Point: Create an internal venture fund to incubate revolutionary ideas.

Story: This week’s Innovation Summit at the Shell Technology Center Houston (STCH) highlighted the need for innovation and collaboration to solve society’s most pressing challenges. As the world’s problems become more complex, the best way to tackle them is with a cross-disciplinary approach.

What are some ways that companies can foster this multidisciplinary collaboration to achieve breakthrough innovation? One way is to create an open mechanism inside the company that solicits promising ideas regardless of where they come from — including outside the company — and offering seed funding that’s outside of the company’s traditional R&D programs to give them time to develop.

GameChanger

Shell is doing this with its GameChanger program, headed by Russ Conser.  GameChanger seeks out and invests in early-stage ideas that could potentially revolutionize the energy industry. GameChanger plays the role of an angel investor; a panel screens ideas and selects ones to fund. Idea submissions can come from any Shell employee as well as from outside the company.

Shell actively solicits ideas from academics and entrepreneurs alike through its web site www.shell.com/GameChanger.  Ideas that pass the initial screen receive seed money — $25,000 to develop a robust proposal and on up to $500,000- $1 million a year to actually test and develop ideas that graduate into projects.

Example

For example, Erik Cornelissen, a research scientist, was in a toy store looking for a gift for his nephews when he saw a science toy that many of us have seen before: a dinosaur that grows in size when placed in water. A nifty, fun gift. But Erik made a connection back to a perplexing problem that had plagued Shell and other oil companies for a long time. Specifically, oil wells contain water, not just oil. Over time, more and more water gets pumped up relative to oil.  Not only does that make the well less productive, but it pumps water that increasingly is becoming a scarce resource itself. The question is, how to detect that water and prevent it from mixing with the oil?

Erik realized that the same principle behind the dinosaur toy — a material that expands upon contact with water — could be applied at the oil well. Erik needed to identify a “swellable elastomer” that would seal off the pipe when water started to mix with the oil flowing through it. The idea was not difficult to articulate or explain, but finding this kind of material proved long and difficult. GameChanger provided Erik with the time and funding he needed to go through hundreds of experiments to find the elastomer that fit the demanding conditions at the oil well site.

Results

About 40% of Shell’s core Exploration & Development R&D portfolio has evolved from ideas submitted to GameChanger, and 70% of the GameChanger portfolio includes collaboration with people outside of Shell.

Since its inception in 1996, GameChanger has funded 3000 ideas, investing $350 million and resulting in 250 commercial projects, said Gerald Schotman, EVP, Innovation, R&D and Chief Technology Officer at Shell.

Action

• Publicize clear and explicit selection criteria, so external submitters know what you want and will fund.  For example, GameChanger uses 3 primary criteria:

1. Novelty: is the idea truly and fundamentally new and different? (There’s no point in funding ideas that would qualify as traditional R&D projects.)
2. Value: Could the idea create substantial new value if it works? (Wild ideas are welcome, but ultimately they need to deliver value if they come to fruition.)
3. Credible Plan: is there a plan to manage risks prudently? (New ideas are risky, but many risks can be identified up front and plans can be put in place to stay ahead of them.)

• Have an end game for how you’ll commercialize an idea that demonstrates feasibility. For example, GameChanger uses 3 commercialization strategies:

1. Move the idea into the company’s internal R&D portfolio.
2. License the idea externally.
3. Spin off a new company to bring the idea to market.

Point: Innovation tournaments can be run either competitively or collaboratively, with each approach yielding better results for different purposes.

Story: In his second book, Best Practices are Stupid: 40 Ways to Out-Innovate the Competition, (named the 2011 best book on innovation by CEORead) innovation speaker Stephen Shapiro offers 40 tips on how to innovate efficiently.  His tip #11, for example, tackles the topic of innovation competitions and tournaments. The tip focuses on what role, if any, collaboration should play in these bounty-driven events.

