Dear Clients, Solution Providers, Partners, and Colleagues,

2012 has arrived, and there is a feeling of optimism in the air. We are seeing that many of the innovators we work with are investing heavily in innovation right now. Organizations of all sizes are looking towards the future, and the many opportunities that beckon.

We finished a record quarter in Q4 2011, and we have NEVER had as good of a start to the new year as we have right now. In all of 2011 we were up significantly in terms of sales orders and revenues, and we added some world class talent to the teams in all the different regions.

We thank all of you for making this possible. It is your trust in our ability to add significant value to your businesses, as well as the confidence you have in the NineSigma team including Partner Organizations, that make us the trusted innovation partner to organizations globally.

Some of the Highlights in 2011 were:

·         A successful capital raise in March that allowed us to invest in further rapid growth

·         A highly praised OI Leadership Summit in Washington DC in May that drew 100 Innovation Executives (and please note that the next one is October 1-3, 2012 in Philadelphia – reserve your place at http://www.ninesigma.com/summit2012.aspx)

·         New services such as

o   QuickScan (a VERY fast and pointed mini-landscape on a Client Need),

o   Technology Landscaping and Monitoring (an in depth analysis of technologies and their respective maturity, as well as recommendation for the most suitable one’s for a Client as a “one off” or ongoing on a repetitive basis),

o   The world’s first Collaborative Innovation Psychometric Assessment that allows companies to measure an individual’s and team’s propensity to being good collaborators

·         The opening of a NineSigma office in Melbourne, Australia, bringing the total regional headquarters count to four

As we look to 2012, we are excited about the many new initiatives we will bring to market for you. Especially of interest is a ground-breaking program aimed at increasing value for clients and solution providers through an open exchange that will provide more opportunity for co-development and collaboration.  With these new initiatives, we are focusing our efforts on helping you to de-risk your innovation portfolio, and to accelerate your speed to market. In other words, we are going to help create a world where FEARLESS INNOVATION is the new reality.

Best wishes from all of us here at NineSigma,

Andy Zynga, CEO

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.

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.

When I was asked to write a blog this week on the topic of how open innovation (OI) is driving new thinking in healthcare companies – my first thought was: When hasn’t OI driven new thinking in healthcare companies? During my career in academic biomedical research, many of my medical school colleagues were funded by such companies to conduct very focused research, and to participate in clinical trials of specific therapies. Pharmaceutical companies and other healthcare companies have a long history of working with the academic world to develop new drugs, understand mechanisms and assess effectiveness.

But one of the challenges I’ve faced at NineSigma is addressing the culture at some healthcare companies whose people may assume they are using OI effectively because of this type of previous experience. When I ask, where have you looked already to find a solution that can meet your needs? Most often the answer is, the experts that are already known and that the company has worked with before, and people identified based on searching for publications based on keywords specifically associated with the topic. But consider this: with such an approach, the same questions are asked of the same people over and over again.

Open innovation is more than that. Open innovation is reaching beyond what is already known, and thinking about problems and possible solutions in new ways. It may be as simple as reaching beyond an existing list of go-to people and organizations to expand across the globe, or as complex as developing an entirely new platform and business model for healthcare access.

These days, healthcare companies are doing more than just keeping the new drug pipeline flowing. With pressure from regulatory agencies to protect the environment (and us!) from accumulation of drugs and hormones in our water, safer drug disposal and “greener” formulation components are needed. With global economies changing, products to facilitate entry into new and emerging markets are of great interest. With energy costs rising, more efficient manufacturing is another big issue. Convenient new drug delivery platforms, novel medical devices, protection against sole source suppliers, overcoming long-standing technical hurdles, and adapting manufacturing for new drug formulations and delivery mechanisms are important current needs.

Many years ago, when my lab was located at Children’s Hospital in Seattle, Washington, the lead nephrologist held television interviews below my office window in response to some of the early pediatric cases of hemolytic uremic syndrome caused by E. coli O157:H7. So one of my hopes for the future of OI in healthcare is that work will be done that helps me feel secure that my family is protected against new diseases and global pandemics. What are yours?

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.

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?

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.

It’s difficult to chart a path forward if you don’t fully understand your starting point. After years of working with companies at all levels of open innovation maturity, we have developed an open innovation diagnostic tool, the NineSigma OI Scorecard, which helps Solution Seekers quickly assess their open innovation capabilities. The web-based tool provides an initial evaluation of a company’s ability to collaborate as part of their innovation process, both with internal and external partners. The tool also assesses the organizational structure and systems that are needed to effectively support collaborative innovation.

Specifically, the open innovation tool measures a company’s ability to collaborate on innovation in three tiers: within and across the company, with the company’s existing external network, and with the global innovation community. What’s different about this tool is that it not only provides a snapshot of the company’s current status, it offers concrete recommendations for how to address the gaps identified while building on the company’s strengths. The scorecard survey takes about 5-7 minutes to complete and is free of charge. We encourage Solution Seekers to check out this new tool and gain a deeper insight into effective collaborative innovation. 

Read more about NineSigma's new OI Scorecard tool. Get your open innovation score today.

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.