Creating intellectual property is a team sport; it takes more and better resources than any single organization possesses. To attract an elite team of innovators—and be successful in the networked economy—it’s essential to offer them an appropriate share of the value created. There are five key action steps to implement distributed innovation.

First, design processes to match the type of innovation required. Idea generation is unstructured by nature, but systems and processes can help to create better results.

Then create structures to access and coordinate top global talent. Pharmaceutical giant Eli Lilly established InnoCentive LLP in order to tap outside talent. InnoCentive’s research tasks are clearly defined by its “seeker” companies, then posted to a global community of thousands of scientists.

Each problem has a specific reward attached, and it’s shared among the team. The rewards can be distributed in two ways, either for their input (salary or fee), or for the value of the final output (commission, profit share or success fee).

Negotiate based on differing objectives, risk appetite, and power. Money isn’t always everything: actor Keanu Reeves took less money for “The Devil’s Advocate” to get to work with Al Pacino.

Finally, be open. One of the most dramatic trends in a connected economy is toward transparency. Information always escapes, and attitudes around the world are rapidly shifting towards expecting and demanding transparency in all things. In the case of distributed innovation, it is essential to provide transparency in order to get the best people to participate.

Darwin Aug 2003