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Speaking
I speak on
topics related to business, strategy and technology. From conceiving and implementing
FAST strategies to pragmatic technology approaches, I seek to challenge traditional
assumptions and help uncover simple, yet profitable solutions best suited to
your company's situation. Get details >>
Papers
- Moving
from Push to Pull - Emerging Models for Mobilizing Resources
(PDF)
John Hagel and John Seely Brown
- Capturing
the Real Value from Offshoring in Asia (PDF)
John Hagel
- The
Agile Dance of Architectures – Reframing IT Enabled Business Opportunities
(PDF)
John Hagel and John Seely Brown
- Overview
of Working Paper Series (PDF)
John Hagel and John Seely Brown
- Break
On Through to the Other Side: A Missing Link in Redefining the Enterprise
(PDF)
John Hagel and John Seely Brown
- The
Secret to Creating Value from Web Services Today: Start Simply (PDF)
John Hagel, John Seely Brown and Dennis Layton-Rodin
- Service
Grids: The Missing Link in Web Services (PDF)
John Hagel and John Seely Brown
- Some
Security Considerations for Service Grids (PDF)
Martin Milani and John Seely Brown
- Control
versus Trust: Mastering a Different Management Approach (PDF)
John Hagel and John Seely Brown
- Orchestrating
Business Processes - Harnessing the Value of Web Services Technology (PDF)
John Hagel and John Seely Brown
- Orchestrating
Loosely Coupled Business Processes: The Secret to Successful Collaboration
(PDF)
John Hagel, John Seely Brown and Scott Durchslag
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Viewpoint
March 22, 2005
Productive
Friction – A Key to Accelerating Business Innovation
Before
I dive into the featured topic, I wanted to let you know that I have finally
launched a more traditional blog called Edge
Perspectives. I will continue to offer more detailed commentary
in postings here to my web site, but I am feeling a need to have a place
where I can post shorter items and where you can contribute reactions
to my postings. I hope you will join me at Edge
Perspectives where I will have an opportunity to stay in touch more
frequently.
Harvard
Business Review published an excerpt from the new book, The
Only Sustainable Edge,
that I co-authored with John Seely Brown. The book itself won’t be available
until the end of March (and its official release date is not until early
May). But, in the meantime, you can get a glimpse of some of our perspectives
in the article, “Productive
Friction: How Difficult Business Partnerships Can Accelerate Innovation.”
In
the article, we challenge the conventional
wisdom that friction is bad – remember all the hype in the dot com
days about the advent of the “frictionless economy”? Certainly, as companies have relentlessly focused
on process efficiency over the past couple of decades, friction has acquired
a bad rap. Executives have been
handed a mandate to root it out wherever it rears its ugly head.
But
what if friction is not all bad? What if some friction is actually essential
to fuel the innovation process? By
rooting out all friction, we may actually damage, if not destroy, innovation
capacity required to drive growth and economic value creation. Certainly
that is the direction that many of our most prominent performance initiatives
have taken us – the watchwords have been “standardize” and “routinize”,
hardly the fertile ground for rapid innovation.
Innovation
is messy, wasteful and, yes, it generates an awful lot of friction as
people with very different experiences and skill sets come together and
tackle challenging problems and opportunities. Of course, even in this
context, friction is not always good . . . or productive. In many cases, friction can degenerate rapidly
into animosity, suspicion and stalemate – it becomes profoundly dysfunctional.
So,
what makes the difference between productive friction and dysfunctional
friction? Well, you’ll have to
read our article (and, ultimately, the book) to get the full story.
We take examples from a broad range of industries and products,
including flat panel displays, the construction industry, apparel and
networking equipment to illustrate the key ingredients of productive friction.
We even use the example of the development of common law as an illustration
of productive friction in action (hey, I have to find some way to get
a return on my rather substantial investment in obtaining a law degree!).
We make the case that mastering the techniques of productive friction will increasingly differentiate
those who create value from those who destroy value in a highly competitive
global economy.
In
our article, we focus specifically
on the challenge of harnessing productive friction across enterprise boundaries.
Many analysts have discussed techniques for getting people from
different backgrounds to work productively together within the enterprise. One of the best books on this subject is Dorothy
Leonard’s Wellsprings
of Knowledge, which develops the concept of “creative abrasion”. As difficult as it is to get “creative abrasion” to work within the
enterprise, multiply those difficulties by an order of magnitude when
collaboration spans the boundaries of multiple enterprises. And yet, in a world of increasing business specialization,
this is where some of the most promising opportunities for innovation
and capability building reside. If
managers can figure out how to bring people from different highly specialized
enterprises together to address shared business problems and opportunities
and help them to bridge the many barriers that prevent these people from
working effectively together, they can build a powerful foundation for
sustained innovation and capability building.
