Earlier this month, approximately 70 innovation leaders from 54 companies and nine countries gathered to discuss the future of open innovation at NineSigma’s Open Innovation Leadership Summit.  Conference participants had the chance to network with their peers, while addressing common challenges in OI such as culture change, speed-to-market, public-private partnerships, OI leadership development, IP management and more. While a few of the attendees knew each other from innovation conferences or similar events, it is safe to say that most attendees left the Summit with a number of new connections and memories of an enjoyable time together in Arlington, Virginia. 

One of the conference highlights was the presentation of NineSigma’s inaugural Excellence in Collaborative Innovation award to Open Innovation champions who have demonstrated dedication, leadership and passion in the field of Open Innovation. Our five 2011 winners were: 

• Dick van Beelen, Director, Open Innovation, AkzoNobel NV
• Christophe Mangin, Director,  R&D Global Strategy, General Motors
• Hajime Nagai, Executive GM, R&D Planning Division, Suntory Holdings
• Katja van der Wal, Director Open Innovation, Philips Consumer Lifestyle
• Michael Wynblatt, Vice President, Engineering Technology, Eaton Corporation

From left to right:

Michael Wynblatt, Christophe Mangin, Alexandre Nicolau (accepting the award for Hajime Nagai), Dick van Beelen and Katja van der Wal

Read more about the NineSigma OI Leadership Summit, May 2-4, 2011. Mark your calendars for the next OI Leadership Summit to be held in October, 2012. Details to come.

I became aware of an interesting trend while traveling through Europe this past week.  During one of my stops in Perugia, Italy, I spoke with a group of senior level managers of small and medium sized organizations (SME’s).  I was discussing the process and value proposition of open innovation, and while most everyone was interested, they all realized that the cost of doing open innovation is still a bit higher than the price that these companies are willing to pay.  In other words, cost is a direct barrier to SME participation in open innovation.  Many of the participants spoke about what they would do if they could participate in the Open Innovation (OI) marketplace using an OI platform to help them find new ideas and resolve problems that have long haunted them, and how such access to a broad range of external knowledge would benefit their companies.  Clearly, they get it.  And, this is not a unique response from others that I received from SME’s in other countries around the world.  They all need it, but don’t know how to realize it with their streamlined budgets.

Now, let’s rewind to recent discussions I had with local governments in Africa, Europe, the Americas and the Middle East earlier this year.  Each of the government officials with whom I spoke made it clear that they had funds available to stimulate the economy through programs that would support local entrepreneurs and businesses in their respective regions.  In fact, many international institutions, such as the World Bank, the IMF and the EU are providing funds to spark regional economic development.  However, when I speak of open innovation with local governments, many of them claim that it hasn’t been proven yet in their regions.  The conservative “wait and see” response seems to be prevalent most everywhere.  However, do their current programs yield tangible benefits?  Have prior efforts worked for them in terms of spawning economic growth?  The answer to these questions is often a resounding “no,” according to the local SME’s.  The funny thing is, when I ask these local governments who helped them come up with the ideas for their existing programs, there always seems to be some internal guru who convinces the government agency that their new idea should work.  It rarely involves the constituency of SME’s in their region who are in dire need of help.  I think you see where I am going with this.

One brave little region in Northern Italy (Piedmont) had the guts to listen to their constituency and try open innovation as a means of sparking the local economy, and efforts for a new regional OI program are just now getting underway.  If more local government officials would listen to their constituency and realize the potential benefits an OI program would have in their regions, such as increasing revenue opportunities, job growth, and providing the foundation for a thriving local economy, they could possibly innovate themselves out of their current economic slump.  All eyes are now on the Piedmont region, and once they are able to demonstrate success, it is just a matter of time before universal adoption begins to take place.  For this to happen, local governments must be prepared to fund both the establishment of local resources for OI participation for their resident SME’s, and be prepared to offer funding for the various acquisitions that will likely take place once the program is underway.  These simple steps will remove barriers to SME participation in OI, and open the flood gates of innovation potential within their regions.  We are at the threshold of a new horizon, but some governments must be willing to work with their constituent SME’s to demonstrate what many large enterprises have known for years – OI works. 

