What is the difference between a Challenge and a Grand Challenge? 

While a Challenge represents the opportunity for multiple parties to collaborate to solve a problem, a Grand Challenge is….. grander.

A Grand Challenge addresses a fundamental problem that is bigger than the need of an individual company or person.  The solution requires broad applications of expertise from multiple parties, and generally multiple industries. Many Grand Challenges also have a positive impact on society, serving an altruistic, greater good.   A Grand Challenge embodies all of the advantages of open innovation, leveraging the synergy of multiple parties collaborating to achieve a breakthrough that benefits the broader community.

For companies, Grand Challenges communicate a concise and powerful message to their entire stakeholder community.  When GE launched their Heathymagination Grand Challenge to invest $10 million in breast cancer research, they broadcast to every GE consumer that GE is committed to medical research.  At the same time, GE communicated to their investors, professional community, and supply chain that GE’s doors are open to discovering breakthrough technology.  Their traditional supply chain was essentially given notice: bring us the best, cutting edge technology or sit by the sidelines. 

A Grand Challenge energizes the investment, inventor, consumer, and technology communities because it opens large companies to the best information from any source, creating a level, competitive field for new ideas.

And the opportunity to innovate at that scale is….grand.

The OI Scorecard Survey tool was developed in the 3^rd quarter of 2010 to help companies assess their collaborative innovation capabilities both internally and externally. We recognized that companies struggled with understanding where they were in relation to other companies using collaborative innovation, and set out to create this online too. In addition to being  interactive and easy to use, the OI Scorecard tool has provided tremendous insights into where  companies are making progress, and where they are not.

I find that one of the more interesting pieces of data from the survey highlights an issue that we have heard many times from some of our large multi-division, multi-national clients. And that is – while 62 percent of those responding rated themselves as effective in tapping into the creative brainpower of their colleagues, only 10 percent had the systems and processes in place to recognize the most promising ideas, and quickly bring them to market.

We expect to see tangible progress in the area of internal collaboration over the next few years. Even companies who lead their industry struggle to improve internal access to information and expertise. As we heard from Dick van Beelen, Director of Open Innovation, AkzoNobel, in our recent Webinar,  “If only we knew as a company what we know, or if only we use what we have - and that in itself sounds like an open door. But, if you think about a siloed organization, this is indeed a big challenge.”

There are many proofpoints collected from the survey data and articulated in the OI Scorecard Survey Report . Have you had a chance to read the report? If so, what findings did you relate to most, or what surprised you? We would like to hear your thoughts.

Article I in a series of four articles published in the Innova Food and Beverage Innovation publication in 2011. Reprinted with permission from Carlos Barroso, a former client of NineSigma's while at PepsiCo.

This is the first in a series of “how-to” articles for getting tangible results with an open innovation approach to research and development specifically in the food and beverage category. Written from hands on experience and a strong knowledge of the open innovation space, this article covers both how to get started and how to set the strategy. The remaining series will address:

·         Soliciting proposals for external research partners

·         Filtering proposals and getting to contracts with research partners

·         Managing a network of external partners including weeding and feeding

About the Author

Carlos Barroso is a highly experienced, international Research & Development Executive in consumer products, with deep experience in Foods and Beverages.  He has built an extensive, open innovation network with external research partners across universities, suppliers, consultants, and small entrepreneurs located around the world.

Carlos is the Founder and President of CJB and Associates, a high level R&D consulting firm specializing in Product Development for the Food and Beverage category. CJB and Associates manages open innovation projects, conducts Innovation Assessments, creates Quality Assurance programs, and facilitates innovation and strategy ideation sessions as well as helping with high level R&D strategy.

Prior to starting his consulting firm, Carlos was the Senior Vice President for R&D for PepsiCo’s $27 billion global food and snacks business. Before joining PepsiCo, Carlos was an Associate Director of R&D at Procter & Gamble. In addition to R&D he has Market Research experience in consumer product testing.

How to begin

You’re ready to embark on an open innovation project. Maybe you’ve already had some projects. Maybe it’s your first time. Regardless, the first step is to clearly define the problem and what success would look like. Let’s also be sure to ask why we think we need an open innovation approach and how do we think it will be different from the way innovation has been done in the past.

