Drucker famously said, “Management is about arranging an organization’s strengths such that the weaknesses are irrelevant.” When it comes to collaborative business innovation, we must arrange ever-shifting intentions in ways that allow them to bridge each others’ gaps while minimizing collisions. Yet, both with general management and innovation, we can’t always solve this puzzle. There will be times when one innovator’s intentions inevitably do violence to another’s. Managers, staff and the various intermediaries that we employ need common standards to help connect intentions that should be connected and also to keep separate those that should be separate. The judgment required to know the difference is hard won, but it starts simply. The next time you are presented with an idea, ask the question, “Given the chance, what do you intend to do?”