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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The Role of Diversity in Innovation

(This piece was originally posted to the HeroX blog)

Can labor laws affect innovation? To many people, this question may sound nonsensical. Why would such a boring thing like labor law have anything to do with an exciting act of creating something new?

Don’t rush to the conclusion. Have you heard about so-called employment nondiscrimination acts (ENDAs)? These areU.S. state-level laws that prohibit discrimination based on sexual and gender identity. A 2016 study showed that ENDAs spurred innovation. The authors of the study found a significant increase in the number and quality of patents at firms headquartered in U.S. states that have passed ENDAs relative to firms headquartered in states that have not. This result was more pronounced for firms in states with a large homosexual population and for firms in human capital-intensive industries, such as technology and finance.

As far as I know, there are no studies suggesting that sexual minorities are intrinsically more innovative. What the above study implies is that innovation requires a certain level of individual freedoms, including freedom from being discriminated against for whatever reason. It also points to an important positive factor affecting innovation: diversity and inclusion in the workplace.

Is Diversity Important?

A growing body of evidence indicates that heterogeneous firms perform better than their homogenous counterparts. Research by Deloitte shows that organizations with inclusive cultures are six times more innovative and agile, eight times as likely to achieve better business results, and twice as likely to meet or exceed financial targets than organizations with less diversity in the workplace. Another study reported that more diverse companies were 45% more likely to report annual market-share growth and 70% more likely to enter a new market.

Analysis performed by McKinsey shows that the benefits of diversity in the workplace originate at the very top of the corporate world. McKinsey analyzed the composition of executive teams in more than 1,000 firms across 12 countries and found that those in the top quartile for ethnic and cultural diversity were 33% more likely to outperform those in the bottom quartile. The analysis also showed that firms in the top quartile for gender diversity were 21% more profitable than firms in the bottom one.

Diversity among members of the boards of public companies matters, too: Credit Suisse Research Institute found that firms with one or more woman board members had higher average ROI and better average growth than firms with male-only boards. And yet, 77% of S&P 500 company boards are more than two-thirds male, and only 2%(!) have more than 50 percent women members.

Diversity and Innovation

Why is diversity important? The answer to this question appears quite straightforward: diverse and inclusive companies innovate better. The connection between diversity and innovation was proven by a substantial body of research.

For example, Boston Consulting Group (BCG) surveyed the innovative potential of 1,700 American firms of different sizes and locations. As the indicator of innovation, BCG looked at the portion of a firm’s revenue from products and services launched within the last three years. BCG found that firms with above-average diversity produced a greater proportion of revenue from innovation (45% in total) than firms with below-average diversity (26%). Not surprisingly, this 19% innovation-related advantage had translated into better overall financial performance.

One specific factor identified by researchers of the role of diversity in innovation was the composition of innovation teams. According to a 2013 report by the Center of Talent Innovation, if a member of the innovation team shares an ethnicity with a client, the team is 150% more likely to understand the client’s needs, a scenario that can make the difference between winning and losing new business. That means that with increased diversity within a firm, its opportunity to acquire new clients and expand into new markets increases, too.

The above study may point to a useful approach for organizations seeking to enter a new market or a new segment of an existing market: to create a market research/innovation team with a demographic composition closely resembling the one of the target client population.

Why Diverse Teams Are More Innovative?

Diversity in the workplace can take multiple forms. Some of them are called inherent (inborn) traits: age, gender, race and ethnicity, and sexual orientation. Others fall in a category of acquired traits: education, professional and personal experiences, veteran and disability status. Recently, a lot of attention has been drawn to cognitive diversity: bringing together people with different styles of thinking and different viewpoints. Adding the component of cognitive diversity to a more traditional “mix” of inherent and acquired diversity can bring organizations to a new level of innovation power.

An important question to answer is, what are specific mechanisms by which diversity may affect innovation? A 2014 article in Scientific American, “How Diversity Makes Us Smarter,” by Katherine W. Phillips began unraveling this fundamental issue.

It’s reasonably easy to understand how the diversity of expertise and experience would spur innovation. After all, in today’s business environment, meaningful innovations happen at cross-borders of different disciplines. Having teams composed of experts in several relevant fields becomes a key prerequisite for any successful innovation project, be it a new car or a new way to save money.

