Open Innovation: Getting to the Next Level

Almost all companies in every industry have some kind of open innovation or external collaboration platform today. The challenge is to get to the next level and reap the full potential.

Help us write THE Open Innovation Book. You can start by checking out my call for contributors, see the content and chapter overview and get a feel for chapter 1. This post is about Chapter 2: Getting to the Next Level.

Here you get an overview of the pieces and snippets that I would like to bring together for this chapter on getting to the next level. Share your comments, reflections and questions by dropping a comment.

All contributors will be mentioned in the book. Join us :-)

Three Generations of Open Innovation

We currently have 3 generations of open innovation:

Generation 1: What is open innovation and why is this relevant to our company and industry? These questions are not yet answered to a high degree. I guesstimate that 60% of all companies are still in this phase.

Generation 2: The key question is no longer why, but how. Here companies already have an organizational structure in place although with lots of room for improvement and they have innovation partnerships with one or more value pools (i.e. suppliers, customers or startups) that deliver real benefits. About 35% is in this category.

Generation 3: Open innovation is being embraced deep into the organization and there is no longer a clear difference between innovation and open innovation; it is just innovation now although with a much higher external input than 5-10 years ago. My guesstimate = only 5% here.

I have likened open innovation to a business game, which is highly relevant for generation 2 and 3 companies whereas generation 1 companies should focus their efforts on getting started as the train is moving fast now.

Suggested Actions?

I could write a long list here, but instead you only get two bullets: 

• Build the foundation: You cannot build a strong reputation and a perception of being a preferred partner if you do not have the infrastructure in place to deliver on your innovation efforts.

• Build the perception: Once the foundation is in place, you must make others believe that your company has what it takes to be a “preferred partner of choice” within your industry.

Building the perception is to a high degree based on stakeholder management and communication efforts (primarily externally focused) and I don’t think this is high enough on the priority list at most companies even though it is key for grabbing the top position.

Slow Movers, Fast Losers:

A while ago, I shared an update that went like this:

“Open innovation in Thailand does not look promising. I only get 50 LinkedIn profiles in my search on "open innovation" in all of Thailand. This is significantly lower than what I see in many other countries. I am visiting Bangkok this Wed/Thurs. Looking forward to it.”

A friend of mine, Michael Wallenius, had a swift reply that went like this:

“No, Stefan Lindegaard! That looks VERY promising! Think about the potential of opening up a new world for the Thai people! The potential of growth is enormous... :-)”

I can see where Michael is heading with his comment, but I disagree and my reason is very telling of the times of fast pace and change that we have today.

If a company or a country does not already have a strong or at least a decent innovation platform today, they are behind. Yes, there might be a larger potential to build upon, but it is my experience that the future winners are those that are already doing well. The pace of business and innovation today means that the gap will only grow bigger and unless you have a very dedicated effort on a corporate or national level, it will be difficult to buck the trend and close this gap.

I like visiting Thailand for business as well as pleasure, but they have a huge challenge ahead of them. Will they succeed? Time will tell, but in the coming years they can pick up some lessons – good as well as bad – from countries and regions like Turkey, UAE and South America where there is a growing understanding of innovation management.

It will be interesting to see how companies in these regions move from generation 1 to 3.

How Companies Must Learn, Unlearn and Relearn:

Not so long ago, I read this great quote by Alvin Toffler.

"The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn."

What if we put this into the context of corporate functions and the rise of collaboration and the shared economy?

Production / supply chain: Companies learned to make their products and services by themselves; then they unlearned part of this in order to become even better through outsourcing and supply chain systems.

Most companies master this critical function so the relearning is more about how to engage the production and supply chain into other functions and in particular into the innovation processes as there is a huge untapped potential in supplier driven innovation.

Sales / marketing: Sales is one of the key elements for any company. If you cannot sell what you make then nothing else matters. But many companies today must unlearn how they have been selling in the past and adapt to a sales process driven by the sharing economy and peer-to-peer recommendations.

R&D / innovation: If you follow my work, you know that I am a strong believer that innovation – and thus R&D – must go beyond products and technologies. It must also embrace business models, services and processes while the capabilities in this context also merge internal and external resources. There is a lot of unlearning, relearning taking place here today.

