Tag Archives: external innovation

Internal vs. External Innovation

Turnover

Turnover by Industry

There is a lot of debate about the scope of innovation management, principally, whether it should include “external” participants or just “internal” participants.  So, are you missing something if you focus your innovation efforts inwardly?

There several good reasons for working only with internal people. First, it tends to be easier to manage innovation from internally-based sources because you know the work environment and control management, resources, rewards, and other organization-based factors.   Secondly, there is typically less junk, less quantity, more focused innovation, and better understanding of the total competitive environment.

There are also many good reasons for including external participants as well.  First, there is a significant amount of research that concludes  “outsiders” are better able to solve problems.  Second, the perception organizations become stagnant and aren’t capable of creativity unless new people/ideas are brought into the mix.  Let’s examine both of these reasons.

Outsiders Solve Problems better than Internal People

I don’t dispute that external people are better able to solve problems and inject creativity, however, even these “outsiders” have peripheral knowledge of the problems at hand.  That is, if you are trying to solve complex electrical engineering issues, then you will most likely have to include engineers.  While you have a very good chance of solving the problem by uninterested, distant people (i.e., a mechanical engineer who spent time with electrical engineers or an accountant who used to work at an engineering firm), they still have to grasp the nature of the problem.  Two pieces of research capture the essence of this thought:

  • At the Harvard Business School, Karim R. Lakhani created a process for “broadcasting” tough scientific challenges to outsiders.  They found that people with expertise on the margins of the challenge quickly offered tenable solutions; almost a third of the “unsolvable” challenges were solved.
  • It’s a time-tested phenomenon. In the book, See New Now: New Lenses for Leadership and Life, de Jaager and Ericson report, “A study of the top fifty game-changing innovations over a hundred-year period showed that nearly 80 percent of those innovations were sparked by someone whose primary expertise was outside the field in which the innovation breakthrough took place.”

Internal People are Stagnant

Another aspect of internal vs. external is the notion that long-term employees are not capable of coming up with new solutions because they are jaded on past experiences, i.e., “We already tried that”, and the problem overcoming the not-invented-here syndrome.  However, consider an organization with 10% turnover per year.  In five years, approximately 40% of the organization will be new.  There are new positions, new thoughts, information on competitors, new information on technologies, and so on.  So with this many new people, how much not-invented-here mentality will you really have?  You can have it, but management has to actively promote it.  Also, many long-term employees become disillusioned with management’s lack of follow-through, lack of resources, and low priority for innovation.  These are issues that are much easier to solve internally.

In conclusion, the difference between the results you’ll get from internally-based innovation versus externally-based innovation can be very similar.  If it’s not, then look to your management to instill a better innovative culture.