Look In, Not Out

Inspiration could be just down the hall

It might be more than 85 years old, but Lego is one of the hottest toy companies around—and one of the biggest in terms of revenue. Many commentators credit the Danish company’s renaissance to its embrace of open innovation, the practice of encouraging employees to look beyond company walls—to rivals, customers, universities—for ideas and solutions. Employees with lots of external connections, the theory goes, are better innovators than those stuck working only with their colleagues.

But, at one company renowned for its originality, the theory doesn’t hold up.

After scrutinizing the working habits of 615 of IBM’s most prolific employees, Siobhan O’Mahony, an associate professor of strategy and innovation, found open innovation might not be worth the hype. She conducted her investigation with researchers from the United Kingdom and Germany.

“Surprisingly, we found that our respondents’ most common sources of inspiration for new ideas were their colleagues inside, rather than outside, the firm,” O’Mahony and one of her collaborators wrote in a Harvard Business Review article. “In contrast with current theories of open innovation, people with broader external networks were no more innovative than people with narrow external networks.”

They conclude that external networking can have its benefits, but that it comes at a price.

“Time networking outside the firm implies less time learning about the firm’s innovation needs,” they write. “Firms can mitigate these costs by encouraging employees to spend time networking with their internal colleagues, while supporting externally focused scouts to deepen and leverage their outside relationships to boost innovation at the firm.”