Innovation tournaments can be run either competitively or collaboratively, Shapiro says.  In a competitive tournament, such as ones run by Cisco and LG Electronics, no participant can see rivals’ submissions.  In a collaborative tournament, such as GE’s Eco-Imagination challenges, anyone can see a submission and comment on or vote on the entry. The Netflix Prize and X Prize use a hybrid version, running the tournaments as competitions for prizes but allowing for collaboration within each submission.

Which approach generates the best solutions? Collaborative tournaments work best in areas where problems require “cumulative knowledge” or “building on best practices,” Shapiro says, citing research by Kevin Boudreau and Karim Kakhani in the Sloan Management Review. The collaborative approach lets players build on to each other ideas and create more refined ideas based on feedback from other participants.

Competition, in contrast, is most effective when the problem requires broad experimentation with an emphasis on truly new ideas rather than refined ideas  The competitive aspect means that many different ideas are pursued simultaneously. Whereas collaboration enjoys the benefits of players influencing each other, competition enjoys the benefits of players being independent of each other, thereby avoiding problems like groupthink, which might artificially narrow the ideas along the basis of the first idea suggested.  In some cases, a hybrid approach will use competition in phase one of the tournament to gather a lot of ideas and then use collaboration during a second phase to flesh out and refine the most promising ideas.

Action

• Hold an innovation tournament to access the innovative energies of suppliers, customers, and smart people from around the world.
• Use a collaborative tournament if you need ideas that are cumulatively built and more carefully refined by the players.
• Use a competitive tournament if you want a wider range of “left-field” ideas and plan to do your own refinement or hold a two-stage contest in which the second stage refines the ideas of the first.

Point:  Budget constraints demand frugal innovation.

Story:  In 2005, NASA’s Constellation program – tasked with designing a way to get humans to the moon and eventually to Mars – suffered a 45% reduction in R&D budgets during the process of getting Constellation running.   “We knew those resources weren’t coming back,” said Jeff Davis, Director of the Space Life Sciences Directorate at NASA’s Johnson Space Center. “We thought to ourselves, we can’t get this done just doing 45% less. We need to approach this whole program in a new way.”

Davis’ team looked for new ways to work and began exploring alliances and external innovation platforms. The team hit upon the idea of using open innovation challenges at about the same time that President Obama’s Open Government Initiative encouraged public participation and the Office of Management and Budget issued guidelines on using prizes to spur public participation to solve innovation challenges.

Using the InnoCentive platform, Davis’ team issued an open innovation challenge entitled, “Data Driven Forecasting of Solar Events,” seeking solutions for how to predict particle storms that would pose a hazard to the Constellation spacecraft above the earth’s atmosphere. An engineer from rural New Hampshire provided the winning solution. White House Chief Technology Officer Aneesh Chopra described the results:

“I share with you the results of NASA’s early experience with Innocentive’s scientific expert network platform, a platform of 200,000 scientists, where NASA said it would pose a few difficult scientific challenges.  One of the challenges was, ‘how can we forecast solar activity to better predict when to release our rockets into space?’” This was a vexing problem that NASA had been grappling with for more than 30 years.  By putting the challenge out to the public, a semi-retired radio frequency engineer living in rural New Hampshire had the opportunity to share his idea on how to address the problem. [All the engineer needed] was a simple Internet connection.  No complicated RFP, the need for a lobbyist, some convoluted process – just a smart person in our country who could help solve a difficult scientific challenge and was paid a modest $30,000 for that insight.”

Action:

• Consider open innovation methods such as external challenges as a cost-efficient way to spur innovation.
• Subdivide large R&D efforts into smaller R&D challenges that members of an open innovation crowd are more likely to be able to address
• Use a pre-existing platform to quickly reach a critical mass of solvers

Sources:
Open Innovation Marketplace, by Alpheus Bingham and Dwayne Spradlin, Financial Times Press, 2011.

Aneesh Chopra, “Rethinking Government” address to the Personal Democracy Forum 2010, posted June 12, 2010

NASA Innovation Pavilion on InnoCentive.com