Ideas are a dime a dozen. Are they really?

Any seasoned innovation practitioner would tell you that idea generation is the most straightforward part of the innovation process. Generating ideas is easy, the thinking goes; it is at the stage of testing these ideas and deciding which one to scale into a new venture that the innovation process begins to choke.

Taken to extremes, this mindset feeds the perception that novel ideas are plentiful and cheap. “Ideas are a dime a dozen,” we can often hear. Are they really?

A joint team of researchers from Stanford and MIT has challenged the “plentiful and cheap idea” dogma. They  presented empirical evidence showing that research productivity, a scientific term for a layman’s “idea,” is actually declining. According to the authors’ calculations, research productivity across the whole US economy declines at an average rate of 5.3% per year. More specifically, in semiconductors (the playground of the famous Moore’s Law), research productivity is declining at a rate of 6.8% per year; in agribusiness and pharmaceutical research, the annual decline is about 5.0%.

In other words, contrary to a popular belief, ideas are not plentiful. We are experiencing a growing shortage of ideas instead.

If research productivity is on decline, how then has steady economic growth been sustained? The answer is simple: by rising what economists call research effort, which in layman’s terms means the number of researchers. Indeed, the number of researchers required to achieve the famous doubling, every two years, of the density of computer chips (Moore’s Law) is more than 18 times larger today than it was in the early 1970s.

In some areas of agricultural research, the number of scientists has risen 23-fold between 1969 and 2009. And while research productivity responsible for the drugs approved by the FDA between 1970 and 2015 has been declining at an annual rate of 3.5%, this decline was offset by the 6.0% annual growth in the number of involved researchers.

Now, if the number of ideas is declining while the number of people generating them is growing, how can these ideas be cheap? They cannot. The ideas are becoming more, not less, expensive.

One can hope that at least the quality of novel ideas remains high. Alas, there is little evidence supporting this intellectual refuge. Consider this: by the end of 2019, the venture capital industry had accumulated a whopping $121 billion in so-called “dry powder,” the money for which venture capitalists failed to find ideas to invest in. So much for plentiful and cheap innovative ideas! 

Let’s ponder for a minute over this fundamental question: where should novel ideas come from in the first place? The answer looks obvious: from R&D, where else?

Exactly, and here is the root of the problem. In the decades that followed World War II, entirely new sectors of the U.S. economy have been created, such as jet aircraft, modern-day pharmaceuticals, microelectronics, satellites, and digital computers. All these developments happened thanks to a heavy infusion of public money, with the federal government contributing more than 50% of R&D expenses.

Although the total US spending on R&D has remained steady for the past years, at 2.5% of GDP, only about 30% of the money now comes from the federal government; 70% of it is contributed by the private sector. With its focus on rapid ROI and the competition, will private sector spend money on fundamental – and, therefore, inevitably long-term and potentially risky – R&D projects? No.

The quality of novel ideas is declining because sources of new scientific discoveries in the United States are gradually drying up. Yes, the industry can still generate incrementally innovative combinations of old ideas – which indeed may already be plentiful and cheap – but it will fail to create breakthrough innovations.

We need a renewed focus on idea generation. We need to highlight current gaps in our scientific knowledge and to draw a step-by-step roadmap to bridging these gaps – with sources of funding clearly identified. We need to resume spending public money on R&D at the level that ensured the U.S. domination in innovation in the past.

It is time to bring “idea” back to innovation.

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: Josh Appel on Unsplash

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Why I Don’t Like the Term “Innovator’s DNA”

And just as each person’s physical DNA is unique, each individual we studied had a unique innovator’s DNA for generating breakthrough business ideas.”

This is a line from the influential HBR article written by Jeffrey Dyer, Hal Gregersen, and the late Clayton Christensen back in 2009. The inspiring image created by article has gone viral, and the term “innovator’s DNA” has become an innovation management buzzword. Google “innovation is in our DNA” and you would be surprised how many people and organizations have more than just adenine, guanine, cytosine, and thymine in their DNA.

Sure, I know that every popular business term immediately becomes a powerful magnet for clichés. Innovation is hardly an exception, and yet I think that mixing innovation with DNA is a bad idea and that “innovator’s DNA” is an awkward term.

To begin with, ascribing innovative (or any other) abilities of a person to her DNA implies that DNA is the sole determinant of who this person is. This simply is not true: our features are the result of a combined action of two major factors: our genetic material (represented by DNA) and our environment.

The relative importance of each factor varies for a particular feature. For example, the color of our eyes or the curliness of our hair are almost exclusively determined by our DNA. But other features, such as our behavior or predisposition to diseases, are greatly influenced by external factors, such as a lifestyle. A general rule is that the more complex the human trait, the more it is influenced by environmental factors.

There is, therefore, every reason to believe that our ability to innovate, a complex cognitive and behavioral feature, is predominantly determined by our environment. You’re an innovator not because you were born with innovator’s DNA. You’re an innovator because you’ve been exposed to innovation environment.

Second, it is fair to say that innovation is about change. Innovators must rapidly respond to changing business conditions, promptly adapt to shifting consumer preferences, and closely follow technology developments. It is also fair to say that innovation is about trying and failing. The only other cliché that comes close in popularity to innovator’s DNA is our obsession with failures (which we love to celebrate but hate to commit). 

At the same time, by virtue of it being the guardian of our genetic code, DNA is extremely stable molecule. Do you know that there are only 0.3 errors produced every time the whole human genome is reproduced – and the human genome consists of more than 3 billion elements? Sure, I can see why holders of Six Sigma Black Belts would worship DNA, but I do feel that innovation practitioners should be looking for inspiration somewhere else.

By the way, my sincere congratulations to Jennifer Doudna and Emmanuelle Charpentier for winning this year’s Nobel Prize in Chemistry for CRISP gene editing tool. You are true innovators, ladies! And you work with DNA.

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: https://innovationdistrict.childrensnational.org/decoding-cellular-signals-linked-to-hypospadias/

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Crowdsourcing: An Innovation Tool to Overcome the Limits of Remote Work

(A version of this article was originally posted to the Qmarkets blog)

The unprecedented shock caused by the COVID-19 pandemic has forced many organizations to change the ways they do business. Almost every business operation has been affected: from the manner firms talk to their customers to the logistics of product delivery to maintaining channels of communication between employees.

Corporate Innovation: A Victim of Remote Work?

Corporate innovation will not be spared the troubles of adjusting to the “new normal.”

One danger corporate innovation teams may be already facing is quite trivial: reduced R&D/innovation budgets, a measure that myopic managers routinely resort to in times of economic hardship. Another danger might not be as evident yet, could turn to be much more damaging long-term: the sharp increase in remote work.

