The 3 E»s of Innovation:
A Networking Perspective
Laurence Lock Lee
Cai Kjaer
Optimice Pty Ltd.
¸Entrepreneurs and inventors are no smarter, no more
courageous, tenacious, or rebellious than the rest of us ·
they are simply better connected¹
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- Andrew Hargadon
Introduction to also provide some insight as to why
success has proved so elusive to so many
Innovation is a much talked about, much firms and organisations.
written about and much studied topic. Yet
In this paper we will describe the theory of
organisations regularly struggle to meet the
social networks as it applies to innovation. We
innovation expectations of their stakeholders,
will then introduce the three E»s as a framework
be they their clients, management team or even
for successful innovation that is underpinned
their own employees. Innovation is regularly
by networks. We will demonstrate, through
associated with breakthrough technologies and
this networking perspective of innovation,
hero worshipped inventors. However, as Andrew
why organisations have traditionally struggled
Hargadon points out, even Edison wasn»t a lone
with innovation and then provide some
inventor, but was involved in a web thick with
guidance as to how organisations can facilitate
ties to other people, ideas, and objects, that
their networks to enhance their chances of
together made up his particular ¸invention¹, the
innovation success.
electric light bulb. Innovation is as much social
as it is technical.
The Theory of Networks and Innovation ¶
Working on the premise that successful ¸It»s a small world after all¹
innovation is underpinned by social networks,
this paper explores innovation from a network There is much more to the ¸small world¹ effect
perspective. Innovation is defined here as ¸good than the catchy Walt Disney tune ¸it»s a small
ideas, implemented¹, meaning that unless an world after all¹. Naturally occurring social
idea is formally implemented and contributing networks show distinctive characteristics
new value, it is still just an idea. The three E»s that are loosely described as the ¸small world
of innovation: Exploration, Engagement and effect¹. Essentially the effect shows clusters
Exploitation have been developed both as a or cliques of highly connected individuals,
categorization of the innovation process and some of who are more central than others.
1 Author of ¸How Breakthroughs Happen·The Surprising Truth About
How Companies Innovate¹, Harvard Business School Press, 2003.
1The connections or ¸ties¹ are described as management and in fact have a low probability
either strong or weak, reflecting the differences of even voicing a new idea. Conversely, less
between say, a strong friendship and a casual constrained individuals have a much higher
acquaintance. The clusters or cliques are then probability of having their ideas positively
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often connected through individuals who share reviewed by management . It is not enough
membership of two or more cliques. These however, for a broker to simply be in a position
individuals are called brokers or bridges and to identify a good idea. Brokers or bridges need
become the main conduit for information or to also have the influencing skills to firstly argue
knowledge flows between the clusters. the merits of the ideas with his or her peers and
then ultimately with management. Kelley»s
study of star performers at AT&T»s research
laboratories identified the skills of initiative,
networking, small-L leadership, organisational
savvy and show and tell capabilities
were required to turn good ideas into
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successful innovations .
Of course identifying promising ideas and
successfully engaging management in their
funding is only part of the journey. To be classed
as a successful innovation, the ideas have to be
productive in practice. New ideas do not come
with tried and tested recipes. This is where the
exploitation teams need to be effective in the
Figure 1 Small World Effect
sharing of the adaptations and improvisations
The figure above shows a typical small world commonly required to make something work
effect with four clusters with a combination in practice. The characteristics of exploitation
of weak (dotted) and strong (hard) ties teams are substantially different to exploration
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connecting them. There exist two competing, teams. Research by March indicated that a
yet complementary theories describing the so concentration on exploitation over exploration
called social capital of networks. The theory of can have a short term beneficial effect on
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closure suggests that high social capital exists organisational learning, but in the long term is
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inside the tightly knit clusters where trustful destructive. He and Wong showed empirically
relationships can be established through regular that firms that could effectively balance the
and frequent interaction. Conversely, the theory competing demands for exploration and
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of structural holes suggests that maximum exploitation achieved higher levels of
benefit lies in bridging the gaps between the innovation success. Conversely, most firms
clusters, called ¸structural holes¹. struggle with innovation precisely because
they fail to effectively balance exploration and
In support of the argument for bridging structural
exploitation initiatives.
holes, empirical research has shown that the
probability of an individual having his or her idea In summary, social network theory suggests that
accepted by management is inversely correlated successful innovation is best achieved through
with the density of ties that the individual has. careful management of the interaction between
That is, members of tight clusters have a very exploration and exploitation activities. This is
low probability of having an idea accepted by articulated further in the next section.
2 Coleman, J. (1990) Foundations of Social Theory, Cambridge, MA: Harvard University Press5 Kelley, R. (1998), ¸Star Performer¹, Orion Business Books
3 Burt, R. (1992) Structural Holes, Cambridge, MA: Harvard University Press6 March, J. (1991), ¸Exploration and Exploitation in Organizational Learning¹,
4 Burt, R. (2004) ¸Structural Holes and Good Ideas¹, American Journal of Sociology, 110: Organizational Science, Vol. 2, No.1.
