Point: Open innovation is much more cost-effective than internal R&D

Story: Larry Huston, formerly Innovation Officer at Procter & Gamble, spoke at the World Innovation Forum on June 8, 2011. Huston praised open innovation as a way for big companies to speed their innovation and time to market.  Huston said that open innovation efforts give companies a 2x return compared to developing the innovation in-house because of risk reduction.  The reason, Huston said, is simple: the technology is already proven to work; it just needs to be scaled or adapted. In short, with open innovation a new technology has a much lower risk of failure than starting internal R&D from scratch. Also, given the realities of corporate life, internal R&D people aren’t just doing innovation all the time — they have administrative work and meetings — which means that internal innovation is much less efficient than open innovation.

Huston related the story of an internal P&G employee who had the idea of printing text and designs on Pringles potato chips — designs like Disney characters or trivia questions. The employee made a very thin potato dough and ran it through an HP printer to demonstrate the idea.  But P&G needed edible food dyes that wouldn’t clog the printer or a printing technology that could handle edible food dyes.

So P&G approached a big printer manufacturer to work together with P&G to come up with a way to print on potato chips. The two big companies spent a year in meetings trying to hammer out the intellectual property (IP) rights issue. The printer company wanted all the IP, even though the two companies would be developing it together. P&G even offered to give the partner the patents if P&G could own only the one application of printing on potato chips. If the partner company then wanted to sell the technology to McDonald’s to print on hamburgers, they could. But still the other company did not agree to those IP terms.

Exasperated by the slow pace of the negotiations, P&G wrote a public brief describing the technical problem to be solved and sent it out worldwide. An innovation network in Europe picked it up, and the brief landed on the desk of a professor in Bologna. The professor, as it turns out, had inherited a bakery. He had dabbled with the equipment and created and edible food dye that could be printed on cakes and cookies.  P&G licensed the IP from him and launched Pringles Prints in eight months, compared to spending one year just discussing IP with the large company.  Within one year, the new product grew P&G’s revenues 14% — a very impressive result given the size of P&G.

Publicizing its R&D needs was a big change for P&G.  In the past, P&G kept its R&D efforts closely guarded. “We were afraid to share our technology needs,” Huston said.  “We thought competitors would read our briefs and launch their product first. But not once did that happen, out of hundreds of briefs”  The reality, Huston said, was “Companies work on what they think the problems are.  Reading a brief, they don’t see the end product, and they’re not likely to reorient their efforts as a result.  Once they see the product in the market, then they’ll respond.” Instead, Huston advocated, “let the world know what you want and that your door is open to ideas from the outside.” In response to a question from the audience, Huston elaborated: “Half of our briefs have our name on them, and those get many more responses.  Other briefs do not have our name.” Those briefs couch the request in more scientific terms, solving the underlying problem rather than explaining the consumer product application.

Action:

• Don’t be afraid to advertise your R&D needs in order to attract outside innovators. Competitors are unlikely to reorient their own thinking to follow you.
• If you’re still concerned about competitors taking your nascent idea, don’t put your company name on the brief, and phrase it in terms of the underlying science to be solved
• Look for smaller, nimble open innovation partners with early-stage prototype technologies.
• Innovate faster by leveraging proven technologies created by third parties.
• Focus on lower-risk adaptation and scaling of existing external technologies rather than high-risk creation and scaling of unknown internal technologies.

For more information: World Innovation Forum

Point: Use open innovation and modularity to identify new product/service needs and accelerate your pace of innovation

Story: Rugged handheld computers are used every day byretailers,warehouse operators, service technicians, parcel companies, and transportation operators to log customer purchases, track inventory, monitor shipments, and scan tickets.  Half a dozen manufacturers compete in the crowded market for these devices to serve customers who want everything — devices that are hardy, high-tech, compact, inexpensive, and suited to their particular needs.

PsionTeklogix needed to differentiate itself from competitors like Motorola, Intermec, Datalogic, Honeywell, and LXE.  The company created a modular platform strategy called Omnii with interchangeable keyboards, scanners, communications modules, screens, grips and optional features like a camera and GPS.  Rather than build small volumes of unique devices for each application or new technology, Psion created a modular platform to build components in cost-effective volumes and then mix-and-match the parts to create a custom-built assembly.

For example, Psion or one of its partners can create a new RF communications module (e.g., for a new cellular data standard) and then plug that module into many of the pre-existing Omnii products. This strategy accelerates innovation because it’s faster and cheaper to design a new module than to redesign an entire product.  This strategy also accelerates adoption of innovation by customers because customers don’t have to replace all their handheld computers, only swap in the new modules.

Then, Psion went a step further, introducing its Open Source Mobility initiative.  Psion created IngenuityWorking.com, an open, collaborative online community for Psion employees, developers, partners and customers.  The goals are twofold:

1. to leverage Psion’s large IP portfolio with a wide range of vendors and component suppliers
2. to give customers and resellers the ability to voice needs and identify micro-niches in the market.

