Dear Clients, Solution Providers, Partners, and Colleagues,

2012 has arrived, and there is a feeling of optimism in the air. We are seeing that many of the innovators we work with are investing heavily in innovation right now. Organizations of all sizes are looking towards the future, and the many opportunities that beckon.

We finished a record quarter in Q4 2011, and we have NEVER had as good of a start to the new year as we have right now. In all of 2011 we were up significantly in terms of sales orders and revenues, and we added some world class talent to the teams in all the different regions.

We thank all of you for making this possible. It is your trust in our ability to add significant value to your businesses, as well as the confidence you have in the NineSigma team including Partner Organizations, that make us the trusted innovation partner to organizations globally.

Some of the Highlights in 2011 were:

·         A successful capital raise in March that allowed us to invest in further rapid growth

·         A highly praised OI Leadership Summit in Washington DC in May that drew 100 Innovation Executives (and please note that the next one is October 1-3, 2012 in Philadelphia – reserve your place at http://www.ninesigma.com/summit2012.aspx)

·         New services such as

o   QuickScan (a VERY fast and pointed mini-landscape on a Client Need),

o   Technology Landscaping and Monitoring (an in depth analysis of technologies and their respective maturity, as well as recommendation for the most suitable one’s for a Client as a “one off” or ongoing on a repetitive basis),

o   The world’s first Collaborative Innovation Psychometric Assessment that allows companies to measure an individual’s and team’s propensity to being good collaborators

·         The opening of a NineSigma office in Melbourne, Australia, bringing the total regional headquarters count to four

As we look to 2012, we are excited about the many new initiatives we will bring to market for you. Especially of interest is a ground-breaking program aimed at increasing value for clients and solution providers through an open exchange that will provide more opportunity for co-development and collaboration.  With these new initiatives, we are focusing our efforts on helping you to de-risk your innovation portfolio, and to accelerate your speed to market. In other words, we are going to help create a world where FEARLESS INNOVATION is the new reality.

Best wishes from all of us here at NineSigma,

Andy Zynga, CEO

NineSigma is pleased to announce the 2012 Innovation Leadership Summit, taking place October 1^st – 3^rd, 2012 in Philadelphia, Pennsylvania, USA.

Following our highly successful leadership summit in May 2011, NineSigma will again convene innovation visionaries from around the world to explore global mega trends and the impact they have on a company's innovation agenda.

The 2 ½ day summit will include interactive sessions and presentations from some of the industry's most provocative and inspiring thought leaders from industry, academia, and government. Confirmed speakers include:

• Frank Piller, Professor of Management and Director of RWTH Technology & Innovation Management Group, RWTH Aachen University
• Ben Kaufman, CEO & Founder, Quirky
• Roger Leech, Open Innovation Portfolio & Scouting Director, Unilever
• Carlos Barroso, President & Founder, CJB and Associates, LLC.
• Many more TBA!

Visit our 2012 Innovation Leadership Summit site for more information including a conference overview, venue details, hotel accommodations, and event registration.

2011 Recap
In 2011, Approximately 70 innovation leaders from 54 companies and nine countries gathered for NineSigma's Innovation Leadership Summit. Conference participants included CTOs, EVPs, VPs, Directors and other innovation and business leaders. Speakers included innovation and thought leaders from: Hallmark Cards, General Motors, Allergan, Centers for Disease Control, DSM, Eastman, Eaton Corporation, NASA, Natura, PepsiCo, Philips Consumer Lifestyle, Schlumberger, TerraCycle, Under Armour, and Unilever. Delegates had the chance to network with their peers, while addressing critical challenges associated with Open Innovation, including culture change, speed to market, public-private partnerships, OI leadership development, and IP management. 

“NineSigma’s Open Innovation conference was superb - the best I’ve attended,” said Jonathan Hague, Vice President, Open Innovation, Unilever. “The caliber of participants and the quality of the content were exceptional, and it was a pleasure to have the opportunity to network with so many like-minded Open Innovation leaders.”

Full 2011 Recap

It was somewhat ironic that I was having dim sum with Chinese friends of our family’s when I learned of Adam Davidson’s opinion piece "Will China Outsmart the U.S." in the New York Times. I was amused by the idea that something dire might happen if China caught up with the US.  I was amused for two reasons- First, historically we’ve been through this scare with Russia and Japan and the European Union and even South Korea. Second, having consulted for a Chinese company 6 years ago including time on the ground in Nanjing, I’m pretty sure that the Chinese have already caught up and surpassed the US in innovation in a number of areas. Many of us, including perhaps Mr. Davidson are blind to what they’re doing or pretend those gains don’t matter.

