John Hagel and John Seely Brown
As a management topic, innovation couldn't be hotter—even as the economy is cooling down. But how much innovation is there on innovation itself? Nearly everybody goes beyond products and services to think about innovations to the core processes of the firm. Some even subscribe to the notion of management innovation. Yet all of today's discussions about innovation are bounded by a common flaw: They stay cloistered within the four walls of the enterprise.
Innovation is needed within companies, to be sure. But today's most powerful and exciting forms of innovation are taking place across company boundaries. Think of them as institutional innovations—the changes companies make to redefine roles and relationships across independent entities to deliver more value to the marketplace and to society. Institutional innovation transcends what an individual inventor or even an innovative company can do. Innovation is a decidedly social process encompassing diverse individuals, corporations, communities, networks, and regions.
Rather than taking the four walls of the enterprise as a given, today's most promising institutional innovations seek better ways of connecting talent wherever it resides and building relationships that foster and focus learning.
An Effective Research Road Map
Consider the powerful example of the Silicon Valley nonprofit Myelin Repair Foundation (MRF), which provides an early glimpse of next-generation institutional innovation (BusinessWeek.com, 11/15/07) as it emerges on the edge of medical research and drug discovery. As its name suggests, MRF has a very specific target—to mobilize and focus research on a particular biological process, myelin repair.
Myelin is the substance that coats our nerves to facilitate the passage of electrical signals. In multiple sclerosis, that myelin coating begins to degrade, resulting in a host of symptoms, including fatigue, blindness, and loss of balance, ultimately leading to paralysis and death. The MRF was founded by Scott Johnson, a civil engineer and MBA by training, who himself suffers from the disease.
What's new and exciting about MRF's approach to myelin-repair research is that it creates a distributed network of researchers within diverse academic disciplines such as neurobiology, immunology, and neurology from independent academic institutions in the U.S., including Stanford University and Case Western Reserve University. These researchers collaborate in defining coordinated research initiatives across institutional boundaries—sharing results with each other in real time.
By jointly developing a research road map, participants construct a shared model of possible explanations of the myelin-repair process and pursue parallel, rather than sequential, problem-solving. This approach, combined with rapid iterations where participants review each other's results and refine their approaches based on this shared learning, dramatically compresses the time required for research to generate promising discoveries.
Collaborative Effort and Intellectual Property
To date, MRF has recruited four top researchers, each of whom runs a lab of 10 to 18 research staff who all contribute full-time to this growing, distributed network. These researchers maintain their existing institutional affiliations but join together in the collaboration infrastructure created by MRF, which includes joint research reviews three times a year, monthly conference calls, a shared audio/video/data platform to virtually link all participants, daily interactions, and the archiving of critical intellectual property for patent protection. MRF supplements the capabilities of this core team by contracting other academic researchers and commercial entities to expedite completion of the research plan and move discoveries into commercial drug development and clinical trials.
MRF signed intellectual-property agreements with each of the academic institutions involved, with which it will share royalties generated from discoveries it has helped to fund.
Lawyers engage with the researchers at an early stage of the research process to identify patent opportunities and document contributions to the discovery process so the appropriate researchers are credited for their contributions. And MRF also helps to identify appropriate commercialization partners in the biopharmaceutical industry for license agreements on patents to speed the transition from lab to clinic. With its 50% share of anticipated royalties, MRF will be able to fund even more research in the years ahead—and ultimately become self-funding.
Accelerating Results
But the real incentive for researchers entering this collaboration was not the MRF funding or the potential royalties down the road; it was the opportunity to make faster progress in their own areas of interest and to deepen their own understanding by working with other leading-edge researchers. The researchers are coming together in this process network because they see an opportunity to make rapid progress in solving large, complex, real-world medical problems.
As Ben Barres, professor of neurology at Stanford and one of the four senior researchers collaborating in the network, notes: "We are bringing together academic scientists that operate in an environment where traditionally data cannot be shared until after experiments are complete and published. Within the consortium model, every time the team gets together, sparks fly. There's no question that better teamwork in science can significantly accelerate results."