In summary:

• PSION uses its IngenuityWorking.com site with customers, developers and partners to drive product developments
• Psion leverages its strengths (modularity & customization) to reduce waste, improve time to market and gain new commercial options

Action:

• Create product/service architectures than enable fast insertion of new technologies. In Psion’s case, interchangeable displays, user interfaces, scanners, radios, etc. all combine to provide a myriad of combinations of functionality inside the rugged case.
• Create an online community among your partners and customers to learn their needs and identify new product/service opportunities.
• Populate the OI site with technical information that helps partners contribute practical and compatible innovations
• Allow customer complaints on the site (valid complaints, not offensive vitriolic rants). This transparency builds trust over time as customers and partners see how you address problems.

For more information, see Todd Boone of PsionTeklogix’s chapter in A Guide to Open Innovation and Crowdsourcing, edited by Paul Sloane, published by Kogan Page 2011.

Point:  “Where” innovation comes from can be a place, a time, or a conceptual process.

Story: At Invention Machine’s Power to Innovate user conference, Jim Belfiore, Senior Director of Client Innovation and Practices, posed the question of where to innovate in this economy. Numerous presenters provided varied and surprising answers about where they find innovation and innovation-related opportunities.

First, “where” can be a literal place.  Mark Atkins, CEO of Invention Machine, discussed research on emerging markets such as China, India, Brazil, and other rapidly-developing emerging markets.  He cited data on the rise of innovation awareness and investment in these countries.  For example, a recent survey found that 52% of executives in emerging markets thought innovation was critical versus only 31% in the US and EU.  The same survey showed that more executives in emerging markets are investing in innovation than are their mature-market counterparts (85% vs. 53%).

The implication: companies should scan and analyze emerging markets for companies that might be disruptive competitors or that might become the company’s new suppliers, new manufacturers, or new distributors for addressing emerging market needs.  By answering “where” with emerging market players, companies can find new opportunities for collaboration.

Second, Dr. Charles Volk, Vice President and Chief Technologist at Northrop Grumman Navigation Systems, showed how innovation can be found in the past — “where” can be a point in time.  Volk’s division makes high-performance inertial navigation systems that enable aircraft and missiles to know exactly where they are, how fast they are moving, how they are oriented in space, and which way they are heading.  The devices represent more than 50 years of technological success, as well as some failures. Failures of the past, however, can be resurrected when new technology advances and obviates previous constraints.  The key, however, is to be able to access the prior work a company has done on a project, to avoid reinventing the wheel.  The challenge gets even bigger given that so many Boomers are retiring, taking past knowledge and lessons learned with them.  That’s one reason why Northrop used Invention Machine’s Goldfire tool to systematically capture and index legacy knowledge from disparate sources and formats.  According to senior scientist David Rozelle, for example, “Extensive efforts were put into feeding all HRG [Hemispherical Resonator Gyro] product-line documentation into state-of-the-art-knowledge base tools, including Invention Machine’s Goldfire system, to allow future engineers easy access to this huge amount of information through queries to the database.”

Third, Henry Gonzalez, Technology Fellow at Eastman Chemical Co, provided an external-source “where” example. Eastman,  a global manufacturer of chemicals, plastics and fibers, wanted to find a new application for one of its existing technologies. Eastman used Goldfire’s Innovation Trend Analysis and semantic capabilities to identify and target likely conferences and papers that could point to an answer. The results? A two-day effort using Goldfire yielded results that took an Eastman engineer 6-9 months to do previously. Eastman engineers were originally skeptical that a tool could help them be more innovative, but they were convinced by the results and are now expanding their Goldfire deployment.

Finally, Belfiore challenged people to look beyond their current S-curve of technology or product adoption to the next curve. More specifically, his answer to the question of “where” is to examine where your current constraints are. Then look to that as “where” to innovate before a competitor does. For example, in the energy industry, hydrocarbon production and supply are a challenge, with the constraints of cost, resources and environment impact. Most alternatives to the energy issue target eliminating hydrocarbon fuels by substituting wind or sun. But these next-generation solutions come with new problems, such as replacing the world’s fleet of vehicles and existing energy-delivery infrastructure if liquid hydrocarbons are no longer used. Joule BioTech, however, pinpointed fuel as its innovation place. Specifically, Joule focused on finding a new way to make hydrocarbon fuel that would reduce dependence on foreign oil and eliminate the carbon footprint of fuel. Joule disrupted the way fuel is made. Rather than start with a hole in the ground to reach fossil fuels, Joule created sunlight-driven bioreactors that could grow artificial microbes that produce ethanol and diesel. The microbes require only sunlight and carbon dioxide to produce ethanol and diesel, thus not only lowering the cost of production but also removing CO2 from the atmosphere.  When the fuel and diesel is burned in the car engine, therefore, no new CO2 is released. And, the fuel is used in the combustion engine just like gasoline, requiring no new infrastructure.

Action:

• Think about all the possible “wheres” of innovation.
• Look at the past for failed innovations that you can resurrect using new developments or to address new needs.
• Look at new markets and the new players arising in those markets as a new source, new collaborator, or new point of demand for innovation.
• Look beyond the current S-curve to create the next S-curve before the competition does.

For more information, on Northrop Grumman’s HRG project, see: http://www.es.northropgrumman.com/media/whitepapers/assets/hrg.pdf