1 The Emergence of Open Innovation

The commercial sector is successfully leveraging innovation strategies to accelerate technology innovation and enhance business growth. Recent commercial examples of disruptive technology range from smart phones to cloud computing to blockchain to virtual and augmented reality. Given that the commercial sector is often where we find the state of the art in technology innovation, it makes sense to consider whether the innovation strategies employed in that sector can serve as a model for the U.S. government and secure R&D. Among the strategies employed by the commercial sector is an emerging class known as open innovation that touts breakthrough success in achieving technology innovation in terms of the time and cost required to innovate, as well as the diversity and novelty of ideas generated.

Open innovation is about broadening participation in innovation beyond an individual organization or division traditionally assigned to perform specific R&D activities. Henry Chesbrough, credited with coining the term, wrote in 2003, “Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.”1

Chesbrough goes on to explain that an organization, to accelerate internal innovation, should leverage the “purposive inflow” of knowledge from outside the organization. Among the many approaches for establishing such a purposive inflow of knowledge to solve a problem or advance technology, three stand out:

1. Fostering competition
2. Providing a means to share ideas and collaborate
3. Offering incentives to innovators to participate

To understand how these work, consider three brief open technology innovation examples widely regarded as successful.

Three Open Innovation Examples

The first example is one of fostering competition. In 1996 the X Prize Foundation publicly offered $10 million to any nongovernmental organization able to “build and launch a spacecraft capable of carrying three people to 100 kilometers above the Earth’s surface, twice within two weeks.”2 It was a lofty goal. (The prize was later renamed the Ansari X Prize, following a multimillion dollar donation to the cause by entrepreneurs Anousheh and Amir Ansari.) In 2004 Mojave Aerospace Ventures (MAV) won the prize. The MAV team, led by Microsoft co-founder Paul Allen and noted aerospace engineer Burt Rutan, successfully achieved the space flight goal. Perhaps even more significant was the fact that their win signaled a dramatic shift in the field of space flight. It opened the door to a new private space industry and commercial space flight.

This competition-centric open innovation strategy succeeded in achieving resource leveraging; the winning team’s estimated development costs were $25 million, or 2.5 times the prize money. The strategy created reputational incentives beyond the monetary prize that contributed to the winning team’s investing far more than the prize money to win. “Over the course of the competition, 26 teams invested over $100 million in aggregate for research and development in suborbital space flight.”3 Incredible advancements in technology areas such as propulsion and spacecraft reusability were made, not just by the winning team. That is, the entire field of space flight benefitted from the competition.

Systems engineering uses the “iron triangle” to depict the constraints on projects, as figure 2 shows. Open technology innovation challenges can be set up to constrain any of the triangle’s dimensions. Some set a limit on the duration of the competition, and the winner is often the best solution achieved within that time frame. The Ansari X Prize had a fixed goal and scope but an unrestricted schedule.

The second example illustrates providing a means to share ideas and collaborate. The start-up company Quirky created a community of innovators and employs a unique intellectual property (IP) incentive structure that helps find the best ideas and then leverages that community to develop those ideas. Quirky has established an environment in which innovators have access to collective knowledge and the ability to share ideas to collaborate.

The Quirky approach involves a three-stage business model. First, the company asks its community to submit ideas. Second, inventors can ask members of the community for help in improving or developing their ideas in exchange for a share of the royalties. Finally, Quirky takes the top product ideas, builds those products, and sells them, sharing some of the revenues with the community according to the IP agreement.4

Quirky has also established a structure that incentivizes potential innovators to participate. The company offers royalties to idea contributors, with the goal of increasing access to potentially valuable inventions. The IP and reward policies are tied to the innovation strategy. The approach has paid off: Quirky has been successful in generating a large number of ideas from a diverse population in a short period of time, receiving about a thousand ideas per week.5

Like Quirky, the third example also offers incentives to innovators to participate. The idea is that the larger the pool of potential solvers to a problem, the more likely it is that a solution will be found. If we can incentivize more innovators to participate, drawing from an interdisciplinary pool of innovators bringing different skills and experiences, then we may be able to solve previously unsolved problems or decrease the time it takes to reach the solution.

Innocentive is an online platform for organizations to launch prize-based open challenges to solve technology problems. The pharmaceutical company Astra Zeneca, consulting firm Booz Allen Hamilton, and health-care provider Cleveland Clinic have all posted “challenge problems” at Innocentive for anyone in the community to solve.

The Innocentive community of “solvers”—individuals from the community who submit solutions—includes millions of people. The challenge success rate is 85 percent.6 Innocentive promotes an interdisciplinary perspective because solvers are not necessarily experts in the field of the particular challenge topic.

