How to Accelerate Innovation through Challenge Driven Innovation

Challenge Driven Innovation enables companies to tap into diverse perspectives and talent to solve problems faster, more cost-effectively and with less risk, ultimately resulting in accelerated innovation outcomes and improved business performance. In this article Steve Bonadio introduces the concept of “Challenges” and their role in the emerging innovation management framework called Challenge Driven Innovation (CDI).

For years, organizations of all shapes and sizes have sought new tools to better manage their lengthy and complex product development cycles, reduce risk and accelerate time-to-market for new products or services.  A variety of methodologies and frameworks have historically been used to achieve these goals, including product lifecycle management (PLM), Stage-Gate, lean and Six Sigma. Yet while providing much needed structure, especially from a process perspective, these frameworks do not and were not intended to address open methods and channels for actually solving problems that matter.

Challenges and CDI provide this capability by enabling companies to tap into diverse perspectives and talent to solve problems faster, more cost-effectively and with less risk, ultimately resulting in accelerated innovation outcomes and improved business performance. So how is CDI defined?

Challenge Driven Innovation is an innovation framework that accelerates traditional innovation outcomes by leveraging open innovation and crowdsourcing along with defined methodology, process and tools to help organizations develop and implement actionable solutions to their key problems, opportunities and Challenges.

In its most basic form, a Challenge is a well-formed problem whose solution has value to a company.

The CDI framework augments and adds value to historical paradigms, such as Stage-Gate (referred to by some as flow scheme, phase-gate, etc.), that have dominated innovation business processes for decades. In the CDI framework, a portion of the innovation is formulated as a “Challenge,” which essentially represents the problem statement for a block of work that can be modularized and, in most cases, rendered “portable.” Such a block of work can be outsourced, insourced or crowdsourced as an integral unit.

In its most basic form, a Challenge is a well-formed problem whose solution has value to a company. Challenges come in a variety of forms, from pure ideation – a broad question formulated to obtain access to new ideas – to those that require more rigor (e.g., the physical attributes of a disease biomarker or material). By definition, Challenges are specific, detailed and actionable. Via rigorous methodology, Challenges are formulated, prioritized, posted to an audience/channel, tracked, and the resultant solutions evaluated and awarded. Depending on the channel selected, proper management of intellectual property (IP) is an essential component of the Challenge process.

Once a problem – or idea, issue or opportunity for that matter – is defined with a sufficient level of precision, they are articulated as Challenges that may then be distributed to an appropriate channel for innovating. Such channels include traditional inside innovation as well as a host of open innovation approaches, including contracted engagements, university grants, joint development ventures and crowdsourcing. Within the narrower spectrum of crowdsourced approaches, the channel may even be configured for more specific channels, defined by the nature of the “crowd” or audience to which the problem is addressed (e.g., internal employees, external communities and networks of problem solvers).

A Real-World Challenge in Action

Innovation practitioners understand the differences between traditional or closed innovation and open innovation (OI). Whereas traditional innovation occurs within the four walls of the enterprise and relies on internal experts, OI acknowledges that problem solvers and knowledge are widely dispersed and may reside outside the enterprise. Traditional innovation is often practiced by rigid “not invented here” cultures that focus too much on who solves problems, whereas organizations that have embraced OI tend to have more open and collaborative cultures that focus on finding solutions to Challenges. The story of Roche, as reported by MLab at the London Business School, highlights the power of OI and crowdsourcing in particular.

Roche’s Challenge was to find a means of better measuring the quality and amount of a clinical specimen as it is passed through one of its automated chemistry analyzers. Both Roche and its partners had been wrestling with the Challenge for fifteen years. So the company devised a test. It posted the Challenge on InnoCentive.com, and through the power of crowdsourcing, exposed the Challenge to a diverse, global and open network of problem solvers. Within two months of posting the Challenge, nearly 1,000 unique solvers from around the world had signed on to the project, and a total of 113 proposals were submitted to Roche.

The result? Roche solved a Challenge that had been plaguing it for fifteen years in sixty days.

The result? Roche solved a Challenge that had been plaguing it for fifteen years in sixty days. And interestingly, the submitted proposals replicated the entire history of Roche’s research and development program into this particular Challenge. In other words, all of the solution attempts Roche had tried over a fifteen-year period had come in.

