How to Deal with the Trust Problems Created by Open Innovation

Securing good ideas through open innovation processes and crowdsourcing is spurring differentiation and growth for companies that get it right but is it also storing up a trust problem? The development of ideas in an open environment is driving some creatives away. Maxine Horn of Creative Barcode, lights up a road to ‘open protection’ and a richer ideas environment for the enterprise.

The other day I donated some spare change to a young person claiming to be homeless. He was asking for money from anyone walking by, it was raining and he was soaked, so I handed him some cash. Did I feel good about it? Not really. It made me wonder whether he was simply taking advantage of my good nature – particularly as I had seen him earlier at a cash point, mobile phone in hand.

However, the incident did get me thinking about the ethical decisions people make in their personal and business lives, and how such decisions can impact on others.

Ethical decision-making is never more pertinent than when applied to those who, particularly in an open innovation environment, use other people’s commercial concepts, ideas and propositions without permission or recompense. Is that ethical? Is it any better than taking another person’s money under false pretences?

Why do they do that? Well, the simple answer is “because they can”. Few, if any, formal rules exist to say that they can’t. No rules, other than personal ethics, are in place to seek recourse for misappropriation.

So why isn’t the commercial expertise of expert originators – industrial designers, digital, brand and graphic consultants, inventors, scientists, technologists, design engineers and other innovation professionals – much more widely recognised, nurtured and celebrated, and why doesn’t ethical best practice form the very fabric of our newly open business culture?

Open Innovation is not truly open – it can be a threat

In today’s business environment business increasingly need ideas about better ways to develop services and products, present brands, or interact with users. These are not rich R&D tasks. They are creative tasks. Open innovation and the progress it promises needs creative talent.

However there is a growing assertion that ‘ideas’ are free and bountiful – with no value until they are commercialised. This devalues the very professionals in the creative industries that firms need: it devalues their talents, education, years of in-practice experience, and their knowledge and know-how.

Equally we are increasingly leaning to a mistaken view that any one person’s ideas are as good as any other persons. Creatives are being asked to participate with the crowd for work. But where we have crowdsourcing we actually need ethical, trust and permission based trading around professionally produced ideas. This is a new departure for the open innovation community but it is needed and needed now.

Without it, free for all attitudes place an almost insurmountable barrier to Open Innovation participation from arguably the most innovative and qualified group in the whole innovation process. And all that is needed to remove those barriers is trust-based, open protection.

The enterprise is encouraged by Open Innovation to play fast and loose at the creative end of their business

Many corporations engage in Open Innovation by encouraging the submission of conceptual ideas originating from outside their own companies. Yet on a matter of principle they often insist they will only view patent-protected ideas or hold non-confidential meetings with creative people where all ideas are on the table, unprotected.

In a global marketplace where an estimated 70% of all incremental and ground-breaking innovation is not subject to patent protection, how can they possibly hope to exploit innovation properly (and respectfully)?

And of those ideas that are, or could become, subject to patent protection, most will be worth significantly less – or prove worthless – if developed without consulting route-to-market partners and agreeing co-creation deals.

The reliance on the ‘public domain’ argument as an excuse for idea misappropriation simply cannot continue. The public domain has been unofficially stretched to include one-to-one meetings between creators and potential route-to-market partners – in other words, confidential business meetings and negotiations.

The public domain is exactly what it says it is – ‘public’ – and includes media exposure, exhibitions, conferences and seminars; social networking sites and other public platforms. To assert that this applies to one-to-one business discussions is a stretch too far.

Some brand owners are attempting to use open innovation activities such as crowd sourcing as a means to solicit solution-led creativity for their brand, packaging, digital and new product portfolio. As such, some stand accused by the professional creative industries of exploitation.

Such practices are considered by the creative industries as ‘free-pitching’ and professional crowd sourcing, building on the new fashion for open innovation, is taking free-pitching to an even higher level of exploitation.

If an open innovation society is to properly exist (and I believe it must, and soon), then business trading models between professional creators, businesses and investors simply have to change. Because at present open innovation is not truly open, it is merely ajar. There is already a backlash building up.

Professional Trade Associations are striking back and advising their members not to participate in what is considered by many as lazy and exploitative procurement practices rather than genuine open innovation. In that context, many believe that crowd sourcing should be constrained to customer/user input, filtered and managed by professional creative industry firms in partnership with brand owners. And the majority of professional 2D and digital firms earning their living from solution-driven creativity on fees for services currently believe open innovation is a threat to their livelihood and should not be utilised as a creativity procurement model.

Are they right? Well, yes and no.

No, because open innovation activities would benefit significantly from the participation of arguably the world’s most talented creative professionals.

Yes, because the current participation and rewards model lacks clarity and is far too imbalanced and therefore exploitative. Rewards are often purely PR based or PR plus below market monetary reward. In other words a disrespectful attitude towards creativity whilst the Creators time, money and skills benefit the end consumer and bring financial and brand loyalty rewards to the firm.

Open Innovation activities were developed as a means to enable any external party, large or small, to bring their innovative ideas to the attention of corporate firms. In doing so corporate firms would have the opportunity to select innovative concepts to commercialise, to supplement their own R & D activities and conclude mutually agreeable deals from licensing, royalty, development fees through to outright purchase.