The potential power of the Innocentive approach can be seen in the experience of Roche Diagnostics, a world leader in in vitro diagnostics, which posted a problem pertaining to product quality control. The company had been working on the problem for fifteen years; the Innocentive responses all came within sixty days. Notably the Innocentive community identified every approach Roche had already tried in addition to identifying a solution.7

The Roche example shows that the cost of open innovation can be significantly lower than the use of internal R&D alone. The cost issue is particularly relevant due to the risk factors associated with dedicating resources to an unsolved problem. As the Innocentive model shows, an open innovation strategy can be architected to have comparatively less risk than internal R&D, such as capping the time allocated to solving the problem and leveraging pay-for-performance such that the solution seeker pays only for the winning idea.8

All in all, Roche’s experience with Innocentive was a success. The high quality of ideas—which included not only what Roche had generated internally, but also a winning solution—enhanced innovation; Innocentive accelerated innovation by generating a large number of ideas in a short time frame; and most important for Roche, this open approach helped solve a problem and thus enabled innovation.

Limitations in Certain Environments

Today there is no consensus on what defines open technology innovation strategy. Researchers have recognized this gap and, as one wrote, “Open innovation is a young concept that includes several meanings. . . . Researchers have different definitions and interpretations about open innovation.”9 There has never before been a taxonomy developed to help classify these various strategies so that they can be critically analyzed and their potential applications to different situations evaluated. As a result, many implementations of open technology innovation are “copycat” and often not grounded in academic theory.

The gap in open innovation research widens in the U.S. government context. There have been few studies of open innovation in the government and fewer still in the areas of national security and defense. The U.S. government remains “in the early stages of adoption of open innovation,” and academia is still “in the process of understanding relevant issues.”10 Academic researchers of open innovation in the U.S. government have focused almost exclusively on the delivery of public services, not on technology innovation.11

Several endemic aspects of secure U.S. government R&D environments help explain the dearth of open innovation examples. Chesbrough identified three limitations to the application of open innovation that correspond directly to these aspects.12 First, he explained that current open innovation strategies do not work well when proprietary or other restrictions prevent a solution seeker from being able to fully define the problem needing to be solved. Organizations seeking solutions to problems sometimes purposely obscure aspects of the problem to avoid tipping off their competitors, but this approach can hinder innovation. Chesbrough advised that providing a complete description of the problem is necessary to elicit helpful innovations. Unfortunately in U.S. government environments, security classification often prevents problems from being fully defined. The “competitors” in this context may be global adversaries.

Second, open technology innovation strategies do not work well when tacit knowledge is required to fully understand the problem. If the problem must be experienced firsthand and cannot be adequately described in words, it does not lend itself to be solved with open innovation.13 Unfortunately this situation is also characteristic of secure U.S. government R&D.

Third, most open innovation strategies are best suited to point solutions—that is, solving one particular problem without regard to related issues—and do not work well in the context of technical interdependencies. However, as discussed above, the technology needed to advance national security is often complex, interconnected, and dynamic.14 For certain technology areas critical to national security, innovators require a prerequisite knowledge base of the complex systems and technical interdependencies involved.

To overcome these limitations first requires a broader understanding of what open technology innovation would mean in a U.S. government context. A starting point is the taxonomy I mentioned above, and the remainder of this chapter introduces a taxonomy to further not only research, but also, and more important, the implementation of open innovation in secure U.S. government environments, where it is so desperately needed.

Building a Taxonomy

To begin let’s explore the breadth of open technology innovation strategies that have been used in the U.S. commercial sector, affording us an opportunity to see trends and design variables that will drive the analysis of potential opportunities for open innovation in U.S. government programs. In this context the U.S. commercial sector includes the industries and organizations that benefit civilian commercial interests either directly (business-to-consumer, or B2C) or indirectly (business-to-business, or B2B), including both for-profit and nonprofit organizations not owned and operated by the U.S. government and that may be privately or publicly held.

Table 1 shows a variety of open technology innovation strategies used in the commercial sector. The eighteen examples were selected from more than one thousand to illustrate the breadth of the solution space. These examples span industries from software to appliances to retail and others. In some cases these open innovation examples are entities themselves, such as Quirky, Kiva, and Threadless, and other examples are part of a larger company, such as Sandisk Ventures, Cisco Entrepreneur in Residence (EIR), and LEGO Ideas. The list also includes platforms that support multiple open innovation approaches, such as Innocentive.