Contact us today to find out how our open innovation experts can help you.

Developing and then measuring the benefits from an OI program can be a challenging exercise. We have coined the term Benefits Case to differentiate this from a more formal Return-On-Investment (ROI) analysis. The Benefits Case has financial elements, but also has “softer” measures as well.

Benefit cases all have the core elements of:

•          Quantifying major improvement opportunities

•          Ensuring that OI resources are allocated to the areas of highest leverage

•          Establishing the range of benefits to be achieved through OI implementation activities

•          Providing the basis for assessing the OI return and tracking benefits during the OI program implementation

•          Developing the rational basis for an OI program

Overall the OI Benefits Case identifies areas of opportunity and quantifies the improvement potential as a result of OI activities. The figure at the bottom of this post shows the components of a OI Benefits Case.

The OI Benefits Case will have both Measureable and Non-Measureable components. Measureable benefits may include revenue projections from new products and services as a result of OI activities, increased revenue impact from improved manufacturing operations due to OI projects, reduced costs due to improvements in speed-to-innovation or time-to-market, increased innovation productivity and other potential measureable impacts. Non-financial impacts may include increased customer satisfaction due to enhanced product features or improvement in product quality as a result of OI project impact.

Non-measurable benefit impacts include clearer roles & responsibilities, the impact of external knowledge gained through OI on decision making, enhanced innovation skills, improved leveraging of internal knowledge and other “soft” or non-quantifiable measures.

In addition to the positive financial benefits, we must subtract the cost side of an OI program. The cost side will include both internal personnel costs and external costs such as training, OI consultants, OI project costs and technology costs. This then provides the top left quadrant of the Benefits Case which is the OI program breakeven point and anticipated return.

The development of a Benefits Case at the start of an OI program provides both guidance in terms of areas of focus and a tool to use during the implementation of the OI program to guide the implementation team. One of the challenges in OI programs is the eagerness to jump right to a ROI, when in fact the full financial impact of an OI program can take significant time to develop due to time-to-market consideration in product development and launch. This is why capturing some of the “soft” benefits and then tracking these as leading indicators can be very valuable to both guide the implementation team and to assure senior management that progress is being made.

Indicators such as early stage innovation portfolio impact from OI, number of projects with a significant OI component, decisions impacted as a result of external knowledge gained through OI activities are all leading indicators of the future ROI as the result of either revenue or cost impacts to the business.

What happens when you go to a meeting or a party and someone asks you what you do?  “I’m a blah-blah” is usually followed by “That’s interesting” and then there’s small talk on the subject, right?  When I respond “I help companies do Open Innovation”, what follows is ....silence.

But that may be coming to an end, because the U.S. Government is getting innovative.

I recently participated in Industry Day for Open Innovation, sponsored by the U.S. General Services Agency (GSA).  The day was kicked off by Aneesh Chopra, the U.S. CTO.  When I explain to someone what I do, (yes, it requires explanation), their response is “That is totally awesome”, if they entered the world after Heavy Metal music, and “Cool” if they can sing along to Fleetwood Mac.  But can you imagine being the CTO of the U.S. Government?  How cool is that?!?

And that is exactly my question: how cool is it that the US government is embracing “innovation”?  For those of us who believe that innovation is the way of the future, it is extraordinary.  NineSigma believes that partnering with our government creates an innovation bridge to bring technology, resources, transparency, and access to our federal system.  Current innovation and crowdsourcing efforts in the Department of Education, NASA, and the Department of Energy are just the beginning.

But if the government is doing it, can it still be “awesome”?  According to Urban Dictionary,  “cool” is “the best way to say something is neat-o, awesome, or swell” but "awesome" is “the highest rank of 'cool'”.  If the New York Times runs a weekly column on “innovation” and the U.S. government has a CTO, has “innovation” gone “mainstream”? 

I certainly hope so.

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…