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.

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.

Thrice in two weeks I have been asked about general and open innovation trends in the medical devices sector.  If I was a suspicious person, I might think there must be something brewing in the medical devices sector.  Apparently there is.  Coming out of a recession, the growing talk around healthcare reform and the cost of providing healthcare appears to be forcing established medical device companies to think about new products while having  to cut costs or provide better performance. Economic pressures will no doubt become a major force driving innovation in the medical devices industry, a sector where higher cost, higher quality products have traditionally been more accepted.  Competitive pressure from lower cost operations overseas are exerting pressure on the industry as consumers demand more value for their healthcare spend and companies seek more value for their product development investments. A recent PricewaterhouseCoopers Medical Technology Innovation Scorecard report effectively compares and contrasts industry influence factors in 9 important markets and highlights that innovators are likely now going to market first in Europe and begin moving to emerging markets by 2020. In recent years, the FDA’s Medical Device Innovation Initiative aims to expedite innovative product approval.  This and the very recent repeal of the medical device tax may slow the tide and help the medical technology industry in America maintain some innovation dominance. 

Beyond the need to provide high quality devices at lower price or providing products with more features or improved designs that will reduce procedure times, provide better outcomes and shorter recovery times, the area of diagnostics and self monitoring continues to be increasingly popular as new product targets.  Home or self-care health systems will no doubt become more important as people desire or are forced to take more control of their own care. In fact, the FDA’s Center for Devices and Radiological Health (CDRH), which regulates medical devices, calls home-care systems and Integrated patient medical information systems so called e-health technologies "the fastest growing segments of the medical device industry."  One simply has to consider the incredible growth of smart phone medical apps offerings (nearly 80% increase in the second half of 2010). Smartphones are definitely changing healthcare for both consumers and providers alike and even creating a new crowd based medical services marketplace.  A recent California Healthcare report highlights many of these new innovative products and services and developing trends.  For hospitals, IT and wireless capabilities will continue to be a big needs focus.

Medical device companies must innovate faster and cheaper. Reaching outside and adapting the collective ideas and technologies from the crowd is a great way to achieve this.  Consider that roughly 2/3 of new medical technologies come from small entities such as physicians, start-ups/SMEs and university spin offs. Adding to that the collective technology and braintrust from other technical areas that could be tapped into to help accelerate medical device innovation and a great case for open innovation can be made.  The medical device industry expects the rate of open innovation adoption to begin to increase.  This is indeed a trend that NineSigma has witnessed as it continues to identify new diagnostic systems, new materials, new manufacturing approaches, coatings, sensors, IT and other enabling technologies to help provide new or improved medical device products for clients. No question, OI is a growing trend in the medical devices sector.   

What will the next iteration of open innovation look like in the medical sector?  Will it be open innovation platforms and services that can effectively integrate companies, small innovators, health care providers, patients and regulators? Will all who have a stake, or participate to advance innovation, gain or be rewarded by the experience? We will have to wait and see.

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?

Watch what happens when you ask for volunteers to lead an innovation project.  Some individuals will wish that they were invisible while others will jump out of their seats with the enthusiasm of a first grader being offered an extra recess.  What is it that motivates people to respond in such different ways?

That is the question that NineSigma set out to answer in our partnership with Caliper.  We had often observed that a client would succeed when they had a motivated innovation champion, but they would then struggle in duplicating that success organization-wide.  After working with hundreds of clients over the past ten years, we could describe the characteristics of an innovation champion, but we did not have the organizational development expertise to answer our clients’ question “how do we create a team of people who have a passion for innovation?”

Caliper, a human resources consulting firm with 50 years of experience advising over 25,000 companies in team building, and employee and organizational development, was a perfect partner.  We found that Caliper shares many of NineSigma’s core values, like a respect for scientific methodology and an insatiable curiosity.  By combining Caliper’s expertise in human resources and personality assessment with NineSigma’s expertise in innovation, we collaborated to create the world’s first Collaborative Innovation Profile.

Caliper’s rigorous methodology started with a validation study, which included a customized innovation job analysis and development of a competency model for innovation leaders and project managers.  Caliper incorporated interview and assessment results from a sample group of Innovation professionals and implementers.  Caliper’s research team then analyzed the data to determine which traits are most associated with success within the competency model.  The result is a specialized tool that helps management and innovation professionals select and develop successful innovation teams.

Of course, the NineSigma team was eager to learn the results of our Collaborative Innovation team assessment.  No surprise to us, the results confirmed that we are a highly innovative and collaborative group.  Our partnership with Caliper is a shining example of how an open innovation company can grow through open innovation. 

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.

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.

With the exponential growth in Open Innovation, companies have a broad assortment of services and platforms to fill their Open Innovation toolbox.  This presents a challenge for the casual-user of OI services who sees a toolbox that looks like mine – a well-loved jumble.  The Project Owner needs to sort through to find the right “tool”, but often he doesn’t know if he needs a screwdriver or a hammer.

How does a Project Owner with a Need select the right way to engage in Open Innovation?   Start by asking questions that will help you narrow down your options.

·        Can you clearly state your Need and what you seek to accomplish?  Test this out with someone who is not familiar with the project.   If they have to ask you many clarifying questions, then you probably should not “post” your Need on an open innovation platforms, where detail is generally scant.  An open innovation process that is fully facilitated can drive better results for more complex Needs.

·        Do you know if the answer can be found inside your company?  Have you tapped into all of your company’s resources and capabilities, both inside your company and with your extended network, like suppliers or university contacts?  If you identify an external solution through open innovation, you will likely be asked this question before the external party will be engaged.

·        Is this project highly strategic and secretive?  Is there any reason you would not want your extended network to know about your outreach?  Are there IP issues that require you to create an information firewall?  In some strategic cases, you may choose to engage with partners that you know well, to protect your strategy.  In other situations, you may prefer to investigate global resources anonymously through an intermediary.  Selection of your open innovation gateway should be influenced by the specific intellectual property and confidentiality profile of the Need.

·        What is the endpoint?  Will you offer prize money for a single “answer”?  Do you seek an ongoing collaborative R&D relationship?  Do you seek to own or license IP, or must you have unrestricted access to the information?  Crowdsourcing and postings on open innovation boards may be more appropriate for lower value Needs.  If you seek partners for longer-term, high value Needs, select an open innovation vehicle that allow you to vet potential alliances according to your business and technology criteria.

By answering these questions, you will have a much clearer perspective on what you want this OI tool to deliver.  Ask your OI service provider specifically how they will perform against your stated expectations.  If they are doing their job well, they will likely be asking you these same questions.  Let NineSigma help you launch an open innovation program.  Contact us to learn more about open innovation.

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. Let NineSigma help you launch an open innovation program. Contact us to learn more about open innovation.

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.

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