Open innovation activities were not designed to replace traditional procurement of solution-led creativity to satisfy a company’s brand, digital, packaging, advertising and product development needs. OI should not be used purely as a means to gain hundreds of creative solutions to marketing based needs’ unless the opportunity and remuneration model offers significantly higher reward than fee for services, not significantly lower.

The design thinking and creativity sector

Designers and creators worldwide remain one of the fastest growing sectors of industry.

However the creative industries are dominated by two opposite extremes. The very large creative companies who have the structure and means in place to protect their intellectual property rights through traditional means, and the ever smaller micro businesses and rapidly growing freelance market, who do not.

In the UK alone there are over 30,000 creative firms and more than 300,000 freelance operatives including designers of all type, writers, content creators, web developers, engineers, photographers, musicians and so on.

The two elements freelancers and micro companies have in common is their creativity and their vulnerability in a David and Goliath business environment

The combined number of micro creative companies and freelance operatives worldwide total a few million

But if corporates are to tap into this wealth of creative talent then the vulnerability experienced from concept exposure needs to be significantly reduced via safe, ethical trading policies.

Is there a business case for ethics?

Absolutely

Generally speaking, individuals and firms in the creative industries do not wish to launch new companies or competitive brands. Instead most wish to co-create and collaborate with route-to-market partners and enjoy commercial rewards on ethical and equitable terms. They simply desire commercial respect for their knowledge-based ideas, experience and know-how. And they will give more than 100% effort in return

And this is where open protection can help open innovation reach its full potential.

We need an active debate around the issue of ethical guidelines for an open innovation culture. Amidst all the gleeful talk of open innovation crowd sourced product and creative societies we need to pull back on the reigns and ask about trust and permission based trading. What does a fully loaded trust and permission based trading culture look like? -

It is probably far less complex than people might imagine.

The OI converts need to understand the fundamental difference between technology led ‘inventive ideas’ that can be patent protected and the estimated 70% of user-focused solution-led innovation more commonly associated with the professional creative industries and increasingly, the multi-disciplinary co-creation teams.

Those three groups operate under different remuneration models ranging from fees for services to shared risk, licensing, royalties and IP buy out.

Dependent on which group/s of idea generators OI practitioners opt to engage with the terms of engagement and remuneration need to suit.

Common to all groups are a requirement for fair rather than exploitative terms and in the case of the non-patent creativity-led groups; a desire exists for non-complex protection and minimal paperwork.

Busy brand owners are most likely to have a desire for the same. Complex reams of legal paperwork hold up or even kills progress whereas an open-protection system under-pinned by a trust based agreement, could significantly enhance and speed up progress.

Let the ethics debate begin and a Fair Trade model dominate idea procurement. After all, who ever heard of a really bad idea being misappropriated and commercialised?

By Maxine Horn

About the Author

Maxine is the founder and was CEO of British Design Innovation (BDI), the trade association for designers and innovators from 1993 to January 2011 which played a role in the early recognition and promotion of James Dyson (Dyson Vacuums), Trevor Baylis (Wind Up Radios) and Jonathan Ives (Apple). She initiated Creative Barcode and hand-picked the co-creation team in 2009 and soft launched it in late September 2010. In less than six months Creative Barcode has received worldwide attention and is regularly cited side by side as compatible to, but the alternative to, Creative Commons established more than a decade ago and benefitting from nearly £5 million per annum patronage of Google and Microsoft. With over 20 years’ experience in the design, innovation and knowledge transfer sectors of the creative industries, she is an advisory member of the UKIPO B2B Strategy Group. 

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  • http://www.bizstuff.co Zulfiqar Deo

    Since Open Innovation is here to stay I think we are becoming used to leveraging its advantages and understanding the pitfalls. Examples of Open Source software development have built an common understanding people are used to globally. This helps us when innovating in an open environment. For example, the sense of expectation we all have when we work in an open environment is better understood and the open source model provides a framework we all can use.

    I would disagree with the need for rules and codes of conduct or best practise. I feel this would inhibit the open nature of what we have developed in our own ways. The global nature of open innovation would create a high degree of complexity when trying to adhere to a set of guidelines most of us may not agree with.

    I agree there are concerns of IP and how its commercialised, but feel this is more to do with companies using old systems & structures and using them to in an open environment. For instance, I used an open model approach for my MBA project and found the results were more robust and delivered a more accurate solution than otherwise. The precise solution I was working on remains confidential, however the theory generated has been published by an academic journal and is available online for free. Here contributions were made from across the world in a way we all felt were appropriate. The lack of any rules etc allowed us to behave in a way we all felt was professional, benefit from the eventual outcome and generate a more accurate understanding of the subject area.

    Hope this helps to show how open innovation can evolve without the need rules or regulations.

  • http://www.octrooicentrum.nl Hans Helsloot

    Interesting discussion. There should also be a way for creatives (not yet famous) to earn something with their ideas, realised by others, that keeps conversation open and still keeps track of each others input.

  • Mary

    There’s a good explanation of the conflict between open innovation and sustainability here: http://www.youtube.com/watch?v=kGSrNjKmQ04

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