Tuesday, August 21, 2007

NEC doesn’t get open innovation

Last week, I was contacted by Kenji Hall, a Business Week reporter in Tokyo. (He sought to gain my trust by mentioning that he too once lived in San Diego, but left out the part about going to that little liberal arts school up the river from the ’Tute.)

Hall was doing a story on the new high-tech research lab by NEC (the Japanese electronics giant) that purported to be about open innovation. I guess I was contacted because of my open innovation research, because I’ve written extensively about the Japanese IT industry, or perhaps because I’ve specifically written about NEC.

Hall referred me to a brief press release about the NEC lab. What’s notable is the snippet:

Intellectual Activity History Recording System: This system has been designed to analyze the innovation generation process via a data base of activity history that is accumulated by recording all image, voice, movement, human contact, book, document and whiteboard use, and PC operation inside the laboratory. Utilizing this data, NEC will strive to reveal the relationship between human-to-human/human-to-object contact and innovation generation, and to identify the process of intellectual activity.
After I did the reading, we then did a telephone interview after midnight (6 days ago) when I got home after an out-of-town trip. (Fortunately it wasn’t a Skype call).

Hall published his article last Thursday on the Business Week website, and quoted me briefly. I did get the final paragraph of the article, which in a business magazine is the honored position (kinda like the furthest seat from the door in a Japanese office). Here is the capper:
As for how NEC's surveillance of researchers would sit with Silicon Valley's techies? San Jose State's West says, "It would be a real hard sell in the Valley."
Since I had to make some notes before talking to him so late at night — and the report is necessarily abbreviated — let me summarize my reaction to the NEC plan, based on what little was available online:
  • As Scott Gallagher and I outlined in our 2006 journal paper, open innovation is about three things: 1) motivating a supply of external innovations, 2) incorporating those external innovations, and 3) maximizing the return from internal innovation. The NEC plan seems to emphasize #2 while ignoring (or denying) the importance of #1.
  • Specifically, most ecosystem management is built around win-win propositions, including a viable (and sustainable) business model for innovation suppliers. In their 2004 book The Keystone Advantage, Iansiti and Levien contrast the “keystone” model of ecosystem leadership with other more domineering (or parasitic) models they refer to as landlords and dominators.
  • The NEC approach — “what’s mine is mine and what’s yours is mine” — is symptomatic of high buyer power enjoyed by dominant industrial conglomerates managing captive supplier networks — such as the Japanese keiretsu (often confused with the neo-zaibatsu groups, the kigyo shudan) or similar entities in Korea, Germany or elsewhere. The only way suppliers sign up for such a lousy deal is if they have no choice; the applicable Japanese phrase is “sho ga nai.”
Using technology to suck ideas more efficiently from captive suppliers is not open innovation. Using the same set of captive suppliers is also not about open innovation, it’s just carrying the books ownership of the firm boundaries differently.

[NEC ecosystemThe ecosystem diagram on the NEC website seems more win-win, so I don’t know if the suggested technology is just a technology-push design gone amok, or whether the PR department thought through the design but not how the “Orwellian” screens would play among the public. The story doesn’t seem to be picked up elsewhere, so it’s not like there’s been a big hue and cry at the gates of NEC.

Finally, there’s one last wrinkle on the story. NEC is one of the corporate sponsors of Berkeley’s Center for Open Innovation, the mother ship of open innovation knowledge for the Fortune 1000. Either there’s more to their plan than meets the eye, or they’ve failed Open Innovation 101 and no one had the heart to tell them.

PS: I do have a problem with the adjective “Orwellian” because it is much overused today. The original 1984 of Orwell’s imagination is an extremely depressing place and even Ridley Scott’s famous interpretation doesn’t do it justice.

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