Initial reports painted quite a rosy picture of the remote work experiment. According to data presented by Upwork back in April, more than half of the American workers were working from home, with almost 60% of managers saying that “the shift to remote work has gone better than expected.” Some big tech companies went as far as to allow willing employees to work from home either permanently or for a foreseeable future.

But voices of caution and concern are getting louder, too. To begin with, not every job, however “digitized,” can be done from home. Adding to that, remote work dramatically reduces the level of interaction between employees. As a result, personal relationships suffer, internal networks shrink, and the whole organization becomes less interconnected. Experts warn that less connected networks reduce employees’ sense of their commitment to one another and to the organization. They also suggest that extended online communication may foster more self-serving behavior and even dishonesty. Besides, less information is known to be shared in online communication, increasing the likelihood of poor decision-making.

It’s highly unlikely that the hastily written Upwork report was capable – or even attempting – to consider the long-term effects of massive and prolonged remote work on organizational performance and wellbeing.

The Power of Serendipity

And then, there is a feature of innovation that sets it aside from some other corporate activities: its unique dependence on face-to-face interaction.

Remember Marissa Mayer, who, shortly after becoming the CEO of Yahoo, banned Yahoo’s employees from working from home? Amid the storm of condemnation that followed Mayer’s move, an important line in the memo announcing the ban has been completely overlooked:

“Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meetings.”

As a former Googler, Mayer knew that innovation requires collaboration, and both thrive on serendipity.

The role that serendipity – generally understood as the process of making an important discovery while looking for something else – plays in innovation is complex, nuanced, and obviously lies outside the scope of this article.

Yet, it’s important to remember that the so-called serendipitous encountersunplanned interactions between employees working in close proximity to each other, represent one of the driving forces of innovation. They are believed to play a central role in the development of new collaborative partnerships that are crucial for the sustained corporate innovation process.

With so many employees working remotely – and the remote work itself becoming a permanent fixture, not a temporary fix – how can the occurrence of serendipitous encounters be preserved? How can you occasionally “bump” into someone in a hallway when all your meetings are scheduled in advance on Zoom?

Technology, of course, can help. Two promising approaches could be considered:

1. Creating a virtual reality office that employees could visit via realistic, high-quality avatars. Spatial, an NYC-based startup, allows its clients to share a virtual room using just a web link so that users can “drop-in” with just a web browser and even without a special headset.

2. Enterprise-wide adoption of networking apps allowing the random matching of the firms’ employees.

Besides, as organizations begin to return to the office space and adopt “hybrid’ approaches of mixing in-office and remote work arrangements, some face-to-face communications will gradually resume easing the pain of extreme isolation.

In addition, firms should not neglect a time-tested approach that by its very nature is designed to let large groups of people innovate together without facing each other – crowdsourcing.

Crowdsourcing Challenges and Opportunities

Crowdsourcing is a process of assigning internal jobs to external crowds of people in the form of an open call. Over the past 10-15 years, numerous organizations – including corporations, governmental agencies, and nonprofits – have adopted crowdsourcing as an open innovation tool to help them address their most pressing technical and business challenges.

By the virtue of using online platforms, crowdsourcing lets organizations bring together large groups of remotely working people around a single innovation project. Not only does this minimize costs – and in times of pandemics, complications – of in-person interactions; outsourcing the problem-solving process to a diverse crowd of external solvers, often results in highly original, often completely unorthodox, solutions.

In times of uncertainty, crowdsourcing should become an indispensable ideation tool allowing organizations to define the contours of their “new normal.” Two major crowdsourcing approaches can be used depending on specific objectives:

Internal crowdsourcing, an approach engaging the “internal crowd” of the organization’s own employees (and, perhaps, a close circle of academic and business partners, suppliers, lead users, etc.). This approach has been proven effective in finding new ways of optimizing operations and cutting costs. Many firms can also benefit from internal crowdsourcing to perfect their remote work processes. These benefits of crowdsourcing may be especially in demand today that the organizations cut their commitments to innovation and focus instead on short-term issues related to their core business.

External crowdsourcing, the more traditional form of crowdsourcing is still an excellent tool to facilitate new product development. In addition, crowdsourcing can be used to spot the so-called weak signals, early signs of shifting customer demand and newly emerging consumer needs. Later, these weak signals can serve as input to scenario planning, a disciplined process of discovering new opportunities and updating strategic plans.

Of course, crowdsourcing will never fully replicate real human interaction and those serendipitous moments. But if working from home is to become a permanent fixture for many businesses across the globe, strategies must be put in place to rectify this. And crowdsourcing is one of these strategies.

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: Andrew Neel on Unsplash

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What Will Crowdsourcing Look Like in 10 Years?

(This piece was originally posted to the HeroX blog)

There is a popular joke (attributed to Niels Bohr): “It is difficult to make predictions, especially about the future.” And at times of uncertainty that we’re all living through, predicting the future is even more daunting. But guessing about what will come tomorrow is human nature. Besides, businesses use predictions to plan their next steps and foresee new opportunities and threats. As Gideon Litchfield wrote in a recent issue of MIT Technology Review, “…the point of futurism isn’t to guess the future; it’s to challenge your assumptions about the present so the future doesn’t catch you off guards.”  

Back in July, I reviewed the past decade of crowdsourcing, a tool that numerous organizations around the world, including corporations, governmental agencies, and not-for-profit foundations, use to address complex technical and business problems. In this post, I’ll attempt to predict what crowdsourcing will look like in 10 years.

Crowdsourcing Will Become an Essential Component of the Future of Work

In a recent Gallup study of U.S. workers published by the New York Times, 34 percent of respondents held multiple jobs or had income from one or more self-employment arrangements. What used to be considered an “alternative” employment is rapidly becoming a norm. We’re witnessing the dawn of the future of work in which open talent strategies and horizontal cross-functional teams will be replacing traditional vertical hierarchies and siloed organizational models. 

Crowdsourcing will become an essential component of this structure. Organizations will be using their own employees to perform the “core” activities. But for the tasks they lack internal resources or expertise crowds of independent on-demand contributors will be assembled. Many organizations will start nurturing their own crowds which will be repeatedly used for similar projects and tasks. The future competition will become competition for the quality of the crowds each organization can rapidly assemble to perform an urgent job. 

