SuperNova 2005: Innovation Networks Shaping Global Commerce

John Seely Brown (aka JSB) is addressing the audience on the topic of his latest book: The Only Sustainable Edge. I have just started reading it, and it really looks interesting. Below are notes I jot down during his talk.

JSB's main point is that companies need to leverage the capabilities of their suppliers, and innovate at the network level - including suppliers' own innovation.

He mentions a few examples:

• Toyota picks up suppliers on costs and cost structures, as opposed to prices. The company has developed a world class excellence on cost management which allows them to understand at a deep level the production costs of each of their suppliers/partners and help them optimize these. They also expect suppliers to contribute their own innovation on materials, parts and processes to optimize the way Toyota's requirements will be met.
  Any Toyota employee can shutdown an entire production line when a fault is detected. This allows process engineers to review the fault, and its context, as a single unit. All workers then get trained on the fault, and process changes required to avoid it.
  
• JSB contrasts this approach with Detroit big 3's that are typically selecting suppliers on costs, squeezing them as much as possible. Instead of the deep dialog and collaboration used by Toyota, they have a "do as I say" approach. And they won't try and engage in long term relationships, going as far as shopping around ideas from a given supplier to try and get a more favorable price from another one - that would not need to recoup R&D costs.
  
• The Chongqing motorcycle ecosystem drives the bottom up development of  products by swarms of local suppliers - not based on detailed blueprints, but as the results of conversations amongst these suppliers as to how they can make their respective elements fit in. About 40% of the world's motorcycles are developed other there now, using these collaborative processes.
• Taiwanese ODM's process is to assemble products (digital camera, plasma TV,...) from major parts produced by a large network of suppliers. The product will have been specified by the ODM's customers in terms of functionality and price point. Innovation will happen on the fly between the ODM and its suppliers, in order to deliver the right parts at the right price point.

In this context of global innovation, off-shoring is therefore not just about lost wages, but the ability to tap into niche sources of innovation which happen to be built in a foreign ecosystem.

In call centers abroad, ratios of managers to employees are much higher than in the US (25% vs 4%) because of the perception that middle management is enabling/fostering learning in the organization. This allows these call centers to "grow" in sophistication in the type of products/services they can deal with. The example of Infosys, one of India's largest IT outsourcers, is mentioned for the investment made in training its workforce to meet clients' needs, and improve their processes (25% middle managers' time is spent on these tasks).

The challenge for companies is therefore to build an edge through capability building: getting better faster by learning from others within and across ecosystems, and deploy open innovation by engaging with different parts of this ecosystem.

As a side note, JSB needs to change the colors of his slides: bright green on white does not work for me at 8 in the morning.

Tag: supernova2005

Comments

[David Tebbutt]

The difference in attitudes was summed up by John Glenn (astronaut) in the 60's: "I was thinking that the rocket had twenty thousand components, and each was made by the lowest bidder"