One of my US colleagues said that the refreshing thing about Europe is that it has 20 or so very different systems which all, in some way or another, seem to be working. Multiple solutions for the same need, that seems like the essence of Open Innovation. Was OI invented in Europe?

Reading the article ´Connect and Develop´ by the very American Harvard Business Review inspired me in 2006 to start a company in open innovation providing expert services. The idea was simple enough:  disclose the enormous innovation potential for companies in Europe by engaging the people who actually invented all the technology and developed all the great products of the last 20 years. They were going to retire anyway and it seemed like a great idea to intelligently use this wealth of wisdom.

There was one small challenge to overcome: getting the companies to engage with these top experts.

One of my lessons learned from working in open innovation in the past four years was that corporations lack the interface for actually sourcing and engaging with external partners in innovation. One of the CTO´s in a more philosophic mode remarked that it was related to the unbalance between “Yes” and “No” inside corporations. If someone says “Yes”  to something from the outside they are required to explain and defend their choice for working with an outside party. Saying  “No” obviously does not require explanation, even if it would be discarding the million dollar idea…

It goes to show that we should applaud the heroes that actually say yes to collaborative innovation, willing to explain themselves to their superiors, colleagues and existing partners. Within NineSigma Europe we are very aware and grateful for the champions that we have at the clients in Open Innovation. That is why we want to organize a way to recognize these champions and create some visibility for those people and organizations that lead OI.

More on this in my next Blog.

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.

NineSigma is, in contemporary parlance an “Open Innovation Intermediary”.  I like to keep it simpler.  We help people with problems make connections with people who might help them solve the problem.  It doesn’t sound as glamorous or hip when presented that way does it?  Or if you look at all the buzz around open innovation, you see a lot of repackaging of old wine in new bottles.  Since I am some of the older wine, I thought I’d share my experience in implementing OI in a SME and what I’ve learned that applies to today’s environment.

Of course, long before someone (Chesbrough, 2003) got the idea of calling getting something from outside your own fences “Open Innovation”,  people were doing just that.  We tend to overlook the roles of suppliers, academic consultants, and consulting firms and technology vendors, development alliances, organized networking and government programs that have been a constant feature of our global industrial civilization.  This means we also overlook the roles of the purchasing departments and corporate policies that engaged these traditional means of obtaining solutions from outside the fences.  The focus on web-centric communication mechanisms, the popularity of terms like “crowd-sourcing” and “innovation ecosystems” tend to promote unrealistic expectations of effortless and cost-free profitability and diminish the perceived value of established innovation infrastructures.  An unfortunate side effect of this kind of promotional language is that it can inspire resistance to OI mechanisms from the very people they can help the most:  The people responsible for delivering new technologies, products and business methods.  People who actually do the hard work of making innovation happen may well regard stories of great, effortless success with raised eyebrows.  The skepticism of working innovators to the management theory du jour or as a colleague puts it “Management by Bestseller” is something acquired easily in an industrial career.  When skepticism is replaced by cynicism, then the game is truly lost.

Before I started my industrial career, I, like all the other NineSigma program managers, was in graduate school.  My graduate advisor had a number of industrial research projects going on his group.  Ziegler-Natta catalyst studies is one such project that a friend of mine worked on.  One alumnus of the group brought in projects dealing with the applications of brassylic acid for macrocycle synthesis.  These are just two, never mind the spinoffs and ventures coming out of the group’s research that led to numerous successful companies and profits.

When I took my first industrial job at Air Products,  it seemed rather natural to cast around for academic groups that would be better places to park some of my research ideas than working on them myself, and I was encouraged to do so.  Air Products was no novice at building alliances and acquiring technology from the outside.  My first assignment (as part of a team) was to evaluate a technology proposal that was coming in from the outside.  Closely attached to the corporate R&D group was a commercial development fellow whose job was technology scouting.   He would visit universities and startup companies around the world, looking at the latest developments that might fit our business objectives.  I remember wanting his job someday.  I like to think my work with NineSigma gives me some of the best parts, seeing the innovations needs of our clients and the amazing range of solution components offered by people around the world.