The Importance of Diversity

Diversity is central to CDI because different perspectives often approach and solve Challenges in unique ways. For example, after the Exxon Valdez oil spill in Prince William Sound Alaska, a method was needed by the Oil Spill Recovery Institute (OSRI) to break the viscous shear of crude oil under cold weather conditions to allow oil to flow to a pump inlet. Basically, the pumps could not handle the near-solid oil sludge. The Challenge was posted on InnoCentive.com and a solution was proposed by the most unlikely of sources. An Illinois chemist – who once poured concrete for a summer job – wrote the award winning solution based on a technique that had been used for years to vibrate and move viscous concrete. As a result, the chemist won $20,000 and the oil industry solved a thirty-year problem within two months of posting the Challenge to InnoCentive’s global solver network.

A couple of points to highlight in this example are:

  • The ability of open innovation and crowdsourcing to tap and harness otherwise unengaged contributors as sources of new innovations and technical knowledge. Indeed, one must ask whether hiring additional researchers or scientists – a time-consuming and costly endeavor – would have made a difference.
  • The acceleration of innovation outcomes, along with the mitigation of both cost and risk associated with a purely internal problem solving approach. OSRI paid only for success, not for the myriad failures and dead-ends familiar in these types of endeavors.

Solutions Are Valuable

The OSRI example illustrates another important CDI concept: Challenges are well-formed problems or opportunities whose solutions have value. As such, monetary and non-monetary incentives drive engagement in the CDI process. Monetary awards for solving Challenges are well-established. Examples include the Longitude Prize, an eighteenth-century Challenge to accurately measure longitude at sea, Charles Lindberg’s solo transatlantic flight that captured the Orteig Prize in 1927, and InnoCentive’s work with Prize4Life, which awarded $1 million in 2011 to Dr. Seward Rutkove for his development of a novel tool to track the progression of ALS/Lou Gehrig’s disease. Non-monetary incentives, such as the personal satisfaction of working on a worthy cause or peer recognition, also drive engagement in the process. And for some organizations, especially in the public sector, solving Challenges expediently can be a matter of national security and public safety.

Not All Approaches Are Equal

There are different ways in which organizations can tackle crowdsourced innovation in the context of a broader CDI strategy. On the one hand, there is idea management. As the name implies, idea management tools provide a “suggestion box” for ideas (i.e. a centralized online forum for users to submit unstructured ideas and a process for how ideas are evaluated). Yet the issue with embracing an idea management platform for innovation is that most organizations are not lacking ideas. Rather, they lack solutions to discrete problems. This is where CDI and its crowdsourced innovation channels step in – the framework and methodology is focused on one thing: results, in the form of solutions.

On the other end of the spectrum are nascent social networking and collaboration tools, which provide a forum for people to talk and network, yet there is no guarantee that the conversation will lead to an actual solution. In contrast, CDI focuses collaboration on the problems and opportunities that matter by leveraging existing investments in social networking and enterprise collaboration to drive tangible improvement (e.g., drive adoption and sustained engagement from end users, provide measurable value to the organization).

Benefits of Challenge Driven Innovation

CDI is a transformative approach to innovation which recognizes that ideas are everywhere, but solutions are more elusive and highly valued. The CDI framework helps organizations to establish the process, discipline and communication necessary for continuous and sustained impact. In short, CDI can produce several key benefits to organizations, including:

  • Improved business results and shareholder value
  • Faster innovation cycles and more cost-effective problem solving
  • A well of diverse global resources, both internal and external
  • Better risk management (offloading risk)
  • A focus on solutions, not just ideas
  • Pay-for-performance, not trial and error
  • World class resources without fixed costs

Furthermore, historical processes such as Stage-Gate are serial in nature. CDI, on the other hand, can (and often should) be executed in parallel, which produces results faster and more cost-effectively while reducing the risk of project delays, bottlenecks or failure at multiple points along the development path.

Indeed, at the outset of a project, there are always multiple potential issues and barriers defined that will ultimately be addressed at an appropriate stage (again, to manage and minimize overall risk). The parallel nature of Challenges enables project teams to tackle several of these issues at once without having to rely solely on captive project resources to get the work done. When coupled with the marketplace bearing the cost of failure and capacity being greatly enhanced by use of “virtual” researchers, new product development sequences can be entertained under open innovation that could never be practiced with closed innovation alone.

This is the crux of CDI – companies that embrace it have near infinite capacity, and they pay for solutions, not failures.

Tips for Getting Started

While all companies have unique requirements, there are a few general tips to consider in order to get started using Challenges and CDI to accelerate innovation outcomes. These include:

  1. Identify key problems that need solving: Look for discrete barriers to progress or opportunities within your innovation portfolio of projects that can be articulated in a way that others, even from diverse disciplines, could make important contributions to your progress.
  2. Pilot the Challenge approach: Launch a series of Challenges to test their ability to rapidly solve the key problems you identified. Consider leveraging a variety of sources for problem solving including internal groups and teams as well as external problem solver networks in order to develop a strong understanding of the nuances involved and value provided by tapping into diverse channels and audiences.
  3. Measure and analyze the impact: Build simple metrics that examine the value received, the avoidance of internal resource consumption, and the simultaneous progress that was made by internal resources while external ones were leveraged appropriately for discrete blocks of work. Be sure to consider the gains offered by allowing only the successful solutions to be paid for and acquired with no cost burden due to the failures.

