Post by Alex Osterwalder at business-model-design.blogspot.com

How Leading Firms Use Open Innovation

Many CEOs see collaboration as key to their success with innovation. They know they cannot achieve their innovation targets using internal resources alone. So they look outside for other organisations to partner with. A good example is Mercedes and Swatch who collaborated to produce the Smart car. When Mercedes wanted to produce an innovative town car they did not choose another automobile manufacturer – they partnered with a fashion watch maker. Each brought dissimilar skills and experiences to the team.

Costa Coffee is a chain of coffee shops which is in fierce competition with Starbucks and Cafe Nero in the UK coffee bar market. It has had considerable success by collaborating. Costa develops concessions with key partners. Current concession partners include coffee stores in Abbey National banks, W. H. Smiths and Ottakars book stores and Homebase DIY stores. The concession stores are managed by the Costa team who provide high quality coffee and service experience to businesses who want to provide their customers with that little something extra. Customers in concession stores can relax with a cup of coffee and food offering as they take a break from retail therapy, consider that purchase or await an appointment.

The next step beyond collaboration is open innovation. This is something that Proctor and Gamble, IBM and Kimberly-Clark have focussed on as a way of driving innovation. Open innovation replaces the vertical integration of innovation processes within one company with a network of collaborators working on innovation projects. Using outsiders can speed up processes, reduce costs, introduce more innovative ideas and reduce time to market.

Kimberly-Clark reduced the time is takes to bring out new products by 30% through open innovation. It launched Sunsignals in just six months by collaborating with a smaller company, SunHealth Solutions. Sunsignals is a self-adhesive sensor that changes colour when the wearer is in danger of burning in the sun.

Proctor and Gamble aims to source 50% of its innovations from outside using open innovation. Early results include new products such as Mr. Clean Magic Eraser and Pringles Prints. In 2005 Kimberly-Clark partnered with more than 30 companies including joint-development, joint ventures, co-distribution, and licensing deals.

The leading companies are pointing the way forward – collaboration and open innovation.

Here are some key steps for success in open innovation:

1. Each party should define what it wants to get out of the relationship.
2. Who owns the intellectual property in the partnership must be clear.
3. Each side should allocate a senior person with overall responsibility for the success of the partnership.
4. Key obligations, expectations and milestones should be established early.
5. Honesty and trust is built on clear communication – especially when objectives look likely to be missed.
6. Get a good legal contract.

Blogpost/article by Paul Sloane on http://www.business-strategy-innovation.com/innovation-blog.html

Paul Sloane writes, speaks and leads workshops on creativity, innovation and leadership. He is the author of The Innovative Leader published by Kogan-Page.

Source: http://www.business-strategy-innovation.com/innovation-blog.html

Link.

Executive summary

In January 2009, InnoCentive commissioned Forrester Consulting to examine the total economic impact and potential return on investment (ROI) enterprises may realize by deploying InnoCentive Challenges. InnoCentive Challenges is an innovation solution that gives users access to InnoCentive’s Web community of experts. In this solution, the users (also known as “Seekers”) post a unique problem, called an InnoCentive Challenge, to the community in InnoCentive’s Open Innovation Marketplace (collectively referred to as “Solvers”). The goal of an InnoCentive Challenge is to solicit solutions from the Solver community and ultimately choose the one that best fits the criteria set out by the Seeker. Challenges can be large or small, short-term or long-term. If a solution is selected as “best” by the Seeker, the Solver receives a financial award, which varies per Challenge.

This study illustrates the financial impact of using InnoCentive Challenges for open innovation in the research and development department of a large consumer products organization.

The organization interviewed as the basis for this case study is a leading consumer products company in Europe, but the group also holds strong positions in North America, Latin America, Asia, and Australasia. The organization has over 50,000 employees and over €10 billion in annual sales. InnoCentive Challenges was implemented in the Personal Care division, one of the four major divisions of the company.

Within the organization, the research and development department of the Personal Care division used the InnoCentive Challenges solution to enhance its own open innovation program. The division is also currently investigating expanding use of InnoCentive Challenges to other departments, such as marketing, within the division.

