Aachh... Thomas beat me to the punch with his piece on John Hagel's Institutional Innovation post. The thesis of which is...
In thinking about innovation, executives would be well served not tofocus exclusively on finding talented product design maestros or evenprocess design experts, but rather creative institutional designers whocan challenge and re-think their existing institutional arrangementsfrom the ground up....
...In a world where profitable growth is the key to value creation,companies need to find ways to sustain and amplify the rewards ofinnovation. To do this, executives will need to expand the scope ofinnovation well beyond product and process to a much broader terrain -institutional innovation.What do I mean by institutional innovation? It redefines roles andrelationships across independent entities to accelerate and amplifylearning and reduce risks. The next generation of institutionalinnovation will seek more productive ways to connect with talentwherever it resides and build relationships that foster and focuslearning rather than taking the walls of the enterprise as a given.
Institutional innovation in the twentieth century focused oncreating scalable institutions through standardized product design anddesign of business processes to cost-effectively serve mass markets. Inthe twenty first century, the focus of institutional innovation willshift to foster scalable learning across institutions.
And Thomas is right, you really do need to read the whole post. If institutional innovation in the 21st Century drives scalable learning, then one of the foundations of scalable learning will be social networking. Why social networking? Well, lets take a look at the Design principles Hagel lays out for institutional innovation. These include:
Diversity. As Scott Pageand others have persuasively suggested, new insight and learning tendsto increase with cognitive diversity.
Relationships. It is not enough to havecognitive diversity. By itself, cognitive diversity often breedsmisunderstanding and mistrust, seriously limiting the opportunity forpeople and institutions to learn from each other. Long-term trustbased relationships, on the other hand, make it easier to engage in productive friction
Modularity. When activities are tightlyspecified and hard-wired together, the opportunities forexperimentation and tinkering are very limited. Segmenting people andactivities into discrete modules with well-defined interfaces can helpto create much more space and opportunity for distributed innovationand learning.
Federated decision-making. To encouragedistributed innovation and learning, it is helpful to distributedecision-making into self-governing units while at the same clarifyingdispute resolution and escalation protocols to ensure that promptaction can be taken across business units when required. If structuredappropriately, these dispute resolution mechanisms can become fertilegrounds for productive friction that in itself drives learning.
Reputation mechanisms. As relationshipsscale, it becomes harder to develop a clear view of the full range ofexperience and expertise available to address challenging problems. Reputation mechanisms can play a vital role in enhancing findabilitybut also help to reinforce incentives to participate and contribute.
Feedback loops. More broadly, there isenormous value to investing in performance measurement systems andstructuring performance feedback loops so that participants can reflecton their practices and focus their efforts to improve performance.
Incentive structures. Focusing narrowly onnear-term cash incentives undermines the ability to build trust andfoster learning. By expanding incentives to include talent developmentand capability building, institutional innovators have the potential toturn zero sum games into positive sum games
Now social networking alone obviously cannot instantiate these design principles into the heart and soul of an organization but it sure can help foster viral spread of these principles in an enterprise. Especially the principles of Relationships, Federated Decision-making, Reputation mechanisms and Feedback. These design cornerstones are today actively supported by social networking solutions and can be comprehensively supported in the enterprise Social Network implementations.
SAP for instance uses social networking and other systems internally for Reputation mechanics and Feedback. Other "20th century" systems are in place for incentives and federated decision making but here we need pure institutional design work to radically enhance the state of these institutional cornerstones. The Business ByDesign launch is a perfect opportunity for SAP teams to introduce Federated Decision Making for instance and we as a team have been discussing it. But we'd love to get some of these other large change issues on the table.
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