But why is the diversity of race, ethnicity, gender, and sexual orientation equally important? Because people who are different from one another in the race and gender dimensions bring to the table unique information and experiences. This diversity of information creates a positive tension within the group and that tension increases creativity. Besides, simply interacting with individuals who are different forces group members to reassess their own assumptions, question others, and prepare better.

Of course, working in diverse groups isn’t easy. It requires individuals to adjust their own behavior and working styles, something that many of us may find uncomfortable. But a better innovation product will eventually emerge from this hard work. And, by the way, who said that innovation was easy?

Crowdsourcing as a “proxy” for diversity and inclusion in the workplace?

Building diverse and inclusive organizations takes time. However, there is a technique to approach large and diverse groups of people right away: crowdsourcing. Crowds assembled by established open innovation platforms, such as HeroX, represent people of different ages, educational and professional backgrounds, locations, and cultures. Crowds are as diverse a workforce as one could only dream of having in any organization – and they show the value of diversity and inclusion day in and day out by providing superior solutions to the world’s most pressing problems.

I’m grateful to Ralph-Christian Ohr for pointing to his 2013 post “Innovation and Diversity.”

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 Ali Yahya on Unsplash

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Sharing Knowledge in Times of Crisis – and Beyond

(This piece was originally posted to the HeroX blog)

In March 2020, the White House Office of Science and Technology Policy1 released an open dataset of scientific information on the novel coronavirus responsible for the ongoing worldwide pandemic. Titled COVID-19 Open Research Dataset, the dataset included nearly 30,000 scientific articles about SARS-CoV-2 (the official scientific name of the virus) and other viruses in the broader coronavirus group.

The dataset included not only published articles, but also unpublished data provided by open sources specializing in health sciences and biology research. Equally importantly, the new dataset is machine-readable, making it easy to use for machine learning purposes. The hopes are that with the help of the shared data, the global AI community will be able to rapidly identify approaches leading to virus prevention, patient treatment, and vaccine development.

We live through challenging times. The coronavirus pandemic takes lives and destroys economies, reveals the weaknesses of national health care systems, and sheds light on both the greatness and incompetence of political leaders. But it also reminds us that we are all together living on this small planet of ours. We’re interconnected and interdependent – and we need each other. Let’s not forget that when the pandemic is over.

The crisis is also showing how openness and unrestricted sharing of vital scientific information facilitate faster development of the tools to fight the pandemic.

The COVID-19 outbreak was first documented in Wuhan, Hubei Province, China at the end of December 2019. By mid-January 2020, Chinese researchers have determined the genomic sequence of the virus and shared it with the World Health Organization. The publicly available sequencing data has immediately opened the door to developing diagnostic kits in China and other countries. Singapore-based Veredus Laboratories, a provider of molecular diagnostic solutions, was, perhaps, the first company to develop a commercially available diagnostic test by the end of January.

Drugs and vaccines are next. First COVID-19 vaccines are already in clinical trials. Academic scientists, pharmaceutical companies, and government agencies are teaming up to test more than active compounds as possible anti-virus drugs and vaccines.

Fortunately, the willingness to open up and cooperate turned out to be as contagious as the virus itself. Nvidia has offered its powerful genome analysis toolkit for free to any researcher working on a COVID-19-related project. Canadian biotech company Bio Basic prioritized all purchase orders of reagents needed for coronavirus research and ships these orders free of charge.

Make no mistake: confidentiality and intellectual property still matter for biopharmaceutical and other companies. However, what the coronavirus crisis has already demonstrated is that even the most competitive enterprises can put aside their protective tools and work with others to solve one of the most urgent challenges of recent times. Openness and caring for each other in times of crisis seem to matter to them as well. Perhaps, even more than secrets and profits.

Let’s not forget that, too, when the pandemic is over.

1A department of the United States government with a broad mandate to advise the President on the effects of science and technology on domestic and international affairs.

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: Patrick Tomasso on Unsplash

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What Can Dancing Teach Us About Innovation?

Many organizations treat corporate innovation as a child: unpredictable, capricious, and difficult to control. And as it often happens to us adults, we feel an irresistible urge to pontificate, to teach the child a lesson.