Crowdsourcing Will Finally Become a Mainstream Open Innovation Tool

In recent years, crowdsourcing has become a popular topic in business publications and social media. Yet, its acceptance as a practical problem-solving tool has been slow. One of the major factors slowing down the acceptance of crowdsourcing is widespread, often completely paralyzing, uncertainty over which technical or business problem can (or can’t) be solved by this approach. In addition, the expansive use of the term “crowdsourcing” has blurred the borders between it and other problem-solving techniques, such as brainstorming. As a result, crowdsourcing is often used in the wrong way, and when the outcome proves disappointing, it is crowdsourcing itself that gets the blame for being “ineffective.”

I predict that in 10 years, academics, business writers, and crowdsourcing practitioners will have finally found efficient ways to educate corporate innovation leaders on the very basics of crowdsourcing (“Crowdsourcing101,” so to speak): definition, typology, infrastructure, processes, success metrics, and incentives for the crowds. Crowdsourcing will become “simple” so that organizations will be capable of practicing it in an intuitive and sustainable way. 

Crowdsourcing Will Be Streamlined by AI/ML Algorithms 

Crowdsourcing of the future will be assisted by advancements in technology, of which using AI/ML tools will be the most obvious development. First, large datasets will be available on both successful and failed crowdsourcing campaigns. Analyzing the data will help identify types of problems most amenable to solving by applying the wisdom of crowds. Moreover, it’ll be possible to design algorithms allowing users to translate their technical or business challenges into specific problem statements with the highest expected levels of success. The same algorithms will tell the users which kind of information they should be ready to provide to the crowd to maximize the odds for the problem to be solved.

Second, algorithms will exist allowing to match a specific problem to a “perfect” crowdsourcing platform. By analyzing a set of problems each platform has dealt with in the past, the reported solution rate, and the size and the composition of the crowd behind the platform, it’ll be eventually possible to automatically generate a list of the most promising platforms to tackle any particular problem. Finally, AI/ML tools allowing rapid creation of sufficiently large and diverse crowds (“crowds-on-demand”) are expected to be developed, too.

Crowdsourcing Will “Invade” Medicine and Law

Although crowdsourcing has been successfully used in many disciplines and professional areas, there are some “islands of resistance” where the progress in the adoption of crowdsourcing has been especially slow. Two such areas are medicine and law, the professional fields dominated by highly educated and trained experts, who are often scornful of the thought that a “bunch of amateurs” can solve a problem that they couldn’t. 

Some positive signs of change have already been spotted in the form of crowdsourcing platforms providing medical help and legal information. Examples are CrowdMed, a crowdsourcing platform providing patients with the online medical diagnosis, and Casetext, a crowdsourced online database of legal information.

I expect this trend to continue. However, the “invasion” of crowdsourcing into medicine and law will require a deep cultural shift on the part of doctors and lawyers. They will have to understand that like any tool, crowdsourcing is not going to “replace” them. Instead, it will make their work more meaningful by taking away routine and repeatable tasks.

The Marketplace of Crowdsourcing Platforms Will Be Consolidated

Complicating the efforts of many organizations to run effective crowdsourcing campaigns is a huge number of different crowdsourcing platforms available in the marketplace, with some experts putting this number at 1,000 worldwide. Obviously, navigating such an ocean of different options is challenging, to say the very least, especially for the organizations new to crowdsourcing. Mistakes are quite often in matching problems organizations want to crowdsource to platforms best suited to deal with each specific problem.

And yet, there has been almost no M&A activity in this space. Fortunately, we’re seeing signs of improvements in this area, too. Last year, HeroX signed a strategic partnership agreement with Ideanco to launch two challenges focused on climate change and food security. In July, the UK idea management company Wazoku bought the crowdsourcing platform InnoCentive.

The trend of consolidating available crowdsourcing services looks promising. I expect that in 10 years, a few large crowdsourcing platforms will emerge, each specializing in solving different types of technical and business problems. At the same time, I have no doubts that new entrants to the crowdsourcing space will keep appearing.

New Forms of Assembling Crowds Will Emerge

As any experienced crowdsourcing practitioner would tell you, crowdsourcing is at its best when it’s applied to a limited-scope problem or task, usually being handled by a single individual or a small team. But in this simplicity lies one of the crowdsourcing’s major limitations: its inability to tackle problems or tasks requiring larger groups of workers, especially if the task on hand cannot be completely defined in advance. 

A few years ago, a group of researchers at Stanford proposed a concept of a “flash organization,” an approach and software to structure crowds like organizations, which allows them to achieve complex and open-ended goals. As far as I know, there are no published examples of organizations using the concept of “flash organizations” to run real-life crowdsourcing projects. I have no doubt that such examples will appear within the next 10 years. No do I have any doubts that new ways of making crowds more agile and effective will emerge.

Crowdsourcing is here to stay. I’d like to finish this piece with another quote (attributed to both Abraham Lincoln and Peter Drucker): “The best way to predict the future is to create it.” By perfecting the way crowdsourcing is being used by organizations, we can help shape the future of this powerful open innovation tool. 

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: Drew Beamer on Unsplash

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Innovation in Legacy Companies: Can You Be Big and Nimble at the Same Time?

(This piece was originally posted to the HeroX blog)

Complaints that large legacy companies can’t innovate abound. Some folks go as far as to say that corporate innovation “is broken.”

This is, perhaps, an exaggeration. Large companies are still quite good at what is commonly known as incremental innovation, which is an improvement of already existing products or services; they’re also doing a decent job in streamlining operations and cutting costs. 

However, it’s definitely true that many corporations are much less successful in breakthrough innovation, which is the creation of new products and businesses. Consider this: of 11,000 consumer product launches in North America in 2008-2010, only six had maintained at least 90% percent of sales volume the following year and produced cumulative two-year sales that exceeded $200 million. Only six, which is 0.05%.  

The major reason for this lack of breakthrough innovation abilities seems to be obvious: a hallmark of any successful modern corporation is flawless, impeccable execution. Unfortunately, while perfecting execution and establishing the culture of predictability and control, corporations lose the culture of entrepreneurship, the habit of experimenting and taking risky bets. That’s why breakthrough innovation, with its high rates of uncertainty and failure, struggles to take root in the corporate soil.

The question, therefore, is how large legacy companies can start innovating big again?

Can Large Companies Innovate Like Startups?

Ten years ago, the business world was taken by storm by a concept called “Lean Startup.” Proposed by entrepreneur Eric Ries, the Lean Startup methodology postulated that every startup was in fact an experiment attempting to answer a question. But the question was not “Can this product be built?” but, instead, “Should this product be built?” 

Central to the lean startup methodology was the assumption that by addressing the needs of early customers and building their products and services iteratively, startups could dramatically reduce market risks and sidestep the need for large amounts of initial funding (hence “lean” startup).