My clients would buy Western Agrochemical technology and improve on it.  They didn’t just run the plant according to the manual…they studied it, worked to improve on it, took some risks and they succeeded.  In the West, we’ve mostly stopped working on improving these things; the incremental profit wasn’t big enough compared to the phony profits reported by the Enrons and Worldcoms.  Anyhow, this kind of continuous, incremental improvement adds up over time.   We like to focus on something that looks like a big jump, say an iPhone, only to forget the hundreds of little technical advances it takes to make an iPhone work, to be manufacturable, to be affordable.  But innovation isn’t just about flashy iPhones…those incremental improvements in the manufacture of agchems matter too, and those iPhones are dependent on incremental advances elsewhere.   Abandoning the basics of manufacturing, insisting on unobtainable returns on investment based on comparisons with bad data leads to its own punishment.

It was also somewhat amusing, but also depressing reading the comments on Mr. Davidson’s article.  The racist denigration of the Chinese was something I would have hoped no American citizen would engage in.  Obviously it was a false hope.  On the other side of the coin was a masochistic delight in the decline of the US.  As someone in the trenches on the subject of innovation, I have a different point of view.  Note that my Chinese clients were buying the best technology they could find.  They would develop their own when there was no other choice, but contrary to the historic notion of insular, inward turning Chinese, they were looking outside their 4-walls and outside their country’s borders.

And that’s what we do here at NineSigma.  We make looking outside a company’s 4 walls an efficient process.  I like to call it manufacturing serendipity.  No matter how much research funding we have, talent is always a scarce resource, and even the Chinese with their huge population cannot have every smart person in the world working for them.  Embedding a systematic approach to accessing outside creativity is a way not to replace but extend innovation dollars, reduce risk and decrease time to market.  Right now, working with NineSigma is an unfair advantage for early adopters.  In the future it will be a necessity to keep pace technically.  So never mind China…which position would you rather have your company in, early adopter or late to the party?

We’ve all held up the Netflix Prize as a key example of how to use online prizes to drive collaborative innovation to improve predictive science.  But this week,  I encountered two stories that show a unique intersection of the gaming field and innovation in different ways.  One, from MIT Technology Review describes how companies are using games to drive new innovative thinking.  Some use games to train workers in new systems, others are used to reward “players” for channeling new ideas for improving the business.  The other from NPR’s All Things Considered (click the link for an audio file and the online transcript) showcases the winners of the Siemens Competition in Math, Science and Technology.  The students worked with researchers at Oak Ridge National Laboratory to adapt the Microsoft Xbox Kinect game system hardware system - a sophisticated camera and laser tracking system that monitors and processes movement by the game players – in order to create an accurate and cost effective system to analyze human gait and identify abnormal walking patters.  The idea was to improve medical diagnoses and physical therapy, and possibly help contribute to advanced prosthesis design.

So what do these stories illustrate?  We all know that taking cool technologies that were developed for other applications and re-purposing them for new uses is what Open Innovation is all about.   But these examples show how open innovation continues to manifest itself into new areas and becomes adopted both by young students to further their education, and by big companies to foster improved employee engagement.

Much has been said lately about how open and collaborative innovation requires different parties to achieve outcomes built on trust. Indeed, we identified “lack of trust” as the number one reason why teams fail in our November 10 blog post. 

I looked up “trust” in Wikipedia and learned that in sociology and psychology: “…the degree to which one party trusts another is a measure of belief in the honesty, fairness, or benevolence of another party…”

One of the complications in collaborating with external parties is that building a belief in the other party’s “honesty, fairness and benevolence” usually requires a series of face to face interactions that convince each party of the other’s benevolent character. What’s more, the “trust” factor may extend to the party’s representative, but perhaps not to the whole company.

This is why it so essential for any practitioner of Open and Collaborative Innovation to have a structured program for  “Partner of Choice” messaging. This encompasses guidelines on how much flexibility is given in negotiations, creation of “win-win” legal agreements, and an openness on the intentions, goals, and the deal breakers. The mantra needs to be “no surprises”.

On the subject of win-win legal agreements, I was at IP Week in Brussels last week, where I (as well as other great companies like Intel, L’Oreal, and Arthur D. Little) spoke on Open Innovation. The audience was full of IP and Patent Lawyers. After our respective speeches one lawyer asked: “How does the legal profession have to change in order to get better at Open Innovation?” I responded that there are 2 major things: Number one is to think in terms of what the other party would and will find acceptable in order to create a “win-win”. Too many times negotiations start out with a legal agreement that EVERYBODY knows the other party cannot accept. Softening the standard corporate term sheets would be a good first step. Number two is to think in terms of “acceptable risk”. It is kind of linked to the first item, but really, any time you talk to lawyers, the focus is “risk, risk, risk”…However, I often resort to asking lawyers – what is the likelihood of this or that event happening, and often it is negligible! When you’re clear on what risks are acceptable you are a long ways towards being able to create a good basis for negotiations.