That’s
the opportunity we see for productive friction. At a
very high level, productive friction requires four ingredients to come
together – performance targets, people, prototypes and pattern recognition
(the four P’s of productive friction – some habits are hard to break:
as a consultant, I used alliteration to make frameworks more memorable
although, for the life of me, I still can’t remember all 7 S’s of the
McKinsey organizational model). Each
one of these ingredients requires careful crafting to create the conditions
for productive friction. The article describes the techniques for crafting
each of these elements in some details and illustrates them with a variety
of examples of productive friction in action.
For
the purposes of this brief overview, I want to focus briefly on pattern
recognition because, in many respects, it is the least obvious and yet
arguably the most powerful of the four elements. What do I mean by pattern recognition? As JSB and I define it, pattern recognition
involves connecting the dots, stepping back from a broad range of experiences
with productive friction and being able to assess where the most promising
learning and innovation has occurred and then developing the institutional
mechanisms to enhance the dissemination of this learning and innovation
across organizations. In other
words, pattern recognition amplifies and sustains
the impact of individual experiences with productive friction. In the absence of pattern recognition, productive
friction may generate significant learning and innovation, but the effects
remain highly localized and temporary. So, even when companies get productive
friction right, they lose most of the benefits because the learning and
innovation never moves beyond the boundaries of the group that invested
all that time and effort to generate it in the first place.
Productive
friction is not just about innovation. Executives who remain focused
on cost reduction may be surprised to learn that their organizations consume
a significant amount of resource in exception handling, especially at
the boundaries of their enterprise. When exceptions are handled well,
productive friction often occurs. More
often than one would care to admit, dysfunctional friction results. In either case, there are usually substantial
opportunities to enhance the productivity of this friction. The topic of exception handling is worthy of
an entirely separate posting, perhaps even an article or, dare I say it,
a book. Let me just say for now that, by
mastering the techniques of productive friction, executives have a significant
opportunity to combine near-term cost reduction with building longer-term
innovation capability. That’s a powerful business proposition that
few executives can afford to ignore.
But
this is not just an opportunity – it’s a necessity.
In my last
posting, I discussed the concept of innovation blowback developed
in the cover
article JSB and I wrote for McKinsey
Quarterly (actually this article was loosely adapted from our
forthcoming book as well). Briefly, we made the case in that article that
emerging markets like China and India are becoming catalysts for profound
product and process innovation. These innovations will then provide a platform
for successful attacker strategies targeted at large, entrenched players
within the more developed economies of the U.S. and Europe. What is driving this product and process innovation?
You guessed it – productive friction.
Companies that master the techniques of productive friction will be in
the best position to mount attacker strategies. The companies that don’t master these techniques will more likely
be vulnerable defenders of established positions.
More
generally, we make the case in The
Only Sustainable Edge that successful business strategies will
depend upon dynamic specialization – making hard choices about what
business activities to focus on while at the same time making aggressive
commitments to build capability rapidly around these areas of specialization.
As companies become more specialized, they will need to learn how
to collaborate more effectively with other equally specialized companies
– not just to access complementary resources, but to push each other to
get better faster. Productive
friction becomes an essential management technique to support dynamic
specialization. Without it,
companies run the risk of becoming more and more insular, focused on their
own specialization and unaware of the opportunities to deepen their own
capabilities through constructive engagement with others.
In
many respects, our focus on productive friction becomes quite subversive. It challenges the dominant model that has shaped how people think about
corporations over the past seventy years. Much of the writing about corporations in economics and business
literature more generally has been shaped by an essay on “The
Nature of the Firm” published by Ronald Coase in 1937. In this essay,
Ronald Coase focuses on the role of the firm in systematically reducing
transaction or interaction costs – the costs associated with finding resources,
getting information about the resources, negotiating to gain access to
resources, coordinating and monitoring the performance of resources and
then switching from one resource provider to another if performance is
not satisfactory. Coase actually had a very nuanced view of transaction
costs and their role in creating economic value, but many of his followers
have significantly narrowed the view of transaction costs to focus on
efficiency considerations. Over
time, this perspective has come to define the primary role of the firm
as economizing on transaction costs.
We
challenge this view. As market
competition intensifies and the pace of change accelerates, we see
the primary rationale for the firm shifting.
