Roland Harwood has an interesting post today on the always worthwhile NESTA Connect blog in which he discusses eight issues that firms run into when trying to manage open innovation. While you should definitely read the whole post, one idea that jumped out at me is this:

Misunderstand the difference between hierarchies and informal networks – Hierarchies work primarily through ‘command and control’ whereas informal networks work through ‘trust’. Both are crucial but mixing the two can be fatal. Don’t do it. All complex innovation challenges now involve hierarchies – which are multiple hierarchies interwoven with multiple informal networks – and we need to understand them both. According to social network guru Karen Stephenson, at any point in time, informal networks trump hierarchy, however over time hierarchies trump informal networks. In other words informal networks have power but hierarchies preserve longevity.

I think that his distinction between hierarchies and informal networks is correct – it certainly rings true with regard to the observations that we are making in our research in this area. It is definitely correct to say that complex innovation challenges do inevitably involve both. My read on this would be that it is important to understand both the informal networks and the hierarchy involved in any particular innovation project. Most firms have a reasonable handle on their hierarchy but no clue about their networks. The methods of managing both differ, and as Harwood points out, they are good for different things.

We’re working hard right now trying to figure out how to effectively manage innovation networks in project-based firms. It’s a pretty interesting challenge as these firms often have a much stronger hierarchy than many of the organisations that have normally been looked at in network research. Manaing the interactions between the two forms of organising can be very difficult. Getting this right is one of the many challenges of managing innovation.

(network drawings from flickr/sevensixfive under a creative commons license)