Open Innovation From A Practitioner's Perspective

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Principles of Open Innovation

The new innovation paradigm requires a dramatic shift in the attitude of companies and individuals towards innovation. As discussed earlier, this shift in attitude is no longer an option for many industries.  The forces of change that come with globalization and more demanding customers are here to stay.  For many companies it is now a matter of survival.  Yet this new landscape also brings great opportunity, at a level never before imagined.  As you prepare yourself and your company, keep in mind the following seven guiding principles:

  1. Develop More Transparency[1] – starting with your own company, look for ways to share information and build trust with all of your employees and be sure to demand the same from them.  Make your organization as flat (and non-hierarchical) as possible. With your outside world of customers and partners, look for opportunities to open up or share information beyond the basic transactional exchange of information.  Intuit holds an annual Entrepreneur Day where they invite customers to spend a day with Intuit senior management in an open idea exchange.[2]
  2. Engage with networks – we live in a highly networked society and the employees (and customers) of tomorrow will have spent their entire lives in this networked world.  Be aware of the value of these networks and encourage your employees to actively participate in professional networks, blogs, and other social media.  There is a wealth of useful (and often) free information that is available.
  3. Embrace community – by definition, most successful networks have a sense of community or shared purpose.  This implies a certain set of norms and expected behavior for members of a specific community.  Interestingly enough, these communities can offer a great deal of insight and value to its members.  On LinkedIn alone there are over 3000 innovation-related groups.
  4. Competitors can be collaborators – this may seem a little unusual to some, but this new world of innovation should force you to rethink what defines a competitor and ways in which you can work together.  If you sell office productivity software, for example, are you competing against other software providers or is your bigger obstacle customer indifference towards your product?  P&G, for example, licensed a core plastic film technology to Clorox, a staunch competitor in certain markets, because P&G was no longer in the plastic film business.  This would have been unimaginable fifteen years ago.  Small companies can cooperate at certain levels to create entire eco-systems around new technology that can help raise the market opportunity for all involved.  Twitter is a good example of a recent innovation in social media that has spawned an entire ecosystem of new services, all benefiting one another.
  5. Discourage the “Not Invented Here” syndrome – nothing kills an idea faster than the belief that your company has all the answers and no possible expertise exists outside your company’s four walls. Time and again we have seen success stories that completely debunk this theory.  No single entity, regardless of size or scope, can legitimately claim to know all the experts in a given area. “Proudly found elsewhere” is a commonly used term to describe the new mindset you need to adopt.
  6. Engage with failure – failure is a reality and a necessary part of the innovation process. Failure today takes on a different context when you consider that one person’s failure is another’s success.  Use failure as an opportunity to re-frame the question or seek completely new sources of solutions.  Failure sometimes is the result of asking the wrong question or focusing your efforts in the wrong area.
  7. Get into the habit of maintaining a “memory” bank of successes/failures – the company should document all successes and failures to understand why something worked and why something else didn’t work. There may be opportunities in the future to bring those failures back to life.

[1] Transparency is defined here as: “Making the optimum level of disclosure for your partner to have all the information necessary.”

[2] For more information go to: http://smallbusiness.intuit.com/blog/where-small-is-going/2009/08/call-for-proposals-–-intuit-entrepreneur-day.html

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Getting to the Right Question

(I posted this originally in the Clorox Open Innovation Site). As companies prepare themselves to enter this new world of open innovation and bringing in the best ideas from the outside, they need to become proficient in several new skills (at the company level and the individual level). Let’s start with individual skills, two of which I’ll highlight here. The first is developing the ability to properly frame questions. Individuals need to remove all unnecessary jargon, acronyms, application(s) of the technology, in order to provide a diverse group of solution providers the ability to solve the problem. Many times I have seen people rush directly to problem-solving mode without pausing for a minute to think about what question they are trying to answer.

The second key skill set for individual contributors to develop is perhaps more difficult to achieve, and that is the shift from being a problem solver to a solution finder. We were trained and rewarded on the basis of our ability to solve problems. In the new open innovation paradigm, your value should be determined equally between your ability to solve a problem yourself and/or your ability to find the solution.

And, of course, the better you become at framing the question the easier it is to find the solution in an open innovation environment!

Two points I left out intentionally (which I will address in future posts): how can/should companies re-work their reward/recognition programs to encourage these new skills and how will these new skills help/hurt in managing confidentiality/IP?

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Open Innovation in Software

Open Innovation in Software

Jeff Howe, in his book Crowdsourcing, presents three forms (or categories) of crowdsourcing. The reason I mention crowdsourcing is because I believe open innovation is a form of crowdsourcing (or an example of crowdsourcing). I also think that a lot of principles of crowdsourcing (community, diversity, competitions, reward/recognition) apply to open innovation.

The three categories of crowdsourcing (according to Howe) are as follows:

1)   Prediction Market or Information Market

Such as a ‘futures’ market for a new movie release, these tend to have a set of fixed outcomes that participants choose from (success or failure, who will win, etc). Examples include Iowa Electronic Markets, Hollywood Stock Exchange, and Betfair.