Open innovation has become part of the innovation vernacular since Dr. Henry Chesbrough coined the term in his 2003 publication on it. Procter & Gamble embraced it early and brought it to the world of Consumer Product Goods companies with the 2006 publication of  “Connect and Develop” by Larry Huston and Nabil Sakkab in the Harvard Business Review.

It’s a good idea to spell out what open innovation means to your company. Keep it simple. If all your R&D has been done in house it may be as simple as looking for some development or technology from outside the company. If you already have a strong network of external partners it may mean expanding that network to research partners in other fields or industries or geographies

Set The Innovation Strategy And Define Success

I have often seen teams jump on an open innovation project without spending enough time up front to define and align on what success will look like. The focus is often on the scouting part of the process without having spent a lot of time agreeing on the problem to be solved and the criteria for success. While seemingly trivial, setting a solid idea for what qualifies as “success” is a vital first step in any innovation oriented project. All too often, an otherwise capable team will embark on a project without clearly outlining this step and will be brought to a standstill when confronted with the varying goals in the different functions or divisions of a company.

Setting the innovation strategy should be done cross functionally and with strong management support and involvement. Too often we’ll see an open innovation project go after solutions to problems that are not seen as priorities because the team has not done the alignment with enough of the internal customers. In the CPG world you have to have engagement from Supply Chain, Marketing, Sales, Legal and R&D and possibly Human Resources if there is a cultural hurdle to over come.

At CJB and Associates, we spend a lot of time on the upfront part of a project assembling the right team and having an in depth review of what the innovation priorities are and where and how open innovation can help. It’s important to include the existing network of research partners. Every company we’ve worked with has some sort of network in place. Usually, they include suppliers, a group of consultant experts, and possibly some universities and trade association groups. If a good solution can be found with an existing relationship it saves the time and risk of having to establish a new one.

Considerations For Setting The Success Criteria

Every project will have a unique set of success criteria, the more specific the better. We ask the client to clearly describe what will be different a year from now and three years from now if the open innovation project is a success. The use of imagery is especially helpful for a cross-functional team as it allows each function to describe success from their perspective.

The R&D function may talk about breakthrough technology. The legal team will want solid intellectual property (IP) protection and little risk of infringing on other’s IP. The marketing team will think about a superior consumer proposition. Sales will want a great story to bring to customers and a cost basis they can work with. Supply chain will want to make sure the new technologies that emerge can be scaled up and planned for in their capacity and ingredient purchasing planning. Finally, senior management should be able to articulate expectations of what a successful increase in sales and profit would look like and over what time frame.

Once the expectations from the various functions on the project team are clearly articulated it is up to the team to distill them down to a short list of project objectives with a clear definition of success and expected actions. CJB and Associates strongly recommends that these objectives and definitions of success are written in a “contract” and signed by all team members. This is the time for second guessing the priorities, not once the requests for proposals are out and the team is contracting work with external research partners.

What May Be Included As Success:

Solutions from non-obvious sources

Keep an open mind towards non-conventional solutions to achieve your goal. Often times such a solution will end up saving valuable time and money. We have found one of the hallmarks of successful open innovation is when a solution comes from an unexpected source. For example, we found a lead for a lower sodium salt from a group working on solutions for osteoporosis. The research group happened to use salt in their proof of principle for a technology that was never intended to apply to the food sector. In a different project that looked for a better way to refine healthy edible oils we found a promising lead from a group working on fuel cell technologies. In this case the fuel cell team was working with novel separation technologies that as it turned out could work for edible oils as well. 

In projects involving food ingredients we have found many break through solutions from the pharmaceuticals world. Pharmaceutical companies have spent years working on better drug delivery technologies. Many of those technologies are ideal for delivering flavors. The pharma groups are usually happy to find new applications for existing technologies and the food companies can take advantage of the years of development and safety testing without spending the many millions of dollars typical of a pharma R&D project.

