Traditionally businesses developed all their new products in-house using ideas that came from their Marketing or R&D departments (or sometimes the MD’s pet projects). Increasingly this internal focus is being replaced by a more powerful and effective approach – open innovation (OI). OI involves harnessing the ideas and development capabilities of outside partners to bring new products, services and methods to market quickly and profitably. Companies like IBM, Procter and Gamble, Kraft Foods, Reckitt Benckiser and Unilever are all leading exponents of OI. Crowdsourcing is a version of OI in which you typically throw out a challenge to a crowd of experts who separately compete with ideas to solve your problem. Here are ten top tips to help you grasp the benefits of OI for your company:
1. Define what you want to achieve
Assess in what areas you need more innovation. Ask how effective are your capabilities at developing new products or services. Identify the areas where you need to be more effective.
2. Set Goals
Set some measurable and timely goals for what you want to achieve. CEO Laffley at Proctor and Gamble set a target of reaching 50% of new product innovations from outside the company – the goal was met.
3. Assess your level of openness
Most companies are remarkably difficult to approach with new ideas. They are internally focussed and there are cultural barriers to accepting initiatives and suggestions from outside. Carry out an audit of how easy or difficult it is for outsiders to contact the right person and then work with your company. You might be surprised. Take actions to fix the problems.
4. Define your challenge
You can just ask for suggestions on any topic that people want to make but there is a danger that you will be flooded with low value ideas. It is generally better to be very specific about what you are looking for – e.g. ‘We want new materials that will perform well in corrosive or extreme temperature conditions’. The more specific you are the easier it is for specialist outsiders to know if they have a fit.
5. Choose your method
There are several different approaches that you can use. E.g. you can throw a specific challenge to anyone who wants to submit an idea or you can pre-select a community of potential partners who meet your criteria. It is good to read up what other companies do and see the pros and cons of various approaches before choosing the one that best suits you.
6. Design your portal
Most people approach your company first through your website so you need a portal specifically for potential OI partners. Here you will explain your approach, define the current challenges, explain how partners can submit, give a list of examples, benefits, contacts etc.
7. Think win/win
This is potentially the biggest barrier that has to be overcome for success with OI. Some of your people may see suppliers as adversaries to be ground down. Others might be hostile to the idea of sharing intellectual property (IP). You have to change the culture to one where people think in terms of a win/win outcome. Suspicion has to be replaced with trust and that involves an element of risk.
8. Put the right people on the case
Do not put a junior R&D executive in charge of your OI initiatives. It should be someone reporting to the CEO. They must have the clout to change things and overcome the many internal barriers that will be put up.
9. Get a good legal agreement
You are going to share IP, risks and rewards with an outside individual or company. You need an agreement which is fair to both parties. Your legal department is used to making your interests paramount but here you have to be fair and flexible. See if you can get hold of sample agreements from other companies.
10. Maintain high-level involvement
Do not initiate OI with a great fanfare and then delegate and forget it. There will be many difficulties and issues along the way so it requires continual monitoring and support. It is risky and fraught with possibilities for error but the potential rewards are huge so it needs the leader’s time and commitment.