Regardless of industry, modern organizations are under pressure to innovate faster than ever. New offerings often rapidly zoom to dizzying market heights, only to be brought low just as quickly by the next great thing. As a result, many leaders are realizing that going it alone won’t get the job done. Instead, they are seeking to accelerate innovation by collaborating beyond their own boundaries.
In the past, companies have been highly constrained by their physical proximity to potential partners, but today, new technologies and capabilities can provide any organization with digital proximity to a full range of potential collaborators. Our research indicates that some innovative firms are taking advantage of an approach we call "digital shoring" to work with a wide range of partners around the world.
As organizations connect and collaborate digitally, they are creating industry clusters that are not defined by location. Physical industry clusters have long provided businesses with tangible benefits, such as access to raw materials and an integrated local supply chain. But less visible rewards—such as the relationships that exist between members—have also been critical to a cluster’s success.
As Frank Bobe, entrepreneur-in-residence at Harvard’s Wyss Institute, told us, “Clusters are all about people and relationships. The success of certain clusters can be attributed to their risk-taking and collaborative environment. You need to immerse yourself in the culture of the cluster and absorb it.”
A survey we conducted corroborated these views. We asked 452 senior executives in nine physical industry clusters about their experience with clusters. Nearly 70 per cent cited "the ability to build professional relationships and a network for the future" as a key benefit—the second-most popular choice, after "the importance of sourcing raw materials". Access to potential collaboration partners was chosen by more than 60 per cent of the respondents.
What do executives see as the most valuable outcome from such collaboration? Two-thirds selected "improved innovation" as the key benefit from building relationships with other companies globally—by far the leading response.
Further research helped us identify how companies are actually creating these new industry clusters. We found that some are connected through formal networks, while others exist in informal networks that can be tracked through the digital connections and conversations of key professionals. Either way, they are pursuing opportunities that can improve their chances for successful innovation at a global or local regional level. Broadly speaking, digital shoring presents two key opportunities for organizations:
A formal network brings together many organizations in a common pursuit. Consider the GENIVI Alliance, a name derived from Geneva, Switzerland (GEN) and "in-vehicle infotainment" (IVI). Composed of 145 members from Tokyo, Munich, Silicon Valley and many other locations, the alliance exists to develop an open-source in-vehicle infotainment platform—a critical part of the "connected car". The network includes companies from many industries, including automotive, software and telecommunications.
Alliance members conduct most of their business from a distance, sending delegates to gather in a common physical location only occasionally. About 20 per cent of the alliance’s efforts to speed up innovation and time-to-market (while significantly reducing costs) are conducted through in-person meetings. Most of the time, GENIVI’s working groups and teams engage with each other on strategic initiatives through digital tools.
AutoHarvest Foundation is another example of a formal digital cluster. Founded in 2012 and based in Detroit, it offers its members a digital meeting space for advanced manufacturing innovators who want to test and develop their ideas. Membership draws from a globally-diverse group including corporate R&D functions, academic institutions, public-sector organizations and individual inventors.
Jayson Pankin, AutoHarvest’s CEO, believes collaborative innovation is critical to growth in today’s competitive and ever-more complex landscape: “Tomorrow’s products are not going to be made by the technologies large companies develop alone under their own roof. Collaboration between different actors—large and small, competitors and partners—is crucial.”
But digital clusters are not just about formal alliances and platforms that a small team inside an organization decides their organization should join; they are also about employees tapping into available tools, such as social media, to form their own digital global communities. One way to track these informal "digital archipelagos" is by analyzing professionals’ activity on Twitter, the social media tool with some 316 million monthly active users.
Our analysis of the Twitter behaviour of a group of identified senior industry professionals in six industrial clusters shows how people are forming digital communities around the world with a focus on collaborative innovation. When we looked at the cluster participants’ activity—the people they were following as well as their active conversations—we saw that 70 per cent of the connections, on average, were with people located outside of their immediate geographic surroundings. In the Basel life sciences cluster in Switzerland, that figure reached 95 per cent.
Within or near physical clusters, companies are using digital tools both to magnify the benefits they already receive from their location, and to better integrate into a particular cluster. These tools include not only Twitter, but also global platforms such as LinkedIn, as well as cluster- or industry-specific applications. AutoHarvest’s Pankin believes that such platforms can be ‘jet fuel’ for physical industry clusters: “People and organizations meet on AutoHarvest based on the subject matter, and it turns out they did not know they were located right next to each other. This [kind of connecting] goes beyond what we could physically do. We are not replacing anything, we are supplementing it.”
