Open Innovation & Impatience: Start Innovating Already

A few months ago I was asked to do a keynote address on Open Innovation and Branding. So this post is basically about that keynote titled:” Start Innovating Already: A Punk View of 13 Poisons to Open Innovation”. It’s intended for new-comers to the field.

There are several mounting market reasons why Open Innovation is a high priority.

Hyper Innovation is Growing

Frighteningly, shorter and shorter product cycles threaten early commodization

much more so than can be anticipated even in the best laid product lifecycle plans.

Luckily, those just learning about Open Innovation have a bevy of online resources at their fingertips: Henry Chesbrough’s Forbes column, Twitter chat groups, discussion groups on LinkedIn, web resources like Braden Kelly’s Blogging Innovation the Open Innovators , The Open Innovation Community and Sweden’s Innovation Management websites, as well as numerous scholarly books on this important subject. A great start, of course, is the trilogy by Henry Chesbrough, the godfather of Open Innovation.

But what’s missing from these abundant resources is a more dark, edgey voice or tone, one which might galavanize a new, younger generation to heed the new strategic business imperative of adopting Open Innovation practices.

And that’s why my slidedeck is slanted slightly to the dark side – bringing in lesser discussed company stories (like that of National Public Radio (NPR) and the LA guerilla restaurant, LudoBites). These stories are each quite purposefully outside the usual OI consultant’s fare. Through the Netflix example I attempt to show how the topics of crowdsourcing, gamification, IP management and Open Challenges interweave to create a rich Open Innovation story.

In the end, the most important reason behind both my somewhat off-color title as well as the choice of case studies presented here is this: Be impatient. Be very impatient. Realise that for most companies “Innovation as a Try-on”is not an option. The companies I describe in this slidececk were highly stressed into a position of near commoditization, facing replacement by competing newer technologies and myriads of competitors and /or unable to abide by the usual market rules due to the 2008 Econolapse. (This is in fact my own experience in startup modes: You do because you must.)

So if I appear to have introduced OI in too discomforting, snarky a manner, understand that it reflects my belief that the impatience factor is under-represented in most discussions. Given the vast army of consultants in OI, (there are more scouts or planners than do’ers according to The Open Innovation Map) perhaps we just need a bit more impatience and the energy which it creates.

Perhaps we need fewer calmly stated, neutral gray business statements (eg. using words like imperative, mandate and exigency) and more frontal statements – yea, expletives- which encourage impassioned and speedy acts of Open Innovation execution.

And with that, here’s the presentation…

Start Innovating Already: 13 Poisons to Open Innovation
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Crowdsourcing + Open Innovation Fuel a Multi-Billion Dollar Prize Market

(This is Part 1 of a 2-part posting.)

One of the fabulous things about the internet and this era of user-generated content, social platforms and collaborative technologies is that they have made us keenly aware of the many talented people out there. It’s silo-breaking, allowing us to identify and access the genius talents of individuals outside our organizational borders. It’s community building, allowing realization of team strengths and the development of new social skills that magnify group intelligence. 

Best of all, the new social web has built-in PR: a resident blogosphere which writes up and actively discusses these team collaborations, many of which, like the DARPA Red Balloon Challenge, light up the public imagination of what’s possible. No where is this more apparent than in the emerging world of incentive-induced prizes and contests, where a cash reward is offered to encourage pursuit of a specific goal.

As I wrote in an earlier post, nothing so woke me up to the potential value of contests and prizes in changing the rules of business-as-we-know-it  as the NetFlix Prize, attracting over 51,000 contestants with the hope to win $1 Mn for improving a movie recommendation engine. There’s consensus that NetFlix leveraged that investment extremely well in terms of received R&D benefit, marketing community brand building and much more.  In fact, there are marketing lessons in the NetFlix Prize that any prize sponsor or challenge seeking organization can learn from.

