The article first looks at the different OI approaches companies are using and the types of internal software support processes and interaction between the Open Innovators and the co-innovation community. It then takes a closer look at why a large German company has selected a not-so-obvious software solution for R&D-driven Outside-in OI.
Any company serious about implementing OI eventually must address the question of which software to choose to support its corresponding processes, and the interaction between internal and external innovators. Current OI comes in many shades and, depending on the OI approach being pursued, there are various types of software that could be appropriate.
In OI Inside-out, companies try to exploit the value of Intellectual Property (IP) not being actively used or not playing an obvious role in deterring competitors. Statistics show that this applies to some 40-90% of a company’s IP. Within the OI paradigm, exploiting the value in this kind of IP involves external market paths such as licensing, joint ventures and spin-offs.
Internal processes are supported by the databases that store and manage the firm’s IP. However, I cannot identify a widely used software solution for managing the interaction between open innovators and the external community. Interaction is mostly person-to-person with little software support.
Consider IBM, seen by many as a global benchmark for this type of OI. IBM spends more than USD 5 billion on R&D annually, holds more than 60,000 patents, and generates some USD 2 billion per year in licensing revenue. How do they do it? IBM’s R&D labs include what they call Industry Solutions Labs. These labs are the drivers of Inside-out OI. Their mission is to ensure early involvement of customers and business partners in order to identify and exploit emerging business opportunities. Around 25% of IBM’s Zurich lab staff work with customers and business partners; they run more than 400 workshops per year, which generate around 100 innovation projects a year.
One notable exception regarding software for this OI approach is www.yet2.com, which is operated by a web company originally funded by the chemical giant DuPont and others.
In Outside-in OI the situation is different. In this approach, companies take external ideas and then treat them as if they were internal ones. In practice, companies pursue this type of OI in two ways: customer-driven ‘crowdsourcing’ (i.e. ideas from customers, co-creation with customers); and R&D-driven.
Interestingly, all of the software used in this context by leading companies is web-based. This supports the argument recently put forward by Ehsan Ehsani.
A quick search on Google using the terms ‘crowdsourcing’ and ‘software’ yields some 4 million results. The software vendors in this type of OI are of six types:
Selection of the most appropriate software platform depends firstly on the focus of your search for external ideas and the associated level of confidentiality. Is your company looking to optimize the potential in existing products, line extensions or radical innovations? Secondly, it depends on the type of crowd you want to attract (although this should be seen, at least partially, in conjunction with the first aspect). Is your company looking for open/semi-open ideation communities, a broad public community, or a carefully selected closed community?
In R&D-driven OI, researchers and developers look for scientific or technical solutions to issues on the current R&D agenda. Looking at global benchmarks, we find that the practice of this type of OI has two variants. In a rather open approach where potential co-innovators have low barriers to membership of the community (e.g. Procter&Gamble’s connect+develop), and as a closed community in which confidential, not-for-public-dissemination information on innovation challenges, is shared.
I recently concluded a project with one of Germany’s largest companies, focusing on the second variant. This project required the building of a closed and global co-innovation community with a three-digit number of members. The rationale for this approach was that one-step seeker/solver-processes in a confidential environment would provide greater potential effectiveness and efficiency than an approach where individual OI challenges were open to a global audience and, where in a second step, the best out of a huge number of proposals had to be chosen. This approach required that the individual OI challenges contained extensive background information. In order to protect this confidential information, a closed community had to be set up.
In selecting the software platform we first established the high level requirements. These were:
On analyzing these requirements we made the interesting finding that, with some level of abstraction, all of them were provided by solutions for strategic, Internet-based procurement (eSourcing).
So, in this case, the client decided to take an existing in-house eSourcing software platform and customize it to the requirements of this particular OI approach. Measured in terms of Total Cost of Ownership (TCO) and deployment time, this was a clever decision.
Looking back at the implementation of the software I think two points are important to keep in mind:
No standard software – software for use in dynamic scenarios, such as OI, will certainly not fit perfectly with business requirements at the first shot. Moreover, companies that have implemented OI have found that the underlying processes change as the breadth and depth of implementation increases. Based on experience, it is wise to plan for several versions that ultimately may yield the best-suited software solution.
In defining the details of the software solution, there will be involvement of at least three different parties, each with a different view and a different language: R&D experts, deeply involved in the technical/scientific challenges they want to be resolved; other stakeholders focused on early results in a new terrain; management with an interest in clearly defined roles and processes; and the software provider, who is strongly tied to the standards set by its software. Based on experience some ‘translation efforts’ will be required in order to achieve an alignment of these parties.
By Frank Mattes, contributing editor, Germany
About the author
Frank Mattes, contributing editor, Germany. Frank is the founder and CEO of innovation-3, a leading Open Innovation catalyst. Frank has collected more than 15 years of experience in managing projects and innovation. He worked for specialized medium-sized national consulting companies as well as for The Boston Consulting Group. Additionally he was working at C-level for an eBusiness firm, an IT firm and a Professional services firm. He wrote several books, numerous articles and is a sought after speaker. More information about innovation-3 and Frank can be found at www.innovation-3.com