In today’s digital era, corporate have developed cool-looking apps and web portals displaying wide variety of collaborative gadgets and gizmos, so as to channelize and leverage the intellectual capabilities of the so called “knowledge workers”. The basic idea behind developing these collaboration platforms is to morph raw ideas to business concepts and finally to revenue streams. These companies are tremendously successful with their crowd-sourcing regime using the capabilities of new media.
One side of the idea-funnel relies heavily on crowd’s ability to generate break through innovations whereas the other end of the funnel disregard the “wisdom of crowd” and leave the capital and talent distribution decisions with few executives. It exhibits participatory democracy on the idea generation side and representative democracy on the capital budgeting and rationing side. The “representative class” or “the fortunate few”, chosen by their ranks and grades within an organization acts as an ultimate custodian of funds and talent rationing process. These executives — generally driven by their personal growth agenda and constrained by organizational rigidities & hierarchies — are always expected to make decisions which move the so-called “organizational KPIs” in the right direction. They are typically left with only one choice — the choice to make decisions which guarantee success and reliability.
The “success mantras” typically ends up choosing reliability over creativity or innovation. The pressure of failure is so high that the norms become uncontested and these executives become sympathetic captives of their own decision making process. This “enforced adoption” of achieving allocative and productive efficiencies leads to the market failure. At board-room level the aspiration is to innovate, however, at the ground level the failure is not an option. This leads to selecting ideas or marketplace participants where success is guaranteed. This raises a question — How companies can truly foster the culture of innovation if organizational rigidity and bureaucracy play a role in capital and talent allocation process?
The world around us is changing — the power is shifting, individuals are reshaping institutions, social media apps have become household names, new norm is the CHANGE — then why we are still glued to the old way of working? These are some questions which lead to alternative hypothesis of creating a marketplace — Market for Ideas, Capital and Talent.
In order to truly foster the culture of innovation, companies need to create fully functional efficient markets for Ideas, Capital and Talent. Organizations need to design and create the conditions for these internal markets to operate, flourish and make decisions regarding funds disbursement and resource allocation; thereby getting away from the conventional orthodox practices and bureaucracy. Failing to do so, makes their success vulnerable to their ability to separate governance role from the executive role.
The internal marketplace is not a new concept. It exists within organizational boundaries in the form of internal job boards, employee referral systems, idea portals, wikis, blogs and online planning & budgeting system. These platforms have created ways for individuals to reveal passions and expertise, for teams to learn from each other, for offices to connect more frequently and easily, and for the company to build on shared themes and directions. Why can’t we leverage technology platforms such as web-based auction models and idea portals etc. along with the concepts of micro-financing, venture capitalism and M&A trading to create internal marketplace that provide stable allocation, increased perceived value for seller i.e talent and reduced buyers’(business) transaction cost associated with the trade? Why business units can’t self-select and hedge their risk by funding ideas suiting their risk appetite and have the potential to earn returns higher than the hurdle rate?
By institutionalizing the innovation process through policies, governance practices, ethics codes and internal “rights management” procedures, effective organizations can create a collaborative culture so as to implement market design principles in order to create efficient marketplace. The efficiency of the marketplace is totally dependent upon organizational culture so failing to create a conducive and safe work environment may lead to market failure. Before one goes out and start designing the internal market for ideas, one need to devise strategies for continuous flow of high quality ideas, maintaining momentum and transparency once the market is operational along with the design of incentive scheme and reward programs to motivate and engage marketplace participants. At a firm level, the adoption of standards similar to “creative commons” provides “rights management” discipline in the digital age.
The purpose of these series is to promote the concept of marketplace for Ideas, Capital and talent within an organisation. In the next few blogs, I will list down some of the design principle that needs to be considered in order to influence the supply and demand characteristics of the marketplace. The final few sections of the blog will apply these design principles in order to create internal market place.