Protect the Technology

Protecting the technology can be realized a number of ways. The important thing is to make sure your company will own it for the applications you’re interested in. Patents are a common way to protect IP. However, you need to be thoughtful about who owns the patent if you engage external research partners. You can demand full ownership of any emerging IP. But, it may be more constructive to consider jointly owned IP where each party defines the applications they want to own. For example, if you are looking for a better oil for frying potato chips, you may be willing to do joint research with an edible oil producer who is primarily interested in the french fry business. As long as you own the IP for potato chips and have no vested interest in the french fry business you can allow the oil producer to own the french fry application. 

Building a superior consumer proposition

Because we’re focusing on the CPG world any success criteria has to involve a benefit to the consumer. It could be better taste, a health benefit, a cost benefit or some combination. A tangible and measurable definition of success will make defining actionable objectives much easier. For example, if better taste is an objective set a consumer test win versus competition or an internal reference as success criteria. If health is an objective you may need a clinical trial or at least very clear product nutritional guidance (e.g. no trans fat and less than 15% saturated fat; less than 100 calories per serving).

Strategic fit

Having a strategic fit assumes there is a clear innovation and business strategy in place. For example, you may have a strategy of improving the health and wellness of your portfolio against a clear set of objectives such as having over 50% of new revenue from healthy products. A project that addresses that strategy such as a lower sodium technology or a natural non-caloric sweetener would likely be a good strategic fit. Though you may chose to pursue an open innovation search that is not a strategic priority it will still be helpful to be explicit whether or not a strategic fit is a relevant success criteria or not.

Likelihood of Success

There is a natural tension between the degree of breakthrough of an objective and the likelihood of success. A tasty and inexpensive non-caloric carbohydrate with heart health benefits would be a breakthrough objective but a higher risk (or lower chance of success) and should be reflected accordingly. CJB and associates recommends a portfolio of objectives and a mix of prospective technical solutions to balance a risk / reward portfolio.

Lay out the game plan and communicate milestones

With the project objectives set and aligned be sure to communicate broadly to the team and senior management what to expect in the coming months and even years. In our experience many senior teams are enthusiastic about taking on breakthrough innovation but are used to time tables that are more appropriate for close in product upgrades, not game changing technical innovation. We have found it is especially helpful to define tangible milestones in the project on a least a quarterly basis to make sure the broader team and management knows what to expect and has the opportunity engage in the process if they don’t agree with the project flow or want to build on it.

The diagram below is an example of how a team can lay out a general game plan for the project.

Open Innovation Project Kick Off

With the objectives set and the key milestones and timing broadly communicated the next step is an official kick off. Key stakeholders from all the functions should be invited. It’s important to make roles clear. Some individuals will be advisors while others will be owners and, of course, there is an overall project leader who can make decisions.

Setting the Budget

Be sure to have a budget in hand to get things moving. It’s hard to know exactly how much to budget but we recommend having enough to get through the first six months which is typically how long it will take to solicit proposals from external research partners, filter the proposals, and establish contracts to engage a short list of partners. Ideally, there should be enough for some early seed money, typically for generating early prototypes. For example, if you ask prospective research partners to submit “proof of principle” prototypes there may be a cost involved. If it is coming from a university where budgets are typically strapped even a modest cost of a few thousands dollars will likely need to be covered by the requestor.

A typical budget for the first phase of an open innovation project is $250,000 - $500,000 which includes engaging a firm for the search, related project travel and consultants if needed. Doing an open innovation search “on the cheap” usually means talking to suppliers and partners who are already in your existing network. This may be fine but don’t expect novel or protectable solutions.

The Next Step

With the team assembled, success criteria articulated and communicated and a budget set you are ready to begin the process of soliciting proposals from external research partners. Stay tuned for the next article in this open innovation primer series . . .

Co-working.  In a world of collaboration and co-creating, we now have co-working.  According to the New York Times July 17, 2011 article “Working Separately, Working Together”, freelancers and telecommuters are finding that being unshackled from the office environment is not nirvana.  Instead, it is a lonely place.   The work-at-home crowd is abandoning their corner Starbucks for membership in co-working spaces called IndyHall and Hive.  These 5000 square ft., open floor plan office spaces offer the community and collaboration that comes from a shared, non-virtual work space.  You can “rent” a cubicle (isn’t that what they were fleeing?!?) and soak in the collaborative energy of tapping keyboards and human contact.

