August 10, 2010 | By Chuck Frey | Category: Open innovation

Stefan Lindegaard, in his 15inno.com blog, recently touched on a subject that hasn't gotten enough attention: The connection between open innovation and social media. Here's the dynamic:

Companies that are committed to open innovation need to position themselves as "preferred partners of choice" to potential partner companies in their industry. In other words, when you need a supplier to provide your company with X, who comes to mind first? Your company ought to be top-of-mind for whatever that product or service is, so you get selected or at least contacted first, ahead of your competitors, to discuss potential partnerships.

So how do you become a preferred partner of choice? In part, by communicating what your firm is doing with its innovation initiatives. And a primary way to do that, Stefan points out, is via social media - blogs, Twitter, online communities and other two-way channels of online communication.

I think Stefan is on to something here. To the extent that large companies are "doing" social media, they're primarily focused on building their brands and promoting their products. Promoting their innovation initiatives probably doesn't even make it onto their radar screens. Stefan highllights P&G, General Mills, Intuit and Psion as notable exceptions to this plight.

In each case, these companies have evolved to the point where innovation is part of their DNA - it's part of their culture, and is woven into everything they do. It's not something that's just promoted by a small group of innovation practitioners and "champions." That makes it much easier to weave innovation into the fabric of their social media communications.

June 9, 2010 | By Chuck Frey | Category: Open innovation

Stefan Lindegaard, in his new book, The Open Innovation Revolution: Essentials, Roadblocks and Leadership Skills, outlines 10 essential elements of an open innovation culture. What makes this list even more compelling than usual is that it comes not just from the mind of the author, but from some top-notch open innovation practitioners in Stefan's Linkedin group.

The person who spearheaded this discussion of open innovation culture was none other than Chris Thoen, a director of R&D at P&G - a person who I met earlier this year at the CoDev conference who really impressed me as one of the brightest minds in this relatively new discipline.

Here is the list of elements that the group compiled:

1. People who can manage relationships with customers and partners: If you're going to open up your organization to ideas from the outside, then you need "agile and people who have the soft skills of emotional intelligence" who can deal effectively with the idiosyncrasies of executives from other corporate cultures.
2. A willingness to accept that all of the smart people do not work for your company: At the same time, to be successful at open innovation, your organization's culture must not only accept this idea intellectually, but also have a willingness to seek out these outside ideas. There's a subtle difference here: acceptance (passive) versus seeking outside ideas (active). Without this drive, open innovation will end up being nothing more than a platitude and a "nice to do," but will probably gain little traction within your firm.
3. An understanding that failures are opportunities to learn, and a willingness to reward those efforts and that way of learning. This idea is pretty radical for most organizations. Just think about what typically happens when a senior-level executive in charge of a major strategic project fails to implement it successfully. He or she becomes a pariah, overlooked for future promotions, or worse yet, laid off the minute the economy goes into a downturn. As Stefan points out, "Failure is a way of life for companies that pursue innovation seriously, and a leader's response has a huge effect on company culture and, therefore, on future projects." Celebrate failure and learn from it!
4. A willingness to help employees to build the knowledge and understanding of how an idea or technology becomes a profitable business. This can be accomplished via a job rotation program that could incorporate partners and customers, Stefan suggests. The people who develop new ideas and technologies tend to be scientists or technologists, with little idea about the dynamics of modern business. In order to support and extend your company's open innovation efforts, they need to have at least a basic understanding of the dynamics of business growth, because it's likely they will be on the front lines as relationships are extended across company lines in the early stages of open innovation partnerships.
5. Dismiss the Not Invented Here syndrome: "If we make the best use of internal and external ideas, we will win. We don't need to own everything ourselves and keep it under tight wraps. We should profit from others' use of our innovation process, and we should buy others' intellectual property whenever it advances our own business model." This, too, sounds simple, but it requires a major sea change in thinking. Most large companies have legal counsel that is already working overtime on intellectual property issues. These corporate attorneys tend to be of the mindset that the company needs to own its IP, and it discourages openness and sharing. As such, they are like corporate antibodies, and open innovation "looks" like a virus to them. Youe CEO can't just talk open innovation; he or she must have the cojones to back up that commitment when internal turf wars break out over thorny issues like IP.
6. A willingness to strive for balance between internal and external R&D. "External R&D can create significant value; internal R&D is needed to claim some portion of that value," Stefan explains. Intellectual property, whether it's developed internally or acquired externally via open innovation and other forms of partnership, must eventually have a bottom-line payoff for your company. Otherwise, it's wasted effort that isn't sustainable.
7. Willingness to be a risk taker rather than being risk averse. Common sense should be used to balance the risk level.
8. Accepting that open innovation does raise intellectual property issues. "Your legal team can choose to either play offense or defense. Hopefully, they'll adopt a constructive approach that supports progress toward the company's business development goals." When I attended the CoDev conference earlier this year, IP was an issue that came up repeatedly in speeches and networking discussions. This is a new area for many companies; therefore, expect that it will take time to work through these issues and gain alignment on how to handle them.
9. Understanding that open innovation requires open communication. "Work around confidentiality and intellectual property issues to create an environment based on trust." Here, a well-crafted non-disclosure agreement can help to set an agreed-upon body of ground rules so that both partners can be completely open with each other. If one party holds back, neither one wins. As several CoDev speakers pointed out, you need to focus not only upon inter-company communication, but on keeping your own troops up-to-date on what you're doing and why. It's an ongoing process which you neglect at your peril. If you don't proactively communicate to your employees, they will fill in the gaps with their own assumptions - which are more than likely inaccurate and misleading.
10. Not needing to always be first. "Building a better business model is better than getting to market first."

