Is Open Innovation On Its Way Down?
Last week, I had a meeting with a high-level and very capable business person. She was wondering whether we have gone through a hype cycle on open innovation and now sees a downturn.
Too many companies started open innovation initiatives and they are now getting disillusioned as the results lack. Boeing was quoted as an example. They got into open innovation as part of their supply chain efforts related to building the 787 Dreamliner. Boeing have big problems on this and Boeing has retrenched a bit on their openness.
I do not think open innovation is on the way down. On the contrary, there is lots of potential to be unleashed. Of course, Boeing needs to rethink their strategies when the product is more than two years late. To some extent Boeing made some of the same mistakes I see many other companies do when it comes to open innovation.
Two questions for you: What is the below? What is wrong?
• Implementation
• Strategy
• Definition
• Why
You probably already have the answers. This is how many companies approach open innovation. They just jump into it believing open innovation can solve many of their innovation issues. Of course, this is not the case making the approach wrong.
You need to turn this upside down. First ask why your company should even get engaged with open innovation, next define open innovation in a way that fits your company, then make open innovation a part of – not the main – innovation strategy which again should reflect the corporate strategy and then you can plan your first steps and begin the implementation.
Stefan – we are confident the Hype Cycle does indeed apply to management techniques (not only technologies). It arises from the timing difference between the management social excitment wave about a new technique and the slow process of solving the real-world practicalities of its application.
Gartner does not currently have a published formal position for open innovation – but I think it is clearly descending gently from the 'peak of inflated expectations' into the 'trough of disillusionment'.
Best regards – Mark
Stefan,
I think your question might be answered by the scale of companies you ask. Boeing have had a nasty experience but that was in supply chain and manufacturing innovation at a massive scale. Jeff Immelt describes how it is being done at GE (current issue of HBR) on a similarly massive and yet departmentalised basis in that other famous multi-national. P&G are also noted for their leadership in this area and are showing no signs of backing off.
I think it has a lot to do with scale; over 90% of businesses have fewer than 20 employees; medium sized companies are the fastest growing, and it is these two classes of firms that have the most to gain from Open Innovation. Boeing have pretty much bet the entire firm on the 787, much as Airbus has with the A380.
But when you look at GE and P&G, their innovations are spread over a wide range of products and sectors, they can afford some failures that Boeing can't.
The smaller companies, with the exception of some extraordinary newcomers, are barely aware of the existence of Open Innovation and yet they potentially could benefit more than others, particularly when it comes to understanding regional and cultural needs.
Suggesting that it is on the way down is far too premature, for most businesses it is just starting.
John.
Stefan:
Boeing is a poor example of "open innovation". As I understand it, they are probably more an example of massive outsourcing. I don't believe they asked their downstream partners to generate ideas and respond to key challenges. More they provided specifications and had the partners build to the specs.
At any rate, the most compelling argument for open innovation comes from A. G. Lafley at P&G. If he believes that there are more, and better, ideas than their research labs can create, then it is probably the case that every organization can find more, and better, ideas by engaging with third parties. However, in something as mission critical as an airplane part, at some point there needs to be a central, governing standard and specification. Perhaps Boeing would have been better off if it had set certain standards and requirements and allowed its partners to generate their best ideas.
Second, an open innovation program needs to be well targeted and used. They are great for generating a broad range of ideas and incorporate many more perspectives than would be generated internally. They can also provide some sense of the crowd's uptake of the idea. They won't generally be successful with really radical or disruptive ideas, however.
Just like any new tool, open innovation, and for that matter innovation in general, is going through a hype cycle. Too many firms are labelling too many things as "innovation". We'll hear the death of innovation announced many times before people understand where innovation is really happening.
Actually, many might feel they are at a crossroads for this emerging practice and this is a good time to urge a deeper evaluation of open innovations performance.
Firstly drawing comparisons, like the Boeing one are lifting out just one of the aspects that make up that ONE companies performance and this is a mistake to apply it to often justify your own issues of poor performance. Taking one thing out of its context is the same as the constant pushing of P&G and its apparent success as something leaders quickly read about and say, we want the same without understanding how long these dramatic changes take. So comparisons can be a dangerous starting point.
I'd start somewhere else, inside the organisation. There are a critical set of questions that should be asked, not exhaustive but you will get the picture:
What are you trying to achieve in our own innovation?
Why do you believe this type of innovation approach, and there are many, is going to give you the results you want?
What is the result you want anyway?
How do we measure the effectiveness of Innovation performance?
Where does innovation link to the strategic need?
What makes up our total innovation portfolio?
Where does our development investment go and why?
Do we have a robust evaluation system that is dispassionate?
What are our present capabilities to innovation?
What are the critical gaps in these to meet strategic needs?
How can we plan ALL available resource options to achieve the strategic needs?
If we re-designed our innovation pipeline to achieve the stated growth needed what does this mean in evaluating different options?
