Creation nets: Harvard Nails It

What McKinsey Missed. And risk.

As soon as I shoot a cannon across the bow of McKinsey because they left customers out of the creation net, I pick up the April issue of Harvard Business Review to find an article called Manage Customer-Centric Innovation -- Systematically by Larry Selden and Ian MacMillan.

They recommend a handful of steps to get customers involved. The "extend" part of their prespcription is a big challenge. You must extend both your capabilities and your segments. How do you do this without disrupting your business model and finances? There may be no way to do this, particularly if you are at a cross-roads with your company or with your sector. In fact, disruption is probably inevitable.

But you will want to manage that disruption. First, look at how others, beyond direct competitors, have succeeded in extending their capabilities and segments. Essentially, you're gathering business intelligence about your (direct and indirect) competitors' creation networks. How have other companies accessed and serviced your markets and do they define their markets differently?

Next, look at your partners and suppliers. What markets and capabilities work for them? Why?

One key insight is that an innovation strategy is risky, so you have to move the costs of those risks somewhere -- in your pricing or your financial structure, for example. You can also move some of those risks out to partners and suppliers, if they are eager to work with you.

Should you innovate? The answer lies in another question: Who is setting the pace for change in your sector? You? A competitor? Or customers?