Once upon a time, a long, long time ago, before anyone had heard of “crowd sourcing”, (coined in 2006) NineSigma clients were fascinated by the opportunity to reach into every corner of the globe for answers to their biggest challenges.  The focus was on “how” and “where” to get the solution.  NineSigma solved the “how” by providing the answer to “where”.

Fast forward to 2010…companies have more information than they can process.  Chat rooms, company-sponsored websites, OI intermediaries like NineSigma…Open Innovation can feel like the suggestion box on steroids.  The real challenge today is how to manage and optimize Open Innovation.

The companies that will be the Open Innovation leaders tomorrow are those that are successful in creating their Open Innovation Office – the structure that broadcasts the right information outside to the best external resources, and then funnels the value back inside to act on it efficiently.

We believe that three pillars are essential to building a successful, sustainable Open Innovation Office. 

Framework –Vision, Process and Organizational Design, and underlying Software

Support – People and resources to:

• Develop OI best practices and build OI adoption
• Manage the Needs Funnel, relationships with external partners and integration of OI projects into the product development cycle

OI Toolbox –Partners and tools to engage internally and externally

Framed by executive commitment to your OI Strategy and program management and accountability, these three pillars build an integrated, managed and optimized Open Innovation program.

An Israeli investor in the medical devices industry recently complained “Israel has too many start-ups. Israeli companies are great at taking an innovative idea through the alpha stage, but then the start-up goes under because we lack companies with the expertise to fund through beta and scale to manufacturing”.  “Aagh”, as my Jewish grandmother would say, “we should only have such problems”.

With the jobless rate for newly minted college graduates at historical highs of 7.5%, Thomas Friedman bemoans policy makers’ lack of focus on what the U.S. needs to create good jobs for the future.  “We need three things: start-ups, start-ups and more start-ups,” recommends Mr. Friedman.  

To create a dynamic economy, I question if a country needs to excel at every link in the innovation value chain.  If Adam Smith could speak to me from my Economics 101 textbook, he would ask, “Why can’t my economic theory of the “invisible hand “be applied to create a free trade approach to global innovation?”  

Here’s a free trade innovation model to consider: American industry jointly funds technology incubators that sponsor foreign-grown start-ups.  By nurturing and co-investing in early stage technologies, American companies gain two advantages.  First, they share the risk of failure (which should be high! That’s what makes these start-ups), and second, they nurture technologies that match their applications and needs.

Adam Smith could not have known in 1776 how “innovative” his theory could be in 2010…

When we talk about culture in Open Innovation, we are usually referring to the openness and receptivity of the organization to collaborative development with external parties.  But what about the old-fashioned culture issues of overcoming country and language barriers?  You might be thinking “That is so last century!  With the internet, there are no global boundaries.”

The speed and ease of today’s communication technology – email, video conferencing, and cell phones –create an efficient global communication infrastructure that was barely imaginable even 30 years ago.   But if we could erase the human element of business collaboration, why are airplanes still full of business travelers?

While your meetings may look like a United Nations convention, your Open Innovation partner might be more firmly rooted in their national culture.  I won’t bore you with all the standard business advice based on cultural stereotypes.  However, if you are aware of cultural tendencies that impact the dynamics of your Open Innovation partnerships, you can avoid pitfalls and surprises.

Each of these cultural partnership dynamics impact the success of Open Innovation collaborations

How the group makes decisions

·        Does your partner share their decision making process

·        Does the group require consensus before a decision can be made

·        Is there a designated “speaker”

·        Do participants defer to a senior figure

·        Are decisions made in the conference room or at dinner

·        Do individuals say one thing in the “official” meetings and something different in casual settings

How the partnership is structured

·        Long term commitment with open outcomes demonstrates value in relationship-based collaborations

·        Short timeframe with multiple “escape” performance clauses reflects a transactional preference

·        Is the partner offering a team or an individual

·        Are payments requested in advance of delivery or after performance

·        Are IP issues of high importance and handled formally through lawyers or are they loosely defined, with a “wait and see” attitude

Borders and Language: An issue or non-issue?

·        How is travel and on-site visitation viewed

·        Is the delivery or collaboration structured to be “virtual” or on-site

·        Is communication primarily written or verbal

·        Is there a team member who is acting as “speaker” who may also be the translator

·        Are emails in eloquent English while verbal communication is challenging

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 just the past 25 years or so, new technologies like that for automated DNA sequencing have enabled us to begin to understand the language that encodes our biological lives. This is the language of the genome- in which our genes are sentences made up of DNA letters and words that are used as molecular instructions to each of our cells. What proteins should be made to build a heart muscle? What enzymes should be produced to control our blood sugar? What building blocks are needed to make new connections in our brains so that we remember what we’ve learned? Our current knowledge and understanding of the human genome is made possible by technological advances that scientists use to detect, measure, analyze, and compile new information obtained through experimentation in the field of molecular biology. We know what many of our genes are for; we also know some of what happens if a gene has a mistake in it, or is damaged. Such mutations can lead to innocuous individual variations, to inherited conditions, or to diseases like cancer, among others. It is this knowledge about specific genes that has allowed genetic tests to be developed that can predict the likelihood that you may develop certain diseases, like breast cancer.

