Opening open innovation toolbox

Proposed by Ralph-Christian Ohr model of integrative innovation management is a set of practical recommendations helping firms adopt a disciplined approach to innovation. Central to the model is the idea that firms must build a balanced portfolio composed of both exploitation and exploration innovation projects arranged along the following three strategic horizons:

  • Incremental Innovation: improving existing products and business models for existing customers.
  • Adjacent Innovation: expanding into “new to the company” markets.
  • Transformational Innovation: creating principally new products and business models to serve markets that may not have fully matured.

The major benefit of the 3-horizon innovation framework is that it shows firms how to structure, govern, and fund innovation programs while successfully managing risks. However, as formulated, it provides little guidance on which specific innovation tools firms should use when reaching for different innovation horizons.

In my previous post, I proposed a classification of open innovation (OI) tools based on the identity of OI partners and the pattern of interactions between them. In this post, I’ll attempt to match the content of my OI “toolbox” to the three strategic innovation horizons.

Co-creation. I consider customer co-creation as most efficient when applied to Incremental Innovation, when firms deal with modest improvements to core offerings and slight tweaks to existing business models. This stems from the two-way partner interaction inherent to this tool, which provides firms with early customer feedback, including MVP validation.

This ability to provide the immediate feedback to MVPs might expand the usability of co-creation into Adjacent Innovation. However, its effectiveness here appears to be lower than in the Incremental Innovation horizon (as I tried to indicate by the length of the corresponding arrow), because customers may have trouble to articulate their unmet needs when it comes to new products. And it’s exactly for this reason—the inability to articulate a need for something, be it a product or service, that doesn’t yet exist–that co-creation becomes virtually useless in the case of Transformational Innovation.  

Startups. This pattern gets reversed for engaging startups: useless when applied to Incremental Innovation, gaining some strength in the Adjacent Innovation horizon, this tool is at its best when used for Transformational Innovation. By their very nature, startups—at least the best of them–are entities created for the purpose of transformational change of the existing technology and/or business landscape. By engaging startups, firms would hire actors with creativity, flexibility, and audacity to challenge status quo that can rarely be found within internal innovation teams in most mature firms.

Engaging startups in Transformation Innovation is far from being easy, but by creating a vibrant startup ecosystem, firms can make this type of innovation possible and, perhaps, even sustainable. I’d even go as far as to claim that for most large firms, engaging startups is the only Transformational Innovation tool they can use with repeated success.

Crowdsourcing. I know that I’m biased towards crowdsourcing and that what I’m going to say may sounds controversial. But I’ll say it: crowdsourcing stands out among other open innovation tools in that it can be used, equally successfully, in all three innovation horizons.

The reason for this lies in the very nature of crowdsourcing as an innovation tool. Crowdsourcing is essentially a question posed to a crowd of people, with the nature of the received answer being determined, first and foremost, by the nature of the asked question. By properly formulating questions addressing problems and issues of increasing difficulty, complexity, time horizon, risk, and ambitions—and helping crowds deliver plausible answers to these questions–firms can successfully apply crowdsourcing to all innovation horizons.

No, I’m not saying that applying crowdsourcing to Transformational Innovation is as easy as to Incremental; moreover, I’d be hard pressed to name right away a bona fide breakthrough innovation conceived by using this tool.  Yet, I’d argue, as I did many times before (e.g., here and here), that the limited success in using crowdsourcing is due more to the firms’ inability to formulate a proper question than to the crowd’s inability to answer it.

(I’d like to point out that all the above was pertinent to external crowdsourcing. The applicability of internal crowdsourcing, the one engaging firms’ own employees, is different from that of external. See, for example, this post.)

Lead Users. As I argued in my previous post, engaging lead users is essentially a co-creation tool, which, as co-creation itself, is most efficient when applied to Incremental Innovation. However, bringing together large numbers of independent solvers may turbocharge this tool with some power of crowdsourcing. I, therefore, speculate that engaging lead users may become more useful tool for Adjacent Innovation than “pure” co-creation. I, however, admit that no data to support this speculation is available to me.

Webscouting. It’s a relatively new tool, and a solid track record of its practical achievements is yet to be built. Netnography, in particular, would seem to be very useful in discovering unmet customer needs, especially given its ability to engage large numbers of potential customers in a manner that is less intrusive and expensive than ethnography and focus groups, two popular techniques in the co-creation basket. That should make netnography a formidable Incremental Innovation tool.

The ability of webscouting to be applied to higher innovation horizons seems to be unclear at this point. One intriguing possibility is to use webscouting for detecting so-called weak signals, indicators of emerging trends that may mature in the future. If used in this way, webscouting should become a useful source of radical ideas firms can use to launch Adjacent and Transformation Innovation projects.

Will this happen? We’ll see.

Image credit: Hunter Haley on Unsplash

About Eugene Ivanov

Eugene Ivanov is the Founder of (WoC)2, an innovation consultancy that helps organizations extract maximum value from the wisdom of crowds by coordinated use of internal and external crowdsourcing.
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