The further evolution of open innovation

A little while ago I gave a webinar on some thoughts on what I call Open Innovation 2.0. Not being sure of the verbal clarity with which I explained some of my ideas and thoughts on the matter, I thought I would take another stab at it via this medium. If at the end of this little screed it still seems dense and ill penetrating (or worse yet, irrelevant!) to the reader, then I will indeed need to reconsider how I present my ideas, or perhaps, consider whether they are worth presenting at all! To proceed:

Today’s featured philosopher is Georg Hegel, he of the wonderful statement above. For those interested in the idea of passion and pursuit of greatness [in feats and achievements, not persona], I am currently reading Grit: The power of passion and perseverance by Angela Duckworth. Not done yet so no judgement rendered but the book highlights research fathoming the why of what most of us intuitively recognize as intrinsic, namely that the search for excellence requires both passion [a focus of interest] and perseverance [sustained effort].

Which brings us back to Hegel. His passion was understanding the larger experiments of history, the large swaths of time through which ideas and societal norms are established through constructive [mostly] conflict. To this end he describes his eponymous dialectic as one characterized by one pole he terms “thesis,” and its polar opposite, “anti-thesis,” through which the dialectic argument occurs. The two are linked by a goal of establishing an optimal state which eventually occurs through achieving a third meta-stable state which emerges through a melding of the best attributes of thesis and anti-thesis, a state he labelled “synthesis.” A new status quo is thus established until such time environmental circumstances change to start the process over again. This back and forth, to and fro process, has been termed by Hegel’s proponents as the “Hegelian Pendulum.”

Over time, this process, if constructive, should lead to forward progress in social thinking and dynamics as illustrated in the figure below.

Source: https://therevisionists.wordpress.com/2012/12/15/the-economics-of-politics-and-the-arguments-against-the-political-pendulum/

So why am I telling you all this? We can see Hegel’s pendulum in action where it concerns R&D and Innovation. Some of my colleagues in pharma-land lament the swing of the pendulum which took us from the mega-billion dollar deals we witnessed in the 1990's and early 2000’s when the stunning advances in genomics captured the popular imagination and personalized medicine was right around the corner. Doing big deals was the thesis of the day. Suffice to say that many investors, private and pharma alike, might still not have adequately captured sufficient return of capital much less return on capital. But as the pendulum swung to its anti-thesis of going back to basic research at universities, with the advent and investment in translational medicine, I still hear today some 20 years after that, that we still have not reaped numerically sufficient, scalable pharmaceutical invention and innovation. 

I think we might be reaching the same type of pendulum swing with respect to open innovation.

Witness pre-2000 innovation, which I’ll call internal, or “closed innovation.”

In this thesis, all innovation occurs internally. Companies are measured by % of revenues dedicated to R&D and how many publications and patents are generated, and of course, ultimately, how many new products emerge at the end of the funnel.

With increasing globalization of markets and competition, investors became concerned that this model would not produce sufficient innovation and new products and services within established companies. Thus by 2002 the anti-thesis arose: Open Innovation. The accepted definition of “open innovation,” most closely associated with Henry Chesbrough’s definition of “…purposive inflows and outflows of knowledge to accelerate internal innovation…” is illustrated by the below diagram and illustrates the advocation for the ability of the organization to have ideas, insights, IP, innovation to flow into and out of the organization at any point in the “innovation funnel.”

However, almost 20 years on I sense that an Hegelian synthesis looms on the near horizon. Many of our clients and indeed many business publications state that to date we in toto have yet to experience or observe the full and optimal harnessing of the idea of open innovation, viz., the ability to suck in all sorts of external information, insights, ideas, IP, and invention into the organization, combine with internal assets, know-how, and matching internal 6 I’s (Information, Insight, Idea, Investigation, Investment, Implementation) to create innovative new products and services has yet to materialize. 

My simplistic take is two-fold:

1.       Innovation is hard; it is basically serendipity at work; the ability for the right idea at the right time to strike in a way that can be economically leveraged for new value creation

a.      We spend all our time trying to find ways to structure or engineer for serendipity, i.e., create greater probabilities for invention and breakthrough to happen, but this is complex

2.      Purposeful inflow and outflow requires command and control to sufficiently execute due diligence that what is flowing in and out truly has relevance and value to the organization. 

a.      This takes skilled people, energy and time. Having all those holes in the funnel is challenging, and I daresay impossible, for the organization to manage for value.

In retrospect [in true Hegelian synthesis mode] it seems overly hopeful to think that cramming and pushing more things through the funnel and not managing to the bottleneck is going to improve any kind of meaningful output. Drilling holes in the funnel still doesn’t allow us to push more through the funnel. It might allow things to escape, but as many of our clients can attest, knowing which things to let go, and knowing what their place and value in the external world is, is an entire endeavor unto itself and difficult to achieve and scale well. 

Allow me to illustrate by pointing to a much smaller scale example. The most recent Fall 2018 issue of the Sloan Review, has an interesting article by Sheila Dodge, Don Kieffer, and Nelson P. Repenning called Breaking logjams in knowledge work I think addresses what I am mentioning above. In the article they discuss the Broad Institute’s efforts to build an internal (genomics) service center. Pushing more projects through resulted in logjams, more work in process, and delays in delivery. If every project has the exact same urgency then no prioritization can occur, and only massively parallel processing can solve the problem, which brings up cost and manpower. By instituting a pull-based system and creating prioritization rules, the institute was able to significantly eliminate backlogged work in process and speed delivery of services.

I suspect that this is the case with the funnel framework for open innovation; too much push and not enough pull. The funnel is useful in construct since it helps us to convey the idea of a filtering process with an implied utility of finding things of value, but it is decidedly un-useful in that it confuses us about how physics and the world works. Filtering through a funnel is a deliberately slow and steady state task; it does not enable any speedup of process. Punching holes, as mentioned above, in either the front end or back end of the funnel does not speed flow through the pinch point or bottleneck of any funneling process! We need a new model.

More on this later, but one idea is not to filter through funnels but more through a membrane analog; viz., to build networks; through which innovation can break through at any point in the network. Another idea is to stop pushing and start pulling, creating market pull that is. A great example of this is Evonik’s creation of its Creavis subsidiary. Creavis creates “project houses” which undertake exciting moonshot projects; attracting talent, energy, partnerships, and publicity. Success in mission of any one of the project houses creates a new market that pulls and creates demand for the materials and products of the parent company. To do this well is to map the adjacent markets you wish to and can enter. It means taking the time to understand the likely technology road map of each adjacency and attacking purposefully.  It also means that in the meantime, while waiting for serendipity to strike, interesting ideas and IP accrue.

So what are you doing to remove the bottleneck in your innovation process? Further, what are you doing to harness market pull for your organization?