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Two models of open innovation

Based on our recent experience of working on open innovation projects, and also building upon a great paper by Kevin Boudreau and Karim Lakhani, we have concluded that there are two distinct ways of doing open innovation – creating competitive markets or collaborative communities – that we call Discover and Jam, described in detail in this post and in the video below.

The Discover style of open innovation

A successful Discover programme starts with a ‘what’ question: ‘What is the specific idea or technology we need?’   A requirement or problem statement can be written as a clear brief whether it is a technical solution you are looking for or a specific new business partnership.  This question is a useful beginning when improving existing products and services or innovating in a mature market.  It is useful if you are looking for new technologies to licence or when you have a clearly articulated innovation strategy and a designated road map.  In our model we name this style of open innovation ‘Discover’.  Our OSCR project with Orange is a case in point.  Orange had a clear strategic need to unite product offerings across its ‘three screens’ of web, mobile and broadband.  This was the basis of the call for innovative services that we issued to a largely existing partner network.

Discover Stage 1  – Clear thinking

A successful Discover programme starts with a clear brief that articulates an unmet consumer need or a specific business problem.  As open innovation often involves striking up new partnerships, it is important that the brief matters to your firm.  This is true of most strategic innovation, but open innovation is often reserved for peripheral innovations and these may not attract the attention or funding they deserve.

A tight and time-bound brief is not enough. An equally important start-point is a clear notion of what collaborative business models are needed.  This is often overlooked in open innovation programmes and this oversight is the reason why many initiatives fail at the final hurdle.  If the large company is looking for a licensing opportunity, delivery partnership or joint development path it should say so.  Having a clear business outcome also enables a firm to line up the most relevant and internal stakeholders that are empowered to make decisions.  Certainty about business models eases the smaller partner’s decisions such as how much time to invest in the project, what to include for a viable business proposal and whether investment in costly IP is necessary. Discover programmes tend to result in ideas being taken to market by the large firm, using its reach to achieve scale.

Discover Stage 2 – Open competition

First you need to identify the relevant supplier, customer or consumer communities to form a competitive innovation marketplace.  This audience will often comprise both existing and new people in an attempt to explore fresh avenues whilst including existing partners.  Common errors here include underrating or neglecting existing relationships and not allowing enough time to build strong new audiences.

The brief is launched next at an event and preferably online.  The event gives competitors a valued chance to meet the innovation professionals and clarify the brief and judging criteria. The online presence creates as easy channel for communication and also demonstrates that the corporate is publicly committed to the process, building trust.

Entrepreneurs from these communities respond to the brief independently and competitively.  We have found that short, compacted time-frames of 2-6 weeks impart momentum and a sense of excitement to a challenge for both entrepreneur and firm.  This project-led approach is a subtle but important feature of all our programmes and can bring results faster than a more organic, culture-led way of operating open innovation.

Discover Stage 3 – The Airlock

The airlock is a term we have coined for the period of judging, developing, protecting and prototyping innovations.  It works via trusted agents that represent to the corporate and the community. The ideas are not exposed to the firm at this stage. This is a vital stage for building confidence in the process and allaying fears about the protection of any intellectual property that will be presented.

The trusted agents perform their most important role in this stage.  The firm’s representative acts in loco parentis and picks those ideas that have most potential for their client.  The agent’s intimate knowledge of the corporate strategy makes for relevant submissions with minimum potential for irrelevance or conflicts with existing projects.  The community representative brings deep experience of the marketplace and an instinctive feel for originality and credibility.

A powerful and unexpected benefit of this stage was the development of a more suitable pitch approach.  The entrepreneurs we worked with reported that this was the most useful aspect of the Discover approach as it enabled them literally to speak the client’s language, refine the business model and practice answering probing questions.  Enterprises reported back that the general quality of thinking and presentation far exceeded the normal standards they were exposed to.

Discover Stage 4 – The Pitches

The next part of the process is a formal pitch by the selected entrepreneurs.  They get rapid feedback within a specified time-frame and a short list of ideas is accepted by the large firm for evaluation. Those ideas that don’t make the short list revert to the originators, who are free to approach other potential partners.  This aspect of open innovation helps small firms justify the investment they make in a process with an uncertain outcome.

The short-listed ideas are offered to the large firm that in effect has the right of first refusal.  There usually follows a pre-contractual period during which the innovator cannot present to others and at the end of which the corporate has to make a firm decision either way.

The feedback from our Discover projects has been that they largely improve the efficiency of open innovation process.  SME can find relevant opportunities and can estimate their resource costs. Corporates save time as they see only those ideas that best answer the brief.   Both parties are less likely to run into legal difficulties in the future as the process protects them from inadvertent mistakes.

