February 8, 2010 | By Chuck Frey | Category: Open innovation

One of the reasons why open innovation is so hard to implement is because you must open up your internal innovation processes to another organization, one which may have a culture and values that are significantly different than those of your organization.

That's why it's critical that you have your internal innovation processes in excellent shape before you begin to explore partnerships and alliances outside of your organization. If you haven't reached consensus internally on what your innovation objectives, strategies and processes are, how can you hope to collaborate in a meaningful way with an outside partner?

In reality, points out Gene Slowinski of Rutgers University, every time you enter into an alliance with an outside firm, you're actually dealing with three sets of relationships, which must be aligned if any meaningful results are to come from it (see the diagram above). There's the visible relationship at the point of interface between your company and your prospective partner. The other two relationships are internal - the cross-functional teams within your firm and that of your alliance partner. Each of those teams must also agree on key  aspects of the deal. This is harder than it seems, which is why many open innovation initiatives tend to fail.

Think about your corporate culture for a moment. Do all of the key executives agree on the strategic direction of the firm? How open are they to fostering outside relationships? Chances are your company has a number of factions, each with their own strongly held sets of opinions. Reaching consensus on strategic issues can often be a long, painful process.

What's the solution to this challenge? Slowinski, in his presentation at the 2010 CoDev & Open Innovation Conference, offered this advice: Start with the assumption that you're going to craft an innovation framework that maximizes the value for both companies. Encourage your prospective alliance partner to do the same. Then compare your two frameworks. Chances are, they will be better aligned, which will increase the odds that your alliance will be a successful one.

February 8, 2010 | By Chuck Frey | Category: Open innovation

Linkedin, the popular professional networking website, isn't just a useful job search and professional networking tool. It's also an essential resource for locating potential open innovation partners, says innovation thought leader Stefan Lindegaard.

Speaking at the recent CoDev & Open Innovation conference, Lindegaard conducted an informal poll to see how many of the conference attendees had Linkedin profiles. Most of the hands in the room went up. Lindegaard pointed out that Linkedin has reached critical mass, because so many business professionals are now listed there. That makes it a powerful tool for finding the specialized people and knowledge we need to drive our open innovation initiatives forward.

This type of resource was almost unimaginable a decade ago, but today we practically take it for granted. The fact is that Linkedin is an incredibly valuable worldwide database of subject matter experts - potential partners for your open innovation initiatives.

Lindegaard used an example to highlight the importance of finding and partnering with smart people outside of your organization's walls. Using P&G as an example, he walked the audience through a simple exercise: Assume, for a moment, that for every one person withing P&G who has some very specialized expertise, that there are perhaps 200 people with similar expertise worldwide. Now multiply that by the size of P&G's worldwide R&D staff (approximately 7,500) and you have 1.5 million people who potentially have knowledge we need to solve product and production problems, to envision new "white space" products and services, to break into new markets, and more. How could you possibly turn your back on such a compelling network of smart people, many of whom could possibly help you to achieve these goals?

That begs the question, "How can we get people to work with us?" Lindegaard shared the example of Netflix, which offered a $1 million prize for the best algorithm that would help to improve its model for distributing movies. In the process, they identified some incredibly smart people with some really promising ideas. The trick was to get them to come forward with their ideas - hence, the big monetary prize.

Even Google, which has been focused for a number of years on hiring some of the world's best and brightest minds, has figured out that it doesn't need to OWN all of these people - but is now working on strategies to partner and interact with them, Lindegaard pointed out.

How do you to that? By becoming a "preferred partner of choice" - a company that is so attractive that smart people bring ideas to it first. If you are serious about implementing open innovation, one of your primary goals ought to be to foster a brand for your company's innovation efforts that helps to position it as a potential partner of choice in your industry.

Fellow CoDev speaker Gene Slowinski pointed out in an interview with me that the "throne" of preferred partner of choice is actually still vacant in many industries. This may be a big opportunity for your firm to step forward and fill that role in your industry!

February 7, 2010 | By Roy Luebke | Category: Open innovation

Open innovation has been hyped in the media and by some consulting firms over the past few years as the next new thing and is just giving a term to an activity that has been underway in business for a long time.

Simply put, open innovation is partnering to gain leverage and build barriers to competition. The actual effect of working with outside partners makes a lot of sense. A company is able to capitalize on a new business opportunity much quicker, and makes it harder for its competition to duplicate, when it brings in the best thinking and technology from any source.