In conducting in-depth interviews with this existing customer, Forrester found that the organization achieved:

• Cost savings.
• Resource savings from a faster research process through open innovation.
• Access to a diverse network of experts.
• Fostering a more innovative research culture.
• Improved ability to frame research problems in all areas of R&D.
• Smoother IP transfer process.

Forrester calculated that the organization achieved a return on investment (ROI) of 74%, with a payback period of less than three months from the benefits quantified in the study.

In addition, Forrester believes that there are benefits associated with using InnoCentive Challenges that are extremely difficult to quantify. For example, as some solutions to client Challenges are integrated into a company’s R&D process, they may contribute to significant commercial product successes and help these products go to market faster. Due to the vast amount of elements that may contribute to these commercial successes (such as the company’s development process or marketing capabilities), we have not quantified them in this case study. Nonetheless, we believe they represent significant benefit of using InnoCentive Challenges.

source: http://image.email.innocentive.com/lib/fef91270706102/d/1/The%20Total%20Economic%20Impact%20of%20InnoCentive%20Challenges.pdf

Here you can find the first draft of the introduction chapter. I would very much like your input/thoughts on my research proposal. Please drop me a line (thesis@meanbean.nl) if you would like to read and comment – I will send you the password (see instructions) to be able to read the draft sections. Thank you in advance!

The introduction chapter contains the following paragraphs:

1.1 Open innovation business models

1.2 Objective & research questions

1.3 Scope & limitations

1.4 Outline report

Joost Cornelissen

LinkedIn
Twitter

One of the main messages in the report is that, nowadays we are witnessing a renaissance in prize-based innovation: The type of the prizes, the forms of the competition between participants and the technological infrastructure used in this area have become much more sophisticated.

Therefore, making the right decision on what for of prize-based competition or/and technology should be adopted is significantly harder. The figure below is one of the simple models they propose for these types of decision making:

The focus of this model is basically on three things: Clarity of the problem definition, the number of potential solvers out there and the degree of risk taking among participants: Different scenarios lead to different mechanisms such as prize, contract, grant and hybrid prize-grant.

Source: www.enovationmatters.com

By Henry Chesbrough and Richard S. Rosenbloom

Link

Henry Chesbrough and Richard S Rosenbloom: “The role of the business model in capturing value from innovation: evidence from Xerox Corporation’s technology spin-off companies.” Industrial and Corporate Change, 2002, vol.11, no.3, pp.529-555. Six components for a business model.

1. Wisdom of crowds: The more people that read and comment on my thesis, the better the final copy will be.
2. As I am allowed to ask friends / colleagues / professors / acquainted experts for advice – I should be allowed to ask ‘the world’ as well.
3. I hope to get enough returning visitors (and ‘experts’ contributing) by keeping it a ‘win-win’ situation: relevant / interesting content in return for comments / feedback.
4. I chose for a Blog structure as I would like to inform – and get comments/feedback in return. I considered starting a Wiki, but that would allow others not only to comment – but also contribute in writing. I feel that would not be allowed – taking the fact that it is my graduation thesis.
5. The blog structure also allows discussions between experts/contributors, not only between the author and contributors. I hope these discussions will add to everyone’s understanding of certain matters (including my own), maybe even creating new insights on subjects.
6. I see this endeavor as a ‘meta-methodology’ for attaining feedback on my research. The ‘official’ methodology will be chosen and defined during the research.

Following illustration conceptualizes my view on the process (meta-methodology):

Meta-methodology thesis process: doing research, writing thesis, getting input/feedback/comments, sharing findings/progression

I hope you will find both the content as well as the process interesting enough to follow. I’ll keep you posted!

Joost

In a bold mood – I started a discussion at two relevant LinkedIn groups, asking for people who would like to read – and comment on my findings and progression:

• Open Innovation and Crowdsourcing
• Open Innovation Discussion Group

Far exceeding my expectations, I got about 50 replies within two weeks. As I did not want to spend more time managing comments and feedback then doing my own reading, research, typing, etc., I considered different ways to ‘streamline’ the collaboration process. After having reflected on several options (wiki, open collaboration software, etc.), I chose what I think is the best vehicle for this task: an interactive Blog.

Reasons for my ‘vehicle of choice’.