My second industrial job was with a much smaller firm, Nepera Inc.  At the time we were owned by Schering AG.  What I discovered on arriving was a catalyst development program working together with Union Carbide, a consulting Professor in Munich and  Sude Chemie.  Clearly, this historic German firm was open to outside innovations.  I had a role in taking that project to commercialization 9 months after I started.   As a successor project, I initiated an outside effort for gas phase reaction modeling.  I learned some of the downsides of outside contracting when the supplier turned out to have significantly over-promised and then held out his hand for more money.

Looking outside however really went into high gear when Cambrex acquired Nepera. Cy Baldwin and the late Art Mendolia were old veterans of chemical industry.  Cy had lead marketing efforts at ARCO and Oxirane while Art lead research at Dupont and was later an Undersecretary of Defense.  When they set out on their own, they brought this experience in front of us and dropped it on the table during our first quarterly R&D review meeting. “Don’t think we’re going to spend a lot of money on R&D here,” they said. “We spent lots of money at DuPont and didn’t get a lot to show for it”.  This was rapidly followed with “Why are you doing that?  Couldn’t someone outside do it better/faster/cheaper?”

At our next review meeting we proudly described where we had engaged outside resources only to be questioned again, “What about the intellectual property here; shouldn’t you be doing this yourself?”  We got it right the third meeting, and thereafter, described a carefully thought through balance of internal and externally focused efforts.  Cy and Art did a significant part of their management of Nepera through those R&D review meetings, holding us accountable for all aspects of the project in relationship to our business objectives.  If we didn’t know something about another department’s activities we were chastised with the rhetorical question, “You’re a small company; don’t you guys talk to each other?” 

In between then and now, I worked for other small companies, as a technology consultant and as an entrepreneur trying to sell innovation into large companies.  I’ve worked as they say, both sides of the street, and now I work in the in middle, part traffic cop, part coach, part target.

Here we are in 2010, some seven years after Henry Chesbrough published the book Open Innovation and we are still seeing a wide disparity in results from open innovation initiatives. In addition, there are many companies that are still trying to determine if they should even try or pilot an open innovation program. What does organizational culture have to do with the success of open innovation?

Hill and Jones defined organization culture in their book Strategic Management (Houghton Mifflin, 2001) as “the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization.”

If we break this definition down (at a very high level) and apply it to open innovation can we glean any insights?

First, let’s explore the phrase “collection of values and norms that are shared by people and groups in an organization.” If an organization has always relied on internal resources for innovation and all of the major successes have originated internally, then it will by default be hard to convince this group of people to suddenly change the way they have innovated in the past to look broadly outside of the organization for co-development partners. On the other hand, if there have been innovation successes that have originated through supplier or university partnerships in the past, then this group of people will be much more receptive to changing to be more open to new innovations that originate from outside the firm.

The phrase “control the way they interact with each other and with stakeholders outside the organization” lends insight as well. Here “interact with stakeholders outside the organization” is insightful. Many times we have seen an organization overcome the hurdle of reaching broadly outside the organization to search for new co-development partners only to hit a wall when having to assess what they find from outside the organization and build agreements for co-development and sharing of intellectual property.

One of the lessons I have learned over the years is that you cannot directly change culture. You can change individual behaviors and through this process slowly change culture. In looking at organizations that have benefited from open innovation, what I have seen is an emphasis on changing behaviors through training, rewards, recognition and managers that constantly ask – Have you looked outside? What did you find? How did you use what you found?

Surprised to see a financial guy writing a blog on April 15^th?  Probably not.  We all love tax day, when we scramble to collate and scrub our financial records to do everything possible (but also legal) to reduce our taxes.   Operating a business without metrics can often lead to that same type of scramble when we are put to the task of evaluating business segment performance.  This is why I was so surprised to see that, according to our most recent benchmarking survey, more than 40% of companies in the advanced stages of open innovation are not employing the use of metrics.  Absent this, how can you measure progress towards your goals?  How can you evaluate your efficacy?

Using metrics for measurement and guidance is only as effective as the quality of those metrics.  That is why we work with our clients to establish open innovation metrics tied to pre-defined goals.  Depending on whether you are in the early stages of open innovation or you are optimizing its use, those metrics will vary significantly.  So where do you start?

