The Current State of Open Innovation

I spent a thoroughly enjoyable two days recently at the Open Innovation Forum in Baltimore. It had a packed agenda, including lots of opportunity to network and uncover the “state of the nation” of Open Innovation. My conclusion is that OI is in a healthy state. Whilst there is nothing truly revolutionary, the picture is one of good solid progression and increasing adoption, with continuing promise for the future.

There were several key themes running through the conference. Nobody does OI just for the sake of it. It is driven by necessity and opportunity; necessity from a lack of resource or competence; and through a vision of the prize that OI can bring. Implementing OI is not always straightforward, but there are plenty of examples of good practice from which to learn. There is an increasing emphasis on crowds of different types, not just from companies whose raison d’être is crowdsourcing.

Suppliers remain probably the strongest source of inbound OI, yet there still appears to be a tension between delivering growth opportunities and meeting short-term commercial goals. OI leaders aim to strike the balance through strong, open relationships.

An often under-estimated area of OI is the receiving company deciding the commercial and technical feasibility. Fortunately there appears to be more attention being given to providing resource and structure to this important activity.

Finally, the softer elements of trust, relationship and top management support were a continual theme throughout the conference. These elements are founding principles of OI and should be central to any implementation program.

1. OI is driven by necessity and opportunity.

Several speakers related their experience of resource constraints driving the need for OI to deliver, thus making external partnerships essential. Dr. Victoria Scarborough from Sherwin Williams demonstrated how OI can help companies in mature industries to get “out of the box”. This is not necessarily radical innovation, but providing many more and varied opportunities to strengthen the portfolio of incremental projects.

According to Roger Chandler, Intel’s business model is totally dependent on OI, particularly as they are one of the world’s largest software companies. A perhaps neglected area of OI, indeed all innovation, is understanding that the hardest part is defining the problem. While talking about how their ideation includes extreme ideas, Roger produced my favourite quote of the conference – “just south of crazy is awesome”.

Olga Patel of Mattel emphasised the need for OI in her company – whilst still seeking ideas internally through an internal portal, the Mattel Innovation Exchange, they source all their innovation externally. They have adopted Nine Sigma’s Nine Sights platform to address small inventors, invention brokers and crowds. Together with “My FP Idea” (for the Fisher Price brand) they invite open-ended submissions as well as targeted challenges.

2. Implementing OI

Dr. Victoria Scarborough from Sherwin Williams described implementing OI as following the classic stages of change management – unfreezing, moving, institutionalising. Top management must therefore “loosen the reins” and give OI teams the scope to explore.

A key part of implementing OI is metrics and associated targets. According to Dr. Shimei Fan of Unilever, their target is to have 70% of pipeline projects with a significant input from OI. Their 2013 result was 58%, up from 38% in 2011, so they are well on track to meet the target. Rather than simply characterising innovation as closed or open, Unilever are aiming for a “seamless” approach. This involves moving from arms length, cost-driven old style projects to long-term partnerships, integrating strongly with internal operations. A good example is the collaboration with Dow Chemical on High Throughput Screening of small molecules that has already resulted in 20 patent applications.

Luis Solis of Imaginatik described a five-step approach to implementing OI.  It starts with an OI strategy; constructing the “sponsor spine”; finding ways to find time; securing a line of credit, not just for the current year; and finally unveiling the role of trust.

Dr. Svetlana Dimovski of BASF outlined the work of an internal group tasked with implementing OI company-wide. In such a large and complex organisation, they break down OI into front end, R&D pipeline and commercial. They have built an extensive toolkit from ecosystem development to support for their scouting network.

3. Clusters, communities and crowds

Shelley Kuipers of Chaordix showed how crowdsourcing has moved very much beyond idea generation and management. Their community of over 750,000 participants is providing predictive insights. The simple crowd segments into brand and user groups; then into leaders and “prosumers”. The latter group are the ideal ones with which to co-create.

Beth Beck of NASA used their innovation communities of practice to show how collaboration can often be chaotic, particularly when dealing with complex challenges. The key is to embrace the chaos, and to channel conflict and disruption into positive innovation output.

Dr. Barbara Sosnowski of Pfizer outlined how their landscape is evolving from a disparate group of players to a holistic ecosystem, fuelled by collaboration within bio-innovation clusters.

Mike Morris of topcoder and Lee Odess of Brivo Labs described app development using topcoder’s >600,000 strong community of coders. This “factory of capacity” can dramatically reduce the time and cost of software development.  Payment is clearly a motivation for the community, but recognition, achievement and the chance to work on interesting projects are also very strong motivators.

Frank Digiammarino of Amazon Web Services showed how the availability of massive web capacity can now support open problem solving such as the 1000 genome project and Cancer Research UK’s “Genes in Space”.

4. Working with suppliers

Dr. Sophia Zhou of Philips showed their approach to stratifying suppliers, from the basic level through to strategic partner. The latter group, of which there are only a handful of companies, have very strong relationships and multiple joint projects, developing joint IP through co-creation.

Dr. Andrew Skulan of Clorox described their segmentation of suppliers into transactional; preferred collaborators; and strategic partnerships. It’s no surprise that the so-called Level 3 group are the main focus and source of supplier innovation, as well as the highest expectations.

Supplier and inventor showcases also feature at Under Armour with the annual Futureshow.

Dr. John Creek of Reckitt Benckiser (now RB), a true innovation powerhouse where 24% of sales come from products launched in the previous 3 years, described their approach to supplier innovation. Selection and engagement are key, as are strong relationships internally with procurement in order to balance short term commercial needs with long term innovation potential.

5. Supporting startups

Ethan Applen of Warner Bros described Mediacamp, a 12 week “academy” program for startups. This novel approach provides funds and mentorship to kickstart embryonic businesses, and to stay close to exciting future opportunities. WB don’t take equity, but in the true spirit of collaboration are in prime position when it comes to doing deals with the most promising candidates.

6. Proof of concept (PoC)

Dr. Victoria Scarborough from Sherwin Williams runs a PoC lab to evaluate claims from putative OI partners. This modest resource investment can make all the difference in convincing the OI team themselves as well as other corporate decision makers.

For Dr. Barbara Sosnowski of Pfizer, PoC is now delivered at the point of a successful Phase II clinical trial. The dedicated External R&D group help to manage relationships up to this point.

Technical PoC is one thing; a business PoC is very much another. “There are lies, damn lies and Excel ROIs at the Front End”, said Jason Berns of Under Armour.  It’s therefore even more important to look at the quality of the relationship.

7. Trust, relationships and support

Many speakers spoke about the principle of trust as the foundation of OI. This was exemplified by Jason Berns of Under Armour in his description of the key principle used in their approach to partnerships – sportsmanship. So they will pay for unprotected, open ideas that in theory they could exploit freely, but recognise that would be the wrong thing to do. They also aim to be respectful and not adopt a large company/small inventor stereotype. Finally, almost every speaker mentioned the importance of top management support in implementing and sustaining OI.

So, the conference was a good showcase for OI, confirming its healthy state and giving good pointers for its future development. I look forward to next year’s.

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  Kevin McFarthing runs the Innovation Fixer consultancy, helping companies to improve the output and efficiency of their innovation, and to implement Open Innovation. He spent 17 years with Reckitt Benckiser in innovation leadership positions, and also has experience in life sciences.