Point: Use open innovation challenges and prizes to inspire solutions, participation and collaboration from employees, partners and customers

Story: In 1919, New York hotel owner Raymond Orteig offered a $25,000 reward to the first person who could fly nonstop from NYC to Paris. Although various people tried, no one won the prize until Charles Lindbergh in 1927. Orteig’s prize, in turn inspired the X PRIZE foundation to offer the Ansari X Prize: a $10 million award in 2004 to the first team from private industry to devise a spacecraft capable of carrying three people 100 kilometers above the earth twice within two weeks. The goal of the prize was to spur private investment and develop a commercial space industry.

Erika Wagner, executive director of the X PRIZE Lab at the Massachusetts Institute of Technology, spoke about how prizes like the X PRIZE are useful to embolden entrepreneurs to take big risks. And, the fact of the substantial prize means that funders and financiers take notice. Ultimately, 26 teams competed for the Ansari X PRIZE and in the six years since the prize was awarded, more than $1.5 billion dollars in public and private funding has gone to support the private spaceflight industry.

Companies from Toyota to Eli Lilly to SAP have run challenges and offered prizes as part of their open innovation efforts through partners like InnoCentive. SCA, for example, a large, international consumer products organization, achieved a return on investment of 74%, with a payback period of less than three months as a result of using InnoCentive Challenges for open innovation in a major R&D division of the organization.

Some of the benefits of prizes are:
• Increasing the number and diversity of the individuals, organizations, and teams that are addressing a particular problem
• Paying only for results
• Attracting more interest and attention to a defined program, activity, or issue of concern (1)

I’ll be sharing more insights about prizes and ideas from the Innovation3 Summit in Orlando Dec 8-10, 2010 in the next post.  For now, here are some action strategies.

Action:

• Word your challenge precisely, around a well-defined problem, to get focused, on-target participation
• Think through all phases of the prize: how will you announce it? How will you determine the winner? How will you follow up to implement the idea?
• Be transparent throughout the process, explaining the criteria for selection of the winners, who will be selecting the winners, announcing and awarding the prize(s), etc.
• Acknowledge all participants, thanking them for their contributions and giving feedback to those who did not win, providing them with information that may help them in future challenges.

Point:  Innovators can use various tactics to evaluate (Manitowoc), protect (J&J), bridge (Whirlpool), and ferry (J&J) innovations across inevitable organizational gaps.

Story: Innovation in large organizations often faces obstacles due to the natural divisions within the firm.  Gaps can occur between risk-taking vs. risk-avoiding groups, diverse business units, and functional silos.  Open innovation adds a fourth type of division: that between the investor/buyer of an innovation and the inventor/seller of an innovation.  Presenters at the 2nd Annual Open Innovation Summit discussed these four different types of gaps and some methods for carrying innovation across the gap.

Johnson & Johnson highlighted the first gap, which occurs between groups involved in long-term innovation versus those responsible for short-term operations.  On one hand, the near-term viability of a firm depends on minimizing risk and costs while consistently delivering value to the customer.  On the other hand, the long-term viability of the firm depends on spending money to finding new, more competitive and more productive ways of delivering value to the customer.  Whereas failure might be essential to innovation, failure can be fatal to operations.

To help handle this very natural and necessary gap, J&J created COSAT (Corporate Office of Science and Technology) to provide a sanctuary or sandbox for new innovations (including external ideas).  This sanctuary protects the innovation from the rightfully risk-averse operations side of the organization; it also protects operations from the rightfully risk-taking innovation side.  In addition, COSAT provides low levels of funding (about $50k to $250k of angel-style capital) to help keep projects alive until the organization is ready for them.

A second kind of gap occurs in large, diversified companies.  For example, J&J has more than 250 divisions that make everything from over-the-counter painkillers to in-the-body artificial hips. The diversity of regulations (consumer products, pharmaceuticals, medical devices), markets (consumers, retailers, physicians, surgeons), and technologies (consumer products, drug chemistry, high-tech materials, and electronics) means that innovations in one part of the organization — even innovations that failed — might be useful in a different part of the organization.