So popular the Lean Startup methodology has become that calls started soon for large companies to adopt it, too. Indeed, a number of legacy companies (General Electric, Qualcomm, and Intuit) have responded to these calls by implementing the lean startup methodology.

Unfortunately, the very hallmarks of the Lean Startup methodology – rapid experimentation, iterative testing-learning cycles, and rapid failure – don’t come naturally to many large companies. They excel at executing known business models, not creating them. And “rapid failure” is still an anathema to many corporations, despite loud calls to “celebrate” them 

Of course, some specific Lean Startup techniques – rapid experimentation being, perhaps, the most notable – can and should be adopted by large organizations. But to expect that many of them will be capable of innovating like startups is unrealistic.

It’s All About Ecosystems

Many academics and business practitioners correctly point out that the Lean Startup methodology was created in large part to help startups overcome a paucity of assets. But the paucity of assets is not a problem for big companies. On the contrary, they have plenty of available resources. So instead of trying to imitate startups, the thinking goes, large companies should instead work with them.

A notable proponent of this idea, Michael Docherty, suggests (in his book “Collective Disruption”) that corporations should support breakthrough innovation by creating innovation ecosystems including startups. In this innovation symbiosis of sorts, startups will provide large companies with disruptive ideas along with a playground for testing and early prototyping, whereas large organizations will use their resources to scale up the most viable ideas.

Creating innovation ecosystems or even simply participating in them, doesn’t come naturally to many large corporations, either. And yet, innovation ecosystems are gradually becoming popular both in academic literature and among business practitioners.

It is important to note that the very concept of the innovation ecosystem idea is changing. The current thinking is that innovation ecosystems should include not only large companies and startups, but other interconnected actors, including governments, civil society, small- and medium-sized companies, and universities. Recently, it has become apparent that innovation ecosystems may include even competing enterprises.  A special term “coopetition” has been coined to describe innovation involving competitors.  

Much will have to be learned to make innovation ecosystems a viable approach for large companies to innovate. But a consensus is emerging that this type of corporate innovation will become mainstream.

The Best of Both Worlds: Being “Ambidextrous”

And yet, the idea that large companies can and should engage in breakthrough innovation, in addition to incremental, is far from dead. In 2004, Charles O’Reilly and Michael Tushman wrote an influential paper for the Harvard Business Review titled “The Ambidextrous Organization.” O’Reilly and Tushman argued that corporations don’t have to choose between investing in existing (core) and creating new businesses; they can do both (be “ambidextrous”) by establishing corporate structures supporting both incremental and breakthrough innovation.

To achieve that, companies should learn how to simultaneously “exploit,” i.e., fully utilize its existing capabilities and portfolios (incremental, cost-cutting, and efficiency-focused innovation), and “explore,” i.e., engage in defining goals and targets outside of the scope of their current products, services, and business models (breakthrough innovation).

Appreciating the difficulty of the “exploration” part of the ambidexterity, O’Reilly and Tushman argue that while pretty much every company understands the importance of the ideation part of the innovation process, they routinely fall short in their ability to incubate and scale these ideas. While startups, too, can do a great job in generating novel ideas and incubating them, it is the scaling part of the innovation process – the part that utilizes the company’s sizable assets – that distinguishes the ambidextrous organization from a startup. Putting this simply, ambidextrous organizations can generate and incubate ideas as efficiently as startups, but they can also use their size to successfully scale them up into viable new businesses.

A list of organizations achieving the ambidexterity status is still quite short, but it is growing. A recent publication mentioned a data analytics company LexisNexis; UNIQA, a subsidiary of Austria’s largest insurance company; and the retail giant Walmart as three successful examples of truly ambidextrous organizations.

Being part of an innovation ecosystem and being ambidextrous share a few fundamental features. Both models require openness to external sources of innovation; both require flexibility in relationships with outside partners; and both require the creation of some corporate structures to facilitate the innovation process. It is therefore up to any particular large company to choose the model that best fits its strategy, objectives, and corporate culture. Or, perhaps, a new, “hybrid,” model can be invented combining the best features of the two original concepts.

The one thing is clear regardless: large size should not stop large legacy companies from aspiring to innovate like nimble startups. 

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: Annie Spratt on Unsplash 

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Want a Big Idea? Take a Shower and Sit Under the Apple Tree

(This piece was originally posted to the HeroX blog)

I’m really amused by how many people claim that their best creative ideas come to them in the shower. What is so special about the shower being a cradle of creative ideas?

Jokes aside, the issue of creativity lies at the very core of innovation management. Innovation is impossible without ideas. Of course, the whole process only starts with ideas, and many additional steps (idea selection, testing, incubation, scaling up, etc.) are required to convert a “naked” idea into a marketable product or service. But while the implementation part of the innovation has a solid footing in the corporate product development process, it’s the ideation part of it that looks uncertain and unpredictable.

Can we control the creative process? Can we ensure a steady flow of creative ideas at will (or, as they like to say these days, “on-demand”)?

The Myth of “Serendipitous” Discovery

Popular literature is full of stories about crazy geniuses making their great discoveries “by chance,” serendipitously, apparently without even realizing the consequences of their actions.

The most canonic is the one about the great Isaac Newton. One day, the story goes, a young Isaac was sitting beneath an apple tree in his stepfather’s garden. Suddenly, a falling apple hit him on the head. “Eureka!,” cried Newton (or was it another genius on another occasion?) and immediately understood that the very same force that brought the apple toward the ground also kept the moon falling toward the Earth: gravity.

Another story describes a Scottish biologist, Alexander Fleming, who, in 1928, was experimenting with staphylococcal bacteria. One day, Fleming left an uncovered Petri dish infected with bacteria sitting next to an open window (a serious violation of the lab safety protocol, if you ask me). When the dish became contaminated with mold spores, Fleming observed that the bacteria in proximity to the mold colonies were dying. He was able to identify the mold as a member of the Penicillium genus. The door to the invention of the first antibiotic drug was made wide open.

 Closer to modern times is a narrative about Percy Spencer, an engineer at Raytheon. In 1945, Spencer, while fiddling with a microwave-emitting magnetron, found that a chocolate bar in his pocket had melted. Realizing that the microwave radiation of the magnetron was to blame, Spencer invented the microwave oven.

Some folks would interpret these stories as evidence that discoveries happen as a pure piece of good luck. What if it was raining that day and Newton stayed at home instead of stepping out into the garden? What if the apple had missed his head? What if Fleming was not a reckless person and did not leave open a Petri dish with potentially dangerous bacteria? What if Spencer did not like chocolate and carried something else – say, an apple – in his pocket?

