Category Archives: Innovation

Open Innovation Conclusions

With the general view that organisations are moving a greater number of processing into the digital space and the prevalence of internet technologies open innovation will increase in popularity. As seen in the case of SAP by establishing a platform to enhance their existing eco-system is paying dividends. They are flexibly using both open idea-creation and selection processes dependent on their needs. It was highlighted that open innovation is based on traditional theories yet traditional approaches do not scale to large audiences, nor support shorter implementation cycles. The Idea Place provides a simple platform to co-innovate with customers and partners. Traditional product feedback relied solely on user groups or costly one-to-one interactions, which is unsuitable to open selection.

Not only are SAP benefiting, established partners have used the idea Place to define products or solutions to address specific customer needs which not prioritised by SAP. This enables the ecosystem to scale while SAP plays a more supportive, enabling role. The lack of physical product and large install base has lent itself to this more collaborative method of working. As highlighted in the SAP case, the control of the environment is fundamental to the commercialisation of the numerous ideas generated via the open innovation model (Rodgers, 2012).

As noted previously, the definition of innovation includes the adoption/application of the novel approach open innovation may have limited use. With the need for differing levels of resource to produce certain physical products open innovation will mainly be widespread in the ideation phase of the innovation process, as seen in the SAP case. The majority of opportunities would exist in more collaborative endeavours, where the various parties are able to share resources physical, technical, financial or physical. This type of collaborative innovation and partnering approach has existed for many decades and we could conclude that this is not a form of open innovation. As the number of involved becomes controlled this would form of closed innovation group resource sharing and joint commercialisation efforts in order to maximise revenue generation.

The established legal protection devised decades ago to protect large enterprises is unsuitable. Intellectual property rights, product & service ownership will continue to hinder open innovation initiatives as potential participants seek protection from “Arrow’s information paradox”. Protecting individuals’ ability to capitalise on the commercial value of their ideas generated restricting unauthorized use needs legal focus (Arrow, 1971).

The open selection principality builds a majority consensus selecting the most popular idea. By exorcising the deviant and extreme radical viewpoints the remaining options will tend towards the mundane and ordinary incremental improvement. The outlandish and revolutionary viewpoints are necessary to produce disruptive innovation (Berglund, 2004).

Thus concluding open innovation regardless of its theoretical potential will struggle to produce significant breakthroughs or revolutionary inventions without substantial corporate sponsorship.

SAP – “Ideas Place” – p4

SAP in 2010 launched an open innovation space as a response to customers’ desire to become more involved the direction of product offering. After the SAP Community Network (SCN) site success a new site positioned as central space for enterprise software enhance submission was launched. A platform called SAP “Idea Space”. The Idea Place website provided SAP customers an online suggestion platform replacing the tedious manual methods to submit suggestions and SAP with a flexible, scalable and transparent management tool.

Figure 1: Crowd-sourcing Ideas (Ideas.SAP.com)

In the 2 years after the initial pilot, Idea Place generated:

  • 8,700+ Submitted Ideas
  • 9,000+ Comments
  • 53,000+ Votes
  • 380+ Delivered Features
  • 260+ Ideas in Development

 

During those initial years SAP learnt from the Ideas Space site and feedback from the User community. Initially, not all products were available for contribution and the site focused on product enhancements. Customers were uncertain were to pose suggestions and what channel should be used. The Idea Place evolved providing an enhanced social experience and a significant improvement in ability of stakeholders to interact with ideas. The Ideas Place team redefined the ideation process, working with product/solution managers pushing to create higher quality ideas, increased voting, greater transparency of review timings, internal priorities and communicate status of ideas submissions.

The most significant change to the initiative was to openly change the focus to target break-through innovation rather than enhancements. Several challenges needed addressing including:

  • Idea Place will never contain all SAP products/solutions,
  • Many channels existed for submitting enhancement requests
  • Idea Place is to provide disruptive innovation via break through ideas
  • Need to reach out to new audiences not traditionally connected with SAP

 

Hence, Idea Place shifted from an enterprise enhancement submission site to a collection of individualized innovation campaigns. The focus became campaign based with a unique experience, navigation and processes specific for each product. Each campaign objective would vary depending on the need of the product/solution, some remaining enhancement orientated and others defined to invoke disruptive innovation.

“With this release, Idea Place is a step closer to reaching the vision of providing disruptive innovation through break through ideas, reaching out to new audiences and connecting with audiences that SAP has traditionally not connected with before,” Matt Johnson IV, VP SAP Marketing press release 2013

As noted previously, SAP understood if submissions were not managed customers may feel ignored. Therefore, guidelines were introduced to minimise opportunities for ideas falling into a void. As the Ideas Place project grew some campaigns matched customer expectation better highlighting improvements were required. Hence SAP revisited each campaign ensuring submitted ideas were all addressed and provided clarity on status of submitted ideas. The renewed focus on the innovation programme defined processes for product management teams to analyze ideas, rank by number of votes and alignment with product direction, feasibility, and business benefit (strategic fit). Procedures ensure that products will not be listed within the Idea Place unless corresponding product management team agrees to monitor, evaluate, and respond to ideas accordingly.

