In the last post we discussed defining the scope of the open innovation program. In this post we will discuss selecting open innovation projects or Needs. If you are familiar with the Want, Find, Get, Manage model for open innovation, Needs equals Wants.

What exactly are Needs? Needs are more defined than ideas. They are aligned with the firm’s strategy and help meet a customer value proposition. They have a direct impact on the firm’s business through either revenue generation or cost reduction justified by a simple business case. They should have a sponsor within the organization. The Need may be already being worked on or it may be something that has been identified, but resources have not yet been assigned.

This often brings up the make versus buy question. In reality the question that should be asked is make, buy or pursue in parallel? By parallel, I mean work the Need internally while scouting or searching for a solution or co-development partner through open innovation.

We typically see Needs falling into the following categories:

·         Breakthrough: The big, bold bets that significantly change the industry competitive landscape

·         Strategic: Platform projects that support multiple product initiatives

·         Tactical: Project specific “gaps” that keep a project from reaching its end point

·         Speed, Cost, Quality: Process improvements that impact a company’s cost position through improvements to cycle time, product quality or cost reduction

The process for selecting Needs for the open innovation program can take many forms. The one I find the most interesting is a two step process. The first step is to solicit key Needs from the organization. This step is focused on indentifying the Need and providing some level of detail around the desired outcome, the customer (internal/external) value proposition, the magnitude of the challenge to achieve the desired outcome and any other relevant information that is specific to the organization.

The second step involves getting the key stakeholders together to “hash” out a ranking of the Needs. Once this ranking is accomplished, the group then selects the Needs that will be worked on in the open innovation program. This stakeholder meeting is interesting to observe as the various people represent why their Need should have priority and others in attendance propose approaches to solving or identify existing internal expertise or IP that can be applied to the Need.

The goal is to pick a manageable number of Needs for the open innovation program.

I was intrigued last month when I saw the Yale University admissions informational video - "That's Why I Chose Yale" - sort of a new way to share the Yale experience and stand out among all the college guidebooks (especially among the "High School Musical Generation").  Now this week, I was amazed to learn that Tufts University allows applicants to submit short YouTube videos to supplement their application (about 1,000 out of 15,000 applicants did this).

Now that the College "Application Video" has emerged, how soon before we see the "Professional" Application Video.  Finding and vetting new partners used to be limited by corporate travel budgets (where conferences and trade shows thrived to offer opportunities for face-to-face introduction and interaction) to finding new partners on the internet and making introductions through written electronic communication (such as emailing or uploading expertise/proposal submissions to corporate needs project postings).  With virtual conferences becoming all the rage, it will be interesting to see how video begins to emerge beyond a social media enterprise and become a more prevalent professional media platform.  In fact, for NineSigma projects, we are starting to see occasional video submissions from solution providers to supplement proposals (often a custom demo specific to the project showcasing a capability or using video to demonstrate unique equipment in action).  As the current 20-somethings who grew up on social media continue to express themselves and communicate beyond email/texting/tweeting, it will be interesting to see how they expand their use of video communication platforms to initiate and secure professional partnerships.  Who knows, a video "resume" may not be too far behind!

I had an interesting phone conversation earlier this week as I was planning for a panel discussion that I will be hosting at the Front End of Innovation conference in May this year.  I was talking with the to-be panelists, Blaine Childress of Sealed Air, Graham Mott of Philips, and Tom Esselman of Hallmark, to plan for the session, which will be on the topic of Increasing Value Through Continuous Open Innovation Improvement.  Each panelist was asked to participate because of their advanced capabilities in the open innovation space, knowing that each would have very interesting stories to share with the audience.  As we were reviewing potential topic questions, the discussion started to shift, as we began to hear about the uniqueness of each company’s progression towards achieving open innovation effectiveness.  Not only did we suddenly realize how different each company’s path was, but also what the term “open innovation” meant to each company.  The differences were astonishing.  Since this phone conversation, I had discussions with several other companies just to hear about their experiences and perceptions, only to discover even more differences!

In order to trace each company’s experience, I used a simple two-dimensional model, consisting of an Engage axis (symbolizing the extent of a company’s reach into the global innovation community) and an Enable axis, which represents the level of a company’s readiness and ability to assimilate new knowledge that it receives from the outside world (see model below).  I was unable to find any two companies that took the same path.  Looking at it from an Engage perspective, most larger companies have a broader pool of resources to draw from, including other internal R&D departments, supplier networks, project-specific eco systems, and intermediaries, such as NineSigma, while smaller companies relied more on the use of intermediaries, because of their limited internal and close-in resources.  While tracing the Enable progression of each company, it was interesting to see the different approaches that companies were using to manage both internal and external innovation resources.  Results ranged from disparate databases to more formal scouting networks, knowledge management systems, managed supplier networks and ecosystems, as well as embedded open innovation processes and organizations.

While most early adopters of open innovation started on the Engage side of OI, we are now seeing many new adopters jump right into the Enable side, strategically deploying their people, processes and technologies before Engaging.  Whether starting out by dabbling with open innovation via an intermediary, or taking a more strategic approach, the results will inevitably be the same.  You will ultimately increase your innovation capacity, while reducing overall time to market and cost.

Now that you have made the decision to get started with open innovation and you have the management team lined up behind you - it is time to think about the scope of the initial program. Many times this initial program is referred to as a Pilot Program.

