Friday, May 08, 2020

Open innovation resurgence during COVID. Why?

There's been a resurgence lately in the concept of open innovation.  I'm not quite sure why open innovation as a concept has received more press and more attention lately.  It's not as though we have new open innovation methods or mechanisms, or that open innovation has demonstrated more effective outcomes.

Rather, I think, open innovation becomes interesting when we are distributed and looking for new ways of working.  Right now, during the COVID pandemic, there is a big push to engage everyone, and tools like Zoom, Teams, Slack and others seem to provide the means to involve a lot of people simultaneously to address key challenges. For some people, there's always been the sense that getting "more voices" involved will lead to more innovation, and I suspect that's leading to more open innovation now. But - simply because we can engage a lot of people at once, does that mean innovation activities benefit?  I think that depends on the type of innovation you hope to achieve, and where the decision making lies.

First, some definitions

Open innovation has traditionally meant getting ideas or technologies from individuals or teams outside your company.  To my knowledge, the phrase "closed innovation" hasn't ever been a thing, but if it was, it would define doing idea generation entirely within a company, with no input from the outside world.  Of course, as any experienced innovator could tell you, that is almost nonsensical, since gaining customer insight and understanding customer needs is important to innovation.  So, at almost any level, almost all innovation has some sense of "open" in it.

Most innovators will say that "open" innovation involves receiving ideas or technologies from individuals or companies outside your organization.  Of course you can go further, collecting needs, insights, and opinions about what you should innovate, or obtaining help ranking the most important challenges and problems.    In the open innovation world you can decide how "open" you'd like to be - can literally anyone participate?  Or only existing customers and partners?  Or perhaps qualified experts, which is how a lot of open innovation was done in the 90s and 2000s, leveraging panels of registered experts.

Why now?

I think open innovation is gaining a resurgence for several reasons.  First, most of us are at home, and we are collaborating over a distributed platform.  Our context and our experiences are different than they were when we were all in one location  Second, the conditions have changed.  No one is quite certain what the new reality will be, so getting more insight and feedback seems logical.  Third, it doesn't cost anything to add a few more people to an idea session over Zoom or Skype, or to query consumers or partners over a teleconference.  People are more willing to share ideas and opinions now than they were before.

But just because the work is easier doesn't necessarily make the outcomes better.  Open innovation has its strengths and its weaknesses.  What COVID and the distributed workforce have done is make it easier to do open innovation in some respects.  However, these changes have not impacted the value proposition of open innovation. 

Open innovation challenges

The biggest problem, at least as I see it, with open innovation, it that it almost by definition is democratic and must satisfy a lot of people.  We know that the value of a network increases as the nodes increase. However, the value of an open innovation program probably decreases as the number of people involved increase, because their ideas and opinions will differ, and often the goal will be to satisfy many people, which leads to incremental innovation.  If you are familiar with the saying that a camel is a horse designed by a committee, you'll get the idea.

If ideas are really good, and really transformative, why would people share them in an open setting?  Those ideas are much more likely to meet resistance from people defending the status quo, and if they are that good and that valuable, good innovators probably don't want to share them.  Instead, they'll find ways to capitalize on the ideas themselves.

In an truly "open" innovation activity, you'll attract people who are truly interested in solving the problem, observers of the process, possible suppliers of solutions, lurkers and a few cranks who are interested in simply taking potshots at the process.  You may also attract your competitors and new entrants who will seek to subvert the process.  This creates a tradeoff between openness and diversity and vetting the participants and the risk of closing off input.

There's a reason that many really transformative ideas and products have been built by really small teams, in some secrecy or in a skunkworks.  The reasons have to do with expert experience, resistance to change and protecting the status quo.  The more people become aware of an idea that threatens the status quo, the more likely they are to either reject it outright or seek changes to make the idea more palatable. 

Lucky number 7

I've long believed that if you want to engage your customers, obtain insights and ideas from them, and source new ideas, you should engage in an open innovation activity for idea generation, but when it comes to trying to create really transformative or disruptive ideas, the largest team you should have should be seven people.  Why seven?

Well, seven is enough people to get diversity of thinking and experience on the team if you can recruit well.  Seven is a good number to resist dominance on the team or group think.  Seven people can represent a lot of different capabilities and functions.  Seven people can keep secrets and work together effectively without a lot of coordination and administration.  Plus, seven is a lucky number.

When should you use open innovation?

Open innovation - real engagement with a large group of prospects, customers and others - is useful when you want to gather and rank needs, understand trends, receive ideas and test ideas in the marketplace.  Most ideas generated and developed in this way will be anchored on existing products and services, so open innovation is an approach to developing incremental ideas.  Open innovation helps you listen to customers and prospects, engage them and demonstrate that you can hear and respond to their needs and ideas.

Open innovation can draw in your existing partners or attract new partners, but the best exchange of IP won't be in an open setting.  Open innovation may create new relationships, but the best exchanges of ideas, technologies or IP will be in a closed setting.

So, understand what open innovation is good for, and what is isn't so valuable for.  Just because the settings seem to encourage more open innovation doesn't mean that what it can create has changed.

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posted by Jeffrey Phillips at 6:36 AM


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