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4 Ways Open Innovation Can Drive Your Business Forward

2013 June 26
open innovation

Ever since GE built the first industrial lab in 1900, research and development has been a highly secretive affair.  Security protocols have been regarded almost as important as scientific ones.  Industrial espionage has been pursued as zealously as the political kind.

Apple, arguably the world’s most innovative company, has become renowned for keeping its cards close to the vest and even “don’t be evil” Google has launched its own super-secret research center.

However, amidst the cloak and dagger a new open innovation trend has begun to take hold.  The turning point was Henry Chesbrough’s 2003 book, Open Innovation, which coined the term and laid down basic principles.  Since then the idea has gained steam and it’s becoming clear that open innovation initiatives are key to staying competitive.

1. Making Breakthroughs When You’re Are Stuck

In Thomas Kuhn’s breakthrough 1962 work, The Structure of Scientific Revolutions, he noted that normally science moves forward under fairly strict paradigms based on what is known at the time.  Eventually though, things run their course and science becomes stuck until a paradigm shift (a term Kuhn coined) enables a new wave of advancement.

Businesses often run into the same problem.  They tend to work in silos, hiring engineers to work on engineering problems, chemists to work on chemistry problems and so on. That works well enough most of the time, but much like Kuhn’s scientists, after a certain point they get stuck on a particular problem can’t move forward.

That’s when open innovation can be really helpful because it allows you to synthesize knowledge across domains.  Platforms like Innocentive allow you to expose thorny problems to a more diverse skill set.  Often, an unusual issue for chemists is a typical problem in a different field (like, physics for example).

2. Don’t Build A Brand, Build A Platform

When Microsoft launched Kinect for the Xbox in 2010, it quickly became the hottest consumer device ever, selling 8 million units in just the first two months.  Even better, being the first company to launch a gesture interface helped rejuvenate the company’s image in the tech world.  Microsoft became cool again (well… almost).

The device attracted a lot of attention and not just from consumers.  Almost as soon as it was launched, hackers started fiddling with it, altering its capabilities to do things that Microsoft never intended.  Historically, Microsoft could have been expected to get their lawyers cranking out cease and desist orders.

But they didn’t.  In fact, they embraced the hackers, altering the USB cable to allow for more developmental flexibility and releasing a software development kit (SDK) in order to help them along.  This was a surprising shift from what we had come to expect.

And Microsoft is not alone.  Everywhere you look, brands have become less corporate assets to be leveraged and more platforms for innovation.  What would the iPhone be without apps?  Or Facebook for that matter?  Or YouTube without private channels. These days, it’s not so much what you can create as much as it’s what you can co-create.

3. Create An Accelerator Program

Simply encouraging collaboration is not enough, however.  Smart companies are also investing in accelerator programs to provide seed money for young entrepreneurs. Microsoft has one for Kinect, shoe maker Nike created one to encourage innovation in its Nike Fuel ecosystem and even the stodgy New York Times launched an incubator.

And you can see why.  For an organization of any scale, providing young companies with seed money is pocket change.  Microsoft offers start-ups $20,000 dollars, probably less than they spend on coffee.  The NY Times simply offers office space.

Meanwhile, they get the most dedicated employees in the world: entrepreneurs chasing their own dreams.  If things go well, the small initial investment is likely to be augmented by venture capitalists who are willing to fund new ideas that are likely to fail in the hopes that a few home runs will make it all worth it.

For particularly promising ideas, firms can acquire not only the company, but the talent as well.  It’s an incredibly efficient way to innovate.

4. Test and Learn Programs

For a long time, marketing was a fairly sleepy affair.  You had big agencies who would negotiate with big TV stations and deliver big campaigns.  A lot of thought would go into strategy and tactics, but very little into emerging media channels.

Technology has changed all that.  These days, new platforms such as Instagram and Pinterest can emerge at lightning speed and that presents a problem.  If you jump at every new opportunity, you won’t have time to do much else and will lose focus , but if you wait for nascent technologies to reach scale, your competitors will run circles around you.

Many marketers are adapting by running ongoing test and learn programs where 5-10 pilot programs are run each year.  Most prove to be ineffective, but the low risk (usually less than 1% of the marketing budget is dedicated to the program) and high reward makes it worthwhile.

Most of all, test and learn programs focus on young, entrepreneurial companies who are on the cutting edge, rather than big established players who are invested in old solutions. The constant influx of new thinking helps drive innovation forward.

The Brand as an Open API

Brands, much like technology, have historically been considered proprietary assets to be leveraged.  An organization’s identity was carefully cultivated and interlopers were not only discouraged, but often subjected to legal action.

These days, a brand’s power comes not from its marketing budget, but in its power to inspire collaboration and co-creation.  As Bill Joy once pointed out, “No matter who you are, most of the smartest people work for someone else.”

Your power to innovate and succeed is no longer merely a matter of research and development, or even attracting the smartest and most capable employees, but who you can inspire to join your cause.  The new economy is a passion economy, where the function of organizations is no longer to direct work, but to focus purpose.

- Greg

4 Responses leave one →
  1. June 30, 2013

    I love the idea of the brand as an open API. Great way to put it.

    In addition to giving support to customers, young entrepreneurs and startups, organizations will likely also see themselves needing to forge tighter partnerships with other organizations and perhaps also their natural competitors. We’ve already seen this to some extent in the tech sector. I predict these partnerships will only need to become more tightly ingrained as organizations share with each other resources and core competencies to drive innovation forward for the industry as a whole.

    [Reply]

    Greg Reply:

    Ali,

    Yes. I think you’re right. We’ve already seen the rise of programs like P&G’s Connect and Develop and platforms like Innocentive. It only makes sense that the trend will grow.

    - Greg

    [Reply]

  2. July 4, 2013

    Nice article. Out of curiosity, do you of any breakthrough innovations that have come via open innovation platforms?

    Thanks!

    Jeffrey

    [Reply]

    Greg Reply:

    Jeffrey,

    Well, I guess it depends what you mean by “breakthrough innovation.” In the framework I described in my post on managing innovation, I defined it as innovation when you’re stuck and in that sense, there are lots of examples. For instance, Watson and Crick pursued the structure of DNA in a very open manner.

    However, many would define “breakthrough innovation” as resulting in a breakthrough product and, with regards to formal open innovation platforms, it’s a little harder to identify breakthroughs, because most of the problems on sites like Innocentive are actually meta problems (i.e. one element in an overall process).

    Nevertheless, there are some that come to mind, like Febreze, which came out of P&G’s Connect + Develop program and is now a billion dollar brand. Also, Facebook, in a very real sense, is an open innovation platform, so companies like Zynga can be considered open innovation businesses as well.

    If you’d like more examples, the real expert on this is Stefan Lindegaard, who is always helpful. You can find him on his site at: http://www.digitaltonto.com/2013/how-to-manage-innovation/

    I hope that’s helpful.

    - Greg

    [Reply]

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