Friday, December 15, 2017

Open Innovation and Closed Minds: Why NASA Used Open Innovation Sometimes but Not Always

Open innovation is heralded as a way to advance technology and product innovation quickly and cheaply. It is modeled on the open source software movement, which is based on computer programmers donating their time to build software components, check their own work, check others’ work, and correct mistakes. Among the famous software suites made through open source, Linux is a computer operating system that is used in everything from cellular phones to web servers, and is often involved when you are retrieving and reading blog posts like this one. Open innovation extends this model to innovations outside computer programming by organizations posting problems that anyone interested can help solve.

The idea is to use volunteer efforts to get innovations for free (almost a Dire Straits lyric), which sounds like a good deal. Unfortunately, this has proven difficult for many organizations, and research in Administrative Science Quarterly by Hila Lifshitz-Assaf has found out why. Her careful study looks at an open innovation initiative in a very innovative high-tech organization: NASA. In 2009, NASA tried an open innovation experiment that led to some speedy, inexpensive, and impressive solutions. But its relationship with open innovation since then has been inconsistent, with some NASA professionals using it to great success and some not. Why the difference?

In a word, the difference is identity. Innovations are typically done by highly educated people who are trained to follow careful processes specific to their organization and to their scientific and technological specialization. These people have a professional identity built around their unique skills as problem solvers for the organization. For people with such an identity, what does it feel like to have amateurs solve problems instead of them? Open innovation draws much of its strength from individuals who may lack formal education, don’t follow the predefined process, and aren’t even employees of the organization. Naturally there is an inherent conflict between the insiders and the open innovation use of outsiders, and some insiders are tempted to seal the organization off from the outside sources of innovations.

Why did some parts of NASA embrace open innovation? Again the answer is identity. Those who could redefine their professional identity to be a solution seeker, not a problem solver, became adept users of open innovation. For a solution seeker, the existence of a solution is what matters – not who made it, and not how it was made. It is a completely different way of thinking of oneself and of solving problems.

The division between problem solvers and solution seekers resulted in NASA professionals adopting various approaches to the open innovation initiatives advocated by their leadership. Problem solvers maintained boundaries, either explicitly or through the pretense of openness but actual closure. That way they could maintain their focus on their individual efforts and internal innovations. Solution seekers looked for outside solutions, sometimes simply embracing externally developed solutions, and sometimes adapting external solutions so that the final solution became a mixture of outside and inside effort. Problem solvers may hold tight to their identity, but open innovation is sure to continue gaining ground. “Get your innovations for nothing, get your praise for free” is an appealing tune.  

Lifshitz-Assaf, Hila.2017. "Dismantling Knowledge Boundaries at NASA: The Critical Role of Professional Identity in Open Innovation." Administrative Science Quarterly, Forthcoming.

Thursday, December 7, 2017

Minimally Invasive Investment: How Ventures Interact with Investment Partners

Of the many kinds of new businesses that are created every year, researchers and policy makers have been most interested in the ones that pursue innovative technologies and market opportunities. They are the ones with the greatest impact on the world, and much effort has gone into studying what makes them innovative. But let’s take a broader view on this question. What if firms around them also affect their innovation – specifically their investment partners, firms that supply them with money and expect returns from their innovations? The answer would be especially interesting if different investment partners had different effects. And as it turns out, they do.

An article in Administrative Science Quarterly by Emily Cox Pahnke, Riitta Katila, and Kathleen Eisenhardt shows how this happens. The important difference is how each organization doing investment has people trained in specific ways, and adhering to specific norms, as a result of their recruitment and career histories. For innovative ventures, venture capital (VC) firms are special because they invest in potential – in firms that could easily fail, and usually do, but have very significant profits when they succeed. VCs are different from sources of corporate venture capital (CVC), which are investment arms of corporations. They are special because they invest in fit to the corporate strategy – firms that develop products and technologies that match so well that they can become integrated into the corporation or at least use its resources well. Then there is the third kind of special investor—government agencies. They are special because they are interested in science and technology with significant societal impact.

