As companies are looking for ways to fuel innovation without burning
cash and other resources, one method of idea generation that has been
garnering a lot of buzz is open innovation. In pursuing open
innovation, companies attempt to leverage members of their value
network (customers and partners) to harvest more concepts around which
innovation initiatives can be mounted. But is open innovation
effective? That was the question behind our latest Innovating To Win
Innovation poll. You were asked to characterize the nature of the
results you were achieving (or expected to achieve) from your open
innovation programs. The results are quite interesting.
Just under 43% of you expect get either breakthrough innovations or
significant new market opportunities through open innovation. Fully
one third of respondents anticipate that the results of open innovation
will be incremental in nature.
At one level, these results are not too surprising. It is a well
understood concept that customers are subject to the same forces of
mental inertia that product designers must overcome. The current use
model of the product or service you are providing your customers
creates a lens through which they see what is possible. This is what
makes listening to customers to indentify directions for breakthrough
innovation especially difficult.
However, what is particularly surprising is the number of
respondents that find their open innovation programs are not yielding
valuable results. Almost 24% feel the results of open innovation are
not adequate. This speaks to the challenges of successful open
innovation. Some companies make the mistake of believing if you build
an open innovation portal, the high value concepts will come. But,
this is hardly the case. Like any other strategic initiative, open
innovation requires great attention and effort to drive its success.
Among the key challenges companies face in making open innovation initiatives work are alignment, authority, and actualization.
Alignment is an issue because your goals and the goals of your
customers and partners are not the same. Don’t fool yourself into
thinking otherwise. As a result, there is a need to create optimal
alignment of participants in the open innovation process. Communication
and goal sharing are key. So too, is building affinity in the
innovation team. Customers and partners have limited loyalty. I
recently had the opportunity to talk about this issue with Michael Chui
of McKinsey & Company. The risks of investing in a partner
relationship when the partner can realign with a competitor at any time
are all too real. This is an area often overlooked in the open
innovation process design. Consider how your open innovation program
creates a bi-directional flow of value.
Once you establish a flow of concepts through your open innovation
program, you must still validate the authority of the source and
concept as it relates to your business and market objectives. This
often means considerable analysis and research to vet concepts. The
need for this type of secondary research should not be underestimated.
At Clorox, an early leader in the successful application of open
innovation processes, high value is placed on the validation of
concepts as they emerge from the open innovation partner network. Make
sure you have properly invested in the infrastructure to support deep
concept validation and research to ensure the best quality of
innovation platforms choices.
Actualization is another piece of the open innovation process that
is frequently overlooked. It’s not enough to find a high-value
concept; you need to do something with it. The challenge of moving
from concept to revenue generating product is among the biggest
challenges companies face according to a recent Boston Consulting Group
report on the state of corporate innovation. In many cases, great
concepts are passed over because the company doesn’t see the path to
monetization. What a waste! Make sure that you are ready to extract
to the maximum value of your open innovation concept stream by
equipping your innovation workers with the skills and tools for
repeatable, high performance innovation.
The bottom line is that open innovation is not a panacea to anyone’s
innovation problems. It’s merely another available tool. Like any
tool, you need to understand how to use it to produce desirable
results. Understand the participants and dynamics of your value
creation network; keep your eyes on the issues of alignment, authority,
and actualization; and you will be starting off on the right path.
Don’t forget, a new poll is now open. Many companies are
identifying that the loss on institutional knowledge due to the mass
exodus of more experienced workers is having a serious impact on the
innovation capacity of the organization. With that in mind, our new
poll probes to see how you are coping with the issues of generational
turnover. You can find the poll in the left hand sidebar. Please
remember to vote.