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Leverage: Minimize Investment Required

About Scaling Edges: Key design principles

Once an edge has been identified and initial resources allocated, the inevitable question arises: “now what?” When looking to kick off and grow, edges will run against resource constraints; the team may lack necessary skills in certain areas or lack the assets necessary to achieve scale on their own. The traditional mentality to “put more in in order to get more out,” may tempt the edge to look towards the core for support (after all, what is the benefit of being attached to a large firm if not to receive funding and resources?) This, however, can jeopardize the autonomy of an edge and again, raise institutional antibodies.

An edge should constantly be seeking opportunities to leverage already established external resources and infrastructures to grow. Relentlessly pursuing leveraged growth models by tapping into resources and skills outside of the core, minimizes investment from the core (and, hence, institutional antibodies). This strategy can also help a team focus their time and resources on the most important areas.

Q: How do you start?
A: Look externally, not internally

It is often inefficient for edges to leverage the shared services of the core. In most firms, the incentives for shared services are structured such that core projects with large and predictable returns receive priority. Further, edges usually incur a portion of the cost of shared services, which may be disproportionately high to the support actually received.

Instead of looking to the core, it's usually more effective for an edge to leverage external resources and ecosystem for support. This form of external leverage can be more economical and help the edge avoid the political pressures imposed by using core resources. Thanks to disruptive technologies, leveraging external support is an even more viable solution. Cloud-based platforms, in particular, are useful to coordinate large ecosystems and facilitate communication between participants.

Q: How do you mobilize the right resources and participants?
A: Starve the edge

To “starve the edge” is to provide the edge with less while simultaneously asking more from it. While this may seem counterintuitive, it forces the edge to become self-sufficient and adopt the scrappy, resourceful mindset so crucial to success in an unknown marketplace. This model is similar to how venture capital firms fund start-ups, as investors make small, targeted investments while maintaining high expectations for performance. There are two key principles for successfully starving an edge:

• Limit financial resources

Limiting financial resources forces the edge to leverage the least expensive resources it can (be it internal or external). Second, being deprived of funding will help focus efforts on those items which provide the greatest “bang for the buck”. Finally, this action sets a precedent that the edge must prove itself with results before returning for additional funding.

• Set interim milestones

Having limited resources makes interim goals all the more important. Edges must have frequent checkpoints and adopt a more agile methodology, changing course quickly rather than sinking more money into a problem. These interim milestones create further incentive for the edge team to succeed while minimizing their expenditures.

Q: How do you use disruptive technologies to grow?
A: Mobilize the passionate outside the firm

There are many benefits to connecting with passionate individuals outside of the firm. As we discussed previously, passionate individuals are excited by challenge and more likely to draw upon relevant experience to derive an innovative solution. Connecting with passionate people, however, can be challenging when they are outside of the organization. Today’s technologies remove much of the friction that made it difficult to search for and collaborate with these passionate outsiders.

Social software is a powerful tool for quickly canvassing a diverse group and connecting with other passionate people to participate in the ecosystem. Similarly, technologies such as cloud computing allow for a much broader scope of participation and the sharing of much more complex problems.

Q: How do you measure success to drive improvement?
A: Measure progress of the ecosystem

Ecosystems of engaged participants are ultimately more successful than those with disconnected or passive members. Therefore, it is important to measure not only the output of an ecosystem, but also track the internal activity and extent to which technologies are being leveraged to encourage collaboration and minimize costs. These indicators will likely be key to predicating the long-term potential of an ecosystem. Below are two important metrics to track ecosystem performance:

• Network Involvement

Having highly engaged participants is crucial to the success of an ecosystem. To measure this, it is important to track the growth rate of a network, and more importantly, the growth rate of knowledge flows exchanged throughout the ecosystem. Over time, these interactions should evolve from one-off, transactional exchanges to repeated, trust-based relationships.

• Technology usage

Disruptive technologies can be used to lower the cost of maintaining an ecosystem and facilitate greater, richer interactions between members. When assessing the performance of an ecosystem, it is important to track how technologies are being employed and whether there are opportunities to leverage these tools more extensively.

Case studies

Innocentive: The community that’s
cleaning up corporate challenges
Look externally, not internally.
 
App-relief: Masses help clean the Gulf
Coast Oil Spill
Mobilize the passionate outside the firm.
 

Innocentive: The Community That’s Cleaning Up Corporate Challenges

Case study

 

In 2008, consumer goods giant Procter and Gamble (P&G) wanted to create a specialized dishwashing detergent that would indicate when the right amount of soap had been added to a sink full of dirty dishes. Researchers and developers within the organization were stumped by the challenge, and unsure of how to proceed, decided to look externally for support.

P&G posted the innovation challenge with the help of Innocentive, a small, unknown start-up based in Waltham, MA. Using Innocentive’s network platform, P&G described the problem and offered $30,000 to the individual who could come up with a solution. Soon, thanks to Innocentive’s network of experts, P&G had its answer. Italian chemist Giorgia Sgargetta successfully pioneered a dye which met P&G’s needs in her home laboratory. Sgargetta walked away with her “prize” of $30,000, and P&G had resolved its innovation challenge.

Innocentive started in 1998, when Alph Bingham and Aaron Schacht, then scientists at pharmaceutical giant Eli Lilly, were brainstorming how the growth of the Internet would affect business. In 2001, Eli Lilly launched Innocentive with seed funding, and since then, the site has posted more than 1,300 challenges across 40 disciplines to its solver community.

While the company’s mission has stayed consistent over the years, the operating model has evolved to allow for increased interactions between community participants. Initially, the majority of interactions were centrally coordinated, using singular, transactional challenges. Since its inception, however, Innocentive has worked to create new offerings including eRFP systems and Team Project Rooms to encourage collaboration. These improvements have allowed for more relationship-based, dynamic ecosystems to form. Rather than transact on one-off challenges, it is not uncommon for participants to collaborate repeatedly, forming virtual teams that learn together and develop in the long-run. By encouraging these deeper relationships, Innocentive has evolved to a dynamic solver community of 250,000 individuals from 200 countries.

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App-relief: Masses Help Clean The Gulf Coast Oil Spill

Case study

 

On April 20, 2010, the explosion of Deep Water Horizon caused the largest marine oil spill in history, releasing up to 4.9 million barrels of oil and causing economic and ecological distress in the Gulf Coast region. In the wake of this tragic event, oil seeped into fishing grounds, waterways, marshes, and beaches and a vast clean-up effort began.

Meanwhile, government agencies and civic organizations scrambled to deploy resources effectively across a vast spill zone. The government used hotlines and other outlets to report spill activity, but these methods were inaccurate and required a high level of effort for a citizen to file a report. Dissatisfied with its current means to track spill activity, the government needed to mobilize external support to fast-track its efforts. The solution: tap into the power of crowd sourcing.

The government used smartphone applications, such as SpillMap, to track the spill by enabling citizens to tag locations and submit content-rich incident reports with text, photos and videos. This geo-aware and open-source application tapped into the user mobile activity, allowing users to tag incidents in seconds, without logging in or waiting on hold. With more than 15,000 posts, SpillMap (and the corresponding Web site, spillmap.org) made real-time conditions publicly available to government agencies, civic organizations, and other interested parties.

Not only did the volume of incidents reported on SpillMap exceed the volume reported on many hotlines, but the geo-specific and image-rich posts often provided greater value, helping volunteer organizations prioritize and deploy resources, and allowing users all over the country to receive updates in real time. The success of Spillmap is just one example of how organizations can rapidly expand the number of participants in an ecosystem and get better results.

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