Many of the people we interviewed spoke of "serendipitous encounters"—in conferences and coffee shops—as an advantage of being located in a dense physical cluster. The structured use of digital media, while not a substitute for personal meetings, can increase the frequency and value of such encounters, potentially “making serendipity routine,” to quote Pankin.
Used in these ways, digital technology is not an alternative to physical presence, but an important amplifier of its benefits. Our survey revealed that professionals from a variety of organizations are already using digital tools to initiate business relationships within clusters. In more than half the incidences we identified, the use of newer digital tools trumped in-person meetings and the use of older technologies as a means for starting a relationship.
Digital tools also help people participate in a dense physical cluster without having to relocate or travel repeatedly. The Massachusetts Biotechnology Council (MassBio), an association of more than 650 life sciences organizations based in Cambridge’s Kendall Square, uses Twitter to increase its impact throughout the state of Massachusetts and beyond.
In 2014, following the publication of its Impact 2020 report, MassBio created #impact2020 on Twitter to enable ongoing discussions between cluster participants, regional thought leaders and experts. Sarah MacDonald, executive vice president at MassBio, emphasizes the importance of face-to-face relationships but says these events can “take Kendall Square to those who can’t reach it,” as well as bring digital-savvy experts into discussions about the future of the cluster.
As leaders begin to shape and implement a digital shoring strategy, they need to answer four fundamental questions:
WHO ARE THE RIGHT PARTNERS FOR COLLABORATION?
The short answer: almost anyone. The right set of partners can include any organization or individual that can help solve a shared problem. Organizations must first recognize that the innovation process is becoming more open, digital and global. Digital shoring enables numerous, meaningful conversations for those who understand that the best solutions to problems will not always be developed in-house. Business leaders need to identify external partners with whom they can jointly solve problems central to product and service innovation, rather than regarding collaboration solely as a means of sharing costs or risks.
HOW OPEN CAN AN ORGANIZATION BE TO OUTSIDERS?
Highly open at first with any qualified participant in a cluster, and then more judicious and selective as relationships deepen and valuable IP comes into the discussion. Business leaders need to establish an open culture that will be the foundation for digital shoring. An organization can have the best people and technology, but without correctly empowering both with the right culture, it will not fully realize the benefits. The default option should be openness. However, being open-by-default does not mean all guards should come down; companies must continue to protect their competitive essence.
HOW CAN EMPLOYEES BE AMBASSADORS FOR DIGITAL SHORING?
To be effective, all ambassadors—and there may be many—need full backing from their companies. Firms can provide this by demonstrating a sponsored and structured approach to skills development and experimentation; visible interest and backing from leadership; and systems to harvest and reinvest network connections and knowledge for the future.
Leaders should also be prepared for their "diplomatic corps" to be far larger—and to encompass many more levels of the company hierarchy—than they might have expected. Consequently, organizations need to develop stronger receptors to absorb the external knowledge employees are gaining. These employees have local and global networks of individuals with whom they are discussing cutting-edge ideas. Organizations should actively invest in their knowledge management processes to capture and repurpose this knowledge capital.
ARE TODAY’S DIGITAL TOOLS GOOD ENOUGH?
Today’s available tools suffer from several limitations, but a portfolio approach can give good results. When we asked executives to name the top challenges they face with digital tools inside their cluster, they identified "cost" most frequently (65 per cent); "security" was cited by 54 per cent, and the third greatest concern was the fact that ‘today’s tools are not yet advanced enough’. When we asked them to consider the design of their ideal digital tool to enable relationships, they cited similar capabilities: real-time functions (for example, for editing documents), partner matching, and ease of information sharing. These frustrations were also reflected in the experience of industry leaders. A marketing director from a global manufacturer believes that digital tools are currently useful only for “low-level activity” to maintain relationships with people—usually people who are well-known to each other. However, portfolios of digital tools are already being deployed to enable digital shoring, with executives working around individual limitations rather than waiting for (or investing in) the perfect platform for their needs.
Companies have begun to realize that innovation cannot be strictly an in-house endeavour. Many also recognize that they will be severely limited if they rely on local face-to-face encounters to spur new thinking and innovative projects.
A digital-shoring strategy that combines new technologies with employee networks can literally bring the whole world into the mix. And in a world of global competition, that’s a capability worth developing.
Matthew Robinson is the London-based managing director of research with the Accenture Institute for High Performance, focusing on industry competitiveness. David Light is the Boston-based director of editorial and publishing operations for the Institute. The authors thank the research team at the Institute for their contributions to this article: Alice MacNeil, BabakMoussavi, Jonathan Prosser, Niaz Souti and Mukund Umalkar.
Digital Shoring: A Path to Faster Innovation was first published in Rotman Management, Spring edition.