At NineSigma, we witness this collaborative energy in our Linked Innovation programs.  Clients come together to address some of the thorniest problems, recognizing that their combined efforts can accelerate the outcome that they each seek.  One group has been working together for 6 months to address a key sustainability issue that impacts their entire industry.  Merging the perspective of nearly a dozen powerhouse corporations into a shared vision statement and action plan is no small task.  As they toiled to blend the nuances of each company’s viewpoint, I secretly admired their passion and commitment.

These companies recognize that they cannot solve the big, global challenges by “freelancing”.  Whether they are seeking new technologies to achieve their long-term sustainability goals, or finding efficient ways to meet regulatory standards that ensure consumer safety, collaboration is the accelerator.  NineSigma’s Linked Innovation program provides the “co-working” environment for them to bring together their collaborative energy into a virtual and physical place.

And like Hive and IndyHall, we even provide the coffee.

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.

At some point in each of our careers we have learned Michael Porter’s Value Chain approach to understanding the movement of materials and information from early stages of inbound logistics to customer-facing services.  While the Value Chain model served us well over the years by providing an understanding of the various functions within a company, it has done little to represent the flow of ideas and information that lead to new innovations.  In fact, I would go as far to say that a company’s complete buy-in to the Value Chain model to represent organizational design and process flows can actually stand in the way of collaborative innovation.  Allow me to explain.

The Value Chain model portrays an organization as a segmented, linear flow of business functionality.  Many companies have designed their various departments to enable this flow, believing that they were conforming to best business practices – and the flow works fine within a typical operational cycle.  But this is only a part of what companies do.  When it comes time to innovate (i.e., stretch beyond the current bounds of the organization), people have a tendency to generate isolated solutions that are relevant only to their department, and not thought through or tested in a systemic manner.  Ever wonder why most organizations today suffer under the silo effect that inhibits the transparency of ideas and information?  A case in point is the proverbial gap between Marketing and R&D.  While ERP systems can help to alleviate some transparency issues, this does not address the core issue, and has little to no effect on innovation. 

If we were simply to take the linear Value Chain model, and bend it around the edges to create a circle (or cycle), it would have an entirely different effect within the company.  In the center of the new “Value Cycle” could be cross-functional teams, processes and social media systems that enable the introduction of new ideas from anywhere within the company, while allowing people from other departments to contribute their perspectives, thus building on and improving the original idea.  Around the outside of the new Value Cycle are the company’s suppliers, business partners, and even regulatory bodies who, if plugged into the process (i.e., the inner circle), can bring yet another perspective to what is now emerging as a new innovation that has been tested and vetted from within.  This merging of internal and external sources into a central innovation process, or cycle, must not be thought of as temporary – it has to become the norm.

If a company is still faced with what appears to be an insurmountable innovation challenge, it can reach out to yet another tier of innovation resources – the global innovation community.  Companies typically do this by instituting a technology scouting function, or simply by engaging an open innovation intermediary like NineSigma, that maintains a global network of solution providers representing virtually every technology category.  This next tier of innovation reach provides yet another perspective that comes from individual inventors, companies and universities from around the world, and often outside the company’s industry.  When new technologies and partnerships are forged from this tier, they too can become part of the inner circle of the company’s Value Cycle.  It is at this point that the company experiences the true essence and value of collaborative innovation.

One of the challenges I still see in open innovation is when it is tried in a highly conservative environment, typically an ‘old school’ engineering company.  By ‘old school’  I mean a company  that is used to doing everything the same way they have for years and years. They use external development partners such as universities and suppliers but they always first try to solve problems internally and then only if that fails will they go to a network of external partners. But typically this external network is the same groups they have relied on in the past which results in the same answers they’ve already received.

We recently wrapped up an open innovation pilot at a client who readily admits they are conservative. They were very impressed with the breadth of the potential partners we presented to them on the different projects we ran. They talked about how we “opened their eyes” on one particular project and uncovered work on the topic they were not aware of. They talked about how open innovation is an excellent way to connect with thought leaders from around the world. Another researcher talked about how the process of creating the NineSigma RFP really made them sharpen their thinking around the problem definition.

However, when the discussion turned to whether they saw open innovation as a fit to their current innovation strategy, they felt that it would be quite a while before they could adopt open innovation beyond the few projects in the pilot.

