From push to pull: The next frontier of innovation - Some companies are learning how to take a more creative approach to mobilizing their resources.

http://www.mckinseyquarterly.com/article_print.aspx?L2=21&L3=37&ar=1642

From push to pull: The next frontier of innovation
Some companies are learning how to take a more creative approach to
mobilizing their resources.
John Seely Brown and John Hagel III
The McKinsey Quarterly, 2005 Number 3

Ever since 1911, when Frederick Winslow Taylor published The Principles of
Scientific Management, businesses have pursued efficiency with a focus
that borders on obsession. Nearly a century later, CEOs and management
authors are still writing hymns of praise to the benefits of executing
operations more efficiently than the competition does. This fixation has
yielded some highly precise approaches to managing modern institutions and
technology. Although these practices vary in their details, they share a
common foundation: pushing resources into the areas of greatest
anticipated need. In today's business world, highly automated factories or
service platforms, supported by rigid and standardized processes, deliver
resources to the right places at predetermined times. In information
technology, massive enterprise applications specify activities to be
performed and resources to be deployed to meet anticipated demand. In
education, standard curricula expose students to codified information
through a predetermined sequence of experiences—an approach many
corporations follow in their employee training.
In each of these examples—and in "push" systems generally—the core
assumptions are that companies and other institutions can anticipate
demand and that mobilizing scarce resources in previously specified ways
is the most efficient and reliable way to meet it. But the efficiency of
push systems comes at a stiff price, for they require companies to
specify, monitor, and enforce detailed activities and tasks. This rigidity
necessarily restricts the number and diversity of the participants in push
models, thus limiting the innovation and learning that can take place in
them. It also tends to turn workers into mere instruments of management at
a time when self-directed effort from a broad range of employees is ever
more essential to big corporations (see "The 21st-century organization").
The highly specified, centralized, and restrictive nature of push systems
prevents companies from experimenting, improvising, and learning as
quickly as they might, both throughout their own organizations and across
others. Push systems not only inhibit product innovation but—even more
important—make it much harder to implement incremental process innovations
rapidly. In a world where the relative pace and trajectory of capability
building are of constantly rising importance,1 push systems thus hinder
companies from participating in the distributed resource networks that are
now indispensable to competitive advantage. The next frontier of
innovation will require the broader adoption of pull capabilities as well
as less reliance on traditional push systems, which, as demand becomes
more and more difficult to forecast, increasingly fail to deliver even the
efficiency they were designed to promote. Organizations that use them
either pile up inventories or go through costly somersaults in an effort
to keep up with unanticipated market shifts.
Signs of a new approach
Many companies continue to operate on the flawed assumption that demand is
intrinsically foreseeable. But others are beginning to embrace a more
flexible approach to setting in motion (or mobilizing) tangible and
intangible assets (or resources), which may reside within or outside the
company. This new approach might be called the "pull" system of resource
mobilization. Its early elements began to emerge from Toyota Motor's
lean-manufacturing system in the 1950s, when the company began pulling
resources into the assembly line as needed rather than allowing
inventories to pile up during production. But more versatile and
far-reaching pull systems—which extend beyond production and, indeed,
beyond the enterprise itself—are now beginning to emerge not just in
manufacturing and supply chain operations but also in arenas as diverse as
pharmaceutical R&D and the media. These early pull models, driven by
changing strategic and operational needs and facilitated by the Internet,
are visible primarily at the periphery of more mature push models. Often,
as in education, they are emerging under the radar, in unexpected areas.
These systems have far-reaching implications for the way companies
organize and manage their activities.
How pull systems work in one industry
Over the past decade, the mass media have been transformed by the
digitization of content (text, voice, and video) and by new ways for
customers to access, assemble, and distribute it through the Internet.
Rather than waiting for media companies to push out their content, for
instance, their customers increasingly pull it in at will. New media
distribution businesses are breaking down the traditional channels' shelf
space constraints, radically expanding the range of content available, and
providing robust tools to help users search for it. Sometimes these
businesses, such as Amazon.com and Netflix, resemble conventional
retailers in the sense of providing a single point of access to a broad
assortment of media. Some provide new ways to sample media before the
purchase (for instance, the TouchTunes Rhapsody digital jukebox for
music). But others lack any central hub and instead help owners of content
interact with each other directly. Half.com (now owned by eBay) is
analogous to a local flea market. Peer-to-peer networks such as BitTorrent
let participants download movies, music, and other digital media.
