Applying open innovation tools to business model innovation

Recently, I proposed a “map” of existing open innovation tools based on the identity of open innovation partner(s) and the mode of interaction between them. Three large “baskets” were included: co-creation (known partners, two-way interaction), crowdsourcing (unknown partners, two-way interaction) and webscouting (unknown partners, one-way interaction). I further suggested that the proposed map may help in matching specific open innovation tools with different types of innovation.

In the first example of such matching, I looked at the usefulness of internal and external crowdsourcing at three stages of business model innovation, the latter being defined by C.M. Christensen, T. Bartman and D. van Bever”as follows:

  • Market-creating innovations, the type of innovation that takes place at the first stage of business model formation when firms search for a meaningful value proposition,g., product or service that would fulfill unmet customer needs (“job to be done”).
  • Sustaining innovations, the type of innovation, which is an improvement in the firm’s core offerings, involving the creation of better products or services that can be sold for higher prices to existing customers.
  • Efficiency innovations, the type of innovation that kicks in when sustaining innovations no longer generate additional profitability and the firms turns to cost reduction, mainly by optimizing internal processes.

Here, I want to explore a match between stages of business model innovation and two other major open innovation tools: customer co-creation and webscouting.

The usefulness of both customer co-creation and webscouting is the highest when applied to market-creating innovations, the process of designing new products and services. Webscouting – in particular, netnography – would be indispensable in discovering unmet customer wants and needs. Its benefits include the ability to scout large numbers of potential customers and being less intrusive and expensive than ethnography and focus groups, two popular techniques in the customer co-creation basket. At the same time, the two-way interaction nature of customer co-creation provides opportunities for early customer feedback, allowing firms to test hypotheses and MVP’s. Using both tools in parallel may have a synergistic effect on the productivity of internal R&D teams.

Customer co-creation and webscouting are still highly effective when applied to sustaining innovations, allowing firms to collect customer feedback to their products and services. Again, using both tools in parallel would be the most beneficial as the depth of interaction with customers obtained through customer co-creation would be augmented by the large number of data points collected with the help of webscouting.

Webscouting, which, by definition, is the collection of customer insight on online forums, simply doesn’t apply to efficiency innovation. But customer co-creation, too, completely loses its power at this stage of business innovation: no customer, however close and trusted, can possess enough relevant information to be able to provide valuable insight with regards to the firm’s internal operations and cost structure, the hallmark of efficiency innovation.

The usefulness of customer co-creation and webscouting closely mirrors that of external crowdsourcing, which, too, is very efficient at the market-creating innovations stage, but gradually loses its efficiency at later stages. So far, I’m aware of only one open innovation tool that could be successfully applied to the efficiency innovation stage: internal crowdsourcing. That being said, I fully realize that the very classification of internal crowdsourcing (i.e., crowdsourcing conducted within the legal boundaries of the firm) as an open innovation tool could be questioned.

I’d also like to add that when talking about customer co-creation I had in mind the group of techniques specifically engaging existing and prospective customers, lead users (and, to a lesser extent, suppliers and academic and business partners). Left aside were approaches involving engaging startups (startup incubators/accelerators, joint ventures, etc.) that I also consider tools in the larger co-creation basket. Matching these open innovation tools to different types of innovation deserves separate analysis.

About Eugene Ivanov

Eugene Ivanov is a PMI-certified Innovation Management Consultant who helps organizations increase the efficiency of their internal and external innovation programs.
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3 Responses to Applying open innovation tools to business model innovation

  1. Pingback: Innovation portfolios, innovation toolboxes |

  2. Pingback: Open innovation, come sfruttare la “saggezza delle folle” per innovare il business – Economyup

  3. Pingback: Open innovation, come sfruttare la “saggezza delle folle” per innovare il business | Economyup

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