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.

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.

My colleagues work closely with innovation champions who are the backbone of their companies' open innovation programs. They hear stories of frustration, elation and the day-to-day effort that is poured into their work to make open innovation a success. These champions are part change agents, motivational speakers, visionaries, and also the 'work horses' that get the job done.

There was an interesting article on Harvard Business Review's blog yesterday that addressed the unique challenges faced by innovation champions. The author, Rita McGrath, argues that success in open innovation "depends on middle managers, scientists, and intra corporate entrepreneurs scavenging for resources in an informal way". We see this in some cases but we also see a general recognition among our clients that this is clearly not sustainable and the proper processes, organizational design, technologies and yes, budget need to be established to maintain a successful program. We like it when 'serendipity' happens and we find a highly unexpected solution and solution provider for our client, but we don't think serendipity belongs anywhere within the foundation of the open innovation program.

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.

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.

I have always liked these funny eye tweaking images in which you can see two different images depending on how you focus on the picture.   

Trying to solve a problem is quite the same; depending on how you look at the problem your outcome may vary. When looking at the image, your brain is doing the trick on its own, but how can you do that with a problem? Most of the time we look at the problem from one single angle: the one we are familiar with. Whether this “way of thinking” comes from our education or is built on our experience doesn’t count, what matters is its uniqueness and the difficulty we have to change our point of view. Corporate thinking in organizations tends to polish peoples’ creativity thereby limiting dissension.

Methods like Lateral thinking and tools like S.C.A.M.P.E.R. or TRIZ are available to help creativity and can be applied to problem solving but they require some training and self- discipline. Very often, getting an “outside view” is simple, fast and efficient to help in finding novel approaches. 

At NineSigma, every day we practice this “outside view” for our clients looking for innovative solutions or business approaches. Even better, we perform a “double outside view” that I have seen at work very efficiently dozens of times since I have joined the team. The first “outside view” pass, occurs with our Program Managers who unscramble, decompose and formulate the problem. They methodically review every possible approach in order to open as many paths as possible for potential solution providers. The second pass is done by the solution providers who offer their own knowledge and approach to the problem. Of course, the first pass drives some expected results in, but almost on every project we do receive unexpected or unobvious solutions. The famous quote from Albert Einstein: “Problems cannot be solved at the same level of awareness that created them” has never been so true.  

In my last blog post I described my checkered past, and how from graduate school to present what we now call Open Innovation has been a constant presence in my career.  I reached outside many times, and can document millions of annual profits because of it.  I ended with this comment:

 “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.”

Open Innovation is something I think is very much worthwhile even if I’m constitutionally allergic to the business jargon and buzzwords that surround it these days.  I have a privileged position now, applying my experience to helping other people do this.  I get to see a lot of what goes on inside a great many companies both in the US and now from my seat in the NineSigma office in Europe.

My first observation is that in general people are not as successful at open innovation as I was or current leaders like Procter and Gamble are.  I’m not unique in making this observation. Sieg et al ( J.H. Sieg, M.W. Wallin and G. von Krogh, R&D Management 40, 3, 2010) have looked at the use of intermediaries and come to similar conclusions examining the activities of another OI intermediary.  One of the striking observations is that 7 of 8 of the clients had abandoned their relationships with that intermediary.

Investigating the causes of these failed relationships it becomes clear that project expectations were not met. But is that the whole story?  Were the project expectations reasonable?  Were in fact the project choices reasonable?  In short the answer is mostly not.  This quote is all too familiar to me-

“If I said our scientists were not very enthusiastic, you can imagine what kind of problems the scientists put up and now I exaggerate a bit [ …] they […] didn’t come up with things they think might have a good chance of being solved.”

How is it that the corporate leadership that buys these services doesn’t see this coming?  Consider the possibility that the leadership has either been oversold or all on their own ‘over bought’.  OI is surrounded by hype about easy successes due to scooping up readily waiting technology and making big immediate impacts on bottom lines, promoting growth etc.  The very projects that don’t have a good chance of being solved above are also those that are likely to have hung around gathering dust precisely because if they were solved a great benefit would come.  So a skeptical or threatened scientist puts forward these unsolvable problems as a way to get this culturally new means doing things off their plate and senior management approves them because they fit the big score expectations that they have for OI.  A winning combination. 

The expectation of easy success going outside is one of many mistaken ideas we see.  Another is the false belief that the problems chosen are uniquely recognized.  The idea that the major problems in your market and/or technology space are not recognized by your competitors has no basis in reality.  Our team may be smart, but generally so is theirs.  But following this line of thinking leads to poorly specified requests being created in an effort to hide the real purpose.

A belief that is equally perplexing, but well known to researchers is the idea that our own team isn’t smart, so we need to look outside.  Generally, this attitude develops when scientists point out to management that their pet idea has a problem.  For years consultants have made comfortable livings providing second opinions in cases like these.  Now OI is used as well when internal scientists proffer an unwanted answer.  This in turns leads to projects where the chance of finding something is low.

So what makes a good OI project?  One clue can be found in the Seig article.  In describing progress towards a goal, the authors note that while the main objective is well documented and planned “…when problems occur on the way, they are discussed with colleagues in the group or in the hallway but rarely formulated in an explicit problem statement.  The problems are ‘in the heads of the scientists’…  My experience in delivering results with OI is that those little intermediate problems are precisely where big impacts on time to delivery of the overall project can be made.  Need to blend a mixture of dissimilar size and shape pellets? Need to separate misblended mixtures?  Sure we could have done it in house…eventually.  But going outside was so much faster.  Need to understand how a competitor achieved a longer shelf life?  Sure, we could have collected samples and tried one analysis after another, but finding the right expert got the job done in days to weeks.

What doesn’t get recognized also is that many of those ‘little’ problems are already solved by the use of outside resources.  We needed to reduce coking in a reactor preheater section.  A sales rep provided us with the right feed atomization technology.  This sort of problem solving is routine and because it isn’t a big problem, isn’t captured generally when people speak of OI success.  But without that atomizer or a hundred little things like it, we couldn’t have delivered the reactor model, and without the reactor model we couldn’t have built the pilot plant and without the pilot plant we couldn’t have validated the reactor simulator, and without the reactor simulator we couldn’t have designed the new system that put the millions on the bottom line.  For the want of a nail..the kingdom was lost.  These days, when working with clients, I tell this story and I ask them, “What are YOUR nails”?

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.

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…

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?