The early years yielded low quality ideas, duplication and similar ideas therefore many ideas were not progressed, having a negatively impact customer experience and perceived throughput of ideas. The new 2013 platform, automatic responses to ideas were implemented providing education on submission quality, accompanied by early product managers’ feedback to assist submitters with increasing value of ideas and likelihood for consideration.

To further support quality submissions the review criteria was made explicit and transparent. Defining factors considered when they are being considered, including number of votes required for consideration. Moreover, other members could comment on, add to, or vote on ideas to enhance quality of submissions. Throughout the process, SAP product teams give status updates and explanations to ensure transparency.

The new platform categorised ideas within a topic or a community posed question, the social media tools were enhanced to encourage further the socialisation. Understanding required vote count required Idea submitters could connect and leverage other channels to enhance or further define the ideas.

Opening the Idea-Selection Process – p3

As previously noted, managers are less familiar with the option of opening the idea-selection process externally. Such approaches commonly take the form of “approval contests”, public voting via internet based platforms. These range from specialist environments to commercial social media applications. Nestlé has mined Facebook data to gain insights during new product development (Mount, M. 2014).

The transferral of costs and risks advantage as defined earlier within idea generation is intensified. By tapping into the shared concessions and opinion of the consumer community increases the likelihood of success (Mount, M. 2014). However, while outsiders may have unique insights into the value of an idea, their concept of value is not always aligned with the company’s strategy, brand or profit goals. By encouraging external groups to make choices about the best ideas and designs, managers cede control to people who might have different incentives.

One solution for companies to retain explicit residual control over final selection against fit to company values and strategy. For example, allowing external selectors to vote on ideas submitted, to narrow the pool final 100. From there, the company’s executives and employees choose designs develop to prototype or final commercial offering.

Despite these real advantages, open selection has the same challenges as idea generation and further perils. The selected ideas may not prove to be economic to produce or deviate from corporate strategy therefore will cause tensions. If the external selections are seen to be overturned or ignored the credibility of the organisation could be questioned causing reputational damage effecting sales.

Opening Idea Generation and Selection

Some organizations, particularly those focused on products where needs change quickly, have opened both the idea-generation and selection aspects of the innovation process. Consumers submit ideas for products and the most popular items are then developed, produced and sold. The benefits of opening both idea generation and selection are not bound to relatively inexpensive consumer items. In software, open-source coding projects let outsiders both generate and select the designs that will be enabled in the software code. The rapid rise of open-source software drives a core part of the Internet’s infrastructure including operating systems, databases, Web technologies and big data analytics). The Linux operating underpins many technical innovations including Android enabled mobile phones and many household items. Indeed, high-tech leaders such as Apple, Google, Facebook and IBM all harness open-source software communities both contributing actively to creation of public software and creating complementary tools that support community-created initiatives (Lakhani, et al. 2013).

Organisations seeking to open both the idea-generation and selection parts of the innovation process must confront the problems noted earlier. They also must address what is potentially a more fundamental problem: How to commercialise ideas? Traditionally, most companies have relied on proprietary knowledge as a major barrier to entry for competitors. They appropriated value from innovations through patents, or commanded a price expert knowledge of customer and market. However, when these activities are managed outside the organization, what is its role and how can it makes money?

Opening the Idea-Creation Process – p2

To increase idea generation, many organizations are turning to innovation contests. Innovation contests have been shown to be effective processes for generating novel solutions in various industries, e.g. architecture. The famous Tower Bridge in London, the largest and most sophisticated bridge constructed at the time was the result of such a contest in 1876. The key to successful contests lies in extracting the best few opportunities from a process that considers many contributors. Participation by many is negated by the economic cost of participation making contests effective processes for generating high quality innovations (Terwiesch and Ulrich 2009). Innovation-contest platforms have been developed supporting organisations in coordinating events where all entries are visible to all competitors, encouraging wider participation and collaboration between participants.

However, designing and managing innovation contests is not without challenges and numerous decisions regards how the contest will run; from defining the contest, soliciting entries to moderating the contest. Understanding participants’ motivation to different incentives and information, are fundamental to how a contest is designed to produce desired output.

One potential problem stems from traditional practices of contracting idea generators, hiring outside experts to develop new products or create process change. With open innovation, however, no expert contract exists, ideas are only purchased after they have been developed and selected; the difference is subtle yet significant. Raising concerns for both parties regards Intellectual property rights, product & service ownership. Intellectual property rights such as patents mitigate this problem by restricting unauthorized use of inventions. But ideas alone cannot be patented or copyrighted. In open innovation cases, “Arrow’s information paradox “is a major barrier. Fearing their ideas copied unfairly might discourage the most talented innovators from participating in contests, leaving a weaker pool of entries (Arrow, 1971).