Looking forward – and after having tested the effectiveness of Challenges within your organization – it is advisable to create an enterprise-wide vision for broadening the reach of Challenges and infusing them into your core innovation strategy and portfolio. This vision includes expanding Challenges into new groups, divisions, and business processes (e.g., beyond R&D into marketing or operations) and fully integrating them into your foundational business processes (e.g., Stage-Gate, PLM). This evolution into a “Challenge Driven Enterprise” is a topic for another day.

Conclusion

Challenge Driven Innovation is an innovation framework that accelerates traditional innovation outcomes by leveraging open innovation and crowdsourcing along with defined methodology, process and tools to help organizations develop and implement actionable solutions to their key problems, opportunities and Challenges. It enables companies to have near infinite problem solving capacity, and they pay for solutions, not failures. And most importantly, it enables companies to solve problems faster, more cost-effectively and with less risk, ultimately resulting in accelerated innovation outcomes and improved business performance.

By Steve Bonadio

About the author


Steve Bonadio, senior director at InnoCentive, has more than 15 years of experience in communicating the value of complex technologies and processes and has led a number of global marketing initiatives, focusing on product strategy, core messaging, market research and sales enablement.

  • http://twitter.com/andreasbreiler Andréas Breiler

    Im I missing something here? Is not all (or at least the very majority) innovation efforts problem or challenge ”driven”? There has to be some kind of beginning i.e problem or opportunity  otherwise its just random ideas for something undefined.

    The approach with both internal and external efforts working on a challenge is appealing but not unheard of, is that what defines CDI?

  • http://twitter.com/fredsko Fred Skoler

    Global Innovation Game on Facebook has innovated on the CDI methodology to tackle global challenges in a social games environment.  We have seen that a primary barrier to participation is incentive.  Gaming dynamics have been helpful in attracting and keeping an audience but a valued incentive must be offered as a constant to stimulate community and ongoing contribution.

  • Anonymous

    Andreas, thanks for your comment. I don’t believe (yet) that the majority of innovation practices are challenge-driven within the context of what we define as Challenges and CDI. Allow me to elaborate on the methodology (which is formally established and well-articulated in Alph Bingham and Dwayne Spradlin’s book on the topic, The Open Innovation Marketplace: Creating Value in the Challenge Driven Enterprise). I wasn’t able to do this in the article given space constraints. In the article, I mention that a portion of the innovation is formulated as a Challenge, in which a “Challenge” essentially represents the problem statement for a block of work that can be modularized and in most cases rendered “portable.” Such a block of work can be outsourced, insourced, or crowdsourced as an integral unit. The central processes to the CDI framework are those of dissection, channel distribution, and integration. - Dissection: Taking a large, complex project or problem and decomposing it into discrete modules (Challenges). - Channel Distribution: Placing individual Challenges into the appropriate innovation channels (e.g., crowdsourcing to internal or external communities of problem solvers, outsourcing to a CRO). - Integration: Reassembling the individual Challenges into a functional whole. Given that Challenges are portable and numerous channels are available for solving them, a whole new potential exists within CDI to transform historically serial processes into massively parallel processes. In this model, orchestration clearly becomes a necessary core competency of the innovation practice. And as I mention, this gets to the real crux of CDI….near infinite capacity.

  • http://twitter.com/andreasbreiler Andréas Breiler

    Thank you Steve for the explanation!
    This should definitely have been in the article ;)

    I was afraid that this was one more of the [insert free word] driven innovation concepts that have surfaced the last few years. They tend to be almost the same with minor differences in how you handle inputs to the need and idea phase.

  • Deemasumba609

    Does the concept of CDI suggest that there are innovations that are non-challenge centered?  Kind of having difficulties to think of any innovation that is non-challenge centered. I think every innovation idea  should seek to provide a solution (in an incremental or radical way) to a challenge in a way not seeing before.

  • Kellie Kalish

    Thank you for this article. I’m sold on CDI and will be passing this along at work to help support the cause. Do you have any recommendations on simple, user-friendly CDI management software solutions? I’ve found most innovation management software options follow the “idea funnel model”(start with a mass of ideas and refine them based on certain criteria or voting). Thanks in advance!

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