Embrace The Edge Or Perish


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Embrace The Edge Or Perish

  1. 1. NEWSWEEK: Viewpoint November 28, 2007, 12:27PM EST text size: TTEmbrace the Edge -- or PerishThe periphery of todays global business environment is whereinnovation potential is the highest. Ignore it at your perilby John Hagel and John Seely BrownMost all of us are familiar with the concept of "the edge"—and not only because were fans ofU2s superb guitarist who goes by that name. Edges are the peripheries of the global businessenvironment, the places where innovation potential is the highest. In todays fast-moving businessworld, playing on the edge increasingly is the best way to gain an edge.Edges define and describe the borders of companies, markets, industries, geographies, intellectualdisciplines, and generations. They are the places where unmet customer needs find unexpectedsolutions, where disruptive innovations and blue oceans get birthed, and where edge capabilitiestransform the core competencies of the corporation.Edges are increasingly significant as the global business environment speeds up. In a world ofaccelerating change, whats born on the edge transforms the core with breathtaking speed. A fewshort years ago, both India and China were marginal players in the global economy. Now they arecentral players. Not long ago, the Internet was a specialized communication platform forscientists. Now its a center for commerce and advertising.Delivering More Value at Lower CostOnly yesterday, it seems, teenagers stayed in touch outside of school on the telephone or at themall. Now they log in to a growing number of social networks. Until lately, derivatives and hedgefunds were marginal players in the financial marketplace. Now they shape market movements ona daily basis. These examples make a fundamental lesson clear: Embrace your edges or fallquickly behind. Companies avoiding the edge will find their core markets and capabilities underattack from edge players who can deliver more value at lower cost.Edges are powerful sources of business innovation because they are places of potential andfriction, where traditional products and practices are no longer adequate to address unmet needsor unexploited potential. Much tinkering and experimentation occurs on the edge, as well asheated debate about the most promising options to address emerging needs, intensified by thediverse backgrounds, skill sets, and perspectives of participants gathering on the edge. [SoundFamiliar] By playing a part in this experimentation, companies participate in rich flows of newknowledge, flows that are the primary sources of innovation. [The new “Big-Bang”]Edges tend to be risky places: There are no well-established road maps. Order, to the extent itexists, routinely dissolves into chaos, only to reform again in a very different pattern. Marketmeltdowns and business failures are commonplace. Relationships form quickly on the edge,because people have less confidence in going it alone and are more inclined to seek out others tohelp them sort through the challenges and share the risks and opportunities created by edges. 1
  2. 2. The iPod Was Born on the EdgeRecall Bill Gates in the early days of the personal-computer industry, harnessing a fundamentallynew technology on the edge of a more traditional computer industry that dismissed these newproducts as "toys." Or consider the host of companies in China and India seeking to reconceiveproducts and processes to serve consumers more effectively in emerging economies atunbelievably low price points. Or think of the early wave of entrepreneurs who saw anopportunity to harness electronic networks to support social networking, especially targeting thedesire of a younger, more computer-literate generation to connect with one another in richerways. Or think of Apples (AAPL) iPod, which emerged on the edge of a number of industries,including consumer electronics, music, and the Internet.Some early and very promising initiatives to harness innovation at the edge of the firm havealready been set in motion. For instance, open innovation and so-called co-creation. But these area small part of a much broader set of edge innovation opportunities, ranging from tapping into theunique dispositions of younger generation employees, who are more "questing" or adventurous asa result of playing online games, to using management practices developed in emergingeconomies to mount attacker strategies on incumbent companies in the West—a process calledinnovation blowback.In future columns, well look at these opportunities and the management practices andinstitutional arrangements required to harness their potential. Well also investigate theinformation technology platforms that help companies get the most out of their edge initiatives.For now, well leave you with some bottom-line guidelines for venturing out on the edge:• Engage. Too often, executives get intrigued with the edge and arrange field visits to explore thisstrange terrain. Insight rarely comes from such casual visits. Instead, executives need to identifyand focus on challenging business issues to engage edge participants productively and drive realinsight. [INDY]• Sustain relationships on the edge. A lot of the current effort in open innovation focuses onshort-term transactions to gain access to existing resources. To get the full value of the learningthats occurring on the edge, executives need to find ways to build long-term, trust-basedrelationships with edge participants. [PIN Service Bureau]• Bring the edge to the core. In too many cases, companies set up remote outposts on the edgethat become isolated and alienated from the core of the business. Senior executives need toidentify challenges confronted by the core where insights from the edge can be helpful andsponsor initiatives to bring participants from both domains together around these issues. [GlobalChange]These broad guidelines have many specific implications this column will explore as we help youget edgier and edgier about innovation.John Hagel and John Seely Brown are co-chairman and independent co-chairman, respectively, ofa Deloitte research center in Silicon Valley. Hagel writes a blog at Edge Perspectives. 2