Introduction

Over 30 years ago, in 1986, Hirotaka Takeuchi and Ikujiro Nonaka, two Japanese management scholars, recommended that firms replace their old, sequential process with a new approach – rugby-style, passing the “ball” within the team down the field. They called it the “new new product development game. ” It was a call to action for firms to reinvent their innovation process. Firms rightfully focused on cross-functional teams and Japanese-style management tools and techniques: a house of quality for everyone. This was followed by other approaches, such as quality management via Six Sigma and Black Belts, disruptive innovation, and more recently design thinking. Despite all of these important initiatives, tools, techniques, and consultants’ advice, many firms still struggle with their innovation efforts. In fact, the failure rate of new products and services remains essentially unchanged – since 1968! Depending on the study, the failure rate for newly launched products and services hovers around 40 percent. And even highly successful firms, like Ford and Apple, go through periods and cycles of reinvigorating their innovation process, then falling back with a return to bad habits. As we prepare for the third decade of the twenty-first century and what will certainly be a dynamic and challenging time for companies, we clearly need to look at the entirety of the innovation landscape and strategically think about our approach to innovation and how it can be improved – i. e., better innovations commercialized more quickly.

The challenges facing today’s firms are unique. To use a fishing analogy, a successful commercial fishing boat can alter where and how it trolls for fish. Navigation paths, improved imaging technology, line sets, and duration can be modified to increase the catch. But environment and weather play a role in the boat’s tactical approach, and like a storm tide formed by two meteorological forces (strong winds swirling toward the center of the storm, combined with low-pressure water currents), the way we approach the innovation game has been radically reshaped by two forces in recent years. They have created an expanded innovation landscape that has led to far-reaching changes in how companies can conceive, develop, and commercialize new products and services.

The emergence of digital design and a collaborative culture have fundamentally altered how firms, and people, approach the innovation process. In the pre–digital design era, most new product and service development was conducted by individuals and organizations holding the relevant expertise, and most collaboration either occurred inside of firms or was governed by market-based transactions between firms. Today, aided by digital design and fabrication tools on the one hand and social networking communities and collaboration/ sharing tools on the other, the “innovation landscape” is marked by new forms of participation and ownership, with new participants entering new markets and new arrangements of collective innovation. The two major forces – digital design and a collaborative culture – form a “perfect storm” that substantially expands the innovation landscape, and in this new innovation landscape four distinct regions are emerging. Each of these regions calls for its own innovation management approach (i. e., its own innovation modus operandi). Each of these innovation modes comes with different but significant ramifications for users, consumers, communities, vendors, and firms themselves. The locus of expertise is shifting from the human expert to the tools, allowing the experts to push technology frontiers outward in the traditional regions of the new innovation landscape, while enabling non-experts to participate in some activities like never before, especially in the venture and community modes. At the same time, whereas economic transactions will remain the main form of exchange in the traditional regions, they are complemented by social exchanges in the other modes, especially the community mode, with significant challenges for designing incentives and ownership regimes.

The good news, of course, is that this creates an opportunity-rich environment for firms to innovate. The expanded landscape, and the new innovation modes that come with it, create an ecosystem where more ideas of higher quality can seed innovation funnels, where new engineering tools allow the vetting of more mature concepts earlier in the process, where new actors can help develop solutions, and where innovation networks can lower costs and barriers to entry. This means more ideas from more sources, the potential for better ideas, and ways to radically reduce the investment needed to bring them to market. The bad news is that this also creates some new demands and hurdles. Managers need frameworks for navigating and understanding how to harness the power of this new landscape. In this book we attempt to show that there are many opportunities to leverage this new landscape, but all four innovation modes exhibit their challenges. We encourage firms to explore these different modes but to do so with clear expectations and a firm grasp of the risk and reward potential.