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strategy and business
 / Autumn 2009 / Issue 56(originally published by Booz & Company)


The Promise (and Perils) of Open Collaboration

Today, in contrast, IBM fosters forums, wikis, and other networks that give developers an early connection to a range of constituents. The company is involved with hundreds of open source projects that include customers, competitors, and other interested designers from outside the firm. Each project is aimed at bringing the brainpower of a huge open source community together to help vendors share the development expense for what is, in essence, commodity software. This more trusting environment has brought a remarkable degree of transparency to IBM.

4. Cultivate continuous improvement. As the quality movement waned, companies became impatient with the slow progress of some quality efforts. Fast-paced, fast-track executives began to regard continuous improvement with scorn as an incremental, bureaucratic, and process-driven function detached from the pressures of line management. In a major departure from the Deming approach, General Electric Company’s Six Sigma effort introduced the idea of cost-benefit analysis for improvement efforts. Over the years, however, companies that gave short shrift to continuous improvement fell behind competitors that made it an essential part of operations.    

Open collaboration has given the idea of continuous improvement a new respectability as a process that often leads to innovation, which P&G’s Lafley describes as “the conversion of a new idea into revenues and profits.”

Releases of beta versions of software represent a classic example of continuous improvement. In open source, it is fundamental to release software early and often, so that initial users can test it and suggest (or make) refinements. Many developers believe this process leads to products with higher quality and performance than those produced by “closed organizations.” And because complex software applications require technology that cuts across product lines, frequent release dates “facilitate the customization of each product line,” explains Doug Gaff, a senior engineering manager at Wind River Systems Inc. Wind River is an Alameda, Calif., company that develops software — much of it on open source platforms — for optimizing electronic devices as varied as mobile phones and the Mars exploration rovers.

This early-release-and-fix process also parallels advances in supply chain management, such as the just-in-time inventory methods that were key to the quality movement and that have become much more than a way to get inventory costs off a company’s balance sheet. Rather, for products with short life cycles, such as cell phones, just-in-time methods help ensure that parts inventories aren’t out of date by the time new product iterations occur.

At its best, continuous improvement leads to real innovation, as the experience of SSM St. Joseph Health Center, a hospital in St. Louis, demonstrates. About six years ago, St. Joseph began to experiment with a new approach to monitoring and treating the glucose levels of patients in intensive care as a way to reduce the number of costly — and potentially deadly — infections. The method, which required hourly glucose monitoring, cut the number of infections among postsurgical patients in the ICU to almost zero. It also led to substantial organizational change and increased the workload of nurses, but they embraced the new procedure because of the staff-wide commitment to continuous improvement. The process has since been adopted as a standard of care by many hospitals.

5. Build a flexible innovation infrastructure. At many companies, the responsibility for quality improvement became vested in a quality department run by staff experts in reengineering or Six Sigma, rather than being pushed throughout the organization by executive and line management. Although the functional experts understood quality techniques, they had little appreciation for the interpersonal connections that made such improvements work, and they often failed to align quality objectives with business goals.

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