Creation nets

I saw a great new article in McKinsey Quarterly (to which you must subscribe, hint, hint). It's called "Creation nets: Getting the most from open innovation" (Brown, John Seely, and John Hagel III, 2006 Number 2).

The idea is that you have to innovate to succeed (and this seems to be increasingly true as competition accelerates), and the best ideas may come from outside your company. CEOs generally agree that internal R&D is among the least successful ways to innovate, according to another McKinsey article I heard about in a recent Peppers & Rogers webinar. (I think the article is called Extreme Innovation. When I've got ten seconds to my name, I'll track down the reference for you.)

Brown and Hagel say:

"Although creation nets thrive in many different parts of today's global economy, they may not be fully visible to casual observers. Many Western executives, for example, go to original-design manufacturers (ODMs) such as Lite-On Technology and Compal Electronics, which are based in Taiwan but have expanding operations in mainland China, to source designs for a wide range of consumer electronics and high-tech products. From the perspective of these executives, they are dealing with a single outsourcing provider. Yet behind the scenes, the ODMs are mobilizing large creation nets to push the performance envelope of the products they design."

But oh, my gosh. Look at the big hole in the program: They've left out the customer in the creation net.

And to make this blunder even worse, it is the customer that actually defines innovation as a business term. New products and services that are not taken up in the market are not innovations.

So, if you leave out the customer during the R&D process, you're playing craps with your capital investments.

This is not to say that inventions of the past haven't, by chance, hit upon a latent (i.e., unknown) need of the market. But chance it was. Shall I mention craps again?

And to top it off, the authors were so close to getting it right, I'm amazed they left the customer out. The reason that creation networks actually create value is that they are constructed on the basic building blocks of a new kind of economy: one that is transitioning from an information economy (post-industrial, founded on information and knowledge sharing via computer technology) and a digital network economy (post-information, founded on the ability for all players to act on and improve knowledge and process outputs). Connectivity, information, motivation and co-evolution of knowledge are all parts of this network.

This is why customer experience management is critical to creating value for your company. The customer experience is an interaction (both you and the customer are players) -- it is not a "message broadcast" or "information delivery" marketing play. You must enable interactions so they can improve. That is, if customer experiences are what you want to manage and improve, then they must reveal actionable information to you (and probably to the customer). If you don’t manage customer experiences this way, you’re stuck in the information age at best – and perhaps in the industrial age at worst, where marketing and public relations were all extruded from the top.

A conscious customer strategy that brings customers and prospects into your innovation processes can really pay off for you. And, you basically have no choice in the matter if you want to be part of the new economy. You have to employ creation nets, and customers have to be part of them. You can't capture marketshare in a net filled with holes.