Where are we effective, where do we lag, what are our choices?
What is needed to put into place a reliable analytical tool that clarifies our efforts and returns to measure effectiveness and options
I'm sure there are a few more questions but the point of this is, there is no point in looking outside your own organisation, trying to compare if you don't really know what you are wanting to achieve and then wondering if open innovation is working or not. You have a good understanding of your own fundamentals. Then you make strategic choice of what are your best options going forward, including opening up to others.
This is party open innovations problem, it has not been for many, not fully integrated into the strategic evaluation process and left as a 'grand' trail and learning curve. It has been treated as a outsourcing exercise and not part of the integrated innovation value chain. Time for many to move on but on the right analytical basis.
If you can't measure yourself and the effectiveness of innovation- inside or outside- then you will be disappointed in open innovation as you don't really measure the right results. These are not cost of research, allocation of resources, even products in the pipeline, time to market, it is innovation effectiveness against organic growth that is needed. Understand the critical need of the business required by innovation that need to be achieved then you go back and look at ALL your available options, including open innovation making sure you have a good understanding of what you presently have, through a critical (perhaps independent) examination.
Presently open innovation is far more focused on the 'tail' of innovation-the lower to no return stragglers- where the outcomes just give slightly better incremental results than keeping them inside the organization. A better solution would be to be a deeper examination of this 'tail' and the real contribution they make to organic growth, many requests might fail this organic growth 'hurdle.
Open innovation has its future in 'bridging' the plentiful gaps in knowledge, expertise and competences one single organization can't provide on their own. How can you use open innovation for bigger 'hits' that ADD to pursuing several alternative growth platforms?
No open innovation is not on its way down or out but it is at a crossroads for many and this is where the 'moaning and groaning' should be replaced with something different -a real effort to raise the game because open innovation can deliver significantly more than it presently is. The question for each organization is where and how to achieve more using all available means, if you don't others will as we are all in a greater innovation race for growth.
To answer this you need to achieve a clear SELF-understanding first; focusing through reliable analytical measures on capability to deliver against the corporates innovation growth needs, a clearer method to constantly redistribute your portfolio, resources and capabilities that are (in your judgement) the best ones to deliver the result needed. You need to be ruthless in pruning where organic growth are not part of the justification. Having a greater dispassionate outlook of results, clearly measured across all activities involved in innovation development and move the organization constantly towards a systemic innovation capability that is comfortable with managing the components, including open innovation, to achieve the solutions for the growth called for.
You need the power of knowing your innovation capability options and what they can contribute, internally and externally more than ever
I think OI is in a trough now. And not an all bad place to be because reality is just around the corner.
I figure the problem is that companies implemented a high-level strategy without the low-level tactics to support it. They'll focus now on filling those gaps: innovation scouting, IP research, asset portfolio management, out-licensing, strategic vendor management, and more.
The assumptions behind Open Innovation are not questionable.
1. The assumption that companies lack ideas. This is false. EEs have a ton of ideas that are either not captured or ignored due to socio-psychological reasons
2. The assumption that "wisdom of crows" can be used in technically sophisticated products that are normally developed by experts. I want to see a computer chip or and airplane developed by a crowd of outsiders who would work for free
3. The assumption that consumers are motivated to help corporate interests to innovate and make even more money.
4. The assumption that internal professional would be excited to to admit that outside amateurs are better innovators.
5. The assumption that the internal staff want to abandon their pet projects for some outside ideas.
The companies and consultants should get real and better use their internal (paid) resources to make innovation happen.
For Sergei Dovgodko, YOU seem to be making all of these assumptions. No one else is. All are false among OI practitioners. No one expects outside innovators to contribute to free. Crowdsourcing isn't open innovation.
See http://tinwhiskers.wordpress.com/2009/04/27/why-c…
Depends on your perception of what Open Innovation actually is. It wasn’t invented by Henry Chesborough –he merely formalised it and gave it a catchy name. The process, mindset or principles that we now call Open Innovation will persist long after the phrase has lost traction and the World has moved on.
Open Innovation is a label that has generated a fair amount of excitement, but like all waves of “hype” there is an inevitable dip when people’s equally hyped expectations are not met. There are many reasons why OI can be seen to not deliver. You have correctly identified Stefan that the infrastructure must be in place in order to support innovation – external or internal. In most cases where the perceived manifestation of OI has not met expectations – that infrastructure is not there, or opportunities have not been properly executed, or have fallen foul of the normal checks and balances (or hurdles and obstacles if your cup is half empty) that filter out all but the best and most fully supported propositions…but that’s the case with all projects. Open Innovation is no different in that respect.
So, the answer is I believe both yes and no, yes the phrase Open Innovation is becoming overexposed; but no, the principles of openness, trust, and proportionate sharing that underpin its potential to deliver value are becoming better understood. What more often lacking are the tools, culture or willpower necessary to drive through to delivery.