Structure, Agency and Open Innovation

As a young student, Nobel laureate Eugene Wigner took up physics because he felt stupid in math class.  John von Neumann, his classmate at the Fasori Gimnázium and one of the great mathematical geniuses of the 20th century, was simply in another league.

Another student, Edward Teller, would later gain fame as the father of the Hydrogen bomb.   John Harsanyi, who won a Nobel prize for completing von Neumann’s work in game theory, also went to the school, as well as others of notable accomplishment.

Was it the people or the place?   That is the crux of the structure/agency debate that has dominated sociology for over a century.  It’s also an issue that’s becoming am increasingly important management concern.  How we treat the structure/agency question will determine how we operate our businesses, hire employees and drive strategy.

Structuralism and The Importance of Context

Structuralism is a school of thought associated with liberal minded thinkers such as Émile Durkheim and Claude Lévi-Strauss.  It posits that nurture is nature or, in effect, that we are the product of our environment.  While many of the arguments are persuasive, it is often criticized for absolving us of personal responsibility.

New research into social networks supports the structuralism hypothesis.  Nicholas Christakis and James Fowler, in their book Connected, summarize decades of research that shows how our social network affects not only our mental states such as happiness, but even health issues like obesity and smoking.

Moreover, influence is not only spread from our direct contacts, but extends to three degrees of separation.  So not only our friends, but the friends of our friend’s friends affect how we think and behave.

Richard Florida also argues for the importance of environment in his book, The Rise of the Creative Class.  He points out that talent concentrates in certain areas and not others.

Moreover, he finds that centers of innovation depend not only on things like the presence of institutions of higher learning and technological infrastructure, but also tolerance, a vibrant gay population and a cool music scene.

Agency, The Unmoved Mover and The Categorical Imperative

Of course, there is something seriously wrong with the structuralist view.  The environments in which we live in are human constructions.  As Rene Descartes pointed out way back in the late Renaissance, there must be a first cause that starts off the chain of thoughts and events that lead to the creation of anything.

Immanuel Kant made the point nicely with his categorical imperative, which states that one should, “act only according to that maxim whereby you can at the same time will that it should become a universal law.”  We are held responsible for our actions and rightly so.

The tension between structure and agency becomes especially apparent in international commerce  You don’t have to do business for long in another country before you hear some version of “that won’t work in this market because the culture is different.”

Does culture really determine how people will act?  The real answer is that sometimes it does and sometimes it doesn’t.  In my personal experience, structure can always be trumped by agency if the issue is important enough.  So, from an operational perspective, the problem of structure vs. agency is really one of priorities.

The Failure of Innovation Factories

Historically, the model for innovation has been Thomas Edison and his famous Menlo Park facility, the first true industrial research lab which created inventions ranging from the light bulb to the phonograph.  In the 20th Century, many corporations such as Eastman Kodak, IBM and Xerox followed suit.

Industrial scale labs still exist and some indeed thrive.  However, it has long been suspected that the approach is less than optimal.

IBM, even with its enormous resources, almost went bankrupt because it fell behind in emerging technologies.  Xerox famously invented the graphical user interface and the Ethernet, but failed to commercialize them because they weren’t especially relevant to their business at the time.

The Path to Open Innovation

As the pace of technological change has quickened, open innovation has proved to be a more successful model.  Rather than lock everything away in proprietary labs, various strategies such as partnerships, joint ventures, license agreements and crowdsourcing are used to help the right information get to the place where it can do the most good.

Great innovations are much more likely to come from synthesis than from lonely geniuses and corporate polices are starting to adapt.

For instance, 35% of Proctor & Gamble’s new products have received critical input from external sources through its connect and develop program.  When hackers started fiddling around with the new Kinect game console, Microsoft embraced, rather than sued them.

Smart businesses are learning to build new and different structures in order to harness the creativity of a multitude of agents.

The Cautionary Tale of Blockbuster

Innovation today involves a lot more than technology.  As James Surowiecki points out in this piece about Blockbuster,  the company’s failure to adjust to a new competitive landscape led to their ruin.  Business model innovation is becoming a core management function

Here’s where the structure and agency take center stage.  While Blockbuster was a technologically forward company, they had built a community of like-minded people who were dedicated to a failed model.  While they were aware that the world was changing around them, they were unable to focus their efforts in the right direction.

Because the culture was structured to support the existing model, any information that defied it was ignored in favor of scant evidence that they might be on the right track.  Blockbuster filed for bankruptcy in 2010.

Building the Right Structure for Innovation

The substrate in which we develop and nurture ideas is indeed highly determinant.  However, we do have the power to shape our surroundings

With that in mind, there are several things that are essential to building an innovative culture:

Diverse influences: In her studies of cities, Jane Jacobs found that diversity was the key to economic viability.  The same is true for business.  Ones that are too entrenched in their own industry (i.e. Detroit automakers) tend to become hostile to outside ideas.

Creative Enrichment: Richard Florida points out that innovative areas such as the San Francisco Bay area are home to not only research labs and supercomputers, but thriving arts and music scenes.  Many planned economic development areas fail because they don’t offer a lifestyle that attracts talented people.

Constant Renewal: As I wrote before, research into the social networks that produce Broadway plays shows that performance falters when teams get too inbred.    While some familiarity is good, too much kills creativity.  So even with successful teams, its a good idea to reshuffle the deck every now and then.

Important ideas tend to spring forth in clusters.  Whether it is that small high school in Budapest, the Cambridge of Bertrand Russell, John Maynard Keynes and G. H. Hardy or the Silicon Valley of today, people and places are inextricably linked.

We should choose both wisely.

– Greg