The fast product cycle and increasing product complexity is making it difficult for even large companies to solely rely on internal resource for product innovation. This trend was first promoted as “Open Innovation” by Henry Chesbrough and over the last decade has been successfully implemented by companies such as P&G, Johnson & Johnson and others for their open innovation platform initiatives. The following are some links that will give you the feel of how these platform are designed and implemented:
The recent trend in Open Innovation is making it fashionable for many companies to create an Open Innovation Platform without any real innovation strategy behind it. Often it leads to internal confusion and the inability to manage the influx of ideas when the doors are made open to the outside world. Practicing Open Innovation without a clear purpose and strategy can also hurt the brand image since the public frustration can spill over into social media.
Each company should deeply think about how “open” they need to be, with whom, how it will advance their product or service innovation and how they can be “open” without giving away their secret sauce.
Also which part an organization “opens” depends on the need and sensitivity areas. Each functional area of an organization can participate in the open innovation process but the leadership of an organization has to create the open innovation strategy based on factors such as: a) What is missing in your current innovation process? b) Why do you want to interact with the outside community? Perhaps you want to get close to a customer and understand their feature preferences and interests like some auto companies have started to do, or perhaps you are short of engineers and need an outside engineering community to work on specific technical challenges that your innovation requires. c) How will you use the outside flow of ideas in your internal innovation process? d) What do you need to do to make sure your internal organization is ready to engage with the diverse outside community in a meaningful, timely and productive manner?
Your innovation process may be different depending on the time horizon (short, medium or long) that you are working with and how radical of an innovation you are shooting for (incremental, evolutionary, radical). These factors will change the dynamics of your engagement with the outside community and the type of deliverables that are both suitable and realistic.
For incremental innovations, it may be merely enough to open sales and marketing channels to listen to customer issues, frustration and suggestions for improvement as they use the product or services. Such Open Innovation Platforms have to be easily accessible for quick input from diverse social media platforms. They key is to engage and capture customers to share how they are using the product, which features they like, which they don’t and what is missing that they would like to see. It is important that internal staff assigned to manage this communication is not defensive and shows deep empathy towards your customers. This requires employees to understand not only what customers are saying but what they are also feeling, thinking and doing with the products. Tools such as Design Thinking, made famous by firms like IDEO, can very helpful if properly implemented to empower employees to deeply empathize.
When it comes to evolutions (next generation) it is important to look at all the technologies that go into the product (entire bill of material) and see which components can be made lighter, faster, cheaper, stronger so collectively the next evolution of the product can give better overall user experience. Besides customers, it is critical to engage with suppliers and understand what improvements can be made to the entire bill of material. Basically, the company should be able to look at all the components (sub-parts) and also continue to encourage new suppliers to propose new ideas and designs which might eliminate some other components or combine a few into one. Innovation at the part level is critical for evolutionary products since the customer may be expecting the same general usage from the product. They will expect the new model to have dramatically better technology considering the rapid changes in the tech industry which is the new normal. If you don’t deliver on this expectation then your competitors will likely have products that are going to be better than your previous generation of the product, which can be tempting even for your loyal customers to switch.