I’m amazed at the popularity of the idea to teach innovation a lesson. The sources of the lessons could be quite unorthodox. History? Of course. Art museums? Sure. Animals like elephants and monkeys? You bet. Soviet-era production? Without question. Hollywood movies like “The Karate Kid” and “Back to the Future”? How can one forget? And then comes my absolute favorite: a parking lot full of meat lovers.

Inspired by these examples, I decided to contribute my fair share to the list. As a competing amateur ballroom dancer, I would like to argue that dancing, too, can teach us about innovation. To prove my point, I want to share with you some wisdom that I have learned from my dancing teachers.

Make every move your own move

In a sense, there is no right way to dance. True, textbooks and competition guidelines describe recommended sequences of steps that every basic dancing move should comprise. Yet, every dancer knows that it is her or his body—its structure, flexibility, and responsiveness to music—that ultimately defines the choice of dancing moves and the way they are performed. You succeed in dancing only when every move fits your physical and spiritual abilities; you become a dancer only if every move becomes your move.

When launching innovation initiatives, organizations—especially those with a shorter innovation history—often look for “best practices,” a set of supposedly proven approaches that can guarantee a successful outcome of any given innovation project.

The truth is that there are no “best practices” in innovation management practice (remember Steve Shapiro’s “Best Practices Are Stupid”?). Instead of chasing chimeras, the organizations should try many different approaches to identify those that best fit their corporate strategy, organizational structure, the level of innovation maturity, and corporate culture.  Only after finding the moves that are its own moves, can the organization successfully perform an innovation dance.

You move with your feet, but you dance with your body

When I was taking my first dancing lessons, I was sure that once I memorized the sequence of the required steps – quick-quick-slow; quick-quick-slow – the art of dancing would be mastered. But then, I was told that my arms mattered, too. Later, I understood that without moving hips (not something taken for granted for a man of my age), my dance would look bland. Finally, I realized that it was my brain (or guts?) that ultimately drove my dance – bringing together my feet, arms, hips, shoulders, and, yes, my face expression. Curiously, the more experienced I became, the less I thought about steps as such.

Usually, organizations begin experimenting with innovation by creating a dedicated innovation unit—be it within R&D, business development, or IT—whose responsibility is to learn the first “steps” of innovation dance. It is crucially important for this group to not stay indefinitely focused on the pure technicalities of the innovation management process. Instead, the innovation group should rapidly reach out to Marketing to make sure that all planned innovation initiatives do incorporate customer feedback. In parallel, it should talk to human resources to ensure that employees who made significant contributions to innovation projects are properly recognized and rewarded.

And do not forget corporate communication whose help with celebrating early successes may play a crucial role in changing the way the organization views innovation. Finally, little will come out even of a brilliantly conceived innovation initiative, if the senior management team, the organization’s brain, would fail to support the innovation team. It is definitely for a reason that innovation is called a team sport.

Motion creates an emotion

I would lie telling you that I’m always in a dancing mood. No, quite often, I do not feel like dancing. But sometimes, I simply must practice, for example, to get prepared for my next lesson. So, like it or not, I get up, turn on the music, and take my first step. Then another. Then one more. And magic happens: my body sheds the rust and gets filled with life. The rhythm of the music begins pulsing in my blood vessels. My dancing motion has created a dancing emotion, and, fueled with this new emotion, my next step is getting better than the prior.

There are so many excuses for organizations to place innovation at the bottom of their to-do lists. “We don’t have time,” “We don’t have resources,” “Our CEO doesn’t care”—have we all not heard this before?

The only way to shake off the innovation lethargy is to leave the proverbial couch and take the first step. Then another. Then one more. Trust me, sooner or later, the motion of repeated innovation “steps” will change the spirit of the innovation group and then gradually take hold of the emotional state of the whole organization. Repeated acts of innovation will become a habit of it.

So, as they say in TV commercials: what are you waiting for? Turn on the music and go to the dancing floor. Better yet, invite a colleague of yours to dance with you. Quick-quick-slow. Quick-quick-slow.

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: from the author’s family album

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Innovating With Competitors

(This piece was originally posted to the HeroX blog)

With the waves of disruption rocking every corner of the global economy – dethroning powerful incumbents while skyrocketing to fame brazen startups – innovation isn’t a luxury anymore. It’s a means of survival. The slogan “Innovate or die” may sound like a cliche, yet it correctly reflects the contemporary business environment in which companies must relentlessly create new products and business models to stay competitive.

