Innovation on the Edge

I’ve played on the edge throughout most of my professional career, whether it was doing deals in the Sultanate of Oman back in the 1970s, building a start-up around a new technology called the microprocessor in 1980, building a new Internet-focused practice for McKinsey in 1993 or spending more time in places like Bangalore, Shenzhen and Shanghai in the early part of this decade (my first visit to Shenzhen was actually in 1982 when I led a major manufacturing offshoring initiative there).

The emergence of a theme

Instinctively, I have been drawn to various edges because of the opportunity and challenge they represent. Over time, I have focused more sharply and explicitly on the importance of the edge as a source of value creation and strategic advantage – hence the title of my blog “Edge Perspectives,” the title of my most recent book (co-authored with JSB), The Only Sustainable Edge, and the name of the new research center that JSB and I lead at Deloitte – the Center for Edge Innovation.  See a pattern here?

The Business Week column

About six months ago, JSB and I launched another edge initiative. We signed on to do a monthly column on the Business Week website called – are you ready? – “Innovation on the Edge.” Business Week has now made available a repository of our columns here (an RSS feed is also available at this location).

As a brief overview, here are the columns that have gone up on the Business Week website to date:

• Embrace the Edge — or Perish – our opening salvo on the importance of the edge
• Phoning from the Edge – exploring Google’s edge innovation in telecommunications
• Catching the Innovation Wave – discussing insights from innovation in big wave surfing
• Learning from Tata’s Nano – highlighting what was not discussed in the publicity surrounding the unveiling of this new automobile
• Life on the Edge: Learning from Facebook – analyzing some innovation initiatives on the Facebook platform
• Institutional Innovations – exploring an innovative approach to pursuing medical research

Why edges matter

From our perspective, edges take many forms.  They describe and define the edge of a company, the edge of markets or industries, geographic edges like emerging economies, demographic edges (either new generations or older generations) or the edges of specific domains of knowledge.

Most executives scratch their heads when I start talking about the edge.  Why bother about the edge when everyone knows that all the profit is in the core? Besides, edges are risky. Modest revenue, high risk, low return – isn’t the edge just a distraction?

In our first column for Business Week here, JSB and I explained why the edge matters in terms of innovation:

Edges are powerful sources of business innovation because they are places of potential and friction, where traditional products and practices are no longer adequate to address unmet needs or unexploited potential. Much tinkering and experimentation occurs on the edge, as well as heated debate about the most promising options to address emerging needs, intensified by the diverse backgrounds, skill sets, and perspectives of participants gathering on the edge. By playing a part in this experimentation, companies participate in rich flows of new knowledge, flows that are the primary sources of innovation.

Edges tend to be risky places: There are no well-established road maps. Order, to the extent it exists, routinely dissolves into chaos, only to reform again in a very different pattern. Market meltdowns and business failures are commonplace. Relationships form quickly on the edge, because people have less confidence in going it alone and are more inclined to seek out others to help them sort through the challenges and share the risks and opportunities created by edges.

A couple of other factors make edges particularly fertile grounds for innovation.  Edges tend to attract risk-takers, so there are a lot of people on the edge who are not only open to ideas, but more willing to act on them, even if they haven’t been tested yet.  At the same time, there are few entrenched interests or legacy assets on the edge, so there are few resistance points ready to impede those who want to try something different.  Bottom line – there’s less inertia on the edge.

Edges have always been a seedbed for innovation, but there is something different now.  Edges are folding back in on the core much more rapidly than ever before. Think of the telecom industry – it wasn’t so long ago that wireless networks were a minor edge to the wireline networks.  Now, many younger customers only own a cell phone and are somewhat puzzled about why anyone would own a fixed line phone.  Voice communication used to be the core of all telecom networks but now data has become the core of network traffic.

So, there is an even more compelling reason to participate on the edge.  If the edge becomes the core, edge advantage soon becomes core advantage. Those who remain focused on the core risk being blindsided by new forms of advantage that emerge first on the edge.  To use another meaning of edge, participating successfully on the edge will be essential to developing and sustaining a strategic edge.

The bottom line

To reduce this to a simple formula:
Edge = Innovation = Edge