So, to build trust, the partners need to be open and clear about their intents, objectives, and the process, AND be fair and balanced in crafting a legal framework for collaboration.

The result according to Wikipedia: “Trust is also seen as an economic lubricant, reducing the cost of transactions, enabling new forms of cooperation and generally furthering business activities, employment and prosperity.”

Best wishes to all of you, and keep building the trust!

What is the difference between a Challenge and a Grand Challenge? 

While a Challenge represents the opportunity for multiple parties to collaborate to solve a problem, a Grand Challenge is….. grander.

A Grand Challenge addresses a fundamental problem that is bigger than the need of an individual company or person.  The solution requires broad applications of expertise from multiple parties, and generally multiple industries. Many Grand Challenges also have a positive impact on society, serving an altruistic, greater good.   A Grand Challenge embodies all of the advantages of open innovation, leveraging the synergy of multiple parties collaborating to achieve a breakthrough that benefits the broader community.

For companies, Grand Challenges communicate a concise and powerful message to their entire stakeholder community.  When GE launched their Heathymagination Grand Challenge to invest $10 million in breast cancer research, they broadcast to every GE consumer that GE is committed to medical research.  At the same time, GE communicated to their investors, professional community, and supply chain that GE’s doors are open to discovering breakthrough technology.  Their traditional supply chain was essentially given notice: bring us the best, cutting edge technology or sit by the sidelines. 

A Grand Challenge energizes the investment, inventor, consumer, and technology communities because it opens large companies to the best information from any source, creating a level, competitive field for new ideas.

And the opportunity to innovate at that scale is….grand.

With the front pages covered everyday with news on the financial crisis, one would almost expect that Europe has come to a screeching halt. Nothing would be further from the truth with relation to open innovation. Although European companies have traditionally been a bit slower in adopting new management practices, they tend to more structurally integrate these practices in the organization when they are adopted. Our observation is that more companies are implementing open innovation practices. There is an increase in roundtable discussions and industry specific networks such as the Food and Drink Innovation Network, where companies are sharing their learnings in practicing open innovation.

Accenture and the Institute for Innovation and Competitiveness i7 created by ESCP Europe studied 20 large international companies that are actively leveraging open innovation and asked the question of whether open innovation is really a new business concept or is a practice that simply has a new label. The study, published this week, uncovered some interesting takeaways:

• Open innovation as practiced now involves a structured and systematic approach for bringing outside inside. There is now a more manageable end to end process.
• There has been a fast pace of adoption: only 10 years from first movers to wide adoption, the early majority came into play in 2010.
• There has been a significant increase in external resources available, which can potentially create huge operational challenges.
• Positioning the open innovation strategy on the right openness scale: combining topic-driven approaches with partner-oriented open innovation
• Defining the right balance between depth and breadth of relationships with partners: the most advanced companies are widening the scope and variety of partners.
• Excelling at the partner management process: creating a real win – win; advanced companies have structured and standardized these processes.
• There is no open innovation “free lunch”: all companies involved have invested in capabilities like organization, skills, tools and governance to make open innovation happen (60% of the companies have invested with NineSigma)
• It is not only about appointing a “Chief Open Innovation Officer”: changing the culture and developing absorptive capacity and making open innovation a natural part and recurring way of practicing innovation.
• Open innovation works: the study shows that open innovation reduces time to market even though it gets more complex with external partners. It also improves intellectual property protection, helps promote the sustainability agenda and enhances the company’s innovativeness.

The full report can be downloaded here.  

With our growing client base in Europe, we have added new team members to our group including Marcel Zillig supporting our clients in Germany, Austria and Switzerland; George Vincent as head of our activities in the UK; Pantea Lotfian has responsibility for our intelligence and landscape projects; and Campbell Lockhart supports clients on implementing open innovation inside their organization.

I look forward to connecting with you. Let me know your thoughts on how open innovation is advancing in the European market. 

The OI Scorecard Survey tool was developed in the 3^rd quarter of 2010 to help companies assess their collaborative innovation capabilities both internally and externally. We recognized that companies struggled with understanding where they were in relation to other companies using collaborative innovation, and set out to create this online too. In addition to being  interactive and easy to use, the OI Scorecard tool has provided tremendous insights into where  companies are making progress, and where they are not.