In the media business, pull approaches have transformed more than just
distribution channels. On the production side, a vibrant "remix" culture
has emerged thanks to the availability of widely affordable digital
audio-editing tools, which make it possible for DJs in nightclubs and
other music fans to pull in tracks from a variety of music sources and to
recombine them. "Blogging" tools help users "publish" their own writings,
music, or photographs, most often by pulling in content from a broad range
of sources and creatively mixing and commenting on it.
Global process networks
Skeptics might argue that the media business is unique and that its
emerging pull systems have little application to sectors whose products
are harder to digitize. Yet pull approaches to the mobilization of
resources are also taking hold in product businesses, particularly in
categories characterized by compressed life cycles and rapidly evolving
customer demand.
Consider the three core operating processes of a business: managing supply
chains (including manufacturing and logistics), creating and
commercializing products, and managing customer relationships. In
industries as diverse as apparel, computers, and motorcycles, new
approaches to the mobilization of resources—what we call global process
networks—are emerging to organize these three processes across hundreds,
and often thousands, of enterprises. Such global process networks, which
change size and shape depending on the challenge in question, use
significant features of the pull model. Participating companies operate
across traditional corporate boundaries, collaborate on innovative
solutions, and learn from one another in a way that helps them speed up
the building of capabilities.
Supply chain management and manufacturing. Li & Fung, a Hong Kong-based
apparel producer and distributor that works with 7,500 business partners,
in 37 countries, can call on any number of specialists to manufacture
everything from high-end wool sweaters to synthetic slacks. The company,
one of the new model's most sophisticated practitioners, has rewritten the
rules of supply chain management. Traditional supply chain managers focus
on limiting the number of partners and on creating tightly integrated
operations—the Wal-Mart approach. Orchestrators like Li & Fung are rapidly
expanding the range of participants in order to gain access to more
specialized skills, as well as nurturing and developing relationships that
help all parties build their capabilities more quickly. Li & Fung sits at
the hub of a network of specialist enterprises that pull in resources in
different combinations and configurations, depending on the nature of
demand.
Product innovation. Taiwan's original-design manufacturers, such as Compal
and Quanta Computer, offer equally compelling examples of distributed
product innovation. These ODMs creatively pull together highly specialized
component and subsystem suppliers in order to generate ideas for
delivering higher performance at lower cost in a broad range of digital
devices, including digital still cameras, mobile telephones, and notebook
computers. Instead of designing products in detail from the top down, ODMs
specify ambitious performance targets and then rely on this diverse
network of technology partners to find new ways of meeting them.
A variety of companies, such as Eli Lilly, Nokia, and P&G, are also
deploying informal open-innovation techniques. In 2001, for example, Lilly
created a wholly owned subsidiary—InnoCentive—that has recruited a
distributed network of more than 80,000 research participants (called
"solvers"), in over 170 countries, to help its clients find solutions to
difficult R&D challenges. InnoCentive has more than 30 such clients
(called "seekers"), including Dow Chemical, P&G, and its own parent,
Lilly. When seekers confront a particularly difficult research challenge,
they post their requirements to InnoCentive's solver network and offer a
bounty to anyone who finds a solution. InnoCentive's success rate is
roughly 50 percent—not bad for research problems that the seekers'
internal R&D staffs couldn't handle.
Most interesting of all, perhaps, are the signs that InnoCentive's solver
network is beginning to self-organize, with diverse solvers coming
together to address a specific seeker's needs. This is a classic pull
system: when needs can't be easily determined in advance, companies can
create platforms to mobilize distributed resources readily.
Employee learning and education. Cisco Systems has shown how organizations
can apply the new model to partner-training and -learning activities,
which are increasingly important for the smooth functioning of global
process networks. The company's groundbreaking (and robust) e-learning
platform gives more than 40,000 of its distributed channel partners—with
combined sales and technical staffs of 400,000-plus employees—access to
training modules at times and places of their own choosing. Cisco and its
partners are thus able to solve the problems of customers quickly.