To address this second gap, J&J’s COSAT helps ferry ideas from their source (from both inside and outside the company) to potential applications at the different divisions of J&J.  This ferrying process includes:

• aggregating good ideas from across the J&J portfolio of companies and outside sources
• validating ideas with key opinion leaders inside J&J
• providing low levels of funding to keep good ideas alive
• brokering ideas to different divisions.

Whirlpool described a third kind of gap, one that’s caused by functional silos.  Each functional department (engineering, manufacturing, marketing, HR, IT, legal, etc.) has its own metrics, goals, and performance pressures that drive that department’s tactics.  But these finely-tuned local optimizations can cause different departments to operate at cross-purposes to each other.  The result is problems such as local protectionist tendencies within silos, barriers to coordination between silos, and money-wasting misalignment in the organization.

Whirlpool’s solution is to bridge the gap between silos through aligned strategy and common processes in combination with communications and training that engage the organization. Whirlpool uses strategy reviews to help the silos see the bigger, shared picture of the organization’s future and the role of innovation in that future.  Whirlpool cascades its overarching goals down to local goals so that the silos support rather than hinder the overarching goal.  A combination of common processes and flexible teams helps create broad organizational engagement.  Communication and web-based training called Whirlpool Foundations (see Communication in Open Innovation post) help everyone in all departments understand the key role of innovation.

Finally, crane and food service company Manitowoc describes a special type of gap that is felt most keenly in open innovation: the expectations gap between the investor/buyer of the innovation and the inventor/seller of an innovation.  Whereas  inventors often see their precious inventions in terms of the millions in revenues it might reap, the investor or buyer of the innovation sees the potential of millions in costs that the innovation will almost certainly incur.  Not only does the situation create a valuation gap, but inventors may feel a parental instinct toward their invention and expect the buyer to not modify the invention.  This gap can create ill-will, broken negotiations, or stall an open innovation implementation.

To deal with this gap, Manitowoc evaluates potential open innovations on five dimensions:

1. the current level of development of the idea
2. the status of intellectual property
3. the potential for competitor workarounds of the idea
4. the degree of technical competitiveness offered by the innovation
5. the expected business impact.

Manitowoc also looks at the technical and business experience of the inventor when deciding whether and how to craft a deal (e.g., patent assignment, acquisition, or joint venture) with the inventor.

Overall, these four gaps reflect the world’s natural diversities in a complex business and technical environment.  Different people in different divisions, departments, and roles really are different.  Rather than homogenize everyone, these four companies found ways to evaluate (Manitowoc), protect (J&J), bridge (Whirlpool), and ferry (J&J) innovations within a gap-filled context.  These gap-handling tactics increase the effectiveness of innovation processes.

Action

• Determine if the innovation is ready to cross the gap (and worth bringing across the gap)
• Use a sanctuary to protect the innovation from hostile forces on the other side of the gap (and to protect the people on the other side of the gap from disruption by the innovation)
• Use communications to bridge the gaps: explain to both sides the respective benefits of bridging the gap (e.g., why the operational side needs the innovation, and why the innovation needs to be operationalized)
• Create a ferrying process or group to help develop, broker, and transition innovations across the gap.

Point: Good communication skills drive open innovation and collaboration

Story: At the World Research Group’s 2010 Open Innovation Summit, many presenters stressed the role of communication for both innovation leaders and in promoting open innovation initiatives.  Top-notch communication skills with senior executives, peers, partners help drive open innovation success.

Stefan Lindegaard, author of the The Open Innovation Revolution, and Greg Fox, Senior Director & CMO – Strategic Alliances at Cisco, held an invitation-only Think Tank group at the Summit to identify and discuss the key qualities of leaders of open innovation.  The group ranked communications in the top three characteristics (vision and adaptability were also key).  The Think Tank group emphasized the importance of leaders using a deliberate communications strategy with holistic internal and external communication.  Good open innovation leaders have the confidence to share what they know but also maintain proper disclosure limits with open innovation partners.

