Web-Enabled Open Innovation: From Hype to Reality (Part 1)

InnovationManagemenet is proud to present yet another experienced and knowledgeable columnist; Ehsan Ehsani, researcher and consultant in the area of innovation and product development. Ehsan is working with Accenture Product Innovation and PLM practice in New York City Office and has previous experience from a variety of firms both in Europe and the United States. This is the first in a series of monthly columns starting off with a hot topic: Web-enabled open innovation.

This subject is particularly interesting to discuss as new web-based technologies are increasingly fueling the beginnings of what seems to be more distributed and collaborative approaches to design and creation processes. We seem to be living in the age of Wikipedias and innovation crowdsourcing.  However, it’s still not clear to many companies how to organize a loosely connected community of contributors to design a new product or resolve a problem in an emergent way.

The use of web in innovation process is not new in the business world

The use of web in innovation process is not new in the business world: consumer goods and pharmaceutical companies such as Proctor & Gamble and Eli Lilly, as classic entrants, applied the concept to their innovation and product development process nearly a decade ago, and these models are now mainstream among many sectors such as consumer goods, high-tech and chemical products.

However, by taking a closer look at the experience of companies with web-enabled innovation, we realize that there are only few companies which are getting true financial value out of their initiatives and the real impact of many of such the initiatives has been minimal. Web-enabled open innovation, even though is widely recognized as an enabler for improving innovation performance is only practiced by few organizations (See Figure 1: Survey results). The success rate on the rest of the companies which were actually practicing web-enabled open innovation has also been rather low.

Figure 1

The success rate on the rest of the companies which were actually practicing web-enabled open innovation has also been rather low

Looking at the companies which have been successful in utilizing web-enabled open innovation, we realize that they do distinguish themselves in the way they approach the technology, though the full picture of what their best practices was not clear to us two years ago when we first started studying web-enabled innovation. This gap became a motivation for us to start a research initiative among several American and European universities to identify some of the lessons learned derived from the use of web for open innovation so far and the key factors differentiating best performers from the rest of the industry.

In addition to a global survey of more than 200 companies in 31 countries, we conducted numerous interviews and case studies in the companies which had adopted such practices to identify what was their degree of success and their experience with their open innovation initiatives.

While summarizing the result of our multi-year research in a short column series might not be possible, we’ll try to highlight some of our findings and lessons learned briefly in the current and upcoming post:

Lessons learned 1: One size doesn’t fit all

One of our early impressions which was later confirmed by our findings was that  a probable reason for low success of web-enabled innovation is that many companies have taken the success story of the pioneering firms with open innovation as gospel and have jumped into this space with the assumption that same solution will work for them too. As the result, many initiatives have been launched for the sake of “going open innovation” rather than companies’ needs.

However, one key element which should be always kept in mind when formulating web open innovation strategy is that collaboration in virtual space has to be carefully crafted around three main areas in alignment with company’s needs:

  • Project Openness: The collaborative nature of new web applications (especially ones called web 2.0) and the fact that they break the boundaries of the physical workplace makes it possible for a distributed group of people, possibly from different organizations, to work together in a more open way. However, the degree of openness should be adjusted based on the nature of the projects that the company is conducting. A company such as Kraft might decide to open up the challenge of new package design to the whole world as the crowd input is easy to evaluate and the general audience have the capacity to solve the issue. Another company like Novartis might prefer to approach a selected community in the web to solve its drug discovery process issues.
  • Governance model: The definition of rules and working hierarchies among people to conduct activities within the web space is also a key theme. In Wikipedia, where the tendency is towards openness, groups of people create shared property or common ground where it is in everyone’s interest to create a positive outcome. In such environments, a hierarchy (if one exists at all) is defined collectively by the group. On the other hand, more traditional structures similar to those in the real world can also be utilized, where the problem as well as the feedback process and rules are defined by one entity. InnoCentive is an example of this governance mode as the process in which companies and solvers should go through is rather standard.
  • Incentive processes: Transparency over the activities conducted by others might be utilized to develop new incentive schemes for web collaboration. Open Source Communities have long been using this type of incentive as programmers contribute to the development of software for obtaining status among their peers. Traditional monetary ways for encouraging individuals or groups is also another way to bring outsiders to solve company’s challenges. HP Labs website does so by financing researchers in the areas desired by the firm. There is no optimum choice as this area should be aligned with the nature of problemscompany is facing and its business strategy.

In the next column we will try to provide you with real examples and some of our other lessons learned.

Till then, let us know what you think!

Ehsan EhsaniAbout Ehsan Ehsani

Ehsan Ehsani is a researcher and consultant in the area of innovation and product development. Working with Accenture Product Innovation and PLM practice in New York City Office, he has consulted and worked with a variety of firms including ExxonMobil, Diageo, Sara Lee, Henkel, Unilever, UPM-Kymmene, Ericsson, SKF, Telefonica, Repsol, Abertis Telecom and Lego. He can be reached at [email protected]

  • http://za.linkedin.com/in/heinzessmann Heinz Essmann

    Hello Ehsan

    Enjoyed this piece! Thank you.

    I agree with you 100%. Your “One size doesn’t fit all” lesson also applies to Innovation Management in the broader context. Companies are so often looking for best practices that they can implement to get quick results. But, in the innovation space, they do not exist. One is only able to establish what is “Good Practice” as demonstrated by other successful organisations and then very carefully adjust those practices to suite the unique situation with the organisation.

    Continuous monitoring and refinement of those practices is then mandatory – it certainly will not work perfectly on the first attempt!

  • http://www.harbinger-systems.com Shivesh Vishwanathan

    Ehsan, Open source frees up software production, letting innovation and variety thrive! Companies need to let go somewhat in order for variety to emerge! Just like mass production was a result of widespread automation in the last century, mass “varietization” will emerge from widespread innovation. Web is a key player in that. Standards are now increasingly made for “supporting” (read “variety”), and not just “adhering to” (read “conformance”), a key difference if you think about it! I argue these points at http://blog.harbinger-systems.com/2010/04/automation-to-innovation-brief-history.html

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  • Chris

    Im a student, and now I know one thing more: I don’t want to look like that when I’m in business. I want to have a life god damn. I won’t go to Accenture…