These questions, while fueling public interest in science – which is actually a good thing – do not make much sense to any scholar of scientific discoveries. By the time the fateful apple supposedly hit Newton’s head, he, despite his young age, had spent years contemplating the laws governing planet movements. Fleming was a prominent scientist studying factors affecting staphylococcal bacteria growth and wellbeing. And Spencer had a solid experience in working with devices emitting microwaves.

They invented what they invented not because they were lucky, but because they were prepared. Their discoveries could not be predicted in advance; yet, they were inevitable.

The Power of Prepared Minds

True, a discovery may look serendipitous if made by someone with no immediate experience in a particular scientific field. However, academic research finds no compelling evidence that effective problem solving requires precise expertise in a specific topic. Moreover, as shown by Prof. Karim Lakhani of Harvard Business School, a contributor’s likelihood of solving a problem increases with the distance between his or her own field of technical expertise and the problem’s domain.

Take, for example, the story of John Davis, who solved a complex technical challenge proposed by the Oil Spill Recovery Institute. The challenge was to find a method to separate oil that had solidified into a viscous mass with frozen water in recovery barges. John had no background whatsoever in the oil industry but he had one in working with concrete. He remembered a tool that used vibration to keep cement in liquid form during mass cement pours. John realized that by attaching a long pole and inserting the tool into the oil recovery barges, it would keep the oil from freezing into a viscous state and allow the oil to be easily pumped from the barge.

Even more fascinating is the story of Jorge Odon, a middle-aged car mechanic who ran an automobile service center in Lanus, Argentina. One day, Jorge watched a YouTube video showing how to get a loose cork out of the bottom of a wine bottle. Inspired by what he saw, Jorge designed a medical device that could facilitate childbirth during a difficult delivery.

Amazingly enough, Odon had no background in medicine, save for obstetrics in particular; nor did he have any prior exposure to the issue of childbirth complications. But he had a prepared mind and a vivid imagination. And that was enough to make one of the most exciting medical discoveries of our times!

Does Innovation Need ”Structure”?

Talks about serendipitous discoveries might be fun when they are confined to discussing historic figures like Newton and Fleming. Unfortunately, some folks (and organizations) make a step further to claim that because of its serendipitous nature, the whole creative process must remain “unstructured.” Why? Because, they argue, “structure kills creativity.”

I cannot disagree more. The creative process can and should be structured as any other process involving humans. In his excellent book, “Borrowing Brilliance,” David Murray separated the creative thinking process into six steps. Each step has its peculiar set of features and rules, understanding and following which will make you more creative – and your ideas much better. I’d also like to point out the tremendous practical success of the design thinking approach, a formal methodology for creative problem-solving.

I will finish this post by quoting the advertising genius David Ogilvy who, in my opinion, gave the best description of how creativity and structure are connected: “Give me the freedom of a tight brief.”

This is how I interpret what Ogilvy said: Here is a problem we’re trying to solve. Here are the requirements any successful solution must meet. Here are the criteria we’ll apply to select the best solution. And that’s it. Now, go and find this solution. And while so doing, feel free to be creative, innovative, unexpected, unpredictable, unprecedented, uncontrolled, bold, wild, out-of-the-box, and out of mind. And serendipitous too, of course.

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: Leana Mikah on Unsplash

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Crowdsourcing: Going Above and Beyond Consumer Products

(This piece was originally posted to the HeroX blog)

In the past few years, crowdsourcing has finally come of age as a powerful open innovation tool allowing organizations – including corporations, government agencies, and non-profits – to use external crowds to performs microtasks, generate ideas, and solve complex technical and business problems.

The attention of social media has predictably focused on crowdsourcing campaigns that attracted a lot of publicity. Many folks remember the 2013 Super Bowl Halftime Show featuring Beyoncé. The introduction to the show used more than 500 high-quality images that PepsiCo, the sponsor of the show, crowdsourced from its (and Beyoncé’s) fans. More than 100 million viewers enjoyed the presentation.

Another darling of social media is consumer good products that were created by using crowdsourcing – and there are numerous examples of them. However, crowdsourcing has proven effective in many areas of business of social activities besides consumer products.

Below, I’ll describe some of the consumer products created by crowdsourcing as well as other examples of using crowdsourcing to help people and create value.

Crowdsourcing Can Come in Different Flavors

In 2012, the already-mentioned PepsiCo launched the “Do Us A Flavor” campaign. The goal of the campaign was to crowdsource novel flavors for its flagship Lay’s potato chip brand. Submitted proposals were reviewed by a panel of judges including a couple of celebrities.

The overall ten-month campaign has resulted in 3.8 million submissions. After a few rounds of judging, three flavors were selected as the finalists: Cheesy Garlic Bread, Chicken & Waffles, and Sriracha.

The eventual commercial success of this crowdsourcing campaign has been moderate, if not outright questionable: after an initial spike in sales of chips with new flavors, their sales soon declined; some of the winning chip flavors in various countries have since been discontinued due to weak or inconsistent sales. What can’t be underestimated, though, is that the crowdsourcing campaign had allowed PepsiCo’s to gain valuable insights into consumer preference and behaviors at a reasonably low cost. The company has also generated positive brand awareness – specifically with the millennial population that it was originally struggling to attract. Even more importantly, PepsiCo was able to substantially shorten the product development life cycle: from usual 15-20 months to only 10.

Crowdsourcing Castles, One Brick At a Time

LEGO is, perhaps, the most known non-food brand that employs crowdsourcing to create new products.

To achieve that, LEGO has created an online community of nearly one million members. Users can submit their design ideas (usually consisting of a picture and a short description); they can also vote for ideas submitted by other community members.  If an idea collects 10,000 supporters, it is assessed by the Lego Review Board and may be produced into a real Lego set to be sold to the public.  In this case, the creator receives a 1% royalty on worldwide sales. In a typical year, four new LEGO products originate from the community.

An additional benefit that LEGO enjoys using the crowdsourcing community includes a substantial amount of data on sales trends and consumer sentiments. Moreover, LEGO can spend substantially less money on marketing new products because a lot of excitement has been already generated in the process of their design.

Crowdsourcing on Quirky: What Went Wrong?

Consumer product companies using crowdsourcing to create new products are not always as successful as LEGO. Consider Quirky, a crowdsourcing-driven platform that connects creative individuals with consumer product manufacturers. Launched in 2009 and hailed as a new frontier in product development, Quirky gradually flew into a zone of turbulence and went bankrupt in 2015. Some academics hastened to call Quirky “a case study of crowdsourcing gone wrong.”

Quirky’s business model was very similar to that of LEGO. Members of the community would submit new product ideas, and the community would discuss and rate them. Once Quirky selected the best idea to work on, it broke down the actual product development work into a number of mini-contests on concept designs, naming possibilities, etc.

