Inside Out, or Outside In?

The standard “inside out” approach to corporate innovation requires clearly formulated goals and a well-understood model for achieving them. By contrast, “outside in” innovation is a more open process that prioritizes seizing market opportunities whenever they arise. Our partners at the ILO Institute hosted a roundtable discussion on the relative merits of each innovation style; here are some of the key insights we gained from the talk.

U+, in partnership with the ILO Institute, is excited to bring you highlights from ILO’s Weekly Virtual Gatherings. For this week’s Insight, we compared two very different approaches to corporate innovation and learned which one best suits the needs of a large, modern organization.

Insight prepared and provided by Peter Temes and Christian Hamilton of ILO.

Many large organizations approach innovation as a formal practice through a fairly traditional planning model. They begin with their measurable goals, pull in senior people expected to have the skills and relationships to lead efforts toward reaching those goals, and make plans. They outline and then launch a new program, and work to execute it through a clear progression of steps.

This is the classic "inside out" approach to innovation, and requires that those goals established (usually by the highest level of executive leadership) are correct, and will stay correct.

Because of its clear and crisp structure, this kind of innovation process will resist change and lead toward an efficient march to a known goal. But when the external market shifts, and that goal point becomes less relevant, changing the program will take extraordinary effort. The need for a change has to work its way up the org chart to the real strategic decision-maker.

In contrast, an "outside in" approach to innovation works much better—as seen in companies ranging from AT&T to UnitedHealth. With an outside in approach, innovation as a function is seen less as a march toward a set of goals and more as a process, and even a place or set of places to which mid-level executives can bring active challenges that might emerge unexpectedly but which represent important opportunities to meet a dynamic marketplace, or internal process need, on its own terms.

You can tell that there's an emphasis on "outside in" innovation when:

  • An organization creates designated physical spaces where mid-level managers can bring interesting problems to colleagues and selected outsiders, without seeking too much formal permission ahead of time
  • Selected groups of customers, vendors and go-to-market partners are engaged in processes that make them easy for mid-level managers to connect with on the fly with good ideas or interesting problems
  • "Challenges" can be posted to virtual communities put in place to foster informal collaboration, open to both company insiders and curated outside players
  • Marketplaces of different kinds are clearly in place, where fast-emerging needs can be matched with fast-emerging solutions in often unexpected ways. Useful examples: IBM's alphaWorks, or Eli Lilly spin-out InnoCentive's solution-seeking platform, or Avanade's vibrant innovation contest, open to all and pulling in customers as part of the process.

The U+ method can efficiently and effectively lead the development, implementation, and improvement of innovations in any sector. To date, we have used this method to bring 90+ products to market, creating over $1 billion in value for Fortune 1000 companies. Check out U+ success stories here.

Get 20 minutes with Sean, the Managing Partner of U+ Americas, to learn more about how U+ can help your company innovate successfully.

Launched in 2005, ILO is a membership organization for large companies, government agencies and not-for-profits, bringing senior executives leading innovation together for knowledge sharing and community building. ILO has completed more than 300 best-practice research reports, focusing on emerging challenges and opportunities. To learn more about ILO, membership benefits, and how to join, visit www.iloinstitute.net.

Check back next week as we’ll be releasing new insights from weekly events with leading innovators from across the globe.

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