Pahnke, Katila, and Eisenhardt looked at what happened to ventures after receiving funding from each of these sources by examining a specific high-technology industry—medical device firms developing products for minimally invasive surgery. The results were clear. The commercially oriented VC investors were good at exactly that. Their firms launched more products after the investment but did not get more patents approved after the investment. The strategically oriented CVC partners were not good at anything that could be measured independently of their strategy. No more patents were approved, and no more products were launched. That does not mean they weren’t good investors, because they could well have selected and improved the strategic fit of their firms. The government was not good at product development, having no effect there, and appeared to harm patenting, with a reduction in patents after entering the investment. That seems bad—but it is actually unclear, because government may be interested exactly in the type of scientific development that is useful for society but hard to turn into patents that give commercial benefit.

So what is going on here? We can tell that one type of investment partner – VCs – has clear and measurable goals and is good at accomplishing them. For CVC and governments, it is harder to tell. Either they are not doing well, or their goals are not exactly what we can measure. Looks like an interesting topic for further research, because each of these investment partners places big bets on our future.

Pahnke, Emily Cox, Riitta Katila, and Kathleen M Eisenhardt.2015. "Who takes you to the dance? How partners’ institutional logics influence innovation in young firms." Administrative Science Quarterly 60(4):596-633.

Friday, December 1, 2017

When Nanotechnology Shrank: How Communities Police the Boundaries of Their Field

It is ironic that I should write a post on how communities of science police the boundaries of their field shortly after writing a blog post on how nations hurt themselves by policing their boundaries. But a paper in Administrative Science Quarterly by Stine Grodal has exactly that theme and some important conclusions. Plus, it is about nanotechnology, something we have heard about and think will shape the future of the world but don’t understand well.

In fact, what I just wrote echoes the start of the nanotechnology field. It was a term coined and advocated by futurists, it was and still is claimed to be a source of advances in science, technology, and business that will change individual lives and society, and it has been redefined many times. The redefinitions of the field are important because they are partly a consequence of these futurists and others with an interest in the term, especially the government, grappling with the question of how best to define the boundaries of the nanotechnology field so that it attracts the right kind of support from others and makes the kind of advances that are desired.

Nanotechnology became a very successful field, in part because of government intervention in the traditional way: giving out money to those engaged in research on nanotechnology. The other source of success was interest in nanotechnology companies from venture capitalists, who expressed their interest the same way: they provided money. This initiated an identity crisis because it soon became clear to the futurists that there were many in the world with little interest in their vision but significant interest in money and other resources that were becoming available, and they had the ability to fit their activities into the loosely defined field of nanotechnology. After all, entrepreneurs are well known for creativity in the pursuit of funding, and scientists are (this is less well known) extremely creative in the pursuit of funding.

The result was a backlash. The creators of the field, the futurists, looked at all the newcomers and their flexible definitions of nanotech, and thought they were changing the meaning of the term and were pursuing different futures than the one originally envisioned. Government officials saw a flood of funding applications and realized that the topics were too spread out to provide any kind of consistency unless the funding agency enforced it. Government interest in nanotechnology started with the futurists’ initiatives, so officials could ask the futurists for help in making a stricter definition of the field. The futurists were pleased to help, given that the field was losing clarity and they were losing funding as competition increased. Interestingly, even some interlopers such as scientists and entrepreneurs started rethinking the meaning of nanotech, seeing it as too trendy a term and not well enough connected to their work.

Nanotech started out as a word with a clear symbolic vision and few adherents. Money was added, and it became unclear and populated with many newcomers, members of peripheral communities. This makes sense. The next step is the surprise, because everyone in the field started looking around and seeing a need to sort things out. The founders and funders of the vision stayed, and the newcomers started leaving. That’s how nanotech shrank, and it could well be how many other fields expand and contract over time.