I'm just starting to read The Open Innovation Revolution, but am already impressed with Stefan's thinking. He's not some ivory tower prognosticator, but a relentless networker who gets out there and develops relationships with key open innovation movers like Thoen and encourages discussion on his Linkedin group. In other words, Stefan's approach is very inclusive; by seeking out many voices, he has developed a deeper understanding of the emerging strategies and practices of open innovation than anyone else I know.

If your company is thinking about implementing an open innovation strategy, then The Open Innovation Revolution is a must read!

March 24, 2010 | By Chuck Frey | Category: Open innovation

Open innovation is one of the hottest trends in the world of innovation. So it's about time that it had its own resource center on InnovationTools.com.

Resource centers, if you're not familiar with how they work on this website, gather the best content on an innovation-related topic into a single location. Think of it as a dynamic executive summary of the latest thinking on critically-important innovation topics.

Click here to visit the new Open Innovation Resource Center.

Among the resources it contains are:

• Links to news articles about open innovation
• Blog posts on this important topic
• Links to the most authoritative websites and experts on the subjects of open innovation.
• The best books on the subject
• Informative videos, including interviews with leading OI experts

If you have any ideas for other resources that should be added to this web page, please send me feedback message.

March 14, 2010 | By Peter Balbus | Category: Open innovation

One of the toughest challenges for any innovation initiative is finding a place to start. Lao Tzu famously observed more than 2,500 years ago that the journey of a thousand miles begins with the all-important single first step. But if you really don’t know where you’re headed, how do you know in what direction to take that initial step?

Innovation is never a single moment of enlightenment but an iterative process of hypothesis and refinement that ultimate results in a breakthrough. I was speaking recently with a colleague who was trying to help a news media client "rethink" their business. But this executive was adamant that they look to current "best practices" and "industry leaders" – within the news industry — for ideas and inspiration.

In much the same way that businesses cannot slash costs to achieve industry leadership, copycatting other (in many cases equally challenged) peer companies won’t lead to breakthrough innovation either. Emulation is a viable technique. However, for it to serve as a useful process for defining a starting place for sustainable innovation one has to look outside of their current industry – and often very far away from that industry.

