Why I believe in Open Innovation

OiefrontcoverAnother week goes by and I've been asked at least twice about Open Innovation. Enquiries fall into two categories. Some are from people who are really interested in the process and others are very challenging. Here is an anonymised example of the latter:

I understand your objective here, but not why you are once again telling your competitors what we are up to on an open information exchange?
What other business develops new products in such an open way? When General Motors are developing a new car, employees are sworn to secrecy in case Ford find out and get to the market first.
A N Other

Receiving this email was like turning up for an exam to find that the exam paper contained all the questions you'd revised for.

Here are some of the points I made in my response:

The judgement you make when deciding to develop an idea, proposal or project in the open is that you will gain far more than you might lose because:

  • exposing your ideas, proposals etc enables others to challenge them and improve them which leads to improved ideas and proposals
  • it further enhances your reputation as a truly open and collaborative organisation/person
  • it raises awareness of the fact that you are about to do something. So it's a form of pre-marketing

In addition, the 'value' of what you do is not in the 'ideas' (I have 3 of these everyday before breakfast!) it's in their realisation.

This is an interesting quote:

"Share your rough notes, meeting minutes and preliminary results as soon as you can. Sure, there's always the risk that someone else might come along and nick your ideas but, unless you're publishing plans for a nuclear reprocessing plant, it's a lot more likely some helpful soul will pitch in with a helpful comment, pass you a link or contact, or tell you you've got it just plain wrong before you spend too much time and effort on the idea."
Source: Robin Hamman (Senior Broadcast Journalist/Producer at the BBC)

General Motors may keep their ideas to themselves and so did Lego. Lego don't any longer. The story goes that a few years ago Lego released a long awaited product that enabled their users to build computer-controlled robotic models. This product took them years to develop in-house and in secret and then bring to the market. Within weeks of the release, the product had been completely reverse engineered by their user community and brought back together in the form of a highly superior product. Lego now do things more openly and have a mechanism for involving (and rewarding) users in all new product development. See this recent presentation by Prof Eric von Hippel, MIT at the launch of NESTA Connect.  (You need to be patient – this video takes a while to start – if the video is too slow you can click the audio tab and just listen to that). Thanks to David Wilcox for bringing this to my attention.

Wikipedia has a good definition of open innovation in the private sector. Someone needs to do one for the not-for-profit sector . . . . may be we could do it between us here . . . A NFP definition would not talk about patents but of Creative Commons Licensing but there are many parallels.

The Wikipedia definition makes the point that Open innovation needs a different mindset and company culture to traditional or closed innovation. It also includes the following table which I think is really enlightening. Again a NFP version of this would be useful.

Closed innovation Principles Open innovation Principles
The smart people in our field work for us. Not all the smart people work for us. We need to work with smart people inside and outside our company.
To profit from R&D, we must discover it, develop it and ship it ourselves. External R&D can create significant value; internal R&D is needed to claim some portion of that value.
If we discover it ourselves, we will get it to market first. We don't have to originate the research to profit from it.
The company that gets an innovation to market first will win. Building a better business model is better than getting to market first.
If we create the most and the best ideas in the industry, we will win. If we make the best use of internal and external ideas, we will win.
We should control our innovation process, so that our competitors don't profit from our ideas. We should profit from others' use of our innovation project, and we
should buy others' IP whenever it advances our own business model.

PS: The image at the top of this post is of the front cover of the proposal to run the Innovation Exchange that we developed in the open here. Click on the image to enlarge it and count the number of authors!

PPS: We are using the same open process to co-design the next version of our ruralnet|online service here. Please feel free to join in or just browse.

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6 Responses to Why I believe in Open Innovation

  1. This is a great post! The paradox is that GM is one of the worst examples of innovation, and this is clearly reflected in its numbers: http://finance.google.com/finance?q=NYSE:GM .
    Lego story is such a fantastic example of crowdsourcing 🙂

  2. Paul says:

    Even Microsoft are at it – http://www.microsoft.com/presspass/press/2008/feb08/02-21ExpandInteroperabilityPR.mspx?rss_fdn=Press%20Releases the faint sound of hell freezing over is getting a little louder…

  3. David Wilcox says:

    Excellent stuff, now mentioned over here http://tinyurl.com/2op332. I think you should form a club for naked CEOs:-)

  4. Robin Hamman says:

    Sun Microsystems takes a pretty enlightened approach to their staff blogging:

  5. Simon,
    What your comment failed to mention, and that which is essential to successful open-innovation and collaboration, are the incentives and rewards the community receives when sharing their wisdom. By nature, people will happily collaborate given both social and emotional reward. For example, Lego-isters joined forces with Lego to raise their social standing amongst the Lego community and to be viewed as authorities. Similarly, employees will participate because it gives them, amongst other things, a voice. The more ‘valuable’ the reward, the greater and more relevant the effort and subsequent offering. Insecurities around ‘sharing’ information are commonplace, but as you say, the rewards are far greater. Another great case study is Goldcorp which you can access here http://tinyurl.com/2ks588

  6. Simon says:

    Stephen – thanks so much for this contribution and for the Goldcorp link (http://tinyurl.com/2ks588). I am right with you on the incentives and rewards. Any system or process, online or offline, that doesn’t consider personal motivations to share and collaborate is doomed to fail. As you say, rewards can range from financial to emotional, but some sort of reward needs to be there for an individual to commit their time, let alone their ideas to a collaborative effort . . . I’ve marked your blog at http://www.dubstudios.com/ as one to keep an eye on!

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