Absorptive capacity for open innovation

In our increasingly open innovation world wouldn’t it be useful to have ‘‘the ability …. to recognize the value of new, external information, assimilate it, and apply it to commercial ends’?   If all the smart guys don’t work for you then it’s going to be important to have the skills and processes to make sure that what they know somehow finds its way into our organization and that we make effective use of it. It’s really a case of building some capabilities in this area – and the good news is that we’ve known about this problem for a long time. The ‘ability’ referred to above is what two researchers, Cohen and Levinthal, talked about in a very influential paper back in 1990 – they termed it ‘absorptive capacity’.[1]

Having given it a neat label you might expect that the next stage in the process would be for researchers and practitioners to put some flesh on the bones and identify just what organizations need to do to build absorptive capacity. Unfortunately whilst the initial question was elegantly framed a sort of ‘academic fog’ has grown up around the term, with many competing and even conflicting definitions and a lot of discussion about what AC is rather than how to do it. Great conference fodder but not so useful in answering the question ‘ so what do I do on Monday morning?’

One notable exception to this was the work of another couple of researchers, Zahra and George who suggested that AC wasn’t a single ting but actually a series of linked behaviours. Whilst there might be great potential in new knowledge out there, realising it would depend on pulling off four key tricks – identifying what’s out there (and relevant to us), acquiring it, assimilating it (making sense of it in our context) and finally deploying it in ways which add value.[2]

So we’re still left with the key challenge of how to make this happen? The good news is that there are now some excellent tools t help us in the process – for example, identifying what’s available becomes much easier using web-based search, innovation markets like Innocentive.com, employing specialist brokers to search at our periphery and running crowd sourced campaigns for new and different ideas.

But in order to work with this ‘knowledge spaghetti’ and weave the strands into something which creates commercial or social value we still need to look to our own capabilities and be clear how we address those four key questions. Strengthening our absorptive capacity to operate effectively in an open innovation environment not only means learning some new tricks – it’s also worth revisiting our old repertoire and dusting it off. A classic example of ‘dynamic capability ‘ – reviewing, revising and sometimes replacing our innovation routines.

Here’s a framework to help start that reflection process…..

Of our innovation management routines … Which should we do more of, strengthen? Which should we do less of, even stop? Which new ones do we need to learn and add?
…to help us handle these key tasks in absorptive capacity:
Identify useful external knowledge
Acquire it
Assimilate it – connect it with what we know and do
Deploy it

(There’s more, including an Absorptive capacity audit tool, on our Innovation Portal: http://www.innovation-portal.info/?s=absorptive)

[1] Details of their work are in Cohen, W. and D. Levinthal (1990). “Absorptive capacity: A new perspective on learning and innovation.” Administrative Science Quarterly 35(1): 128-152.

[2] Details of their work in Zahra, S. A. and G. George (2002.). “Absorptive capacity: A review, reconceptualization andextension.” Academy of Management Review, 27:: 185-194.

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