An additional challenge in managing open innovation is the burden of cost and risk of idea generation. In closed models, idea generators are paid for efforts, and purchaser bears the risk. With open innovation, the company pays for ideas only after it has been completed, submitted and selected. Leaving the idea generator bearing both the cost and the risk of developing ideas.

Thus contestants rely on the organisers’ reputation in the absence of traditional protections. S.C. Johnson & Son has worked diligently to establish a reputation as an honest buyer of external ideas hence succeeds in attracting good ideas from outsiders. One of the most creditable and successful innovation contest platforms, InnoCentive, connects organisations to their community of idea generators. Companies are essentially “renting” InnoCentive’s reputation to gain legitimacy, with than 1,000 successful innovation contests, with awards ranging from $5,000 to $1 million (XXX).

Crowd-sourcing innovation weaknesses resulting from patterns of behaviour caused by groups or the controls placed on them, the phenomenon of groupthink. The theory suggests a pattern of thought which is characterised by self-deception, manufactured consent and conformity to majority group values will dominate. Groupthink is synonymous with defective decision-making through overestimation cognitive ability, collective rationalisation and the illusion of unanimity (Rose, 2011). With open innovation premised on democracy, outlying voices will be marginalised to leave the mundane and ordinary. Even though everyday events and thinking are potential wellsprings for innovation these tend to produce incremental improvements on existing processes (Berglund, 2004).

As the innovation group identify forms deviant and extremes will not be allowed to dominate or monopolise the direction, thus diminishing possibility disruptive innovation output as it relies on radical thinking (Christensen, 1997).

The groupthink theory has critics that argue that after many years of investigation the research has failed to produce compelling evidence (Baron 2005). Where as the proponents of the groupthink theory have offered alternatives which in the case of Henningsen et al (2006) argues that it is two processes; a compliance process and a reinforcing process. Whilst investigating innovation the emphasis was on the role of the individual and their unique qualities in the innovation process. In a study on innovations within the military arena concluded that disruptive or radical changes needed to be promoted vigorously, championed, in order to survive: “the new idea finds a champion or dies.” (Schon, 1963:84)

The Challenge and Opportunity of Open Innovation – p1

Open innovation has been defined as the exploitation of both internal and external knowledge to accelerate the process and expand potential commercialisation of innovations (Chesbrough et al, 2006). It can be traced back to Silicon Valley tech start-ups in 80’s and 90’s, where superior R&D budgets of organisations like Xerox and Bell Labs were unable to compete with resource deficient smaller businesses. Studies into these anomalies noted a more collaborative/open approach to innovation was evident, this has now become an excepted norm regards general management and strategy within many technical businesses, especially software (Gassman, et al, 2010).

Organisations becoming concerned where the next innovative idea will come from have begun to explore the option of open innovation and crowd-sourcing. Some organisations are concerned with venturing into an entirely new innovation process. Others did not fully appreciate the risks, or opportunities, engaging external resources with innovate. Open innovation principles stem from classic innovation principles such as idea generation and selection (Campbell, 1965). As with all processes, success relies on implementing suitable methods to organize, monitor and manage progress.

Organisations understand of the potential for idea-generation through the open innovation as one of the significant advantages: the sheer volume of prospective ideas. As organisations’ main experience of cultivating ideas is internal; open innovation has been used build high-quality ideas banks. Rather than being constrained to the finite number of employees to produce ideas for existing problems, external experience and intelligence could be utilized. The logic is simple: if anyone can provide solution ideas, the statistical principle is, the more ideas generated, the better the quality of the best one is likely to be. The advantage to casting the net widely to capture significant quantity of ideas may mean the average the quality of ideas falls; yet the possibility of one to be spectacular is greater.

Secondly, lesser-known advantage of open innovation is that the value of ideas generally increases with the level of variability. Studies found organisations believed only employees possessing the industry and strategic knowledge could judge on validity of ideas. Yet opening idea-selection process externally could generate significant value, harnessing distinctive expertise and perspectives, in selecting most successful ideas.

 

 

Campbell, D.C. (1965) “Variation and Selective Retention in Socio-Cultural Evolution,’’ in “Social Change in Developing Areas: A Reinterpretation of Evolutionary Theory,” ed. H.R. Barringer, G.I. Blanksten and R.W. Mack (Cambridge, Massachusetts: Schenkman Publishing, 1965).

Chesbrough, H.W., West, J. and Vanhaverbeke, W. (2006) Open Innovation: Researching a New Paradigm. Oxford: Oxford University Press.

Gassmann, O., Enkel, E. and Chesbrough, H. (2010), The future of open innovation. R&D Management, 40: 213–221. doi: 10.1111/j.1467-9310.2010.00605.x