2)   Problem Solving or Crowd Casting Network

Here you are looking for expertise in a large crowd to solve a specific problem, such as InnoCentive. You still need to share across the crowd (and a diverse one at that) because you’re not sure who in the crowd can solve your problem.

3)   Idea Jams

As the name implies, they’re much more open-ended and are less structured. Here you are brainstorming new ideas/applications for a given product or service.

What I like about this framework is that it works perfectly for open innovation. In other words, you can use open innovation in each of the above categories. For prediction markets, imagine inviting a network of suppliers, employees, partners, retirees to vote on a series of possible outcomes (or options) for a given product launch. What’s ‘open’ about this is whom you invite and how you frame the questions.

Problem solving networks are probably the most common examples of how open innovation is being carried out today. What’s important to remember is that in reality this represents only a portion of an overall open innovation strategy, yet for many companies they latch on to this approach and consider it their ENTIRE open innovation strategy.

Idea jams are very interesting because here’s where diversity can pay off in a big way. By bringing in people who know nothing about your particular business or product you can open up the possibilities to new and interesting uses for your products and new markets for your business.

One other key element of any open innovation strategy is the concept of community. It is important to incorporate aspects of social media and social networking in any open innovation activity (to the extent possible).

If we take the three above categories and map them in software, (both the service and the product side), one can start to see interesting strategies emerge for each grouping, as shown in the following table:

Table 1 – Possible open innovation tactics for each category of crowdsourcing
strategy, for software as a service and software as a product.

 

 

Service

 

Product

 

Information Market

  • Bring the crowd (new and experienced users) to vote on the top service improvements they’d like to see (using a form of prediction market or exchange)
  • Bring the crowd (new and experienced users) to vote on the top product improvements they’d like to see (using a form of prediction market or exchange)

 

Crowdcasting Network

  • Run prize-like competitions to find new applications for existing products
  • Allow user community to suggest new ways to deploy software-as-a-service business models
  • Post specific problems on other third-party innovation broker sites
  • Post specific problems that need solving on corporate site or on user community site
  • Topcoder programming competitions
  • Post specific problems on other third-party innovation broker sites
  • MATLAB is a good example:
    http://tinyurl.com/ygxacve

 

Idea Jam

  • Run internal/external idea jams or brainstorming competitions
  • Invite external power users to internal idea jams
  • Release part of code to general public; allow for modifications
  • Run internal/external idea jams
  • Open up an app store to allow for new add-ons to existing products

Here is a good example from BT and their shift from a product to a service-based company (and how open innovation was a major factor in this transition):

http://www.youtube.com/user/citrisuc#p/u/140/g7eRgHWQCZc

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Netflix Prize Winners Announced

This is proving to be a fascinating story on open innovation/crowdsourcing and the tremendous benefits it can provide, beyond financial. Clearly it’s important to achieve the desired financial results (new sales, reduced costs, etc) but the other rewards are just as important. These include learning how to ask the question, the value of iteration, expanding your network.

Netflix has announced the winner of the first Netflix prize, which was created to improve their current recommendation engine by 10%. The process itself and what was learned along the way were as interesting as the result itself. Teams cooperated and published their algorithms, with the hope that others would come in and improve them (and they did). The original team would take the improved algorithm and make it even better. Some companies gave their employees permission to work on this during their work hours. Why? Because in the end this made them better programmers and what they learned by participating actually led to $10 million payoff (internally), according to one company.

Netflix announced a new competition with a new set of criteria, it’s also covered in the same article. Looks like they learned how to better frame the question……

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More on Confidentiality and Intellectual Property Rights (IPR)

As an update to an earlier post on this same topic, I want to focus on several ideas to properly manage IPR in an open innovation/crowdsourcing context.

First, I’ll repeat what I think it important for everyone to understand: not every single challenge or idea, whether it comes from R&D or marketing or product development, is a candidate for an open innovation/crowdsourcing approach. This is where every organization needs to start – with a determination of what is and is not fair game to share externally. In my experience I have seen that even after a company sets aside those challenges or projects that are considered too sensitive to share externally, there is a still a lot of information to work with.

Secondly, and really the focus of this post, is to consider a critical skill everyone needs to develop to be successful: framing the question properly. Too often I’ve seen companies focus on problem-solving and not problem-framing. I’ve been told by many senior managers that a properly framed question can be 70-80% of the work in getting the answer they are looking for.

How can questions be framed properly:

* make sure to breakdown the question into smaller ‘pieces’; this allows for a more focused effort on the part of potential soution providers and it also helps mask the problem (a few pixels won’t give you the whole picture)

* remove all industry or corporate jargon (helps to hide the potential application or market opportunity)

* clearly define solution criteria (this helps somewhat in managing confidentiality but also it’s jsut a good practice in general)

In summary, spend more time thinking about the real problem you are trying to solve and not only will you improve your chances of success but you will also improve your control of what information you disclose (and the risk associated with that disclosure).

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