Scott Cook, the founder of Intuit and an early contributor to the MRF, observes: "The Myelin Repair Foundation is pioneering a new way to organize medical research that speeds breakthrough drug discovery. It uses a unique approach to shared incentives to produce intense collaboration and rapid idea-sharing among the leading neuroscience centers."
Time Frame and Takeaways
In 2004, the MRF undertook a five-year, $25 million research program with the goal of licensing its first myelin-repair drug target by 2009. Conventional research approaches would take 15 to 30 years to identify and validate a single target suitable for drug development. The MRF is currently pursuing leads for 18 targets and is confident it is on track to license the first one by next year. Before coming into the MRF network, the primary researchers had accumulated 125 years of research experience and, in that time, filed for two patents. In the few short years since the MRF network came together, they have already filed for nine patents with eight more in the pipeline.
So, what can executives take away from the MRF story?
1. Institutional innovation amplifies other forms of innovation. The researchers in the MRF network are generating significant discoveries, leading to much greater patent activity. The MRF itself has innovated on the discovery process. But underlying all of this innovation is the institutional innovation driven by Scott Johnson and his team—finding ways to more effectively coordinate research activities across distributed teams in very different disciplines and across major institutional boundaries. As the race for talent intensifies, all businesses will benefit from innovating innovation at this fundamental level.
2. Customer co-creation will become even more profound and sustained. The MRF took shape under the leadership of an MS patient, not an academic researcher or a pharmaceutical company. Experiencing MS firsthand, Scott Johnson had little patience for the slow, sequential pace of traditional medical research and a strong motivation to pioneer innovative approaches to generating promising treatments. Most of the stories of customer co-creation to date spotlight relatively narrow and episodic input provided by customers into specific features or products. Johnson's involvement in the medical research process is far more engaged: He actively participates in the sessions that define the research agenda.
Companies need to seek out customers with the kind of insight and passion that Johnson brings—and find ways to engage with them in much more fundamental ways than conventional market research or customer forums permit. Customers represent an important edge that will drive business innovation in the future. Companies should also remember they are customers themselves and find ways to promote institutional innovation among suppliers and other business partners.
3. Boundaries between domains of knowledge represent significant edges for innovation. Knowledge silos help to deepen knowledge, but they can become significant barriers to insight when experts find it difficult to connect across them. The MRF has paid a lot of attention to building shared understanding and respect across very diverse domains of research. By bringing together experts from such different areas, it's possible to generate insights that simply would not have arisen from individual domains.
4. Innovation is not just about idea generation. Too often, discussions of innovation tend to focus on ways to generate more creative ideas. In our experience, the core innovation challenge in the business world is rarely about generating more ideas. Sift through any business organization and there is an abundance of ideas. The real challenge is to mobilize a critical mass of resources behind promising ideas and to create the mechanisms to more rapidly test and refine ideas as they move from concept to delivery. This is one of the core insights of MRF's institutional innovation—it focuses on accelerating the idea-testing process and creating the necessary incentives to rapidly scale the most promising ideas into commercially successful products.
5. Distributed innovation does not necessarily mean loss of intellectual-property protection. A key institutional innovation of the MRF was to develop a way for participants to file for patent protection more rapidly while still sharing their discoveries traditionally via publication in peer-reviewed journals. Without adequate patent protection, the intellectual property generated from MRF's research would have little appeal to biopharmaceutical companies that will have to invest significant amounts of their own money to commercialize products. At one level, the MRF has created an open-source platform engaging peers from diverse institutions while finding a robust way to protect intellectual property.
John Hagel and John Seely Brown are co-chairman and independent co-chairman, respectively, of Deloitte LLP's Center for Edge Innovation. John Hagel writes a blog at Edge Perspectives. Their monthly column, Innovation on the Edge, explores what executives can learn from innovation emerging on various forms of edges, including the edges of institutions, markets, geographies and generations. Sign up here for an RSS feed.
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