Just this past week, I had the opportunity to update my retirement account contribution through my employer’s plan. Included in the glossy brochure that explained all the new features and investment products available to me was a quiz. You probably know the one- it has a series of questions that assess your tolerance for riskiness in your retirement investment portfolio. I bring this up because in the 3 years that I’ve been a Program Manager at NineSigma, I’ve seen many clients and potential clients with a broad range of risk tolerances when it comes to Open Innovation (OI). Yes, many of our clients are Fortune 500 companies, and Wikipedia defines middle market companies as “those with revenues generally between USD$100 million and USD$1 billion per year.” Some of you might assume that a big company with annual revenue of $1 billion plus might have higher tolerance than a smaller company for spending money on OI, for opening up to new suppliers and development partners, or simply for participating in a process that can sometimes bring in completely unexpected results.  Do the Fortune 500 have more resources to wade through and vet potential solutions, and to engage with and fund new solution providers? Maybe, but my experience has been that it’s really a matter of comfort with the unknown that drives “success” in the application of OI in any organization- no matter what the annual revenue is.

Big companies and small can face challenges and road blocks as they try to improve processes, reduce costs, enter new markets, and drive products to market faster than their competitors.  Addressing these issues might mean that a company asks an OI intermediary like NineSigma to conduct a search for a partner with a very specific set of design/development/manufacturing capabilities, for an experts group to act as an advisory panel for a new market, for technical and business intelligence in a clearly defined technology arena, for co-development partners for a new product, for a novel technology that will improve an internal process, or for a toll manufacturer or material supplier. Bottom line is that we see needs of all types across companies of various sizes. Open Innovation intermediaries can give you access to people, technologies, and geographies that you might not be able to reach on your own, even if you do have the internal resources for an extensive scouting group. The Fortune 500 may run multiple NineSigma projects and a smaller company might run one or two a year, but the process we use, and the support we provide, is the same and applies equally well. Depending on your openness to new ways of looking at and solving challenges, OI could be a nice addition to your middle market company’s  “investment” portfolio.

Open Innovation (OI), a well proven strategy for CTOs, marketing and R&D, is now gaining advocates amongst the CIOs, strategic business planning teams and CFO level financial management inside Global 500 companies.

Changing culture and the way organizations have always done things is a leader’s greatest challenge and I’m anxious to assess how well corporations can adopt OI across the customer facing operations side of the business.

I believe that the opportunity to quickly acquire new knowledge for services, business process, CRM (Customer Relationship Management) and new business models can exceed the value or competitive market share gain from OI for a new product.  Costco can adopt a Bank’s branch office customer service ideas or automobile manufacturers can adopt a new business process model from Starbucks for the automobile dealerships service department.  And the software to support the processes and assess business metrics for the CFO can be acquired as well and implemented by the CIO.

In some cases a business offering services is competing against a business providing products.  John Deere and other equipment manufacturers could begin losing lawn care product sales as the lawn care service provider sells lifestyle choices and long term cash flow as a reason to not buy the new mower.  John Deere needs to look outside the manufacturing industry for the next innovation to win market share from the lifestyle choices available to their customers.  And, what industry would John Deere look to for managing the financial risk issues in the transition process?  Perhaps the automobile manufacturing industry that adopted Starbucks business process model for auto services.

Many of our clients use their corporate website to highlight strategic and tactical needs as a way to solicit solutions from the global science and innovation community.  Today, I wanted to highlight a website from a client of ours, Johnson Controls, Inc. (JCI).  Their Open Innovation website, launched in mid 2009, is interesting because although many similar websites exist within the packaged food and consumer packaged goods industries, I am not aware of any other automotive OEM or Tier One supplier doing this today.  Below is a summary of a few questions I've been bouncing off the Johnson Controls Automotive Experience team (the division behind the OI website).

Kevin:  First, can you give some background - who is Johnson Controls?

JCI:   Johnson Controls is a global leader in energy and operational efficiency for buildings, innovative interiors for vehicles and advanced vehicle power solutions.  The Automotive Experience business of Johnson Controls provides automotive seating, interiors and electronics components and systems to almost every automaker globally. Our seating products include: seat trim, foam, metals and mechanisms, as well as complete seat systems. Our interior components include: door panels; overhead systems, sun visors, overhead consoles; in addition to center and floor consoles and instrument panels. Our electronics products include integrated electronics - displays, instrument clusters, connectivity systems and body electronics; as well as electrical energy management and the HomeLink Wireless Control System.

Kevin: How do people submit solutions, and what process do you have in place to review submissions?

JCI: As with most of these websites, in order to keep the flow of information clean and to avoid disclosure of proprietary information, all submitters must have issued patents or patent applications for their technology.  To review submissions, we have established an expert review process.  Each idea submitted is available to all experts for review, but individual ideas are categorized and sent to the appropriate experts to ensure the right people are notified immediately that an idea in their area of expertise has been submitted for their review. Inventors are notified if there is interest, typically within three months.

Kevin: What technology interests are you seeking from your website?

JCI: We are particularly interested in a few key technology areas.  These include surface / thin-film technology, new cover materials, bio-polymers and natural fiber materials, advanced high strength steels and structural composite materials and the associated technologies to form and join these materials, “smart” materials, injection mold tooling technology that reduces cycle time, technologies to reduce component assembly time and cost (such as unique fastening, assembly automation and in-plant logistics), sensor and actuator technology for electronification of interior features, unique technology to achieve downsized mechanisms like recliners and adjusters, and software tools to improve predictive analysis and design optimization.  We're also always interested in solutions that can reduce product weight, costs, and/or improve environmental sustainability.

Kevin: Why is your product set a good one for Open Innovation, and what kinds of solution providers are you seeking?

JCI: Our broad product scope requires solutions from an array of technologies to create successful systems. For example, many of our products serve a structural role and are important for performance and safety.  But what are ways to weld/join different kinds of components and materials?  This is something that is being addressed in a variety of industries (not just automotive), and therefore, new approaches are always of interest. As for the types of solution providers, we are looking to this website to communicate differently with our traditional supply base, but also of significant interest is the ability to extend our network to the many academic and non-profit research institutions, as well as to inventors working in diverse technologies and other companies searching to license applicable technology.

Kevin: What kinds of results/successes are you already seeing?

JCI: We are pleased with what we’ve seen so far. The submissions have been steadily coming in, and our internal network of experts has been enjoying the experience of reviewing the ideas and connecting with the inventors who have made the submissions to our site.  More than a few submissions have been technologies that have potential for application in more than one product area.  These submissions have been particularly exciting for us.  For example, just last week we had a series of meetings with potential solution providers, and we had a particularly interesting company in for a visit to explore their technology as it might be applied to automotive seating and interiors.

Kevin: What were your biggest obstacles in getting this initiative complete, and what advice would you have for other companies considering creating an Open Innovation-focused needs website?

JCI:  As you know, Kevin, executive support of Open Innovation is important for the success of these initiatives.   Innovation is a core value for Johnson Controls, and we have had great support from our leadership team, so getting this initiative up and running was not a significant challenge. Our challenge is to make connections with the innovative people outside of our organization with whom we have not yet met.  We want every inventor with technology applicable to Johnson Controls to know that we are open to their ideas and know how to share them with us. 

As for advice for other companies, I suggest that having a robust process for reviewing the ideas once they are received is critical.  We are seeing successes, in part, because we have a system in place to ensure that, while all of our experts have access to the submissions, individual experts are specifically notified when an idea in their area of expertise is received.  The initiative can’t be successful if the review process doesn’t expose the best ideas for follow through.

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.