I recently had dinner with a leader from one of the top technology companies in the world. He was just back from the World Economic Forum in Davos – so I asked him what he had learned. The first thing that sprang to his mind was the pronounced difference between the quality of conversation with elected leaders versus monarchs. Well, it’s been over 200 years and we American’s can take for granted the progress we’ve made.The pronounced difference stems from the fact that elections tap the knowledge network via a competitive model that monarchies lack. The founding fathers had no internet, but they understood Metcalfe’s law regarding the power of networks and distributed processing. Yes – we are the United States of Crowdsourcing.Our dinner conversation moved on to why tech giants get knocked from their perch by tiny competitors despite spending billions annually on innovation. Then the dots connected – and I recognized that quasi-monopolies and monarchies frequently suffer from the same critical weakness: they both resist outside influence (or disconnect from the knowledge network) and thereby loose their knowledge advantage. This is exactly what happens to large incumbents that lose market share to start-ups.I’ve been lucky to have the opportunity to study from the inside how two of the great technology companies – near monopolies – have used active Corporate Development programs to address this challenge. Active and consistent acquiring and investing can co-op the competitive ecosystem and maintain a more effective culture of innovation.In the early 90’s, I had the unique experience of helping John Akers and his CTO Armando Garcia connect IBM to the knowledge network through the creation of an integrated and active corporate development capability. I was part of a small group of consultants who were badged in as IBM employees to help transform the company over four years. The evolution of their Corp Dev group – now over 200 people with its own $20M IT budget for M&A – has played a major part in their success for the last 20 years. It has added as much, if not more, value than their internal R&D channel. Before 1992, it had been afterthought.In 2006, I had the unique experience of spending a day with John Morgridge, at his home and in his class at Stanford. This was the year he retired as John Chambers’s boss at Cisco Systems. John talked at length about the importance of Cisco’s M&A strategy from a talent management perspective – he was the driver of their digestible “deal-a-month” pace. Of course, he cared about technology and financials when looking at deals. But, his early experience in the mini-computer industry had taught him the dangers of a closed R&D culture. He believed that constant integration of fresh talent prevented Cisco from going off the rails, and that HR flexibility alone justified their acquisition spending. This was obviously not a point of view one broadcasts to the general public. Since Morgridge’s retirement, Chambers has shifted his M&A strategy to mostly occasional bold strokes and Cisco’s edge appears to have dulled.Larry Page is a product of the network economy – a time when Moore’s law was blown away by Metcalfe’s. Google’s acquisition and investment rhythm is a non-stop contest to attract the best ideas and talent. For every company they acquire or invest in, dozens more tried to win the contest. All of these companies are working for Google for free in hopes of being acquired. Every time Google finds the “best solution” outside the Plex, their current employees are reminded that they are competing with the entire network, on and off campus. I’m sure this knowledge is humbling and inspiring, in the way constant competition can be. Sustaining leadership in the knowledge economy is about securing the best knowledge. They are working the network to keep the edge (or edges) that high walls can dull.IBM, Cisco (in the 90’s), and now Google, have all used active Corporate Development programs to avoid the innovation stagnation that comes from isolated R&D. They realized that disconnecting from the knowledge network, taking refuge in a single vertex, can only lead to one result – revolution and over-through.