Our sixth Principle of Open Business is Open Innovation.
To borrow the definition of founding father of the term Open innovation, Dr. Henry Chesbrough, it is
‘The use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively.’
At 90:10 Group we refer to: “Innovating with partners by sharing risk and reward in the development of products, services and marketing”
Once again, we invite you to score your organisation against this Principle and offer a guide at the end of this post to help you do so.
Open Innovation and its methodology in itself are nothing new and have been around since the 50’s. Most large blue-chip companies with the resources to do so have been actively looking outside their organisation to other companies or institutions such as universities for some time now through relatively structured partnerships.
However the integration of consumers and customers into the innovation process has been on an adhoc and sometimes superficial basis. When done badly it’s become derided as ‘crowd-washing’ – rarely moving beyond the focus group or marketing campaigns – driven by a desire to give the appearance of being engaged with customers rather than innovate with customers.
The advent of social technologies lowers the barrier for companies to discover and connect with people, not just other institutions. And they can do so in real-time and at scale anywhere in the world, at a cost they can afford. This then presents them with a revolutionary opportunity to integrate customers and the data they create through their online interactions, directly and /or indirectly into the innovation process to both inspire, qualify and refine.
And the output is not just more innovations and more effective innovations but also a greater sense of ownership from current and future customers and therefore greater advocacy. This in turn leads to a lesser dependency on interruptive, expensive and inefficient marketing as markets are built into the process of innovation not just consumption. They are thought of as active partners not just passive consumers.
How many of your companies innovations come from outside the organisation compared to within?
The fastest growing and most innovative companies to emerge in recent decades – such as Apple, Facebook and Google - have all shown that applying open innovation thinking must go beyond one-off tactics. It must be in the dna or the organisation – as an organisational design principle. Following the principle has demanded of them that they become a platform for collaboration and innovation and it is this which has delivered growth to outstrip all other models.
Open Innovation can’t be a bolt-on – that way lays the fail of crowd-washing. We believe the whole organisation should be seen as a platform that uses its unique expertise to directly collaborate with markets to realise new innovations through processes of Open Innovation which include; co-creation, crowdsourcing and netnography.
Most larger companies have experimented with the increasing number of open innovation platforms such as eYeka or Ideo, or boutique consultancies like Face Group or Insites that offer virtual, real-world or hybrid workshops and forms of structured open innovation to serve one part of the innovation process.
Few however have managed to patch these constituent parts together to become a total system built to sustain ecosystems of partnerships that can consistently deliver innovations that both spin-off and spin-into their parent organisations.
Why? The sheer scale of change management required, political barriers to overcome, as well as the many moving parts of data collection, processing, partner recruitment and management make comprehensive change an unnerving prospect.
So what we currently see are two extremes; with incumbents there is a gradual opening of innovation processes through pockets of open innovation while new entrants are built on the Principle of Open Innovation by default – disrupting every market they touch.
One great barrier, especially for ‘old-world’ closed business, in using open innovation is fear of loss of control and the protectionism around ownership of IP. This is not something that has been fully resolved other than in the ‘open source’ technology movement which is a key part of the Open Business Principle of Sharability and of Open Data, but is giving birth to interesting thinking around Co-IP whereby co-innovators are rewarded with part ownership (and therefore risk and reward) depending on the level and success of their involvement – scaling through particular stages. This requires well defined legal systems to be in place but will become critical as the competition for the most creative consumers becomes hotter.
Most others to date rely upon a quadrant (as seen below) to decide the degree and type of open innovation they apply in a particular situation:
One thing is for sure doing innovation behind closed doors and occasionally sense-checking with focus groups can longer keep pace with organisations fully networked and open to market collaboration nor can it deliver the same level of transformational innovations. The myths that surround misquoted Steve Jobs and Fords comments on open innovation “If I had asked people what they wanted, they would have said faster horses.” Also represent an underlying misunderstanding; open innovation is not about handing over your company to the crowd but partnering with its carefully selected representatives, in a structured way, that combines their needs, ideas and opinions with your team’s professional wisdom and IP.
- Distributes the risk of innovating
- Reduces the risk that the innovations won’t fit the needs of the intended market
- Develops customer ownership of the innovation pre-launch
- Allows external ideas to be surfaced early in the process
- Scales effective idea generation and development
Syngenta: When multinational agribusiness Syngenta adopted open innovation processes Forrester compared the total economic impact compared to traditional closed methods of innovation. They saw an ROI of 182 percent with payback in less than two months. In addition to financial returns, the study revealed qualitative benefits including greater efficiencies, cost savings, and productivity. (Source: Forrester)
Goal State (Scores 5/5) 100% of developments in service, product or comms design are made in collaboration with people outside the org in an organisationally-appropriate co-creation process.
Worst Case (Score 1/5) All developments are made in secret and internally.