Wiring the open-source enterprise by McKinsey Quarterly

If you are a usual reader of the blog, reading another excerpt of a McKinsey Quarterly is not a novelty. So I could resist to publish some excerpts from the article "Wiring the open-source enterprise". I hope you enjoy it. 

Social technologies lie at the core of a new model that spurs user participation and speeds up product innovation.

Open innovation isn’t a new phenomenon. The first Oxford English Dictionary was an open-source project: editors solicited the participation of hundreds of amateur volunteer readers. Fascinating examples of information sharing and innovative intellectual-property arrangements can also be found in the evolution of Cornish pumping engines in the 18th century and of blast furnaces in northern England during the 19th century. Software itself was distributed free of charge during the 1950s.¹

But open innovation has been gathering force in recent years, thanks to the emergence of the Internet as a global information-sharing network; the increasing importance of digitizable, knowledge-based products and services; and the sheer volume of data being generated, processed, and stored by a wide range of enterprises. From a beachhead in software (see companion article, “Managing the business risks of open innovation”), open innovation has spread to a range of industries that use external insights to boost internal R&D efforts or even rely on outside networks for core product ideas. Our latest research on Web 2.0 technologies reveals that more and more executives are taking advantage of these opportunities and foresee the need for organizational change if their companies are to compete in a more open, networked environment.

Organizational change to catalyze contributions

While the number of open-source projects is growing rapidly, research has shown that about 90 percent of them don’t fully achieve their potential. Leaders will need to know how the innovation landscape is evolving and be ready to respond by following some basic tenets.

Start at the grass roots. Our survey research indicates that nearly half of the early adopters of collaborative technologies promoted their use by mobilizing people on lower levels of the organization. Hierarchal, top-down controls rarely succeed, since most creative interactions are tacit and dynamic.

Develop competencies at the edge. Companies best leverage social and knowledge networks by venturing beyond corporate boundaries, as P&G has done. But opening the gates of the enterprise doesn’t guarantee a robust network—and could compromise valuable intellectual property. Success depends upon the ability to gain the trust of users, transparency, and a deft hand in managing interactions.

Understand what makes participants tick. Users and consumers have different motives for contributing their time and skills. For some, the goal is simply recognition; for others, rewards or revenue sharing may be necessary to induce valuable efforts. Determining what matters for your priority constituencies is crucial.

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