Congratulations! You have been tasked with implementing or re-implementing an open innovation program within your organization. What is your first thought? Google ‘open innovation’, read some books and papers, talk to people you know that are at companies that have active open innovation programs, hire a consultant or just wade in and try and make it happen? Actually, all of these are good things to do. Today, there is a rich body of knowledge about open innovation and how to create and implement a successful program.

For the last 15+ years, my work has consisted of consulting to companies that are engaged in large scale transformation programs such as re-engineering, SAP and most recently open innovation. If there is one lesson I learned from my consulting work that I would pass on to someone at the beginning of an open innovation program – it is to communicate, communicate and then communicate some more. Yes, you need a well articulated vision, clearly defined objectives and buy-in from leadership. You will need to make sure you know your innovation organization’s strengths and weaknesses. You will need to fully understand your innovation ecosystem (current network of partners/suppliers). At the foundation you will need to have some type of simple process to leverage your innovation ecosystem, and the people in the functional areas that interact with the open innovation process will need to understand their roles and responsibilities. All of this is necessary - and more.

Ultimately the long term adoption of open innovation will be a function of how well you communicate. You need to communicate that you are implementing open innovation, why you are implementing open innovation, and what you are learning along the way. Share the setbacks and successes and stories about the people on the front lines. This communication needs to happen in many forms, many places and not be limited to the open innovation group. And, when you think you have communicated enough, communicate some more. Think in terms of a constant drumbeat.

One of our clients talks about the three phases they are progressing through in their open innovation program. These are introducing, embedding and delivering. At each stage we have been communicating to the broad organization through multiple channels. They are seeing the benefits of this communication through new innovation as a result of both internal collaboration across business units and new external collaborations. They realize there is still much to be done, but they can see the change that is happening and a new mindset of open innovation emerging.

Over the last ten years, we have either worked for or discussed working for a large number of companies that are implementing open innovation programs. Many times they have referred to NineSigma and others as Open Innovation intermediaries.

I have always pushed back when firms classify NineSigma as an OI intermediary. To me an intermediary is a group that simply connects two groups together and hopes for the best from the connection.

At NineSigma our work is focused across the two dimensions of Engage and Enable. Our Engage business is all about supporting our clients in solving a critical business challenge. This may involve finding and acquiring a platform technology to enable a suite of new products, it may be mapping out a white space and presenting options to our client on how to capitalize on new opportunities, it may be helping indentify new applications for existing technologies or it may be identifying and then contracting with a co-development partner.

The work typically involves broadly Engaging the global innovation community in order to deliver the desired results to our client. We use the term Engage to differentiate NineSigma's level of interaction with the global innovation community. Engage implies searching for and then engaging groups identified to deliver results to our client. Engaging means dialog, analysis, interpretation and synthesis to create a final work product that adds value to our client. This is much more that simply acting as an intermediary and connecting two groups together and hoping for a good result.

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?

In our last post we discussed identifying and selecting Needs for an open innovation pilot program. In this post we will discuss the next step of engaging with potential solution providers that may have an answer to the Need.

Many organizations refer to this step as a "make versus buy" decision. This implies that there are only two options for solving the Need - either develop internally or find and use an external partner. In reality, there are three options - internal, internal/external and external. By external, I mean either license technology that exists or co-develop. We see many of our clients pursue the internal/external path where they are working on the issue internally at the same time they are searching externally for someone who has either solved the problem or is farther along or on a different, more compelling solution path.

The other process that is undertaken at this point is determining the solution network. For large, global organizations the first step may be to communicate the Need broadly within the organization to see if there is a solution available internally. We are currently working with a large multi-national chemical industry client to create a structure / process to communicate needs internally in order to leverage their globally distributed R&D resources. Once the internal search for a solution is exhausted then the search becomes focused on external resources. Now the decision becomes one of "do I use my existing networks or do I use a firm like NineSigma to communicate the Need broadly?" Again, here the answer is not yes / no, but what factors such as timing, cost, degree of technical challenge and others may play in the decision making. Many times for incremental technology development an existing supplier may be the obvious choice. Or there may be considerations for funding university work such as "community relations" that drive the decision.

Looking broadly, across industries to the global innovation community has one significant advantage and that is the opportunity to find an "unobvious" solution to the problem. In our work in over 1,600 open innovation projects, we have seen many unobvious solutions. Semiconductor research applied to fabric care, candy dispensing applied to appliances, agriculture sensor systems applied to automobiles and many others. In addition to the opportunity to find an unobvious solution, reaching broadly to the global innovation community will bring back considerable information that the project team can use. This external information combined with internal knowledge will help with decision making and ultimately reduce project risk.

Back to getting started with open innovation. We would recommend evaluating the Needs that were the highest priority and selecting some of these to communicate to the global innovation community. There are a number of firms today that can help with this. Evaluate them and select a partner. When looking for a potential partner a couple of key points to evaluate are:
- level of support provided to the OI project team
- breadth of network and is it a passive or pro-active approach to finding solution providers
- how is IP handled
- experience and references
- others

In the next post we will discuss what happens once you have connected with the global innovation community and have initial the results back.

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.

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.

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.

It may seem that seven years after Chesbrough’s book “Open Innovation” that posting an entry on getting started with open innovation would not be necessary. Even though there has been significant success and press regarding open innovation we still see companies that are just launching their open innovation efforts. Given this, we wanted to discuss some of the best practices in launching a successful open innovation program.

A quick disclaimer – for those of you who have been involved in large change programs, some of the following comments may be considered as “motherhood and apple pie” because they are common to any successful transformation program.

First, launching a successful open innovation program is not hard – but it does take commitment to see it through. Most all firms have practiced open innovation. They have worked with universities, suppliers or consultants on previous innovation projects. The major difference in an open innovation program is the scope of the outreach effort. In open innovation, rather that going back to the normal suspects, the firm will look broadly both globally and across industries for potential collaboration partners.

The major cultural challenge I see many times is "openness." Openness has two dimensions. The first is the firm sharing what they are trying to accomplish with the global innovation community. The second is being open to seriously evaluating what is returned from the global innovation community. We will talk about this in a future posting.

We see four key elements to a successful open innovation program. They are:

•       Leadership support

•       Scope

•       Selecting the right Needs

•       Resources

As in all change initiatives leadership is critical to success. Leadership must be behind the program answering the “why are we doing this” and providing the resources to ensure success. Leadership must be active in all facets of the program and visible to the participants. Finally, leadership must evaluate the results of the program and determine the next steps in moving forward with open innovation.

I will talk about the scope in the next post.