According to a recent post on the TechPresident blog, the latent potential of such success-contingent prizes has not been lost on the White House which issued a directive on open innovation in January.  Two weeks ago, the Office of Management and Budget  released guidance to federal agencies on how they could legally arrange contests to seek ideas  for using technology to promote innovation, open government and other national priorities. The message is clear: “Go forth and crowdsource.”


To facilitate the agencies’ action on this, the White House is launching  a public website within the next 4 months which agencies can use to “advertise” and promote their challenges  Adding momentum to the initiative, Michelle Obama simultaneously launched her “Apps for Healthy Kids” contest, part of her Let’s Move campaign.  The contest invites software designers, game developers and others to build fun and engaging tools to motivate children to eat better and engage in physical activity. It has  built-in lesson to agencies watching too as the contest design requires using the USDA nutrition data set. What a clever and constructive way to build a better user interface to what would otherwise be fairly dry and abstract data to kids.

Starting with a great example is smart, but how will federal agencies new to this learn the intricacies of both crowdsourcing and contests? (Obviously, DARPA, NASA and a few others within the fold have talents to share.)

 

Enter McKinsey’s Roadmap for Understanding Prizes


For those seeking to understand how to successfully construct prize contests and challenges, the OMB memo references a 2009 McKinsey study “And the Winner is…Capturing the Promise of Philanthropic Prizes” . This  124 page report describes McKinsey’s research, case studies, a rather comprehensive database of prizes as well as  their future potential. But what makes the report extremely valuable is that it leverages the knowledge of sponsors and administrators of some of the best known and successful large-scale prizes, including interviews with experts from NetFlix, The World Food Prize, the X Prize and many others.

 

The Attention Rivetter: A  $1-2 Bn Big Prize Market


What’s capturing a bit of attention right now is that McKinsey estimates there’s a $1- 2 Bn Prize market today in the U.S. – and it’s growing.  They point out that the dollar amount for prizes over $100,000 has tripled in the last decade to $375 million a year, expanding particularly in the area of incentive-induced prizes.

Now with part of  federal agency budgets to be unleashed soon, there’s more money to add to the prize pot. As Thomas Kalil, Deputy Director for Policy at the Office of Science and Technology Policy at the  June 2009 incentive2innovate conference  reminded conference attendees,


When you consider that the government invests a total of $150 billion in research and development, there’s a bit more room for experiment in this area.

 

Starting Point: What Types of Prizes Exist?


One of the more useful thought tools within the”And the Winner is…” report  is a description and analysis of  six archetypal prize types. ( The diagram below modifies the original McKinsey exhibit to include some of their examples for each prize category.)

 

Source: McKinsey’s “And the Winner is….” Report

We are all perhaps most familiar with their “Exemplar” form of prize, one, like the Nobel prize, which sets a standard for excellence in a field. But there are newer, less familiar prize forms here, ranging from the narrow  “Point Solution” (eg. NetFlix prize) in which a specific challenging problem is posed to the broader “Market Stimulation” type, the canonical example of which is the X Prize portfolio, in which real world market conditions are emulated inside the challenge.  Perhaps nothing so raised public perception of the raw power of prize development as the $10 million Ansari X PRIZE, which helped ignite the development of the private spaceflight industry.

The diagram is great mind food for considering the types of prizes your own organization might consider, depending upon your goal.

What prize can your organization offer? Will your organization build and implement prizes? Or will your organization seek to win one of the prizes to the benefit of your brand’s value?

If I’ve inspired you to read McKinsey’s “And the Winner is…” report, that’s great. That was one my goals. But bear in mind that while there’s a groundswell of interest in prize mechanisms to address complex problems and identify emerging markets and a growing corpus of knowledge, the report makes clear that the intricacies of successful execution are non-trivial.

In my next post, I will continue this topic, summarizing some of the business efficiencies associated with prizes that are wooing government as well as commercial ventures, despite the complexities. I’ll also identify some of the pre-game players who stand to win one of the near-term “prizes”,namely, building the infrastructure itself for the new prize-driven government and commercial markets.