For radical innovations, the purpose to connect with the outside world has to be much more diverse as explained by Professor Roberto Verganti in his book “Design-Driven Innovation”. Through various examples since no one, including the customer, knows what the radical innovation will look like or which one will be successful. Hence, the communication is more around the innovation of meaning rather than innovation of product. For example, we all know that 10 years from now homes will be smarter and so will the cars but what does a smart home or smart cars mean and what meaning will be the preferred meaning for customers who will buy such products? Companies that understand this shifting meaning are in a better position to focus their R&D resources (internal and external) towards building products and services that will deliver on that emerging meaning. In fact, if they are engaging with other recognized experts and thought leaders, they actually end up influencing the meaning that finally takes hold with customers. A classic example of shifting meaning is what happened with the phones. As mobile technology got more and more powerful, there was an opportunity for a new meaning that Nokia totally missed and they kept building more and more power phones. Apple saw the opportunity and proposed a new meaning – that of a general purpose digital mobile device than be a wireless and mobile window into all sorts of application with the phone being only one application. That particular innovation of meaning was the start of the mobile digital revolution and also led to the demise of Nokia. They understood the new shifting meaning in a complex organizational process that involves people from all departments who are listening and engaging systematically over a long period of time. The process involves listening, interpreting and addressing. It is primarily focused on the meaning behind products. Another example is how many products are opportunities for being offered as a service with greater value and convenience to customers. For example, the meaning of buying a car is changing as people start to look at transportation as a service in the broader context as including a personal car as one special case. The car as a service of course would be possible because of all the advances in technology (location, identification, sensors, usage, payments etc.) that will power such a service-based business model. Over the next 10 years, the meaning of owning a car will change. The company that understands and influences this meaning will eventfully be preferred by customers. They will have a huge competitive advantage since they will be able to channel their R&D to build products and services that will deliver on that new meaning. There are many experiments underway and some are showing more promising results than others. Not one company has yet proposed a meaning that can be considered a home run by any standard.
As you can see from the above discussion, Open Innovation is a very complex social interaction of ideas inside and outside an organization. To manage these interactions between thousands or even millions of people will require sophisticated Information Technology tools. All large IT vendors (especially those focused on Product Value Chain Innovation) are enhancing their existing product suites and introducing new products.
For example, Oracle is addressing this challenge by introducing an Innovation Managment software tool that gives companies a systematic way to manage and control the innovation funnel. Not one company can possibly offer a complete solution for everything that will need to implemented within various scenarios of Open Innovation as discussed above.
The following are some suggestions that can help you create a wish list for your Open Innovation Platform before you go out shopping for tools:
Know the outside people and communities that you will need to engage with and the primary purpose for exchange. Next, design the User Interface that is natural and easy for them to engage with you. Customers engage differently that engineers who in turn engage differently than people in news media writing about future technology trends.
Make sure internally you have right people assigned to handle and manage the flow of ideas coming in. Unless there is two-way exchange, people will stop contributing ideas. Make it meaningful and rewarding for people to send in ideas. Give feedback and let them know where their ideas are in the funnel. Such metrics can also be used for a recognition and reward system around ideas.
Frame your problem and innovation need areas broad enough to allow wild ideas to come into the funnel and narrow enough so they can be acted upon within the timeframe you are targeting. Framing of the innovation design challenge is critical for keeping the activity focused towards your innovation strategy and goals.
Reach out to your target audience though an aggressive social media campaign so that people using various tools such as Facebook, LinkedIn, Wechat, QQ, Weibo etc. Find out about your Open Innovation outreach and make it easy and interesting to hook into the platform using standard social platform credentials.
Create a clear metric for measuring and rewarding ideas. Ensure that you make it as transparent as possible. When dealing with sensitive IP issues, make sure your platform has access to an internal legal IP resource who can help close such issues in a timely and efficient manner. This way you won’t lose critical technology to your competitors. Many critical IP owners are often two or three engineers and don’t have a resource to engage in a lengthy legal procedure.
At frequent intervals, package ideas which you have already adopted into your upcoming products and share them as blogs through social media channels. These blogs are power house to communicate your innovation of meaning and how you are making sense of the future. Let people connect innovation of meaning with your brand and Open Innovation Platform. It will put you up there in the innovation leader category and the media buzz will follow. That can be done, of course, without revealing your future products.
Plan for success in terms volume of communication activity flowing in and out. Make sure you have the tools to manage the workflow and collaboration. At each stage of the funnel you will need further human collaboration to narrow down the ideas through elimination or integration with other ideas against some meaningful criteria guiding your innovation strategy. This is where your senior managers and executives come in. They will probably be busy with thirty other day to day operational things. Make sure the executives have enough context and necessary information to quickly and easily weigh in on ideas and make go/no-go decisions to keep the funnel moving forward towards few ideas that are going to be worth prototyping and field testing. If you have thousands of raw ideas in the funnel, they will probably need to be cut down into hundred working ideas. Don’t delete those wild ideas that did not make sense at this stage. Just park them on the side or hide them from view so you can continue moving forward. The rejected ideas are often great ideas in a different context at a different time. Make sure you have a process of going through rejected ideas systematically once a year or so and reactivate them if the time or context is right.