On a broader level, complete genomes have been recorded from several individuals so that we know exactly what DNA sequences describe these people. The cost of compiling this information has ranged from $2.7 billion for the first one in 2003 to $1,500 today, according to Wired magazine’s online article, and is predicted to go even lower. As far as I can tell, even these numbers don’t take into account the time and cost of all the technological innovations required to enable researchers to do the work! But the idea that every one of us could soon have our own genome “read” so that we can learn more about our sensitivity to certain drugs, or about how effective our medications are likely to be, is the subject of new fields called pharmacogenetics and pharmacogenomics- perhaps better known as personalized medicine. These new fields address how your genes control the way you respond to certain drugs, and why different people (with genetic variations) will respond to a certain drug in different ways.

New technologies are going to be required to allow us to personalize our healthcare to adapt to our individual genetic variations. Inexpensive genome sequencers are in the works, and at NineSigma, I’ve seen an incredible variety of new medical devices and diagnostic technologies presented in response to challenges we’ve posted on behalf of global clients.  What is especially exciting for me, and something that NineSigma prides itself on, is that we often find a technology from one area that may be relevant to a completely different industry. Advances in personalized medicine, while valuable and even essential for human health and well-being, might be applicable in other sectors. A tiny genetic lab-on-a-chip might be useful for an individual’s medical diagnosis, but may also be useful to detect microbial contamination in an industrial setting.  As personalized medicine moves forward, this is an exciting time to be part of the innovation world!

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.

     Attending the WBT conference in Dallas last week reminded me of roaming a traditional outdoor marketplace or Middle Eastern bazaar.  Unlike other conferences where deal making occurs in the shadows of learning and under the guise of “networking”, the focus of WBT is to bring together buyers and sellers.  

     The sellers are ambitious and creative inventors of intriguing technologies.  Although some are wizened pros and others are as “green” as the technologies they hawk, they all promote feverishly, convinced that the perfect investor is just one elevator pitch away. 

     The buyers look the part of the moneyed elite, surveying the marketplace with feigned disinterest.  Circles of VC guys boast about companies in their portfolios like cards in a winning poker hand.  Corporate types swagger down the aisles knowing that the Fortune 500 employer on their nametags tantalizes the inventors like designer labels to a crowd of teens.

     In our high tech world of virtual marketplaces, nothing can replace the energy of the marketplace, where buyers and sellers face-off, live and in real-time. 

After working with a number of management consulting firms in the areas of process improvement, benchmarking, sales training, and pharmaceutical thought leadership, I was intrigued by the concept of Open Innovation (OI) to find solutions to companies’ challenges from very different industries.  As a consultant,  I had worked across multiple industries and had participated in adapting solutions from one industry to another but the challenge was usually in finding solutions that were available to share with clients.   I was, therefore, very excited when the opportunity arose to join NineSigma whose business it is to connect the world to innovation and, in so doing, to help people find solutions to problems that had eluded them.

Stepping into the world of OI with the NineSigma team is inspiring, exhilarating, and absolutely fascinating.  The internal team of Program Managers who conduct the research are highly intelligent and curious people and are the heart of the company.  They happily share their current Open Innovation projects from diverse industries, all of which touch our lives – consumer products, automotive, healthcare, industrials, energy-- and the list goes on and on. No two projects are alike but the needs from the client are the same, i.e. to “help us find solutions to the problems we’re facing.”   As these Program Managers talk about their projects and share the results of their work, a newcomer can only be amazed at the unexpected connections that are so often the outcome of these projects and inspired by the results that OI produces.  So far I've hear about connections between electronics and butterflies, industrial fibers and CAT scans, biomedical needs and marine animals, and more. Some of these results can even change the world.  It’s hard to believe that ‘going to work’ can get better than that.

Did you hear the one about the automotive sensor manufacturer who found oil-level sensor technology from the dairy industry?  How about the time we connected a candy manufacturer with enabling dispenser technology to impact an appliance manufacturer?  Or the one where the crash sensor radar/imaging technology was applied for inspection of heat-sealed pouches for food products to detect a failed seal?  

Storytelling is the life blood of Open Innovation (and NineSigma, too), and cross-boundary/cross-industry connections not only make fantastic stories but validate day after day how powerful a structured Open Innovation program can be towards delivering results.  This comes to mind today, because during my staff meeting this morning, we spent part of it filming our technical team in order to capture and document just a handful of the amazing project stories among the 1600+ client engagements.  This is always a tricky exercise to showcase an interesting outcome, while protecting client confidentiality, but the passion surrounding the stories engaged everybody, and the excitement was infectious.  We look forward to finding better ways of sharing success and stories with the NineSigma community...  What other stories are out there?

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.