The challenge was culture. Even though they clearly saw the benefits of open innovation, they could not see how to change the culture. It is interesting that some seven years after the book “Open Innovation” was published that companies will still revert back to their old ways.

I would be interested in your thoughts and observations on the cultural aspect of open innovation adoption?

I often see people struggling to understand the difference between Crowdsourcing and Open Innovation (OI).  Are they the same or completely different?  Is one a sub-set of the other?  Well, the unpopular, yet correct answer is “it depends.”  While Crowdsourcing is, by definition, different than OI, the two disciplines can, in fact, overlap.  Let me try to explain.  Crowdsourcing is a process by which an organization leverages the power of crowds (either a captive community or the general public) to help identify trends, or to source new concepts, ideas or designs for the marketing and development of new products and services.  Open Innovation, on the other hand, is the process of going outside an organization’s physical boundaries to identify and/or acquire new innovations, which can be in the form of a concept, expertise, intellectual property (i.e., technology), or a new supply source. 

Using the fishing metaphor, think of Crowdsourcing as a broad net, where the net (or challenge) is cast out to a larger population of loyal customers, targeted communities or the general public.  The person casting the net is interested in identifying trends and ideas coming directly from a large population (at least much larger than can be achieved by a typical consumer insight study).  OI, on the other hand, uses a fishing pole approach to target a very specific community that can solve an existing innovation problem – one that cannot necessarily be resolved by the organization seeking the solution.  For innovation needs that are more conceptual, Crowdsourcing can be used to find a solution.  However, as the seeker’s needs become more specific, other techniques, such as NineSigma’s RFP (request for proposal) method have proven time and again to be much more effective – especially when the seeker has access to a broad network of potential solution providers to whom the RFP or challenge can be sent.

It is important to know which approach to use and when to use it.   As companies begin to rely more heavily on OI and Crowdsourcing to resolve innovation issues and to support broad-reaching marketing efforts, picking the right approach can make a world of difference in terms of efficiency and overall success. 

Want to learn more about crowdsourcing? Contact us today to find out how our open innovation experts can help you.

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.

Many years ago Geoff Moore wrote a book called Crossing the Chasm. His premise was that many high-tech ventures fail to cross the chasm from early adopters to the early majority and therefore fail as viable businesses. Is there an analogy for open innovation?

Many companies have implemented open innovation organizations and programs over the last few years. Companies adopt open innovation with high expectations. They expect to find the next breakthrough technology, a new business model or an undiscovered product that they can market globally. But, there has been a wide disparity in results obtained from these efforts. Why do only some firms see a significant contribution from open innovation? Many times as the open innovation program develops and the first few open innovation projects generate results, we will see a “chasm” form as the initial results do not meet expectations.

It is at this “chasm” that many open innovation initiatives will fail or become stuck.

NineSigma sees three distinct phases in the adoption of open innovation. These are Launch, Consolidate and Embed.

The Launch phase is just as the name implies – a firm launches an open innovation program. This can either be a small experiment in one SBU or department or it can be a broader open innovation initiative. In either case, the firm has a level of commitment to open innovation.

The Consolidate phase is where the firm now is focused on identifying the best practices from the Launch phase. Once identified, the focus is to consolidate these best practices and roll them out broadly across the organization.

The Embed phase is where open innovation is no longer a specific program, but is now embedded into the day-to-day work of innovation.

Why do firms not easily move past the Launch phase to Consolidate? What can be done to make this transition easier? A few of the reasons it is hard to move from Launch to Consolidate are:

• There is no clearly defined open innovation process – no one knows how open innovation should work
• Open innovation is cross functional but other functional areas are not on board
• Building new alliances is hard and can take time
• There is a lack of metrics  to measure performance
• Financial benefits fall short of expectations

How does a firm avoid the chasm? Mainly it is a matter of approaching an open innovation program the same way you would any large change program such as six sigma. You need to have clearly identified goals, all of the stakeholders aligned, good communications, someone responsible for success, training and good execution. This does not mean a big, expensive program. Even if your start with some simple projects to reach broadly outside of the organization to find new innovation, you need to define the goals, set expectations and then learn from the experience.