I suggested to this colleague that he might want to look at a completely unrelated industry and its structure for some ideas to emulate – and pointed him towards the deregulated U.S. electric power industry as a great place to start. At first he was incredulous, and professed that he saw absolutely nothing in common between a news media company and an electric power player. But then I could see the spark of enlightenment take hold in his eyes and his attitude changed markedly.

He saw that news, much like electric power, has three very distinctive businesses in its industry value chain – generation, distribution and customer interface. Where most news organizations are missing the boat, I pointed out, is that they undervalue their generation capabilities and instead focus on the much lower added value distribution and customer interface components. The real value of a news organization isn’t its distribution, printed output or website – but the depth and quality of its reporting. That’s what truly distinguishes one news organization from another. The other pieces are essentially commoditized today. And yet it’s in these commodity segments that most news organizations spend most of their time trying to gain competitive advantage – and failing in the process.

Of course there are salient differences – for one, the electric power industry still has regulated elements in its value chain, while news media don’t – except perhaps in broadcast media. The point here is not to blindly copy another industry, but to extract key business insights as a starting point and then refine these concepts as required to align with the unique aspects of the industry you are trying to innovate within.

What do you think? Where have you seen unique aspects of one industry you think would be transferable to another seemingly dissimilar industry?

February 23, 2010 | By Chuck Frey | Category: Open innovation

One of the common themes of the speakers at the recent CoDev Open Innovation Conference was the importance of developing exceptional communication skills. In the age of open innovation, when partnering with firms outside of your organization in the pursuit of great ideas will become the norm, cultivating this capability will be essential to your success. Let's take a closer look at the specific skills that will be needed:

Consensus building: The speakers at CoDev were universal in their assertion that you must reach alignment around your internal innovation objectives before you begin seeking external partners. And that means the ability to build consensus and manage relationships effectively. Open innovation "kicks up a lot of dust," pointed out conference chairperson Cheryl Perkins. In other words, it requires culture change - and that tends to generate a lot of resistance, including the "not invented here" objection. That's why strong relationships and trust are essential to the success of open innovation. Be clear on who your company's internal stakeholders are. What boundaries and expectations do they have about open innovation? You'll need to take their viewpoints into consideration, and determine how they may contribute to the end solution.

Networking: This is the ability to develop a matrix of relationships outside of your firm, cultivated via online groups, professional associations, trade shows and other industry gatherings. Speaker Stefan Lindegaard encouraged attendees to be clear on why you're networking. You need to have a reason to focus your efforts. What, specifically, are you looking for? Let that drive your networking efforts, or you could easily waste a lot of time, with little to show for it.

Lindegaard also urged the audience to refine their elevator pitch - the 30-second or less summary of who they are, the firm they represent, and what their objective is. If you're networking more and communicating more, then it follows that you will need to do a better job of selling your ideas.

Finally, you need to give some thought to tools, resources and programs that will make it easier for your company to connect with the outside world, and to invite talented people to share their ideas with you. At General Mills, for example, senior vice-president Peter Erickson envisions creating a "developers workbench" - a set of online resources that will enable its researchers and marketers to find key people and make connections faster. Let's say a General Mills scientist is looking for the best thinking on a certain type of food flavoring, He or she could use this workbench to query multiple sources to quickly locate and contact subject matter experts.

Marketing: In the past, it was enough to communicate a strong brand to your consumers or end customers. In the world of open innovation, you need to strongly and consistently communicate a brand for your innovation initiative. The ultimate goal is to become a "partner of choice" - the company that entrepreneurs with new ideas bring them to first.

You also need to cultivate an excellent reputation with job seekers as a leader in your industry, so you can attract the best and the brightest. According to Carlos Linares, senior vice president of research and development for Alberto Culver, you need to be adding capabilities to your firm with each new hire. That includes finding people who are adept at scouting out new technologies and opportunities - a skillset that is different than that of a product development professional, he pointed out.

Please share your experiences and insights

What have you learned about communication, and how it supports your innovation initiatives? Please share your lessons and insights in the comments area below. Thank you!

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