Nona Minnifield Cheeks, Chief, Innovative Partnerships Program Office, NASA Goddard Space Flight Center noted that consistent messages and behavior (i.e., walking the talk) improve trust and outcomes. It’s vital to establish clear sense of why the organization is doing open innovation, set context, and create sense of urgency, Cheeks said.

In addition to Think Tank members, other presenters at the conference concurred about the crucial role of communications in innovation.  For example, Dr. Gail Martino, Principal Scientist in the Open Innovation Group at Unilever, described seven soft skills communicators need to persuade, inspire and garner support for open innovation efforts. Communication involves being a good listener, she said, to build trust and feel empathy for others’ situations. At Unilever, top-notch communication skills include a balance of being convincing but also being an advocate for the partner.  Balanced communications also include conveying both the rewards and risks of innovation, not just mindless cheerleading.

Moises Norena, Director of Global Innovation and PMR at Whirlpool Corporation, described how Whirlpool aligned innovation to strategy through Whirlpool Foundations, which communicated to all employees and helped transcend silos. Whirlpool develop training programs for all levels of employees, including a mandatory half-hour web course that taught all employees about Whirlpool’s innovation strategy and created common language for innovation at the appliance maker.  Cisco‘s Sharon Wong recommended that open innovation platform operators communicate simply and often to maintain excitement and interest in the open innovation effort.

Jeff Boehm, Chief Marketing Officer of Invention Machine, focused his presentation on the role of communications as driver for innovation, collaboration and revenue.  He explained why and how marketing or internal communications supports the use of a good innovation platform and satisfaction of top-management mandates.

Boehm suggested that three key elements are necessary — but not individually sufficient — for creating successful, ongoing innovation programs. First, offering a powerful platform for innovation helps but doesn’t guarantee that innovation occurs.  A “build-it-and-they-will come” approach doesn’t work because too many people are too busy to take the time to find and participate in even the most exciting innovation initiative.

Second, top-down mandates may be necessary for engaging busy people, but mandates alone aren’t sufficient to ensure innovation participation, either.  Employees typically assume that daily operational pressures trump innovation mandates, so it’s easy for them to short-change innovation or allow it to slip out of awareness over time.  That implies using a third element — marketing or internal communications — to reach users, communicate the value of the program, remind them of mandates, and convey the excitement and accomplishments of the effort. For example, putting an innovation icon onto employee badges creates a natural reminder and talking point about the effort.

Boehm, who has extensive experience leading these communication efforts, listed the following four actions as the critical steps for internal communications the drive participation in innovation initiatives:
Action:

1. Make innovation relevant. Ask different users (executives, peers, functional silos, external partners, etc.) about their struggles and challenges and show how the innovation initiative can help them.
2. Promote innovation. Create a roadmapped stream of communications that spans time and multiple channels (e.g., lunchroom posters, emails, newsletters, tent cards, tchotchkes, badges) to reach, inform, and encourage people to participate.
3. Provide easy calls to action for innovation.  Avoid obstacles such as convoluted registrations, approvals processes, and delays.
4. Sustain the momentum of innovation with ongoing communications.  Continuously relay successes, platform improvements, ongoing activities, training, and new information to avoid attenuation of attention to innovation.

Open Innovation Summit Think Tank Members:

• Greg Fox, Senior Director & CMO – Strategic Alliances, Cisco
• Dr. Andrew G. Gilicinski, Director, R&D – Innovation Networks, Clorox
• Jeff Boehm, Executive Vice President & Chief Marketing Officer, Invention Machine
• Dr. Jan M.K. Jaferian, VP Intellectual Property Manitowoc Foodservice
• Stefan Lindegaard, Founder & Chief Facilitator, 15inno.com
• Nona Minnifield Cheeks, MBA, Chief – Innovation Partnerships Program Office, NASA Goddard Space Flight Center
• Andrea Meyer, MLIS, President, Working Knowledge

To join the 2nd Annual Open Innovation Summit LinkedIn group, click here.