Well, where do you start with your tax information?  I typically break the information down into the sections of the return.  Pages 1-4, Schedule A, Schedule B, Schedule C, etc.  Determining metrics can also start with similar compartmentalization.  How so? Departmentalization of impact.  For instance, financial (hard and soft impact of both revenue and cost), time (acceleration of ideation through product development and then on to dollarization), and new opportunity creation (relationship and network building that yields growth in ancillary areas and knowledge, not just the focal point of the task or topic at hand). 

Gauging success and defining metrics is as much art as it is science.  Your business model, your corporate structure and your culture all affect the determination of what metrics are most important to you and how you choose to evaluate your progression and ultimate success.   But you cannot have a painting without picking up the brush and splashing color on the canvas, so what are you waiting for?

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.

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!

Boy it's hard to stay focused today while tracking the latest live tweets from the CoDev 2010 conference and live blogs of the Apple event to launch the iPad (not to mention documenting project status reports, updating my NineSigma portal with new projects, etc.).  But actually, this hunger for new information (and how to make sense of it) is an important characteristic we look for in our own employees, and is also a driving force in the Open Innovation Champions we meet every day.  But what other skills are needed, and how can you spot your company's next Open Innovation Champion? 

First, it is important to recognize that (at least for now) 99% of the Open Innovation Champion roles are created internally by companies (so far I have seen very little movement to fill these roles externally).  This is because it is important for these OI Champions to really understand their organization, the IP requirements and preferences, and how much the organization can stretch.  Quite often, it is redefining a role that someone has been playing already informally, so filling internally makes a lot of sense. 

Critical internal experience also includes success at team building, visibility with the organization (and credibility across multiple disciplines, not just for the technical organization), exposure to corporate/business strategic goals/initiatives, and experience navigating approval and gaining buy-in to new initiatives (not to mention flexibility and adaptability).

In terms of external skills: deal facilitation experience, comfort interfacing with vendors/university partners/etc., and a passion for external collaboration.

Additionally, since OI Champions have to juggle quite a few tasks (many are in this role only part-time), excellent organization and communications skills are a must. It is critical for the Champion to be able to build, collect, and communicate best practices within the company and outside of it, and having ninja-like Excel and Powerpoint skills certainly is a plus.  

What is really quite interesting, is that although many of the OI Champions "grew up" through R&D or product development, OI Champions can really come from any role - marketing, business, operations, legal.  This reinforces how Corporate Innovation initiatives cross many different disciplines and organizations.  And as these roles continue to evolve (along with the evolution of the corporate innovation strategies), continued learning and training are essential. 

What thoughts do you have on good (or bad) characteristics for OI champions?  Feel free to comment below.

The technical and popular press have devoted a great deal of attention to open innovation, and the concept of being "open", in recent years. It is undoubtedly the way all companies are headed, to varying degrees. I wanted to touch on the concept of Openness, and how I have come to view it.

Prior to launching an open innovation program, the leadership team should do a quick check of the organization’s degree of openness. Here I define openness within the context of open innovation across two dimensions. The first is the organization’s willingness to openly share information externally.  The second dimension is being open to embracing and acting on new, innovative ideas that are presented to the organization from the global innovation community.

For open innovation to be successful, organizations must be open to sharing their innovation needs with the global innovation community. It is hard for an external group to determine how they can offer effective help to an organization that will not share what it is seeking. Clearly, this does not mean sharing competitive or confidential information with the global innovation community. But, we see many organizations struggling with what they can share, when they can share it and how best to share. NineSigma’s Program Managers have worked with many organizations to help them answer these questions and to develop Briefs describing innovation needs that can be broadly shared with the global innovation community.

The second aspect of openness is the willingness of the organization to embrace and act on new, innovative ideas from outside the organization. Many times we see firms overcome the challenge of sharing what they seek - only to not follow up on what they find. Here the challenge is being open to ideas that did not originate within the firm. Some may refer to this as NIH, but many times it is more a matter of the firm’s reward systems and culture.

As the leadership team considers an open innovation program or initiative, they should take some time to assess the organization’s openness. The degree of openness will play a pivotal role in the overall success of the open innovation program. If the leadership team is concerned about openness then they should consider including a change management workstream in the open innovation program.