How Companies Can Utilize Outside Knowledge

The notion that ‘whoever you are, the smartest people work for someone else’ has heralded a boom in open innovation, as organizations strive to make innovation a collaborative exercise.

A recent paper explores the two core ways in which organizations pull in outside knowledge: partnership style licensing with cross-company teams, or standard licensing for external knowledge.  Regardless of the approach taken, a crucial aspect is the attention given to each project by the leadership team, with this especially true for more radical forms of innovation.

Managerial attention

The study examined two distinct forms of attention:

  • Top-down, whereby the attention comes directly from the C-suite.
  • Bottom-up, whereby attention comes from researchers and other front line staff.

The researchers analyzed 50 leading pharmaceutical companies, with their various licensing agreements tracked over a ten year period.  They gauged bottom-up attention via the areas their R&D departments focused their patent attention on.  For instance, if patents were recorded across multiple areas, the attention was scored as low, whereas when efforts were concentrated on a few areas, each area was deemed to have more attention given to it.  Attention was especially dissipated when researchers were allocated to numerous tasks at once.

To measure top-down attention, the team examined news sources to understand the strategic direction of executives.  They then compared these with the licensing agreements found for each company.

Showing importance

Both the bottom-up and top-down forms of attention were crucial when bringing in external knowledge, especially with a standard license that was designed to deliver innovative impact.  The strong attention of management significantly increased the likelihood of the innovation delivering results, largely because the external knowledge is more likely to be capitalized upon.

“Top management has a sizable role because not only do they influence their organisation, but they also affect assignment workloads, or the direction of their R&D teams. Managers know that if they assign too many projects or if the company is working with too many different technological areas, R&D teams are less likely to benefit from the external knowledge they bring in,” the authors say.

Things tend to fall apart when managers lose their focus, purchasing external knowledge in fields that are already overloaded and therefore with scant attention to devote to its successful utilization.  Such knowledge tends to fall through the cracks.

By contrast, the best results appear to be when highly focused knowledge is given to teams with the capacity to utilize it.

It’s a timely reminder that whilst we often give a lot of attention to money and brainpower, we don’t perhaps give time and attention itself the emphasis they deserve in terms of delivering breakthrough innovations.

“When a company buys outside knowledge, it’s vital for managers not to fall into the trap of believing that that purchase is a completed event. Buying knowledge off-the-shelf does not necessarily make for innovation. Managers must continue to pay attention to what happens next if their company is to create something completely different. Attention is a key ingredient of innovation,” the authors conclude.

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