Pilot Programs are a proven approach to reducing risk and addressing the many tasks in implementing open innovation. Pilot programs are a well understood concept in most firms and are used to test new markets or introduce new products into a limited market prior to a major roll out. Pilot programs deliver valuable knowledge about the viability of the proposed concept in the actual operating environment. There is no substitute for the value of a working prototype as a learning tool, particularly when the critical resources of time, people, and budget are being considered. A well scoped open innovation pilot program will provide:

•       A manageable scope in terms of projects, people and time

•       A “test drive” of the work process by key stakeholders

•       Understanding of potential organizational changes and impacts

•       Increased buy-in for an overall open Innovation strategy

•       Key success factors for an expanded program

•       A defined decision point on the benefits of finding and acquiring innovation globally

In thinking about a pilot program, one must develop a program that is not so small as to not fully test the benefits of open innovation to the organization, but also not so complex and over-reaching that there is a long period of time until the benefits are realized. The scope of the pilot program will come down to two key factors. These are:

The first is leadership commitment to open innovation. By this, I mean is open innovation viewed as an experiment because the firm has not bought into the benefits of open innovation, or is this the first step on the path to transforming the way the firm does innovation? If it is an experiment, then the focus needs to be on quickly demonstrating the value of reaching broadly outside the firm to advance a current program forward. This will make the initial open innovation program  more project focused. If this is the first step on a broader transformation, then a larger scope that includes open innovation process, roles and responsibilities and metrics should be undertaken. These pieces can then be piloted and adapted as one learns and goes forward from the initial open innovation program.

Second is the size of the firm. If the firm is mid-sized with a centralized innovation organization then the scope of the program is a matter of how many people to involve and how many open innovation projects to launch. If the firm is a large, globally distributed organization, then the initial program can either be piloted in a single SBU or spread across a couple of SBU's and then rolled out to the broader organization.

Once the above two questions are answered, then developing and finalizing the scope of the open innovation pilot program is a matter of defining the resources required in terms of people, time and budget.

The last point is to establish a defined decision point to evaluate the program. This can be as simple as a leadership review that looks at progress made or a more formal review using metrics that were established at the outset of the program. Either way, the positives and negatives should be identified and reviewed.

In the next post we will discuss selecting the right Needs for the open innovation program.

You are ready to embark on your first open innovation initiative.  You know what you are looking for and you have identified several potential partners who claim to have the technology expertise you seek.  What is your next step?

A.     Call the external partner and have a chat

B.     Ask the external partner to send numerous tests and reports to demonstrate they can solve your problem

C.     Request samples, free of charge, for you to test

D.     Call the legal department

In fact, the answer is a combination of these choices.  Let’s go back to my mantra of “Put yourself in your partner’s shoes” and run through the options.

If you were the inventor who received a call The Big Corporation, what would be running through your mind?  “I am so lucky that The Big Corporation found my phone number that I will give them whatever they want”?  No! Your first thought is “I have invested my entire life in this great technology and I need to be careful, because if I tell them too much, they will steal my idea and develop it with their deep pockets of funding.” 

Therefore, if you select B and C, the external partner may not welcome you enthusiastically.  And if your legal department (choice D) requires you to send a one-way NDA before you start a dialog, it isn’t likely to be well received either.

The best way to take a mutual first step is (A) to engage in a non-confidential conversation.  To avoid giving your legal team a heart attack, refresh yourself on your company’s policy on non-confidential information exchange.  Generally, both parties can talk about what the technology “does” (performance parameters) without discussing “how” or the specific application.  Solution partners can establish credibility and expertise by sharing examples of other collaborations in similar areas, or their ability to conduct proof of concept or scale concepts.   Seekers can share limiting factors or target timelines without disclosing even their industry.

The goal of this first conversation is to confirm mutual interest – that the seeker and inventor believe the proposed technology is a good match, and that the two parties have the same vision for the framework of their collaboration.  Once this groundwork has been established, it may be appropriate to establish a mutual NDA, exchange samples, share test results and visits.  This first non-confidential conversation lays the foundation for a trusting and balanced relationship between potential partners.

Open innovation is one of those “feel good” initiatives that makes a lot of sense.  Leverage technology to build new capabilities, create openness that results in breakthrough growth, speed up the innovation process…why is everyone in the room smiling except the lawyers?

In most organizations, the legal team is given the responsibility of being the “protector” of the company’s intellectual assets.   There is no greater threat to protecting a company’s intellectual assets than opening the floodgates to a free flow of information, both in and out of the company.  Whereas the dreamy idealists envision an environment of sharing, lawyers envision lawsuits and liabilities.  Clearly, companies that successfully balance these two competing tendencies are the ones that can be most successful leveraging the power of open innovation. 

Here is my mantra for successfully managing IP risk in open innovation:  Put yourself in your partner’s shoes.  I don’t care if you are having a first conversation with a collaborator or trying to define the legal agreement. If you take your partner’s perspective first, you will always create a better collaboration.  An open innovation collaboration is a long term relationship, not a real estate deal.  If there is water in the basement, you will both be knee-deep in water.  If the terms of the collaboration respect both parties’ vital interests, and share both the risk and the reward, you have the fundamentals of a real partnership.

In my next entry, I will discuss a key IP event that can either block or smooth the path to a successful open innovation collaboration.