How open is open? Hint: Constraints are good!
The Economist has a good article on open innovation and how the concept continues to wreck havoc on conventional R&D practices. But how open is open? Depends on who you ask.
"IBM is another iconic firm that has jumped on the open-innovation bandwagon. The once-secretive company has done a sharp U-turn and embraced Linux, an open-source software language. IBM now gushes about being part of the “open-innovation community”, yielding hundreds of software patents to the “creative commons” rather than registering them for itself. However, it also continues to take out patents at a record pace in other areas, such as advanced materials, and in the process racks up some $1 billion a year in licensing fees.
Not everyone is impressed. Kenneth Morse, head of MIT's Entrepreneurship Centre, scoffs at IBM's claim to be an open company: “They're open only in markets, like software, where they have fallen behind. In hardware markets, where they have the lead, they are extremely closed.”
P&G was an earlier advocate of open innovation. BIF Research Advisor Larry Huston, who is the former VP of Innovation at P&G and father of the company's Connect + Develop business model, gave me an interview a while back. You can check out my article here. Basically, there are varying degrees of openness and throwing open the doors for collaborative innovation with anyone, anywhere is not the answer.
With their global solution networks, P&G is practicing what sociologist Mark Granovetter calls "the strength of weak ties" in that the most efficient networks are those that link to the broadest range of information, knowledge and experience. It's important however to define the criteria for accessing these large networks and targeting plays a key role. For P&G, often times, it means passing on a lot of great ideas. "You need to get really clear on what you're looking for and how value gets created," Huston told me. "Look for things with a pedigree and a reason to believe. Here at P&G, we're looking for solutions that solve a consumer problem and are ready to go. Without proof of concept, we don't move forward." In other words, constraints are good!
Results have been astounding—P&G's R&D productivity has increased by nearly 60%; R&D investment as a percentage of sales is down from 4.7% in 2000 to 3.4 % today; in the past several years, the company has launched more than 200 new products attributed to its external networks. Today, the company is getting 50% of its innovations from external sources.
The point here though is not just about starting with narrowly-defined problems. What's important is that incremental advances are understood and leveraged into a repeatable process; a platform that can scale. This is something P&G has totally figured out and it's why we’re fortunate to have Larry Huston on our advisory council.
Our focus here at the Business Innovation Factory is helping organizations experiment collaboratively (and openly) with new business models. Many competent leaders have learned the hard way that a big bang approach to change that turns the entire organization on its side is not only hard, it’s expensive and risky. Our platform – called Innovation@Scale -- leverages the state of Rhode Island’s size and densely connected to networks to safely explore and test new business models. Here, organizations are easily reaching a diverse population of just over one million within a footprint of a thousand square miles. We offer streamlined access to government, community, academic, and industry leaders. Our focus is on building networks in different markets. The diversity of experience encountered here leads to understanding of the practices involved in institutionalizing innovation.
Rhode Island is a unique ecosystem. It’s a powerful platform we’ve built. Feel free to contact me and learn how you can take advantage of it.
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I also came across a video interview of Henry Chesbrough who is coined the term "open innovation." Both of Chesbrough's books are fantastic and the video provides a short primer of his work. (Thanks to Alex Osterwalder.)
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Henry Chesbrough wrote an article for BusinessWeek about the Holllywood strike talks. It's all about business models he says and both sides need to seize Internet and digital media opportunities.
Posted November 9, 2007 10:10 AM by Chris Flanagan | Permalink
