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Not so long ago, companies created departments to create innovation. But the result was often that innovation was turned into a state secret. The only people who knew what was going on — and therefore the only people who could really contribute — were the Chosen Ones inside the innovation department. Not surprisingly, this approach limits both the quantity and quality of ideas so companies have started to search for new ways of developing new ideas.

One new idea is distributed or open source innovation in which customers (or anyone else for that matter) are the co-producers of the products and services they consume.

Open source software development began when one smart individual realized that he wasn't half as smart as all the other people he knew if he put them together. The open source movement worked in software because the original motive was altruistic — the end product was given away for free — and people thought they were on the side of David fighting a mighty Goliath (or Bill, as most people know him).

This is networked innovation made possible by the Internet. Ideas (or problems) are made freely available to anyone that cares to look at them. The result is smart software with the bugs ironed out in record time.

Recently the idea has been transferred to all manner of projects ranging from an open source encyclopedia called the Wikipedia and collaborative industrial design such as ThinkCycle to open source aeroplane design, cola recipes, film scripts, and beer. The latter was developed with the help of some self-appointed beer aficionados (found on the Internet) who created everything from the name of the beer to its packaging and advertising. Even NASA has embraced the idea by using volunteer scientists (or "clickworkers") to identity and catalog craters on the surface of Mars.

But perhaps the biggest opportunity for open source innovation lies within the pharmaceutical industry. One of the problems with traditional pharmaceutical R&D is that the patent system effectively blocks outside insights or enhancements to a particular discovery or invention. It also means that there is little or no incentive to develop drugs aimed at people (or countries) with little or no money to spend.

There are some other parallels between open source software development and pharmaceutical research. Both tend to employ young researchers who are keen to be involved with "big vision" projects and professional status is often seen as being more important than financial reward.

How can open source principles be adopted by commercial organizations? In some ways open source can be thought of as a suggestion box scheme — albeit one with a giant transparent box. A topic is posted on a Web site, and anyone from industry experts to members of the public can contribute to the solution. Everything is transparent in the sense that all ideas are shared and discussed in public. In some instances, people will do this for nothing, while in others they will ultimately have to be paid in some way.

Some detractors argue that open source innovation is little more than giant focus groups, but there are big differences. The first is sheer scale. Focus groups rarely involve more than a hundred people. Open source can involve thousands and still turn things around faster than more traditional approaches. Second, focus groups usually ask people to react to ideas. Open source asks people for solutions and allows ideas to build cumulatively. Third, focus groups rely on a representative sample of people who are "ordinary" and by definition uninterested. Open source relies on people who are articulate, passionate and enthusiastic.

Another point, articulated by both John Kao and Ross Dawson, is that traditional innovation can be compared to classical music, whereas the open source model is more like jazz. Classical innovation is usually driven by a single leader with a team following detailed notes. The end result is faithful in letter and spirit to the original objective. Open source, in contrast, involves individuals improvizing against a background score. Sometimes there is no leader or set framework and the results can be quite unexpected.

A good example of a company moving towards an open source approach is Procter & Gamble. The company has an objective to generate 50% of new product ideas from outside the company. P& G's Collaborative Planning, Forecasting and Replenishment process (CPFR) is a collaborative and transparent process that allows P&G's customers and suppliers to improve its supply chain. Another example is P&G's use of the virtual technology market P&G lists every one of its thousands of patents on in the hope that it will facilitate connections and ideas from the outside.

How can you use the open source model to kick start innovation within your organisation? Here are some thoughts to get the ball rolling:

  • Innovation is not a department. Make sure it's job number 1 for everyone.
  • Bring back the company suggestion box, but make it virtual and transparent.
  • Don't just ask for ideas, clearly formulate the problem, and then ask for solutions.
  • Seek out and attract enthusiasts for your product and collaborate with them.
  • Give away your product for free to people that might help you to improve it.

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