Once you have a set of desirable ideas worth pursuing, it is time to finalize the technical feasibility. This is where it is important that Oracle’s Innovation Management tool allows you to organize semi-random ideas into set of desirable featured, requirements and specification so that you can systematically analyze and discuss them internally with different groups and senior management. Make sure your Innovation Management tool allows you to track and manage the attributes related to technical feasibility and keep track of the emerging product structure details. Building mock and working prototypes allows you to give shape to an idea and visually see what documents and spreadsheets cannot show. If you have an innovation lab setup for this it will be excellent since common resources and tools will already be available for product designers to work with rather than having to organize this activity from scratch. Share these prototypes generously internally and even externally to get feedback. Find the strengths and weaknesses of the concepts. In fact, the more alternative prototypes you can build the better. Keep them low fidelity so you an turn them around quickly and at a low cost. Basically, they should be thrown away prototypes that are only there to allow people to engage for the purpose of understanding and giving feedback. The Innovation Management Platform should allow you to capture all of these prototype details and social interactions around them.
Next it is time to build a working testable version so you can pilot and test in the field. This is where the business model and viability comes in as well. Make sure your Innovation Management tool allows you to build such models and test the business model viability under different scenarios.
Various marketing and financial attributes need to be tracked under different assumptions so the tool needs to be flexible. They should also allow data integration with other financial modeling tools so you can do rich and robust analysis to better understand the investment decisions needed to move forward.
For a large company there may be hundreds if not thousands of ideas flowing through the funnel. It is critical that the Innovation Platform tool allows you to manage an overall portfolio to answer questions such as: a) Do I have enough interesting ideas coming into the funnel to energize the pipeline? b) Where are the bottlenecks and chocking points in the pipeline? c) Is my overall portfolio balanced between short, medium, longterm as well as between incremental, evolutionary and radical innovations? d) Who are the key people and companies that are critical for success during the next three years? I can form closer ties with them to ensure efficient execution. e) How much revenue can I expect from new products in the next three year horizon? f) What are some core technologies that are common across many potential products in the innovation pipeline? I will need to treat these as core platform technologies and put our best minds to work on these projects. If these core technologies belong to outside companies or people, perhaps I need to think about a company or license acquisition to ensure we have a competitive advantage against competitors.
For companies to embark on an innovation strategy journey, two tools are crucial to make sure the process is flexible and manageable. The first is the Open Innovation Platform to engage with the outside world. The second is the internal Innovation Platform to drive the funnel so you actually convert ideas into meaningful products and services which will generate revenue and profits for the company. These two platforms have to be tightly coupled so that they complement and amplify the external and internal resources within your innovation ecosystem. With the right tools in place, it can free up your employees so they can focus their human talent with making a connection between wild ideas and product concepts – which address human needs in both new and novel ways (something computers cannot do) rather than wasting time tracking and organizing information (which computers can do better than humans).
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Dr. Hugh is a practitioner-scholar with over 25 years of experience working and consulting with global organizations in the US, Europe and Asia in areas of IT-enabled business innovation.
Currently, he is heading the Xavor China operations (based out of Shanghai) to facilitate product innovation ecosystem development between multi-nationals and startups in US and China.
Dr. Hugh maintains a strong network of university collaboration in the US and China through his MBA teaching of courses in Design Thinking & Design-Driven Innovation, Cross-Culture Management and International Marketing at various universities including University of Southern California (USC), Wuhan University, Chongqing University, Beijing Normal University, Peking University, Renmin University and Fudan University.
In addition, Dr. Hugh is also the founder of Xavor Corporation, which provides innovative business solutions to high-tech organizations. He has a BBA from University of Texas Austin (USA), Executive MBA from University of California at Irvine (California) and Doctorate in Management from Case Western University in Cleveland, Ohio (USA).