The Jam style of open innovation

A successful Jam programme starts with a ‘who’ question: ‘Who are the potential collaborators that we can work with to greatest effect?’.  In this case there is no clearly defined problem statement, rather an area of opportunity that will be refined together with your partners.  Such a clear definition would in these situations inhibit the creative freedom needed to create the desired new markets, radical innovations and fresh business models.  The ‘who question’ approach is also useful when approaching new sources of inspiration or unfamiliar sectors and markets. In our model we name this style of open innovation ‘Jam.   Our VJAM project with Virgin Atlantic illustrates this form of open innovation.  The area of opportunity was defined as how social media could improve the whole flying experience. The partners were lead users of the airline, web developers and social media experts.

Jam Stage 1 – Picking the right partners

A successful Jam programme starts with a clear idea of the likely communities or networks that provide the sources of new thinking.  Much attention is paid to finding a group of people or organisations that will work well together, sharing both their aims and the workload as the relationship develops.

Whilst much open innovation takes place between corporate ‘Goliaths’ and external SME ‘Davids’ our project range contains examples of three other sources of partners.  Firstly the end consumers of a product or service are well placed to provide insight.  A proportion of them will also have the skills, attitude and experience to deliver a solution.  Secondly existing suppliers that already have a transactional relationship with their customer are overlooked.  These relationships can be galvanised by sharing innovation projects.  Thirdly a company’s own staff is an important resource.  Not only will they have extended and relevant networks but there may be venturing opportunities involving employees as innovators.

Jam Stage 2 – Open briefing

A further consequence of finding new collaborators for inspiration and specialist expertise is the diversity this creates.  Our Jam programmes all benefited from the diversity and new viewpoints of the participants. A collegiate approach creates the right conditions for create cross fertilisation between unusual partners.

Building on an opportunity area, everyone in the process helps to author the final briefs, often building on research insights or horizon-scanning programmes.  Open briefs maximise creative freedom needed to create lateral leaps.

A key benefit of the Jam style comes from the organic way new business relationships between the participants are allowed develop. This development takes place within a pragmatic approach to intellectual property within a broad and agreed framework.

Jam Stage 3 – Catalysis

The nature of open briefs places more emphasis on brainstorming and other workshop techniques.  The role of facilitator is important in creating a collaborative and status-free atmosphere.  But the role of catalysts in the Jam process extends beyond managing creative events.  We have found that a crucial part of this role, often overlooked, is follow-up.  Innovation events often result in few tangible projects, for want of the relatively simple project management of outcomes.

The catalysis stage can also be usefully augmented by on-line environments.  These complement the high pressure of events and give time for research, reflection and development.  Specialised extended teams can be formed in this way and the interactions on such private social network sites can keep momentum going in between brainstorms whilst building.

Jam Stage 4 – Business planning

In addition to facilitating brainstorms and overseeing follow-up, the catalyst plays a key role in keeping discussions business focused.  At each stage of the programme which may involve several workshops, the collaborators are encourage to iterate better business propositions as well as new ideas.  Different plans can be prototyped and played out in different scenarios.  This process is important as there is less emphasis on passive ownership of IP and more on valuable delivery partnerships.

The aim of the business planning stage is to extract investable propositions.  These can be funded by participant organisations or externally by banks or venture capital.

The process culminates in a pitch where teams have the opportunity to make investment or partnership decisions.  Jam programmes tend to result collaborative business models like joint ventures or delivery partnerships.  A welcome by-product of these programmes is that the communities stay active long after the programme has ended keeping the conversations going, and value flowing.

Summary

So in summary, we believe open innovation is becoming a mainstream business practice and there are two disctinct ways emerging by which organisations do it well that we call Discover and Jam. Discover projects start with a ‘what’ question and are all about creating competitive marketplaces, and Jam projects start with a ‘who’ question and are all about creating collaborative communities. In the spirit of open innovation we share our learnings here with the hope you will build upon them and as ever we would welcome your input and feedback.

2 Comments

  1. Posted April 7, 2010 at 10:31 pm | Permalink

    very thoughtful. essentially, there’s a process which starts with a defined problem and outcome, and is more linear. And there’s another which is more freeform, more exploratory. In my dark advertising days, there were similar processes – one where you start with the brief, and the other where you just start, anywhere, and then work back to the brief / problem. From my experience, there’s no right answer and if you can, do both.

    A more linear process has better chance of being embedded within the organisation, whilst the more exploratory method, often solves problems (and opens markets) that the company never realised existed.

    The main thing for me is the need for ‘follow-up’. Ideas are easy to be honest – wherever they come from, be it a collaboration or competition – the tricky bit is always the implementation, which is the boring bit and there’s never enough focus on this part of the innovation process. The focus is always on the idea – and i see this everywhere, be it in marketing or in the social innovation world – and more and more i believe the ideas themselves are not the things that matter. Embedding innovation (catchy, huh?) seems much more important.

    One final small thing, I’m not sure if Discover is the right phrase (not that it matters a great deal) for the first process. Your second format seems more about discovery / exploration, whereas the first one is more task-based, or solutions-focused. If no one else has noticed….

  2. Posted April 10, 2010 at 8:06 pm | Permalink

    Nice comments http://www.TRAIDmark.org is a model that helps.

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