Point: Open innovation makes developing niche products and services affordable

Story:Tesco.com, the world’s largest online grocery retailer, is opening its API to third-party developers. Developers get access to Tesco’s powerful grocery engine to design apps for specialized purposes. For example, a developer could design an app for customers who have an allergy to peanuts. The app would display only those Tesco grocery items that are free of any peanuts. Likewise, another app could focus on calorie counting: customers could order just the right amount of food to stay within the calorie, carb, and fat limits of their chosen diet.

The Open Innovation strategy is a win/win: Tesco doesn’t have time to develop and support all these apps internally, so it benefits from the skills of external developers. The developers might have special relationships with particular customer segments (e.g., a tie to allergist or being the author of a best-selling diet books).  External developers get compensated (currently 5 pounds) for each new customer who signs on to Tesco.com, and they receive a micropayment for each purchase made that used the app.

The biggest hurdle Tesco executives had to overcome before opening up to external developers was “allowing someone to be between us and the customer,” said Nick Lansley, head of Tesco.com. “This is an issue. But what convinced us is that we don’t have the time or resources to write for all these different websites, but others do.”  Tesco requires that developers must support the app and they can’t use “Tesco” in the title, only “powered by the Tesco API.”  To further convince developers that the initiative is real, Tesco stated that they will maintain the API for at least two years.

Action:

1. Define a reusable interface that lets software developers bundle or use your systems to meet new needs
2. Create a mutually-beneficial compensation plan to both attract developers and to encourage developers to attract customers
3. Pledge to support the API

For Further Information:

http://www.vimeo.com/7738321

Point: By picking where open innovation occurs and what it communicates to the rest of the organization, innovators can protect open innovation efforts from corporate antibodies

Story: All organizations, especially large ones, have an “immune system” in the form of an army of fine-tuned antibodies that root out risk and threats to the smooth-operating status quo.  These antibodies help drive efficiencies, attack waste, promote uniform performance, and prevent infection for foreign ideas.

That’s good for efficiency, but innovation requires taking risks and changing the status quo to create more value.  That makes innovation a prime target for the cleansing action of antibodies.  Open innovation is especially prone to antibody response because it involves foreign ideas.  At the December 2009 Open Innovation Summit, presenters from HP, CSC, Clorox, and Shell described how they avoided corporate antibodies at their companies.  The techniques addressed who participates in open innovation, where they operate, and what they communicate so that innovation succeeds and doesn’t get killed by antibodies.

For example, Russ Conser, Manager of EP GameChanger at Shell, offered a good metaphor for where to do open innovation.  He showed an image of a young girl building a castle in a sandbox under a large umbrella. The sandbox metaphor works on two levels.  It provides a protected place for innovation to do its value-creating experimental work.  The sandbox also is the container for the innovator’s gritty sand, protecting the larger organization from the risky rough ideas.

Phil McKinney, SVP and CTO at Hewlett Packard, concurred — HP put its OI in a quiet corner of the Personal System Group. The sandbox creates an antibody-free zone for innovation work and protects the larger organization from the early-stage risks of innovation.

When communicating about open innovation efforts, innovators’ communications can either attract attacking antibodies or help pacify them.  What innovators and their representatives say determines how antibodies react. For example, Lemuel Lasher, Chief Innovation Officer at CSC, cautioned that innovators shouldn’t be too quiet or too secretive, especially when the facts are on the side of the innovator.  Innovators should be provocative as long as they don’t provoke too strong an immune reaction.

Ed Rinker, Manager of the Technology Brokerage Group at Clorox, used hard-hitting facts to convince his organization to deviate from its brand strategy.  Consumer trends toward gentle green and natural products seemed antithetical to the Clorox brand of strong cleansers.  Rinker used facts like marketing tests that proved  consumers preferred GreenWorks with the Clorox name on the product to convince the antibody nay-sayers.

The most-cited communications recommendation, used at HP and Shell’s programs, is communicating what the innovators did and not what they are doing or planning to do.  This focuses the discussion on the new products, new customers, new revenues, and new profits generated by innovation, rather than on the potentially risky or disruptive projects underway by the innovators.  Shell’s Gamechanger Group continues to thrive after 12 years inside the billion-dollar giant because they show results.

Action:

• Find an ‘air-cover’ executive who provides the umbrella of protection for innovation
• Use a quiet corner or sandbox where innovators can generate results without interference or creating risk
• Describe the good projects you did, not the risky projects you’re doing or plan to do
• Live on the boundary between sufficiently provocative and excessively provoking

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Point: When reviewing the ideas submitted to your open innovation portal, identify ideas that have momentum and ideas that are outliers.

Story: Open innovation efforts yield many ideas, often too many to use. So, what’s the best way to manage and make productive use of the ideas you receive? To answer this, I interviewed Jim Todhunter, CTO of Invention Machine, as part of the Open Innovation Summit held in Orlando December 3-4, 2009. I asked Jim about how Invention Machine Goldfire software can be used in open innovation efforts. He described three key tasks to do after you have received a set of submissions from an open innovation effort.

The first step is to organize the ideas into buckets.  Todhunter described how Goldfire speeds this process and reveals relationships among ideas as well. Goldfire uses semantic technology, which means that it’s not limited to finding exact keyword matches when searching or analyzing submissions. Rather, semantic engines understand the meaning of the words, so they can cluster related ideas regardless of the specific terms that users submitted. That’s a useful feature for open innovation, because people often use different terms or nonstandard words in their submissions. Semantic technologies find text that has similar meaning, even if it does not use identical words.

Todhunter illustrated the second step with a hypothetical example. Let’s say you’re a medical device company looking for innovations related to sphygmomanometers (the familiar arm-cuff device for measuring blood pressure). Goldfire will automatically divide your open innovation ideas into different tiers of concepts. Top-level tiers are general concepts and concepts around functionality. Finer-grained buckets under these meta-categories are categories like advantages and disadvantages that your customers see about your product or competing products.  For example, within the “advantages” cluster you might notice that a customer submitted an idea referencing an advantage of a competing product by saying “this other sphygmomanometer doesn’t pinch when people pump it up.” Regardless of the specific terms that a person uses, Goldfire can identify a concept like “pain-free use” and create a cluster of that concept.  If several other people use terms such as “pinch” “hurt” “discomfort” or “squeeze”, then you know that’s a key issue to focus on. Identifying ideas that have momentum helps the company serve existing customers better.

But it’s not just the momentum ideas that have value. In the third step, you identify a different type of potentially valuable suggestion. Specifically, Goldfire looks for what Todhunter called “singularities” — outlier ideas that had very little discussion. Outlier ideas may be worth nothing or they may be the future of the company.  On one hand, the dearth of discussion might mean that the idea wasn’t very useful. On the other hand, that singularity may be next new application that is just starting to emerge. “Singularities represent interesting, unique points of value that may relate to unserved audiences, new applications, new applications of technology, or new pockets of interest that you as a company haven’t served — these can be your underserved communities that create the opportunity for new disruptive market elements,” Todhunter said.

Action:
1. Gather as many open innovation idea submissions as possible
2. Quickly bucket the ideas (and parts of ideas) to look for patterns
3. Look for the most-mentioned ideas to find high-priority innovations
4. Also look for outliers to find potential high-value innovations.

For more information:

Open Innovation Summit

Invention Machine

Jim Todhunter’s blog: Innovating to Win

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