It is not necessary to reinvent the wheel and build everything in-house. An article by Linder and Davenport (2003) listed five external innovation sourcing channels:

1. Buying innovation on the market through sponsored research, innovation for hire, strategic procurement.
2. Investing in innovators through venture capital or equity partnerships.
3. Co-sourcing with competitors within or across innovation sectors, or through joint ventures.
4. Sourcing from communities of sophisticated users (i.e., open source).
5. Resourcing on-demand talent and innovative new tools.

The five sources listed above are presented in the marketplace by various sources as "open innovation."

A company must first establish its strategic intent and vision, and then determine various ways of achieving that intent. Achieving strategic intent may involve a combination of approaches to deliver increased value to customers, and partnering with external sources for building solutions is one approach.

Working with an outside partner may be an excellent choice for a company, depending on its business strategy. The most difficult challenge a company may have in working with partners is the not-invented-here syndrome and a cultural reluctance to seek out the best solution components.

With all that said, the term "open innovation" may lead people to think that this is some new management fad, which is unfortunate because the underlying rationale for partnering is strong and getting stronger as companies try to realize growth in markets like China and India where adapting offerings locally will be increasingly important over the next several decades. Forget about the hype and remain focused on where your firm is going to win.

February 5, 2010 | By Roy Luebke | Category: Innovation Trends

One key partner that has the potential to greatly affect and enhance the human condition is government. This author prefers the open market as the main catalyst for change, but given the complexity and scale of certain types of research, government can play a vital role in advancing knowledge in science and technology by supporting basic research.

While some governments have been funding research for quite some time, the inefficiency of the process may be keeping new discoveries from being commercialized. For costly, long-term research, governments can work to build laboratories and collaborations between universities.

Individual companies would be hard pressed to fund the depth and breadth of research required for new discovery. Individual companies are better suited to commercialize what is invented in a lab if there is an efficient way to find these discoveries. While most universities appear to have some sort of tech transfer programs, it appears that there could be a more efficient network function needed to expose lab discoveries than is currently available.

It appears that the current road from the lab to commercialization is somewhat difficult. Government and university efforts to foster commercialization of lab discoveries is somewhat localized. Since technology has made the world much smaller, if there isn’t a local entrepreneur willing or able to launch something discovered in a local research site, there could be other companies or people in more distant geographical locations better suited to commercialize new findings based in science, medicine, engineering, etc.

Government in some form could be the glue to create an "open innovation network" of some type. Governments could increase the visibility of new research findings and help foster economic growth through more efficient networking between researchers, companies and entrepreneurs.

In addition, lowering legal hurdles will go a long way toward speeding the process from lab to market. One may only wonder how the world could be improved if we relied less on chance meetings between researchers and investors and made the process more visible and less daunting.

February 3, 2010 | By Michael Fruhling | Category: Open innovation

Last week, Todd Abraham, SVP Nutrition and Research at Kraft Foods related a fascinating anecdote during his keynote address at the 2010 CoDev & Open Innovation Conference in Scottsdale, Arizona.

Abraham recounted how Kraft had been seeking a "clean water" additive for their powdered drink mixes. This would permit residents in developing countries to safely enjoy its popular drink mixes, Tang and Crystal Light, which are widely sold in developed countries.

Kraft's preferred innovation partner in the project, TyraTech, was unable to solve Kraft's specific challenge, but instead suggested a safe, affordable technology that would prevent waterborne parasitic infestation that chronically afflicts millions of Asian, African and South American residents.
 
In speaking about the enabling technology, Abraham said, "It addresses the problem with the problem." In other words, TyraTech's suggestion illuminated an even bigger challenge that was aligned with the company's goal of meeting the needs of people in developing countries.

Kraft seized this tantalizing opportunity and is developing a daily-use beverage incorporating TyraTech's technology. It has the potential to improve millions of lives.
 
To be absolutely clear, Abraham didn't suggest that companies should exclusively or even predominantly rely on serendipity to drive innovation, and certainly not at the exclusion of searching out approved technology needs. He simply acknowledged that open innovation and serendipity can create attractive, strategically relevant innovation opportunities, if one is open to them and if appropriate, is willing to champion them:

"It would have been easy for us to have said we're not interested. You have to know an opportunity when you believe it exists. You may find something a little different than what you looked for, and that's important too," Abraham explained.
 
Echoing this sentiment, Chris Thoen, P&G's Director of Global Open Innovation and another speaker at the CoDev conference, observed, "Serendipity and connecting the unexpected dots are very important still in addition to the targeted proactive searches for new opportunities."

The lesson of this story is clear: When you're engaged with partners in exploring open innovation opportunities, be open to the unexpected. You may uncover a game-changing idea that you weren't looking for, but which helps you to achieve your strategic objectives in a more compelling way than you originally intended.

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