The prevailing innovation “doctrine” postulates that in order to innovate effectively, companies can’t restrict themselves to exclusively internal sources of knowledge and expertise. They should engage external sources as well: customers, suppliers, startups, academic, and business partners.

The competitive nature of the innovation process seems to exclude from the above list one important constituency: the company’s competitors. Why would you work together with your competitors and potentially help them take a bite of your market share? 

And yet, strange as it may look, one repeatedly witnesses examples of fierce competitors working together to solve a complex problem. A classic case of such cooperation has been Ford and General Motors teaming up to engineer a new type of transmission to be used in their vehicles. Another example was cooperation between Sony and Samsung to develop an innovative type of an LCD flat TV panel. (A term “coopetition,” a combination of “cooperation” and “competition” has been coined to describe this type of interaction.)

An interesting approach to engaging existing and potential competitors has been used by Tesla Motors. In June 2014 Tesla announced that it was opening up to anyone its portfolio of patents related to electric car technology. Explaining the move, Tesla Motors’ Elon Musk wrote that Tesla’s competitive advantage didn’t need to be defensive; instead, Tesla would compete and win on the merits of its talented engineers. In a similar move, Microsoft open-sourced more than 60,000 Linux-related patents in 2018.

One of the driving forces behind the idea of coopetition is the concept of “innovation ecosystems,” a business paradigm postulating that a sustainable innovation process needs the engagement of a wide range of interconnected actors: governments, civil society, the private sector, universities, startups, and individual entrepreneurs. Each member of the ecosystem is important for its ultimate success, and such an ecosystem is impossible without bringing together participants with competing interests.

As Michael Docherty wrote in his book “Collective Disruption,” in the very near future, competitive advantage will mean not who has the best technologies but who has the best relationships. 

One can consider crowdsourcing a form of coopetition. When you crowdsource, you become agnostic to the identity of the potential solvers of your problem. They can be anyone: folks working in a different country, or in a different industry – or, yes, for your competitors. The only thing that matters to you is whether your problem will be solved. 

Sun Microsystems’ co-founder Bill Joy reportedly said: “No matter who you are, most of the smartest people work for someone else.” Using crowdsourcing can help you mobilize the smartest people in the world, including those working for your competitors, to solve your most difficult problem. 

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Innovation’s “Uncharted Waters”

(This piece was originally posted to the HeroX blog)

A few years ago, Wazoku, a UK idea management software company, sponsored an innovation survey. The results of the survey are a cause of concern for anyone interested in corporate innovation. 

Full 85 percent of respondents to the survey –  board members, senior and middle managers, and line workers within large UK enterprises – considered innovation important to their companies. Yet 53 percent of surveyed managers were unaware of their organization’s definition of innovation and how it fits into wider corporate goals; 38 percent of them said innovation wasn’t their responsibility because it wasn’t in their job descriptions.

A lack of understanding of what innovation means – in general, and for any organization, in particular – remains one of the most serious problems facing corporate innovation. Even many CEOs aren’t immune to this “disease,” but at the lower organizational levels, almost everyone is affected.

No single fix exists to solve the problem. However, the organizations that are new to the structured innovation process – or the ones that experience troubles in running effective innovation programs – may consider a solution that looks deceptively simple and yet may prove surprisingly effective. 

This solution is to create a corporate Innovation Charter. There are at least three reasons why the Innovation Charter could help organizations innovate better.

The Innovation Charter outlines major aspects of the company’s innovation strategy.

The major objective of the Innovation Charter is to outline what innovation means for this specific organization. It should explain where the company stands today; where the company wants to be in a few years; how the gap is to be bridged, and what role innovation should play in this process. The clarity about the place innovation occupies within the framework of the general corporate strategy will help select and support appropriate innovation programs. 

Equally important, the Innovation Charter would help create a common innovation language, the lack of which often results in a communication wall between the innovation team and the rest of the organization.

The Innovation Charter creates the innovation “law of the land.”