Unfortunately, Quirky’s management made a number of strategic mistakes. First, Quirky spread too thin: in 2014, it was selling products in over 26 different product categories, which made quality control almost impossible. Second, Quirky offered products across a broad range of categories with a high product turnover. This made it difficult to establish a Quirky brand, which in turn complicated selling Quirky’s products to large retailers.

Finally, by fostering a close relationship with its member community, Quirky has dramatically democratized its decision-making process. While not necessarily bad when it comes to product development, such a decision-by-committee turned to be too cumbersome when the company needed to comply with the demanding requirements of its manufacturing partners.

Those who blame crowdsourcing for Quirky’s downfall should remember that crowdsourcing is not a business model; it’s a front-end-innovation tool, which must not be held responsible for downstream operational mistakes. It is not crowdsourcing that has gone wrong; Quirky has. And, by the way, Quirky was back in business in 2016 and is alive and well today.

Crowdsourcing: from Ebola to COVID-19

When reviewing, a couple of months ago, the past 10 years of crowdsourcing, I mentioned one crowdsourcing campaign that I personally consider one of the most exemplary, both in purpose and design. It is the 2014 Grand Challenge launched by the U.S. Agency for International Development to crowdsource the safe and comfortable protective equipment for healthcare workers battling Ebola.

The hallmark of this campaign has been the precise identification and proper formulation of the question to ask the crowd. Fighting the Ebola pandemic was happening on so many different fronts that it was easy to lose focus and fall in chasing goals that are too broadly defined to be handled by crowdsourcing (like “fighting world hunger”).

So one can only applaud the USAID officials for choosing a perfect target for their anti-Ebola hit. It goes without saying that containing the Ebola outbreak could only succeed if the medical personnel treating Ebola patients were fully protected. However, the personal protective equipment (PPE) available at the time was not suited for the extreme heat and humidity of West Africa, the hotspot of the Ebola pandemic. Very appropriately, the USAID Grand Challenge was seeking “novel PPE or modifications to current PPE that address issues of heat stress and comfort for healthcare workers.” The problem was defined in such a way that even people without any experience in infectious diseases could productively contribute to its solution. No wonder the Challenge has been such a tremendous success.

The Ebola Grand Challenge was and still is a sound example of the ability to successfully use crowdsourcing not only to create novel and attractive consumer products but also to address the most challenging social problems facing humanity at the geopolitical and macroeconomic levels.

Fast-forward to the present. Crowdsourcing has been one of the first and most effective innovation tools to be rapidly deployed to respond to the consequences of the ongoing COVID-19 pandemic. The effect of the solutions generated during these pandemic-related campaigns will be long felt in the future.

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: https://ideas.lego.com/projects/9f650c10-1766-4fc6-bc25-213e6e3c646e

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What Is Holding Your Business Back from Becoming the Next Big Thing?

(This piece was originally posted to the HeroX blog)

 As a famous line (wrongfully attributed to Charles Darvin) reads: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.”

The COVID-19 pandemic has challenged every single aspect of our daily lives; some of them will change forever because of the crisis. The same can be said about business: every single organization is under tremendous pressure to adapt to the new environment. Guessing about when we’ll be “back to normal” has been rapidly replaced with a quest for finding the “next normal.” Whether Darvin did or did not say the words quoted above, one thing is clear: only the most adaptable organizations will emerge from the current crisis stronger, not weaker.

Why Is Innovation Even More Important Now Than in “Normal” Times?

Everyone seems to agree that innovation is not a luxury anymore. It’s a necessity, it’s a means of survival. The mantra “Innovate or Die” may sound melodramatic, but it reflects the fact that the lack of innovation is a frequent cause of business failure. Just ask Blockbuster, Kodak, or Toys R Us.

Business innovation becomes even more important in uncertain times. And yet, many organizations react to crises by cutting down “dispensable” expenses – and innovation is often one of such items. This is a huge mistake. Gartner, a research and advisory firm, studied Fortune 1000 companies that outperformed their peers following the financial crisis of 2008-2009. What made all the winners look similar was that they invested in new growth opportunities instead of just cutting costs.

Unfortunately, sustainable business innovation proves to be difficult for many organizations even in “normal” times. Below, I will discuss a few common innovation “blockers” and the ways to overcome them – helping your organization to survive the crisis and become a new big thing in the post-COVID world.

The Peril of Aiming Low

The lack of a coherent innovation strategy still plagues a lot of organizations. It may appear strange but some corporate innovation leaders are still genuinely surprised to learn that different types of innovation exist (see picture below) and that they have different time horizons, resource requirements, and ambitions. Yes, ambitions.

Three types of innovation (by Steve Denning)

When designing their innovation programs, many organizations aim too low: they focus on incremental innovation, which is often a mere improvement of their existing lines of products and services. Confining their efforts to low-risk, low-return incremental innovation projects, these organizations dramatically reduce their chances of finding new sources of revenue. Worse, they open themselves up to disruption.

The solution to this problem isn’t easy, but it does exist: organizations should recognize the difference between incremental, breakthrough, and transformational types of innovation (a.k.a. the 3-Horizon Model of Innovation) and fully embrace practices of Ambidexterity and Integrative Innovation Management. Spreading your innovation “bets” among projects of varying scope, longevity, risk, and, yes, ambition will eventually help you score big. That is how Google has transformed itself from a two-person, dorm room-based startup into one of the largest companies in the United States.

Does Innovation Need “Structure”?

Over the past years, many corporate innovation leaders have mastered the art of talking about innovation, delivering well-rounded answers to friendly questions in non-confrontational surveys and interviews. Unfortunately, as I mentioned in the previous section, a frighteningly large number of them still demonstrate a weak knowledge of the very fundamentals of the innovation process. Worse, they take a hands-off approach to innovation management, proudly claiming instead that “in our company, innovation is everyone’s job.”

Exacerbating this dangerous trend is a wide-spread belief that innovation management does not need structure. Moreover, one can often hear that structure prevents companies from being innovative because structure supposedly stifles or even kills creativity.

Nothing could be further from the truth. A 2012 study by Accenture found that organizations that have a holistic, formal innovation structure consistently report better outcomes of their innovation programs. As Tracy Brower wrote in a recent Forbes article, sustainable innovation can be learned by organizations if they succeed in putting together a balanced combination of structure, processes, and incentives.

There is no reason to confuse structure with bureaucracy. At the very beginning of the innovation journey, all that your organization needs is an innovation charter (or, at the very least, an explicit verbal buy-in from the top management), a steering committee, a budget, and a dedicated innovation team. But as your organization becomes more and more innovation-mature, the structure will transform into something else. It is called culture.

