The Key to Innovation in the 21st Century:

Many people are confused about innovation:  What is it?  Where to find it?  How to create more of it?

In the 20th Century, innovation was used to describe three different phenomena: "product innovation", "process innovation", and "business model innovation".  The more appropriate word for "product innovation" is "invention".   "Process innovation" is really just a euphemism for "cost cutting" and "retreat".  The persistent waves of dot.coms and the hard lessons of globalization stand as teachers of the fundamental principle that the only real and lasting form of "innovation" is "business model innovation".

Just as "process innovation" has proven to be effective in managing the denominator of the profit equation, "business model innovation" is the secret key to unlocking the power of the numerator.  Reconfiguration of the relationships in a particular industry's value network provides an opportunity to re-balance the contribution and reward rules, which tend to move out of control over time, even to the extent of "dis-intermediating" non-value-adding players.  It is amazing how, over time, certain elements within any industry continue to extract a large share of the profits while their value contribution approaches zero.  With the ultimate goal of providing higher end-customer value and service levels, at a more competitive price, business model innovation is the key to customer value transformation.

In management science, new models are typically discussed and explored long before they are able to be operationalized.  A number of forward thinking consultants clued into the concept of virtual organizations and their potential value before discussion of this topic was common place.  In Competing for the Future C. K. Prahalad and Gary Hamel identified the speed advantages of collaborating with organizations that already possess key competencies to accelerate competency acquisition, as part of managing the migration path to the future.  In 1994 Benjamin Gomes-Casseres presented an article "Group vs. Group: How Alliance Networks Compete" in the Harvard Business Review (July, 1994).  This article explores the dynamics of what we might call today a collaborative or networked business model.  Although this type of business model has been very interesting to management scientists and academics, the practical obstacles to making them work have prevented their springing up in every corner.

The Internet has certainly enabled some dramatic examples of business model innovation (Amazon, eBay, et al.), but mostly for brand new, clean slate companies.  For existing companies with history, baggage, brick and mortal, the enablers for creating enterprise extensions, let alone multi-enterprise collaborations, simply have not existed or have been prohibitively expensive.  The only practicable alternative has generally been to create a new venture.

Perhaps the largest obstacles to this type of collaboration have been intended and unintended barriers that organizations establish that prevent sharing information easily.  A significant amount of effort has gone into information security without a commensurate amount of effort going into value-creating information sharing capabilities.  Such capabilities are a prerequisite to collaborative business model innovation, and most organizations are structurally "un-competent" to engage in this type of activity.  Nowhere is this more apparent than in the Federal Government, especially the Department of Homeland Security.

No wonder, then, that innovation is such a rare phenomenon.

Idetix eScore Tools provides the keys required to unlock the value-creating power of collaborative business model (a.k.a. "Virtual Enterprise") innovation.  By providing the most efficient means possible for sharing information between organizations, collaborative innovations will define the new price of entry.