Pull approaches are also highly visible in the context of open-source
software. Discussions on that subject tend to focus on the innovative
techniques used to produce complex systems by mobilizing highly
distributed programming talent. Far fewer observers have noted the
significance of open-source software as a platform for effective learning
through apprenticeship. Open-source programmers often start with code
developed by others and then develop enhancements for specific
environments. As the code is generated, it is posted for review and
testing by a broad community of experienced programmers. Participants in
open-source projects learn at four levels: they observe and work with code
from other programmers, they observe their own code in action, they get
feedback and commentary from other people who execute their code, and they
have access to feedback and commentary about code developed by other
open-source programmers. Participants begin on the periphery of the
platform and advance, by building their skills, to become coaches and
mentors. In this way, they structure their own learning environments,
pulling in whatever resources are most relevant and timely.

Contrasting push and pull
Push systems contrast starkly with pull ones (exhibit), particularly in
their view of demand: the former treat it as foreseeable, the latter as
highly uncertain. This difference in a basic premise leads to
fundamentally different design principles. For instance, instead of
dealing with uncertainty by tightening controls, as push systems would,
pull models address immediate needs by expanding opportunities for local
participants—employees and customers alike—to use their creativity. To
exploit the opportunities that uncertainty presents, pull models help
people come together and innovate by drawing on a growing array of
specialized and distributed resources.
Rather than seeking to constrain the range of resources available to
participants, pull models constantly strive to expand it while helping
participants to find the most relevant options. Rather than seeking to
dictate the actions of participants, pull models give even people on the
periphery the tools and resources (including connections to other people)
needed to take the initiative and to address opportunities creatively as
they arise. Rather than treating producers as passive consumers whose
needs can be anticipated and shaped by centralized decision makers, pull
models treat people as networked creators even when they actually are
customers purchasing goods and services. Pull platforms harness their
participants' passion, commitment, and desire to learn, thereby creating
communities that can improvise and innovate rapidly.
The open-source world isn't the only niche community where this kind of
learning and innovation now take place. The world of rare books, for
instance, has been turned upside down by Amazon's ability to aggregate the
offerings of many local special-interest sellers; customers are no longer
constrained by the quirky collections of titles assembled by owners of
antiquarian bookshops in out-of-the-way physical locations. In extreme
sports such as surfing and windsurfing, participants increasingly innovate
and cocreate new offerings, such as footholds on windsurfing boards to
enhance wave jumping.2 And customized cars, or hot rods—automobiles
modified to suit individual tastes—rank among the fastest-growing segments
of the North American automobile market. In each of these cases, consumers
are becoming more engaged in the creative and commercial processes.
Cocreation is a powerful engine for innovation: instead of limiting it to
what companies can devise within their own borders, pull systems throw the
process open to many diverse participants, whose input can take product
and service offerings in unexpected directions that serve a much broader
range of needs. Instant-messaging networks, for instance, were initially
marketed to teens as a way to communicate more rapidly, but financial
traders, among many other people, now use them to gain an edge in rapidly
moving financial markets.3
How to pull
The benefits of pull systems should by now be clear: enhanced innovation,
increased opportunity for collaboration, closer relationships with
customers and suppliers, more rapid feedback, richer reflection on the
results of distributed experimentation, and greater scalability, for
example. In our view, however, the essential reason to begin implementing
pull systems is the fact that they help companies to secure deeper sources
of competitive advantage at a time when the traditional sources are
disappearing. Although a comprehensive exploration of the way big
corporations can assemble pull systems is beyond the scope of this
article, several areas of focus are worth highlighting.
Use metaphors to deepen understanding
Push models are typically based on programs—an image that conjures up
thick and tightly scripted manuals, standardized curricula, the offerings
of network television, and software. By contrast, pull approaches tend to
work on platforms, a word suggesting a more open-ended design, to
accommodate the changing needs of participants. The right image is
conveyed by Expedia's travel service or a hospital's emergency ward.