Rather than focusing on the firm primarily as an institution designed
to achieve higher levels of efficiency, firms will have to justify their
existence based on their ability to accelerate capability building and
talent development. Within this perspective, management techniques
like productive friction then become central to the continued existence
of the firm. More broadly, we begin
to change our view of friction in business activity. Rather than focusing on it solely as a source
of inefficiency, and therefore something to be stamped out, we need to
recognize that certain types of friction are central to learning and innovation.
We need to learn how to recognize these types of friction and help
to create conditions for this type of friction to flourish.
In fact, as we come to appreciate the value
of productive friction and become more comfortable with the management
techniques required to manage it effectively, we will find ourselves seeking
out more opportunities to spark productive friction.
So,
what should executives do about this?
The first step is to realistically assess your organization’s capacity
for productive friction. A more systematic diagnostic is likely to
be required, but you can start by asking three relatively simple
questions:
- What
are the five most innovative companies with capabilities that complement
yours? Do you have effective business partnerships with them? If not, why not?
- Identify
your five most significant business partners today. To what extent did you pick them because
of the opportunity to accelerate your own internal capability building?
- Identify
your five most significant business innovations (they could be either
product or process innovations) over the past year. How many of them emerged from interactions
with business partners?
The
answers to these questions should give you a broad sense of the degree
to which your organization has harnessed the full potential of productive
friction. If your company is like most, productive friction
is at best an ad hoc event. It
has not been designed into your organization – for example, by explicitly
targeting certain business partners in terms of their potential to help
generate productive friction. Nor
are management techniques for productive friction well understood or broadly
applied within most companies.
If
your company is like most, it will need to pay much more attention to
productive friction. Without learning
and innovation, we will struggle with diminishing returns as each new
round of efficiency become harder to find and capture. Productive friction
offers a way out of this bind.
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Blogs
- The Big Shift (HBR)
- EdgePerspectives blog
Books
The
Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion
by John Hagel III, John Seely Brown, and Lang Davison
ALSO
The
Only Sustainable Edge: Why Business Strategy Depends on Productive Friction
and Dynamic Specialization
by John Hagel III and John Seely Brown
- Out
of the Box: Strategies for Achieving Profits Today and Growth Tomorrow through
Web Services
by John Hagel III
- Net
Worth: Shaping Markets When Customers Make the Rules
by John Hagel, III and Marc Singer
- Net
Gain: Expanding Markets through Virtual Communities
By John Hagel, III and Arthur G. Armstrong
Deloitte
ongoing
research:
The 2009 Shift Index
The Big Shift Index: Uncovering the Emerging Logic of Deep Change
www.edgeperspectives.com
Cloud Computing working papers
BusinessWeek
The Next Wave of Open Innovation
April, 2009
Does the Experience Curve Matter Today?
April, 2009
Peer-to-Patent: A System for Increasing Transparency
March, 2009
How World of Warcraft Promotes Innovation
January, 2009
Harrah's New Twist on Prediction Markets
December, 2008
Innovation for Hard Times
November 2008
How SAP Seeds Innovation
July 2008
Student Activism Can Change the World
May 2008
Myelin Repair Foundation's
Institutional Innovation
May 2008
Learning from Facebook
April 2008
Learning from Tata's Nano
February 2008
Catching the Innovation Wave
January 2008
Phoning from the Edge
January 2008
Embrace the Edge - or Perish
November 2007
Funding Invention vs.
Managing Innovation
February 2006
Articles
- Creation
Nets: Harnessing the Potential of Open Innovation (co-authored
with John Seely Brown) April, 2006
- Connecting
Globalization & Innovation: Some Contrarian Perspectives (Prepared for the
Annual Meeting of the World Economic Forum in Davos, Switzerland January 25
– 30, 2006; co-authored
with John Seely Brown)
- "The
Benefits of a Long Distance Relationship" (co-authored with John Seely Brown),
August 9, 2005
- "Feed
R&D - Or Farm It Out?" (HBR Case Study with Commentary co-authored
with John Seely Brown), July 2005
- "Productive
Friction: How Difficult Business Partnerships Can Accelerate Innovation"
(co-authored with John Seely Brown), February 2005
- "From
Push to Pull: The Next Frontier of Innovation" (co-authored with John Seely
Brown), 2005, No.3
- "Innovation
Blowback: Disruptive Management Practices from Asia" (co-authored with John
Seely Brown), 2005, No.1
more
articles >>
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