Human Resources: The fast pace of business today requires a new mindset and new skills – and we need to take a hard look at our organizational structures. Are what we have today really what we need in the near future? I don’t have a clear answer on this, but I find experimentations such as Holacracy at Zappo’s really interesting.

Management: Well, someone got to take the lead on this and here we have the biggest challenge. We can definitely talk about unlearning and relearning here. Many executives will not be up for the job and that will have severe impact on their companies.

When Open Innovation Becomes Corporate Transformation - Great Lessons from GE:

GE is one of my favourite companies. Period.

With regards to open innovation, they are a strong leader and one of the most advanced companies with regards to mindset, efforts and capabilities.

Just take a look at this manifesto.

The GE Open Innovation Manifesto

We believe openness leads to inventiveness and usefulness.

We also believe that it’s impossible for any organization to have all the best ideas, and we strive to collaborate with experts and entrepreneurs everywhere who share our passion to solve some of the world’s most pressing issues.

We’re initiating a fundamental shift in the way we do business – this is what we’ll stand for in our open collaboration efforts and how we will operate. 

• Customer focus, imagination, courage, expertise, inclusiveness, and clear thinking will always guide our collaborative effort.

• We will openly celebrate the efforts of lead solvers who have submitted winning solutions within our public collaborations.

• We’ll collaborate with transparency – publishing evaluation criteria, rules, compensation and IP rights at the launch of our engagements.

• We believe ideas should be compensated – and compensation pools will always reflect level of impact, effort, commercialization risk and IP rights.

• We’ll provide access to pools of IP to enable the Global Brain to create new and beneficial outcomes.

• We’ll never stop experimenting, collaborating and learning – we’ll get smarter as we go, and the Global Brain will evolve and grow with us.

You can get an idea of the activities based on the manifest on the GE Open Innovation website.

Companies need to know why they are pursuing open innovation and they need to be strong communicators on their efforts. Those are two key steps in my framework – 7 Steps for Open Innovation and I like how GE makes this happen.

It becomes even better when GE starts using open innovation as one of their key drivers a corporate transformation process towards becoming the leading digital industrial company. The main program for this is called FastWorks. Check it out here.

The Power of Many

“The challenge of achieving more efficient and sustainable energy production is too large for one entity to address alone,” said Eldar S?tre, president and CEO of Statoil.

This is key reason why two big global companies like GE Oil & Gas and Statoil decided to work together on one of their open innovation initiatives rather than just using their sheer size to do it by themselves.

The initiative is called Powering Collaboration and here GE Oil & Gas and Statoil aim to solve some of the biggest problems facing the global oil and gas production. Grand Challenges with prizes up to USD 500,000 is a key element in the initiative.

Having two or more companies team up on initiatives and platforms like this is an interesting development that we will see more and more of in the coming years among the mature and seasoned companies in the context of open innovation.

We are moving from a mindset where open innovation is about one company addressing many companies/users to a mindset where it becomes more common with a setup with a few or even many companies that will address many companies/users.

This is a good development.

An Example of (Slow) Open Innovation in Healthcare:

I actually like the efforts of GSK Consumer Health when it comes to open innovation.

They have a decent portal for this, they use the Want-Find-Get-Manage framework, which works well for many companies and my interactions with some of their people leads me to believe that they are on the right track.

However, I did stumble over an interesting thing while browsing their portal in early 2015 and I sense this is an element that haunts many companies that are pursuing open or external innovation and in particular within the healthcare industry.

It is a lack of speed.

When I clicked to see the open innovation pathway at GSK, I noticed that it took GSK more than 3 months to do an early stage review and 12-18 months to carry out R&D and/or consumer testing to determine fit with GSK brands.

This is a paradox as many of the companies I interact with on their open innovation efforts state that speeding up the innovation process is a key objective. I acknowledge that the healthcare industry can be more difficult than other industries with regards to innovation due to regulatory issues, but sometimes you also need to look at your setup and processes.

This is the explanation on the issue taken from the FAQ pages from the innovation portal:

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1. Why does the process take 3 months and what is happening during this time? 