These platforms are invariably modular to help make resources and
activities more accessible and flexible. Instead of being rigidly
specified, as in push systems, the modular elements are "loosely coupled":
they can be joined easily, without friction or customization, and just as
easily disassembled and reassembled. Interfaces show users the contents of
the module and how to access it.4 A module might, for instance, consist of
a business partner or partners (as in Li & Fung's global process network)
or of a specialized tool (such as a radio telescope or an electron
microscope that can be operated remotely through standardized interfaces).
Understand the spectrum
Pull platforms and push programs are not mutually exclusive. Li & Fung's
global process network is a highly flexible pull platform, for example,
yet many apparel producers participating in it organize their own
resources in the traditional top-down way. Amazon and eBay use pull models
to help consumers gain access to books produced by traditional push
programs, but pull distribution systems are now creating opportunities to
reconfigure the production process through publishing on demand.
Examine your mind-set
Companies incorporating pull platforms into their operations must
challenge and refine their key assumptions about what is required for
success: greater control, for instance, will no longer be the appropriate
response to growing uncertainty, which must be seen as an opportunity, not
a threat. Executives will have to stand back and let individual employees
identify and mobilize resources and collaborators at the right time. In
many cases, it will be necessary to transform not-invented-here cultures
that prevent organizations from effectively leveraging third-party
resources. Instead of wondering what companies can get from their business
partners, executives will have to ask what they and their business
partners can learn from one another.
Reexamine your company's focus
As we have noted, companies traditionally carry on three core processes:
managing infrastructure, managing customer relationships, and creating and
commercializing products. It's tough to be on the leading edge in all
three areas, but in an effort to retain control, most companies try. More
versatile pull platforms let executives concentrate on becoming world
class in one of the three processes, relying on external partners to
supply the elements of the other two.5
Start where you are
In our experience, most companies already use pull platforms in fragmented
and informal contexts. Executives can begin preparing for a more
systematic and formal transition from push to pull by investigating how
effectively their companies now utilize such pull capabilities and which
of their most profitable revenue streams might be vulnerable to
pull-oriented competitors. These executives can start to transform
corporate operating processes by challenging the managers who run them to
deploy additional pull capabilities as a way of meeting performance
targets. And companies can begin to redesign the organization by making
pivotal employees—engineers in a high-tech company, for example, or brand
managers in a consumer goods one—responsible for creating a pull platform
to improve the way they work, both within and outside the enterprise.
The cyberpunk author William Gibson has observed that "The future is
already here—it is just unevenly distributed."6 Pull systems may seem a
remote threat, given their location at the periphery of many industries.
Yet forces at the periphery can come to the center with astounding speed.
As they do, business executives will have to reassess nearly every aspect
of today's corporation.
About the Authors
John Seely Brown, the former head of Xerox's Palo Alto Research Center and
chief scientist at Xerox, can be reached at jsb@johnseelybrown.com; John
Hagel, an alumnus of McKinsey's Silicon Valley office, is now a senior
adviser to the Firm and can be reached at john@johnhagel.com. Their most
recent book is The Only Sustainable Edge: Why Business Strategy Depends on
Productive Friction and Dynamic Specialization.
Notes
1John Seely Brown and John Hagel III, The Only Sustainable Edge: Why
Business Strategy Depends on Productive Friction and Dynamic
Specialization, Boston: Harvard Business School Press, 2005.
2Extreme sports are a particularly active area for user cocreation because
their participants continually tinker with the equipment to reach the next
level of performance. Participants themselves determine what isand isn't
fair on a case-by-case basis, and through viral marketing useful
innovations spread like wildfire.
3Information technology will play a central role in helping companies to
make the shift from push to pull systems. IT will be radically transformed
as it addresses the challenge of distributed pull systems spanning
thousands of enterprises: "outside-in" IT architectures, for example, will
replace traditional "inside-out" ones. We will discuss the IT implications
of pull systems in greater detail in a working paper on
edgeperspectives.com.
4John Seely Brown, Scott Durchslag, and John Hagel III, "Loosening up: How
process networks unlock the power of specialization," The McKinsey
Quarterly, 2002 special edition: Risk and resilience, pp. 58–69.
5John Hagel III and Marc Singer, "Unbundling the corporation," The
McKinsey Quarterly, 2000 strategy anthology, pp. 147–56.
6Talk of the Nation, National Public Radio, November 30, 1999.