Not invented here
Hey, I just met you, And this is crazy, But here’s my number, So call me, maybe?
The era of Open Innovation appears to require any successful company delivering goods or services, particularly to the consumer segment, to find a way to utilize external ideas in their product development process – or to at least make an effort to appear to do so. The successes supposedly generated through Open Innovation (OI) are touted to customers, suppliers, potential partners, and even investors on the Street. Many companies go so far as to brand their OI to have it stand out further. (see Connect & Develop as one prominent example of branded OI)
One particularly big out-growth of OI is programs that seek to involve the wisdom of the crowd or to open firms up to ideas from individuals, rather than companies, outside the firm. This component of OI (let’s just call it Crowd Sourcing) requires a high degree of trust on the part of the collaborating partners – often small companies or individual inventors hoping that the company will respect their invention, work with them, and pay for their effort. This translates to large amounts of time spent by the companies evaluating ideas, providing feedback, and chasing imperfect leads so that the contributor feels valued and receives the desired follow-up call and feedback.
Too often this part of the process of OI is white-washed by the press and enthusiastic consultants looking to help you build your own system. The promise that every company can have its own ‘Connect & Develop” (P&G’s prototypical model of how to run an OI system) seems irresistible. To the press it’s a great story that connects with the everyman – ‘you too could get rich off your ideas!’ – but should the Osmotic Innovator put time into Crowd Sourcing or are external sourcing efforts better focused in other ways?
The Problems with Crowd Sourcing
– Technical Literacy: While it’s true, as Chesborough and many others argue, that the smartest people in the world don’t work inside your company that doesn’t mean that everyone is positioned to equally understand your business model, supply chain, and regulatory pressure. This means that a large volume of the ideas you’ll see from Crowd Sourcing ignore basic realities of the business you’re actually in or are obvious incremental developments with low value to the organization. Getting a real insight or connection you haven’t seen already if you’re running an efficient OI program is rare!
– Information Overload: The next problem with Crowd Sourcing is that once the gates are open and you start advertizing your willingness to pay for ideas you’ll be sorting through significant volumes of requests – trying to give each contributor an answer or feedback can become a job of its own, one with little return on the investment besides from a PR standpoint.
– Exposing Your Achilles Heel: Once you’ve created your Crowd Sourcing program in order to cut back on the noise and obvious ideas you can always put out specific technical challenges to properly direct those seeking to work with you. The balance that needs to be considered with this is that the more detail you provide on the real issues you are facing, the better the feedback, but the more your competitors can come to understand your weaknesses and potentially exploit them.
– The Door is Open: There’s a well-known saying that begins, “when opportunity knocks . . .” that is very apt for a Crowd Sourcing program. Simply having the Crowd Sourcing program in place makes it easier for real opportunities to find you, perhaps before they find your competitor. A main point to having the Crowd Sourcing component of your OI program might well be argued to be as an advertising program for your R&D department.
– Wisdom of the Crowd: If you’ve ever watched the hit game show ‘Millionaire’ you know that having the crowd on your side can be a huge help. A volume of research also exists to prove that crowds do have a particular ‘wisdom’ that can direct decision making appropriately. Interfacing with the outside world has the benefit of allowing your innovation program to leverage the crowd.
– Perception: Its been mentioned briefly before, but it deserves its own mention – simply having a Crowd Sourcing as part of your OI program is visible proof to the market that you’re a modern company fully taking advantage of current thinking on innovation and R&D. As well, small and medium sized companies can see the Crowd Sourcing program as proof that your company is equipped to work with them.
It’s fairly obvious that there are downsides to running a Crowd Sourcing component of your innovation program, particularly the resource needed to fairly and appropriately respond to ideas. However, the author tends to find the arguments in favor of Crowd Sourcing to be compelling. In the modern R&D world, no company can expect to go it alone without extremely deep moats. Even with that kind of protection ignoring outside innovation and opportunity is a dangerous game. Having a Crowd Sourcing program, and advertizing its successes no matter how small, is invaluable in communicating with the outside world that you are truly open for business and innovation. The next time someone gives you their number be sure to pick up the phone, and call them, maybe.
Most product development processes within corporations rely on a regular transition of responsibility as an idea progresses from conceptual to final product. Some of the most common examples are transitions between inventors and feasibility assessment teams, feasibility teams and development teams and even marketing and R&D operations. Often these transitions are also where we see the product development process fail as the product idea never fully takes hold in the imagination of the new team and fades away. One of my preferred ways of visualizing the issues that can arise during transition is through an analysis of idea “ownership”.
The chart in figure 1 describes the level of ownership that a team developing a particular innovation may experience over time. As the team starts out the commitment level is relatively low, no one has spent much time on the initiative and there are many different paths to success still available to the team. Over time the team feels more commitment towards the innovation path and the sunk cost of the current program of work increases, this increases the ownership of the program.
Within every product development project there is a level of complexity that the team is expecting to encounter. This expectation can vary significantly (think landing a man on mars vs. developing a new flavour ice cream) but the important factor is that there is an expectation. Deviations from this expectation are what we call “problems” (or occasionally “lucky breaks”). Tasks that do not deviate from our expectation of complexity are what we call our day job. The chart in figure 2 describes an example of the complexity curve for a project over time.
If we begin to think about how we could measure complexity in the above example it becomes obvious that the level of complexity of a given problem could be measured by the level of commitment and effort required to solve said problem. In essence what we are saying is that every problem we encounter within the product development process will require a particular level of “ownership” in order to be overcome. This allows us to overlay the two previous charts with the common y axis of the theoretical construct “ownership”, see figure 3.
Ownership and the transition
Turning our attention to the concept of ownership as it relates to idea transition between corporate groups we can imagine a (worst case?) scenario where the ownership level of the accepting group post transition is extremely low, Fig 4. This low ownership scenario can arise for many reasons including a lack of understanding of the idea potential, a poor incentive structure (the fabled “not invented here”) or simple housekeeping such as stressed resources limiting the interest in yet another project.
Fundamentally, a project in a low ownership situation is fragile. Problems encountered during this state can cause the project to fail as those responsible for the next development stage see the hurdles as insurmountable, Fig 5. Often these same hurdles are seen in a very different light by those who continue to experience high ownership for the project.
Bridging the gap
How then to avoid issues arising from transition fragility? Obviously one cannot control when an unexpected problem may arise during a project but it is possible to influence ownership in the lead up to, and directly after a responsibility transition. Examples of how this can be achieved are numerous but a couple worth considering include shadowing programs which engage the second group in the decision processes of a project prior to transition, Fig 6. Shadowing programs allow a new transition group to develop understanding and commitment before they take ultimate responsibility for the project.
Another approach uses dovetailed leadership structures which create matrix teams during transition, Fig 7. In this instance a temporary matrix team is formed during transition consisting of the (low ownership) core of the second team reporting into the (high ownership) management of the first team. After a fixed period of time the matrix team is disbanded and reporting lines are reset. This allows for a soft transition where high ownership individuals are always present in the responsible project team.
The innovation transition process within a corporate innovation program can be a very complex procedure in which success is as much down to the personalities of the individuals as the rigor of the systems employed to control it. Companies that focus on solely on the mechanical aspects (document control, handover procedures, technology debriefings etc) may be leaving themselves open to failure through no fault other than the realities of human psychology and the timing of a project hurdle. Innovation programs that incorporate ownership management within their transition processes go a long way to reducing that risk of failure.