I find that one of the more interesting pieces of data from the survey highlights an issue that we have heard many times from some of our large multi-division, multi-national clients. And that is – while 62 percent of those responding rated themselves as effective in tapping into the creative brainpower of their colleagues, only 10 percent had the systems and processes in place to recognize the most promising ideas, and quickly bring them to market.

We expect to see tangible progress in the area of internal collaboration over the next few years. Even companies who lead their industry struggle to improve internal access to information and expertise. As we heard from Dick van Beelen, Director of Open Innovation, AkzoNobel, in our recent Webinar,  “If only we knew as a company what we know, or if only we use what we have - and that in itself sounds like an open door. But, if you think about a siloed organization, this is indeed a big challenge.”

There are many proofpoints collected from the survey data and articulated in the OI Scorecard Survey Report . Have you had a chance to read the report? If so, what findings did you relate to most, or what surprised you? We would like to hear your thoughts.

While failure is perceived to be a natural part of the innovation process, no one really wants to see their innovation team fail, particularly when the stakes are high. My NineSigma colleagues and I have been giving it some thought lately, and it is interesting to hear people's answers to the question 'Why do teams fail?' Fast Company featured this topic in their 30-second MBA video series and asked NineSigma's Denys Resnick to prepare a short (yes, 30 seconds) video on the topic. Denys asserted that it is 'trust' that lies at the core of any good team. When we proposed the question to a broader audience via our LinkedIn group, we received an interesting response from a client.

Blaine Childress, a seasoned innovation leader from Sealed Air and a client of ours, had some interesting thoughts on the why teams fail. Per Blaine: "There are many, many reasons:

1)  lack of trust- results in isolated rather than cooperative, synchronous progress. If the members are not interacting and communicating, an advance by one sect may not fit with that by another. If this continues too long without shared update re-tooling is needed, time is lost, and blame games too often ooze in.
2)  environment- a team may possess the right composition, practice the proper level of communication and role responsibility, but be broad-sided by upper management's sudden change in priority. Budgets can be cut to a crippling level; critical members may be pulled away (together with the skill/talent they were previously providing); and excitement fades. It is difficult to resume the race with such losses.
3)  loss of urgency- nothing drives team melding like a common sense of urgency. Rapid progress toward what is uniformly seen as IMPORTANT provides self-satisfaction. Management must be present at quarterly or monthly team report meetings to echo/reinforce the importance of the effort and the launch date. A team ignored can often be a team that loses momentum. Obviously, urgency is linked to environment.
4)  lack of continuity- the team should have consistency in terms of its leadership and communicators. Membership will naturally change as a project matures from early prototypes to early stage manufacture, but champions from the internal and external subteams should be kept to insure clear relay of purpose and maintain trust."

In addition to these reasons, I am interested to hear what other factors can cause a group to fail. Please share your thoughts with us. 

Open innovation is clearly taking root in just about every industry, as organizations strive to create openness in their innovation and business processes. We see companies increasing their ability to leverage internal and external solutions yet struggle with building the right processes and tools to extract maximum value from the new solutions. (See NineSigma’s new OI Scorecard Survey Report  for more information). Among the factors that can make or break an open innovation program is intellectual property. We have come to realize in working with our clients and solution providers, collaborators can  enjoy all of the benefits that open innovation has to offer only if they understand the issues associated with intellectual property (IP).

First things first: how do we define intellectual property and confidentiality in the framework of an open innovation strategy?

Intellectual property is how our legal system attaches value to ideas and concepts. Most intellectual property is protected by a patent, but that’s not always the case. Sometimes IP can be in the form of trade secrets, which can be anything from a product formula to test data.

Confidentiality is defined less vaguely. The concept often involves a confidentiality agreement (CDA) or non-disclosure agreement (NDA) in order to create a safe space in which two parties can exchange information without worrying that they’ll lose control over their trade secrets. In general, parties will limit the agreement scope specifically to what will be the most valuable to what they are working on.

In addition to understanding what IP is, it is important to understand the nuance between protecting IP and managing it. Protecting IP implies that your interests are at risk of being threatened and that pre-emptive action is needed. Managing IP, on the other hand, embraces the more nuanced perspective that the processes, documents and relationships in a collaborative environment should increase value for all parties. In understanding the role IP plays, it becomes easier to see how culture can be positively impacted by the collaborative innovation process. A more open approach to solving problems, even if they are core to the business, doesn’t need to be a daunting proposition. In the next part of this series of posts, we’ll discuss what happens once the IP issues are hurdled and you are ready to consider the preparation and discovery phases of your open innovation program.

Contact us for more information.