Are Innovation and Ideation the Same Things?

Another popular mistake that corporate innovation leaders often make is equating innovation and ideation. True, innovation starts with collecting ideas, but it does not stop here. Innovation can only occur if the collected ideas are assessed, incubated, and finally implemented into new products, services, and operational improvements. Ignoring this all-important implementation part of the innovation process, the one that follows the ideation part, simply means a misrepresentation of what innovation really is.

Yes, there is no innovation without ideas. But the reverse isn’t true as evidenced by numerous examples of organizations collecting zillions of poorly defined ideas and not knowing what to do with them.

Instead of spending time and limited resources on generating numerous but useless “ideas” organizations should master the art of disciplined problem-solving. In this model of innovation (which I call the top-down model of innovation), the focus is on problems. The organization’s leadership formulates problems that are crucial for the organization to solve and then moves them down the ladder for employees to suggest solutions. Various venues could be used for this purpose: innovation jams, innovation contests, or challenges posted on internal and external innovation networks.

Formulating problems needed to be solved lies in the core of the innovation process. Otherwise, you will be finding the right solutions to the wrong problems.

A Couple Words about Leadership

And this brings us to the all-important question of leadership. I cannot overstate it: nothing will happen in any organization aspiring to become an innovation leader without active personal involvement from the C-suite.

Let me say this: to survive in the current business environment – much less to become “the next big thing” – organizations must innovate. With strong leadership in your organization, you will have innovation. Without leadership, innovation will not happen. It is that simple.

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: https://www.finyear.com/Charles-Darwin-would-have-built-a-killer-stablecoin_a41689.html

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Five Barriers to Adopting Open Innovation and How to Overcome Them

(This piece was originally posted to the HeroX blog)

A friend of mine, an innovation consultant, likes to joke: “Innovation is simple…but not easy.” The same can be said about open innovation. Henry Chesbrough, who introduced the concept of open innovation in his classic 2003 book defined it as using external sources of knowledge and expertise to advance internal R&D. What can be simpler than that?

And yet, the adoption of open innovation has been far from seamless. Open innovation might look simple…but it’s not easy. Firms attempting to create formal open innovation programs face numerous barriers. And although many of these barriers are specific for each organization (remember Leo Tolstoy’s “Happy families are all alike; every unhappy family is unhappy in its own way”?), some barriers are quite ubiquitous. In this piece, I will review five common barriers to the adoption of open innovation and suggest approaches to overcoming them.

Treating open innovation as a “special” type of innovation

There is a reason why innovation is not easy. Modern organizations, especially corporations, are obsessed with execution. Predictability of outcomes and the precise match between planned and achieved results are the metrics against which organizations measure their performance and performance of their employees.

Innovation is different. By its very nature, innovation is highly unpredictable and relies on constant experimentation with most experiments ending up in failures. This unpredictability of outcomes makes innovation difficult to implement, especially when firms try to move their innovation targets beyond incremental improvements of existing products.

Open innovation adds a twist to this complexity by increasing the level of uncertainty: now, one needs to innovate with “strangers.” This fear of losing control over the innovation process forces firms to slow the adoption of bona fide open innovation tools like crowdsourcing and rely more on occasional surveys of their suppliers and business partners.

To overcome this barrier, open innovation must be closely aligned with the overall corporate innovation strategy. The simplest way to achieve that is to consider open innovation part of a single “innovation body.” One side if this body represents the innovation potential of the firm’s employees (internal innovation). The other side, open innovation, extends behind the corporate walls reaching out to the diverse pools of external talent.

In practical terms, in firms that just start using open innovation approaches, the open innovation team should reside within a larger corporate innovation unit. Sure, as the open innovation programs mature, the team will grow and at some point, become separate. But starting with a separate open innovation team from the very beginning is likely to set it up for failure.

Overcoming Not Invented Here Syndrome

As happens with the adoption of any new paradigm, successful adoption of open innovation requires cultural change – and cultural change is something that almost every organization has a difficulty to deal with.

A cultural problem most often associated with the adoption of open innovation is so-called Not Invented Here (NIH) Syndrome, a rejection by internal teams of ideas and solutions that did not originate within the firm. (It’s important to realize that NIH Syndrome affects internal innovation as well, but this is a topic for a separate conversation.)

There are no simple ways to overcome NIH Syndrome, and it takes time. Firms should promote a cultural shift from problem-solving to solution-finding. This approach postulates that employees are ultimately responsible for the project outcome. How this outcome is to be achieved – by solving the problem internally or by finding a suitable external solution – is of secondary consideration. What is important is how fast this outcome has been achieved and at which cost.

I strongly recommend reading the excellent article by Hila Lifshitz-Assaf, “Dismantling Knowledge Boundaries at NASA,” describing how NIH Syndrome was dealt with at the Space Life Science Directorate at NASA.

Mishandling Open Innovation Tools

Adding to the adoption problems is widespread confusion over available open innovation tools. Sure, some open innovation techniques, such as crowdsourcing, are not intuitive and need training and experience to use. But others, such as working with customers, suppliers, and partners, and running innovation competitions is something that many firms are quite familiar with.

Unfortunately, what is missing is a clear understanding that each specific open innovation tool is only good when applied to a matching innovation task. Some tasks are better performed using tools from a “co-creation” basket, others require crowdsourcing, and some may be achieved only with engaging startups.

It falls on academics, business writers, and innovation practitioners to educate innovation teams on the classification of open innovation tools and good practices of using them.

Fear of Revealing “Secrets”

A surprisingly common and persistent fear of adopting open innovation is the possibility of revealing proprietary information to competitors. One can often hear: “If we launch this open innovation initiative, our competitors will immediately know our strategy and our direction.” Perhaps, but don’t they already know your strategy and your direction?

In the era of digital transformation, the pace of innovation is increasing, and going “open” helps firms sustain this pace by shortening time to market and reducing R&D costs. These days, competition is won or lost on being able to over innovate your competitors, not trying to keep them in the dark. A good example of this approach was shown by Tesla in 2014 when it announced it was opening to anyone its portfolio of patents related to electric car technology. Explaining the move, Elon Musk wrote that Tesla would compete and win relying not on secrecy but on the talent of its engineers.

IP Concerns

Close to the fear of revealing proprietary information are concerns around Intellectual Property (IP) rights. Now, those are real concerns: confidentiality and IP still matter for many firms, especially tech companies. “What will happen if we include some sensitive data into our open innovation brief? We cannot control who will read it,” you can often hear.

