Open Innovation Made Simple

There’s been a lot of buzz lately about “Open Innovation,” even in this magazine. In the past 10 years, books have been written, conferences filled to capacity, university research projects published, enabling software sold, and consulting firms oriented around this new era of collaboration. And all this despite the fact that Open Innovation (OI) isn’t really all that innovative. What!?!

If you strip OI down to its essential parts, at its core you’ll find what used to be called “partnerships,” “joint development” and even “TRIZ/TIPS” (a.k.a., “Theory of Inventive Problem Solving”), which have all pre-existed, but perhaps not as neatly packaged. If anything, the OI movement signals a greater acceptance from top management, whose endorsement facilitates a mandated reduction of “Not Invented Here” syndrome that cascades downwards through the corporate immune system and allows foreign business contributions to germinate and thrive where once they would be weeded out and ostracized. This is not even to mention recent economic motivators. Recessions really can make strange bedfellows.

Part of the problem is OI’s nebulous nature. It seems that many people are unsure about the borderlines of an OI project, with everything from complicated multi-business ecosystems like the iPod to single-source patent licensing being given the label. But even though at times it feels like a new paint job on an old jalopy, there are tremendous benefits for companies who increase their awareness of external innovation sources and who purposefully scout for new technologies and processes that can accelerate market growth, market share and, of course, profits.

Here is a sample of types of Open Innovation, or more accurately, the reasons behind particular types of collaborations. This is nowhere close to a complete list, but represents some of the most common ventures that occur in the OI space.

Repurposed Technology. TRIZ is a technique developed in Russia wherein one would search patent databases for inventions that could be applied to problems they were not originally designed to solve. For example, if your product is a phone to be used in outer space, there may be an existing patent that covers low-temperature PCB design meant for arctic regions. Sometimes this is easy, but often it is needle/haystack frustrating. Regardless of how solutions are discovered, OI case studies contain a healthy amount of repurposed technology examples where companies have licensed patents in just such a way.

Plug and Play. Why reinvent the wheel? Let’s say you make shampoo and you want a piece of a new billion-dollar market for natural botanical products, yet you can’t find a formulation stable enough for your manufacturing process. In your scouting, you find an existing company with 10 years experience infusing rainforest-based compounds into hand soaps. The investment in legal fees, JDA’s, or acquisition can sometimes be less costly than the R&D needed to do it yourself and a faster route to store shelves.

The Block Party. This is OI on steroids. The tired and overused iPod example must be invoked here, with its multi-company, multi-industry, multi-
technology, multi-business model convergence. Not much to say here, you can easily fill in the blanks yourself on how this phenom used partnerships and co-development to build on old innovations while infusing them with new innovations on almost every dimension to create the most recog-
nizable product and brand in recent memory.

The Piggy-Back. Perhaps the least innovative type of OI, this is more about marketing than technology. Think “L.L. Bean model Subaru” or “Coach Leather BMW” and you get the idea. Almost all types of OI are born of a shortcut mentality, and this is perhaps the least painful and most efficient way to leverage the combined values of two partners.

The Yin Yang. Most OI partnerships are not true partnerships, but a relationship where one company is clearly dominant. However, on occasion there are true collaborations which could not exist without what each side brings to the table. Video streaming such as consuming Netflix downloads through a Nintendo Wii video game console comes to mind, as neither company could accomplish the service with in-house resources. Some represent this category as the equation 1+1=3.

Internal OI. Some companies are so huge and complex that getting ideas from another section of the company is considered external sourcing. Many companies are today using social networking-driven technology so that inventions and ideas can more freely flow through the corporate capillary systems. At the recent OI-focused 2010 CoDev conference organized by Management Roundtable, Todd Abraham, senior vice president at Kraft Foods, compared these activities to his past experiences in “Knowledge Management,” but this time done better and for better reasons.

The Customer Spaghetti Wall. This one is intriguing, as it involves customer input. Although many companies spout the politically correct rhetoric of putting a high value on voice of the customer data, the real truth of the matter is that most find communicating with customers a bit of a necessary annoyance. Today, companies like General Mills and Procter & Gamble, under OI umbrellas, have flipped this paradigm with formal programs to invite product ideas from the consumer space, complete with websites, online communities and corporate support. Of course, when your shareholders demand that you create brand new billion-plus dollar product lines every year, you will drill for new idea wells anywhere you can. Both companies mentioned, and some others, report great success with these efforts, but be forewarned that it takes a tremendous filtration system to extract the value (plus healthy sized markets to draw from).

Again, this is just a sample. As Open Innovation continues to define its identity, additional flavors will come and go. While some still consider Open Innovation just another fad, there are enough high profile successes to ensure that companies will be following this path for quite awhile, whether or not the current nomenclature
sticks.