Last week I attended open2012 inaugural event at the Computer History Museum in Mt. View Ca. The opening speaker was Michael Docherty, CEO of Venture2 Inc. Early on in his presentation, Docherty set the stage of the conference by telling the audience:
“Big companies can’t innovate.”
A very provocative statement, and I suppose there is some truth to it. Docherty’s point is that big companies are focused on exploiting existing markets and optimizing their current operations. Exploring and nurturing early stage markets (i.e. navigating their white space) isn’t a skill that most big companies are good at. After all, these are “distractions” and too small to justify the time and resources required to nurture them along.
So most large companies prefer to wait on the side lines and let the pioneers figure out what works and doesn’t work in the market. And when the market shakes itself out, either follow (fast follower strategy) with their own solution or acquire the surviving companies left in the game after the market shakeout.
M&A has merit, but not without its risk. Risk include missing the market tornado (look at Microsoft and its search efforts to name just one) to acquiring companies at too high a cost (HP’s acquisition of Autonomy). In fact, there are numerous studies that show technology mergers seldom work out.
Open Innovation is an alternative strategy to M&A
Open innovation has a lot of definitions and “components” associated with it. The core concept is that more innovation and solutions exist outside the organization than inside. The idea of open innovation has been around for decades. Pat Haggerty, the then president of TI, in 1964 stated:
“The sum total of exploratory R&D done in other industrial organizations, research institutes, and universities is so much greater than our own organization can perform that is seems almost inevitable that most of our strategy programs must evolve from exploratory research done outside.”
At the time when Haggerty made this statement, TI had been extremely successful with its own internal (closed) innovation practices – having achieved a compounded revenue growth of 30% per year and earnings growth of 27% for more than a decade. But Haggerty knew that internal R&D could only take TI so far. The tech world was already moving too fast to do it alone.
In theory, Open Innovation enables a company to connect with someone who has already developed the technology in need or who is further along the development path. It’s a way to speed up innovation and achieve better results by “not reinventing the wheel.”
For example, Apple, well known for its so called “closed” innovation, clearly seeks technology from outside partners. A great example is its successful partnership with Corning and the use of Gorilla Glass. Apple is very “open” to using great technologies not invented internally. They know what they do great, and know how to seek and incorporate great technology from the outside to complement their internal development capabilities.
Open Innovation is a two way street
Open innovation is about finding people with the knowhow to solve your problems and/or finding people who have a problem your knowhow can solve.
In the case of Apple, it partnered with Corning to create a superior protective glass for its iPhone and iPad. For Corning, it was able to commercialize a technology it had developed in the sixties. A definite win/win. And that’s the spirit of true open innovation. Apple also exploited unused technology early on with Xerox PARC – though I am not sure it was a true win/win deal in retrospect, but evidently Xerox was a willing party in negotiating the terms.
I can’t imagine any company today involved with launching a new product not using open innovation is some form or another. It’s just too complicated and time consuming to do everything internally The quintessential concept: “Why reinvent the wheel if the wheel has already been made?”
But wait, that’s not all! The Wisdom of Crowds
Open innovation is a big topic, and a big deal as I observed at Open Innovation 2012. At the conference there were many examples of how companies are using internet technologies including social media, chat rooms and cloud computing to connect people together to discover and vet ideas, not just solve technical problems.
There are several open innovation platforms competing for market share including Maven ( the host of the conference), InnoCentive ( created by Eli Lilly – not at the conference), CompetIQ and several others, that are developing global communities of problem solvers to help companies discover, vet and solve problems using crowdsourcing and “challenge” competitions.
Many of these sites also integrate product lifecycle management workflow with open innovation tools (i.e. crowdsourcing), allowing companies to manage open innovation from discovering ideas through product commercialization. It’s a very exciting, albeit, crowded market space. Lots of interesting ideas are being shaped around open innovation platforms and no doubt, real value is being created as never before.
In future articles, I’ll explore some of these services in greater detail and examine “how to” implement successful open innovation using these platforms. It does require a clear definition of what your objectives are and an implementation strategy. Remember the advice the Cheshire Cat gave Alice:
“Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where–” said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
“–so long as I get SOMEWHERE,” Alice added as an explanation.
“Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.”
(Alice’s Adventures in Wonderland, Chapter 6)