Capturing the Value of Synchronized Innovation

How can companies coordinate their product development efforts? Research by Jason P. Davis (MIT Sloan School of Management) shows that synchronization can take three forms: proactive planning with partner organizations; reactive action to signals by other companies; or combining these two in a hybrid. Each approach has its own implementation costs and challenges. Moreover, the network of relationships that already exist within an industry affects how quickly synchrony emerges.

Challenges are magnified when the process depends on other players in the industry network. Understanding what it takes to coordinate critical activities can be extremely helpful — especially in technology-intensive industries, where innovation is distributed and companies are strategically interdependent.

Drawing from more than 100 interviews with executives, managers and engineers developing projects in fields including Internet commerce and mobile applications, Davis notes that coordinating product development is not an easy task: “Synchronization between companies presents an inherent conflict: Even if the benefits are obvious, many companies are reluctant to cede leadership by aligning with another entity entirely.” Acknowledging this tension is helpful when selecting which approach to use, and blending the two approaches can overcome the weaknesses of both planned and reactive synchronization. Davis notes, as well, that “Synchronization develops faster and more easily in denser networks with a greater number of alliances, such as the manufacturing and finance industries.”

Managers of companies in younger industries, Davis writes, “need to explore how alignment with other companies can strengthen their company's position — and how their position might be disrupted.” Managers of companies in more mature industries, on the other hand, “should examine how the structure of the industry might change and how active they want to be in promoting those changes.”