7 He, Z. and Wong P. (2004), ¸Exploration vs. Exploitation: An Empirical Test of the
Ambidexterity
2The 3 E»s of Innovation the broker or bridge between clusters is seen
as critical to the exploration process. The
The three E»s of innovation infer a linear process engagement process is where the informality of
starting with an exploration process, or a broad the exploration process meets the formality of
based scanning of the environment, looking the management hierarchy, required to fund the
for new innovation opportunities. New ideas or progression of prospective ideas. The success
inventions necessarily need to progress through or otherwise of the engagement process will rely
an acceptance filter which is usually in the critically on the influencing skills of the brokers/
form of management acceptance and approval bridges. Having survived the management filter,
to invest in an idea»s progression. This could prospective ideas now need to be developed
be seen as an engagement process between and implemented in practice. This exploitation
the idea proponents and the organisation process relies on close collaboration and co-
management who has the authority to invest. operation of exploitation teams as ideas are
Finally, for those chosen initiatives the task implemented, adapted and fine tuned to meet
is then to convert the ideas into a deliverable the demands of a real world environment.
solution or product from which a business In practice the exploration and engagement
benefit is gained. practices are best facilitated by the bridge or
On the surface the 3 E»s looks like a straight broker with what Kelley calls ¸star performer¹
forward linear process with stage gates and characteristics. The transition to exploitation
ultimately 100% success. In practice, reality might typically take the form of a ¸best practice¹
is far messier than this. Social networks are implementation. In many organisations today,
neither linear nor mechanistic. Feedback loops cross divisional ¸communities of practice¹ are
between phases will occur as brokers travel used as a mechanism for implementing a global
to and fro between exploration, engagement best practice across organisational boundaries.
and exploitation. However, networks can be Again, while a star performer broker could
assessed and orchestrated to an extent, to help initiate the exploitation process, the ¸high
maximize your chances of innovation success. contact¹ style of the tight clusters or cliques
The schematic below describes the innovation that make up effective exploitation teams
process in terms of networks. The exploration could quickly alienate the exploratory style of
process is seen as the environmental scan the broker. Therefore, it is usually best to have
for new ideas, with the points of intersection the broker retreat from the activity at this stage
between clusters or cliques representing and let the exploitation team get on with the
separate disciplines or cultures, seen as the implementation unhindered.
most fertile areas for exploration. The role of
Figure 2 - The Three E»s
3What Can You do to Improve your Chances of
Innovation Success
In this paper we have argued that successful
innovation is as much to do with social networks
as it is with technology developments. Therefore
to be successful one needs to be aware of the
social networks in your organisations. These
are often known as a firm»s hidden or shadow
organisation. The hidden organisation is best
exposed by an Organisational Network Analysis
(ONA). A typical ONA process is summarized in
the schematic below:
Figure 3 - ONA Methodology
The organisation is firstly sampled according In terms of the innovation process and the 3 E»s
to the key business processes or functions. the steps would be to:
Selected survey respondents are then asked to
nominate their most trusted contacts or ties that 1. Identify the brokers/bridges from the ONA
they rely on to help perform their job functions. analysis. Research has shown that these people
The resulting network can then be analysed for are not always visible to management. Do they
individuals playing network roles such as display ¸star performer¹ characteristics like
broker/bridges, central connectors and initiative, perspective, organisational savvy,
peripheral experts. small-L leadership, show and tell capabilities?
Do their networks go beyond the organizations
boundaries? If so, recruit them into the
4exploration process for new value adding ideas. About the Authors:
2. Encourage the selected broker/bridges to put Laurence Lock Lee is a partner and co-founder
forward a portfolio of innovation prospects that of Optimice Pty Ltd. He has personal experience
they have gleaned from their participation in with the three E»s, having been a research
diverse networks. leader for artificial intelligence and knowledge
3. Management should then assess the based systems within BHP»s corporate
prospects put forward on a risk/reward research laboratories, before following these
basis to come up with a final set to take
to implementation. developments into the exploitation teams across
BHP»s operations and later other corporate and
4. Identify the natural communities of practice, government businesses. More recently he has
cliques or clusters along with their centrally been a research affiliate of Computer Sciences
connected leaders. Central connectors are Corporation»s (CSC) global leading edge forum.
usually more visible to management than brokers Email: llocklee@optimice.com.au
or bridges. Recruit the central connectors into
the exploitation phase. Cai Kjaer is a partner and co-founder of
5. Have selected senior managers take on the Optimice Pty Ltd. He has been responsible
sponsorship role by brokering connections for a number of innovations in the knowledge
between the broker/bridges from the exploration management area. For his efforts in deploying
and engagement phases to the central Knowledge Management in CSC Scandinavia,
connectors of the exploitation teams. Cai received the CSC Scandinavia President»s
award for outstanding performance. Since
6. As sponsors the senior managers need to moving to Australia, Cai has pioneered a
be mindful that the broker/bridges and central strategic framework for information management
connectors may suffer personality clashes if left
unattended. The sponsors may need to facilitate capability assessments. In the area of networks
the graceful withdrawal of the broker/bridge to Cai also pioneered Optimice»s accelerated
ensure that the implementation team»s work networking approach for facilitating faster and
can proceed unhindered, such that the better networking between participants at
business result is achieved and therefore the conference events.
innovation a success. Email: cai.kjaer@optimice.com.au
In summary, this paper has provided a To learn more about Optimice Pty Ltd go to
framework, the three E»s, for implementing www.optimice.com.au
an innovation programme underpinned by
the social networks that naturally exist within
your organisation. A key requirement is to
understand the hidden or shadow organisation
that exists within your firm and the different roles
that individuals play in these networks. Once
identified, they can then be leveraged to facilitate
the innovation results that have proven so elusive
to firms relying on more structured approaches.
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