CEOs are routinely blamed for the lack of attention to innovation. But let’s face it: they are very busy people in charge of everything, and it’s plain unrealistic to expect them to pay undivided attention to innovation, a continuous process with no evident need for day-to-day executive control.

So, instead of asking the CEO for constant intervention, the innovation team should create the Innovation Charter and ask the CEO to explicitly endorse it. With this endorsement, the innovation team can claim executive support even when the attention of the executive leaders will inevitably shift to other priorities.

In other words, the Innovation Charter establishes the innovation “law of the land.” Sure, like any other law, it needs periodic re-enforcement, but it still helps maintain order even when “the cops are away.”

The Innovation Charter makes innovation “everyone’s business.”

Corporate innovation can only succeed if it’ll expand from the traditional R&D or product development units to departments that are not directly involved in innovation programs (manufacturing, finance, HR, etc.). Unfortunately, very often, the corporate structure is too rigid, too “anti-matrix,” to allow innovation to become “everyone’s business.”

Realistically, not everyone in the company will be willing to assume an extra-load that participation in innovation activities demands. But even those who are, often can’t get involved because of the pressure of their everyday tasks. Here, the Innovation Charter can help too as it provides an explicit mandate to get involved in innovation activities, something that even all-powerful mid-level managers can’t easily ignore.

In other words, the Innovation Charter sends a message to the whole organization: “Yes, you can and you should!”

Image credit: https://callnewspapers.com/charter-citizens-bill-of-rights-is-rejected-wont-go-to-voters/

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Democratizing Innovation with Crowdsourcing

(This piece was originally posted to the HeroX blog)

In 2006, Prize4Life, a Cambridge, MA-based nonprofit organization dedicated to finding the cure for amyotrophic lateral sclerosis (ALS, a.k.a. Lou Gehrig’s Disease) launched a multi-stage crowdsourcing campaign, the ALS Biomarker Grand Challenge. The purpose of the Challenge was to find a cost-effective biomarker that could measure the progression of the disease in ALS patients. 

Three years later, Prize4Life awarded two “progress prizes,” $50,000 each, for solutions that had made the most significant progress towards reaching the ultimate goal of the Challenge. The first prize was awarded to Dr. Seward Rutkove, a neurologist at Beth Israel Deaconess Medical Center in Boston and a prominent researcher in the field of neuromuscular disorders, such as ALS. Dr. Rutkove went on to win the $1 million Grand Prize in 2011.

The recipient of the other “progress prize” was Dr. Harvey Arbesman, a private practitioner in a suburb of Buffalo, NY. Although his biomarker did not fully meet the Challenge criteria, Prize4Life chose to recognize Dr. Arbesman’s valuable insight into the fundamental mechanisms of the disease.

Interestingly, before receiving the “progress prize,” Dr. Arbesman was virtually unknown in the ALS community. Why? Because he was a dermatologist by training, with no formal connections to the field of neuromuscular diseases and no prior publications on ALS.

Was there any chance that Dr. Arbesman would have been selected, as an expert, by any organization that wanted to work on ALS? No. But Prize4Life didn’t start its quest for the ALS biomarker with looking for ALS experts. Instead, it began by formulating a problem it wanted to solve (“We need a biomarker for ALS”); it then proceeded to ask anyone capable of providing a solution – regardless of their education, professional background, or place of employment – to submit their proposals. Prize4Life didn’t look for people who had the solution; instead, it arranged for a person with the right solution to come to them.

This is a fundamental difference between crowdsourcing and other problem-solving tools. By posting your problem online, you become agnostic to the sources of potential solutions. They may come from anywhere and anyone, and you don’t have to do much to “target” your search to a potential solver – given, of course, that the crowd you’re approaching is sufficiently large and diversified. In other words, when running a well-designed crowdsourcing campaign, you don’t have to spend time and resources on finding solvers to your problem; you only need to analyze the solutions that these self-selected solvers are sending your way.

By creating the conditions when ideas no longer belong exclusively to subject-matter experts, crowdsourcing is democratizing innovation. It is leveling the innovation field by opening up new channels to the folks who have been barred before from innovation activities by institutional or educational barriers. 

Of course, the ascent of crowdsourcing as a new innovation tool results in changing the rules of how new knowledge is generated, collected, implemented, and protected by organizations. I’ll touch upon these important topics in the upcoming posts.

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