Once GSK receives your information, we will follow up with you within 48 hours to let you know we have received your idea. Because there are several functional groups within GSK that need to review the information and determine feasibility, it often takes time to coordinate input from the various team members. We are committed to move the idea as quickly as possible and provide a response in a timely manner.

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It should not take 3 months to get back to potential partners with an early response. If a company is really committed to move ideas quickly and provide a response timely, they commit the necessary resources and work out strong processes to do this.

I don’t think this is the case with GSK and this is a bit of a shame as I believe they are doing some good things. I just don’t hope their handling on this important topic of getting back to potential partners will give them a bad reputation for being slow because such a reputation can travel fast and long.

You don’t want to carry such a reputation for obvious reasons and in particular not in a situation where the key reason for companies to adopt open or external innovation is speed.

Maybe this little story can serve as food for thought for GSK as well as other companies within and outside the healthcare industry.

I think this is a nice example on one of the many elements that companies aspiring to get the next level of open innovation should look into.

Clorox - A Company on the Next Level:

Clorox is one of the leading practitioners of open innovation. Not many people really know this, but it becomes obvious, when you interact with Clorox people and listen to their presentations.

Navin Kunde, Business Networks Leader at Clorox, gave a great presentation at the Open Innovation Summit in Chicago end of 2014. The presentation, which he has given me permission to share with you, focused on three key takeaways.

1) Focus on fewer partners who can deliver deeper, more effective relationships that drive business results

2) Innovate with partners who are not the usual suspects

3) Invest in tools and processes, which build a culture of innovation throughout your company

You can find the full presentation on 15inno.com: Focusing on Open Innovation Efforts to Drive Business Impact by Navin Kunde, Clorox

I hope the below appetizers will entice you to look at the presentation and do some more research on Clorox on their open innovation efforts. Here we go:

Organize network partners for competitive advantage!

Clorox say that “we build cutting edge networks and partnerships that drive technical innovation and accelerate growth”

A network is defined as “A network is a collection of people or entities, including external and internal partners, who have the knowledge, experience and connections to effectively educate and help execute current and future initiatives, while reducing risk.”

When you look at the presentation, you can see that Clorox has done some interesting work on mapping their networks.

Partnerships on three levels

Clorox has three levels of partnerships with their supply base.

1) Transactional relationship: Engage on innovation only when they bring significantly differentiated capabilities

2) Preferred partnership: Provides some innovation value, with proportional investment in relationship

3) Strategic partnership: Deeply integrated teams (e.g. Glad JV), and core innovation suppliers (e.g. win-balance, core fragrance)

Clorox applies a Win-Balance program to their level 3 partners, which is ultimately an exercise in strategic governance. The tactics include: 

• Share deeper strategic insight with Win-Balance partners

• Proactively engage at multiple levels of the Clorox organization, and across the breadth of Clorox business units

• Promote business growth with Win-Balance partners through preferential engagement relative to non-Win-Balance suppliers

The Clorox benefits from the program are: strategic clarity, deeper collaboration and supply base consolidation

In the presentation, Navin Kunde also shared some insights on two specific innovation initiatives at Clorox named !NNOVENT and The Creative Coalition and he provides an overview of one of their networking programs.

The latter in particular looks quite interesting and seemingly very successful with internal feedback such as “Over half of R&D managers now strongly support external networking, up from one-third a year ago!” and “Significant increase in value from interactions with external experts and suppliers (33% and 45% respectively)”.

Some quotes by Lindegaard:

“Know your internal, external stakeholders if you want open innovation success. Are they backers, blockers, neutral? Why?”

“Open innovation works best at adjacencies; not in the core. Companies should structure efforts for this”

“When are you successful with open innovation? When organization no longer differentiate between internal or external innovation; it’s just innovation!”

“Open innovation today is not just about companies and people. If you want to be a leader in this field, you must also master the machine to machine innovation interactions as driven by the IoT movement. More complexity, more challenges – yes – but also more opportunities.”

Key questions for contributors to the book:

Are we missing something important for this chapter?

What companies do you see as the leaders of open innovation? Why?

Drop a comment or get in touch!