How to Find New Ideas Inside and Outside the Company

“Not all smart people work for you.” – Bill Joy, the co-founder of Sun Microsystems was famous for saying it and companies are well aware of this truth.

That’s why, many seek to tap the potential of “open innovation” by encouraging their employees to scout for new ideas among external partners, such as universities, research institutes, competitors, and customers. Companies as diverse as Procter & Gamble, Henkel, Lego, and Bosch all use technology scouts to import ideas from external sources.

Research suggests that exposing employees to a broad range of external partners can lead to more innovation in a company. But if they spend too much time searching for new ideas outside their firm, this could detract from the work they are supposed to do inside: presumably have less time to attend internal meetings, talk to colleagues, and stay on top of email. So, while they may be increasing the potential for future innovation, their time away from the firm’s activities could negatively affect current productivity.

Linus Dahlander, from ESMT Berlin, with David Gann, of Imperial College London conducted field research at IBM to explore whether searching for new ideas outside the firm led to greater innovation for the company. Surprisingly, respondents’ most common source of inspiration for new ideas was their colleagues inside, rather than outside, the firm. In contrast with current theories of open innovation, people with broader external networks were no more innovative than people with narrow external networks.

Experts, with a broad external network, were more innovative only when they devoted enough time and attention to those sources. Those who spent more time cultivating external relationships reported higher innovation outcomes, in terms of either patent quantity or quality. When people created a broad external network but did not spend adequate time learning how to use the information gained, the costs of being more distant from the organization outweighed the benefits of identifying novel information from external network.

Many managers are keen on the idea that networking and forming external ties can boost the flow of ideas that spurs innovation. But for that to happen, employees need to devote significant time and attention for creating as well as sustaining their external relationships.

Based on the field and related research, Dahlander & Gann identified some ways in which managers may be able to ensure that employees searching for new ideas outside the firm make best use of their time and network, in ways that are likely to enhance innovation.

• First, not every employee needs to cultivate a broad external network to innovate. Although, managers should promote networking outside and inside a company as important sources of learning, the first step in making this happen is by finding out what approach is better for current employees and also by mapping potential networks inside the organization.
• Second, cultivating a broad external network takes more time than people realize and involves certain tradeoffs. Managers can address this by discouraging “networking for networking’s sake,” and encouraging employees to create ties that support incorporation of outside knowledge into their work.
• Third, since it takes time to develop fruitful relationships with external partners, the employees who do this may become more distant from their companies. Thus it is imperative to ensure that these employees not only devote time to networking externally, but also prioritize absorbing and applying what they learn by diffusing this knowledge internally. Thus, managers may want to pair their external “power networkers” with their more internally focused colleagues to obtain the best of both worlds: leveraging the external sourcing of ideas and connecting them with skilled internal brokers who could perhaps better direct the application of novel ideas.

The team at Actuate Business Consulting, a knowledge based management consulting firm in India, believes there are many ways in which the search for external ideas can be beneficial for innovation. However, one cannot attribute sweeping benefits to scouting without considering the opportunity costs. Firms can mitigate these costs by encouraging employees to spend time and energy networking with their internal colleagues, while supporting externally-focused scouts to leverage their outside relationships in order to boost innovation.

If someone is creating a broad network without reflecting on how to apply these learning, then the benefits of networking are difficult to realize. Managers have to ensure that employees searching for new ideas outside a firm make best use of their time and network in ways that are likely to enhance innovation.