These concerns, while real, are overblown. Techniques exist to write open innovation briefs in such a way that the identity of the firm that sponsors the initiative will be hidden. Moreover, very often, it is possible to write a problem statement without even revealing the technical application behind the problem.

Another concern is the so-called “IP contamination,” a fear that solutions coming from outside will “contaminate” IP generated within the firm. This is a real concern, too. But again, techniques exist (the “need-to-know” distribution of external information, using “IP-buffer” intermediaries, etc.) that can deal with this issue.

Yes, open innovation is not easy. But it can be learned, and the benefits of mastering this tool will justify the effort.

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

 Image credit: by Nick Fewings on Unsplash

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Does the Term “Closed Innovation” Still Have Meaning?

(This piece was originally posted to the HeroX blog)

Remember the famed Bell Labs, once a powerful R&D center for the telecommunication equipment company Lucent Technologies (acquired by Nokia in 2016)? Bell Labs’ researchers are credited with the development of radio astronomy, the transistor, the laser, the Linux operating system, and the programming languages C and C++. Nine Nobel Prizes (eight in Physics and one in Chemistry) have been awarded for work conducted at Bell Labs.   

And yet, all the intellectual might of Bell Labs did not prevent Lucent from consistently losing its market share to Cisco, a company that did almost no internal research.

Another story is the one of Palo Alto Research Center (PARC), which for 30 years has been part of Xerox Corporation. Despite receiving lavish R&D investments from the parent company, PARC failed to create significant value for Xerox and its shareholders.

In retrospect, one can say that the inability of two innovation powerhouses to provide a competitive advantage to their parent companies signaled the sunset of the era of closed innovation and the dawn of the era of open innovation.

What Went Wrong with Closed Innovation?

For a long time, internal R&D has been viewed as a strategic asset and an important competitive tool for any large organization. Because internal R&D wasn’t cheap, the large and deep-pocketed corporations used it as a weapon to protect its market position from the less funded competitors. If you were big, you could innovate and win the competition; if you were small…well, you simply couldn’t.

But then, completely new entrants to the market began emerging. What was remarkable about them is that they conducted little or no basic in-house R&D. Instead, they preferred to cooperate with other, often smaller, companies engaged in more basic research.

Three major factors have fueled this trend. First, the abundance of highly-trained people with college and post-graduate degrees. This abundance was helped by the increasing internal mobility of this workforce along with the growing inflow of high-quality professionals from abroad. As a result, knowledge and experience have ceased being the exclusive property of a few; they began belonging to “everyone.” (As Sun Microsystems’ co-founder Bill Joy reportedly said: “No matter who you are, most of the smartest people work for someone else.”) 

Second, the Internet and the host of modern telecommunication technologies have dramatically reduced the cost of starting and running a business. As a result, small, nimble, and brash startups have begun relentlessly challenging large and inflexible incumbents.

Finally, the nature of innovation itself has changed. Modern innovation occurs at the cross-borders of different disciplines, and no company, no matter how large, can afford to hire researchers from many different fields. Innovation now happens when people with different but complementary skills and experiences put their heads together – regardless of where they work.

By publishing his now-classic 2003 book, Prof. Henry Chesbrough was the first who said it loud and clear: the era of closed innovation was over.

Does Internal R&D Have a Future?

It would, however, be a huge mistake to think that the end of “closed innovation” means the end of internal R&D. Quite to the contrary: internal R&D efforts will play an important role in any organization’s innovation activities. What has changed is that internal R&D has stopped being closed innovation; it is now internal innovation.

In one of my previous posts, I argued that open innovation is not a “special” type of innovation; it is part of a single “innovation body.” Open Innovation serves as a branch extending over the corporate walls to reach out to the diverse pools of external talent. But it can be successful only if it’s tightly connected to the other side that is utilizing the innovation potential of the company’s employees.

In many respects, it’s internal, not open, innovation that represents the foundation of the corporate innovation strategy. Only internal innovation teams can identify and properly formulate problems facing organizations. Only internal innovation teams can fully understand incoming external solutions to select those that make sense. Only internal innovation teams can ensure the successful integration of external information with the knowledge available in-house. It’s only at this midpoint of the problem-solving process – at the stage of generating potential solutions to the problem – that open innovation is superior to internal. 

Organizations, therefore, should consider internal and open (“external”) innovation as different, complementary tools in their innovation management toolboxes. There is no sense in discussing which tool is better; each should be used at its proper time and place.

Building Internal Innovation Networks

Many organizations, especially in the tech sector, organize their internal innovation activities in the form of internal innovation networks (IINs).

In addition to supporting open innovation, there are at least four important benefits IINs can bring to any organization.

First, IINs provide a communication platform between different corporate units that in many organizations often have no institutional space to discuss strategic issues. By providing such a platform, IINs increase the efficiency of the decision-making process and reduce the need for face-to-face meetings, something that has become of paramount importance during the COVID-19 pandemics.

Second, IINs help foster the culture of collaboration, bringing together corporate units that are traditionally involved in the innovation process, such as R&D and Marketing, with those that are not (Business Development, Finance, Legal, HR). It’s useful to remember that the notorious “NIH (Not Invented Here) Syndrome” manifests not only as a rejection of external knowledge and expertise but also as resistance to intra-company collaboration, as individual units are often reluctant to share their findings with others. By breaking internal silos and promoting intra-company collaboration, IINs enhance the overall innovation potential of the organization.

Third, IINs can be used to find solutions to problems that individual units have failed to solve on their own. Such problem-solving could be especially productive in multinational corporations with numerous units spread over geographic and time zones. People in different units, often brought together as a result of M&A, rarely communicate with each other and almost never meet face-to-face. Yet, often one unit may possess specific knowledge that is desperately needed—and can be immediately implemented–in another. Connecting such “dots” through IINs can result in significant savings of time and money for internal R&D.

Fourth, IINs help identify the organization’s emerging thought leaders, who – especially in junior positions and in geographically remote units – often remain unnoticed to the corporate leaders. IINs provide a voice to every employee regardless of their rank and location in the company. Besides, the very format of online communication is especially attractive to younger workers who play an increasingly important role in the global marketplace.

In summary, when developing a viable corporate innovation strategy, organizations must create a balanced portfolio of internal and open/external innovation programs. Yet corporate innovation leaders should always remember that the full potential of any innovation program can only be realized by the concerted effort of properly connected people within organizations. Or, putting this differently, the power of corporate innovation comes from the strength within.

Check out my eBook, “We the People of the Crowd…,” a collection of stories about crowdsourcing reflecting my personal experience in working with corporate and nonprofit clients.

Image credit: by Patrick Tomasso on Unsplash

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