Table 1. Representative examples of open technology innovation in the U.S. commercial sector

Ansari X Prize	Organization that launches public competitions to bring about radical breakthroughs, incentivized by multi-million dollar prizes. No fixed timeframe; goals are generally achieved in about eight years.
Quirky	Online platform for inventors to submit ideas that are developed and manufactured for sale. Inventors are rewarded with royalties. The time frame from idea to sale is about a year.
Innocentive	Crowdsourcing platform for organizations to seek ideas to solve specific technical problems. Innovators are financially incentivized; awards vary but are often $10,000–$80,000. Time frames are fixed, such as sixty days.
Google Ventures	Venture capital arm of Google that invests in start-ups. Investments are “non-strategic,” meaning they are not limited to those synergistic with Google. Over fifty investments a year, usually a few million dollars each.
SanDisk Ventures	Strategic investment arm of SanDisk. Launched in 2012 with a $75 million fund to invest in companies synergistic with SanDisk.
Dell Technologies Capital	Strategic investment arm of Dell, including EMC, VMware, and other divisions. About twelve investments a year, usually a few million dollars each.
Indiegogo	Crowdfunding platform to raise funds for projects, charities, and start-ups. Can be a fixed duration (such as one month) or a fixed amount (such as $3,000). Indiegogo takes about a 4 percent fee. Incentives for funding a project range from pure charity to T-shirts to equity in a start-up.
Kickstarter	Crowdfunding platform, competitor to Indiegogo.
LEGO Ideas	Website for users to submit ideas that might be turned into LEGO sets for purchase. Innovators are incentivized through recognition, complimentary LEGO sets, and royalties, such as 1 percent of net sales.
Topcoder	Organization that administers programming contests of fixed duration, ranging from a few hours to weeks. Dozens of challenges are open at a time, each with a financial incentive, such as $500. Reputational incentives include a Topcoder Ranking.
Threadless	Company that creates and sells T-shirts based on designs submitted by users. Users receive a share of profits.
Zazzle	Online marketplace for users to create and sell arts-and-crafts-based products. Community includes designers, makers, and buyers.
GE: FirstBuild	“Micro-factory” for producing low quantities of innovative appliances; leverages 3D printing for rapid prototyping. Innovators are incentivized through recognition and royalties, such as 0.5 percent of sales.
Cisco Entrepreneur in Residence (EIR)	“Incubation program” for start-ups relevant to Cisco. Incubation period is limited to six months.
Linux / The Linux Foundation	Widely used open source computer operating system. Linux has spawned a community that has developed tools to manage contributions.
Kiva	Nonprofit that allows people to lend money via the internet to low-income/underserved entrepreneurs and students. Loan duration varies. Average loan is $400.
MIT Clean Energy Prize	Annual innovation contest for students. $100,000 grand prize, plus prizes targeted to specific categories, such as improving energy usage.
Foldit	Online puzzle game to discover native protein structures, leveraging gamification to encourage participants to fold proteins.

It should be noted that outcomes associated with many open innovation implementations tend to be documented by the initiators and sponsors themselves rather than in independent, objective assessments. The latter would be indicative of a higher level of maturity in the field of open innovation; the former illustrates that open innovation remains at an early stage.

Based on the list in table 1, the taxonomy of open innovation strategies in figure 3 categorizes those that have been pursued in the U.S. commercial sector in recent decades. Let’s look at these in a bit more detail. “Challenge/Contest/Game” and “Innovator Network” correspond to the examples listed above in this chapter. “Challenge/Contest/Game” includes “Grand Challenges” such as the Ansari X Prize, which set a lofty goal and offered prize money as a reward. “Innovator Network” leverages a community of innovators to solve technology challenges, such as in the Quirky and Innocentive examples. The innovators in the community often have varied backgrounds and are not necessarily subject-matter experts, a situation that can lead to interdisciplinary work and generation of ideas that cross knowledge boundaries.

“Venture Capital (VC) Arm” is a twist on traditional funding strategies. VC arms can be “self-directed new venture groups charged with moving the firm into a new market.”15 They often invest in start-ups with a technology focus synergistic with the firm’s growth areas and that have potential for merger or acquisition at a later point.

“Crowdfunding,” a relatively recent concept, involves posting ideas on a designated online portal and raising money by soliciting contributions from a large number of contributors. Accepting small contributions creates a lower threshold to participate. There are several varieties of crowdfunding. In microfinancing-based crowdfunding, the money contributed is in the form of a loan—as in the example of Kiva, a nonprofit founded in 2005 that connects potential lenders with borrowers in multiple categories. In rewards-based crowdfunding, such as through the increasingly well-known Indiegogo and Kickstarter platforms, the money can be a donation that is rewarded with items such as a T-shirt or even an early version of the product. Finally, in securities-based crowdfunding, money is contributed by what the U.S. Securities and Exchange Commission (SEC) calls “accredited investors” in exchange for equity. Recent SEC rules allow anyone, not just accredited investors, to invest an amount based on the annual income and net worth of the investor.16

“Product Platforming” involves opening a firm’s base product platform for others to add on features and components, such as apps. Google’s partially open source Android operating system is a commonly cited example. Innovations built on the platform are often incremental rather than “disruptive” because they conform to an existing platform. Many of this strategy’s benefits tend to be in product adoption and network externalities rather than in the enhancement of innovation capability through a unique strategy or structure.

“User-Centered Innovation” seeks to benefit from loyal product users’ experiences by involving them in the product development and redesign process. These users, sometimes called lead users, are often evangelists of a product and proactively customize products to their own needs. These customizations may highlight areas for new feature development. For example, a user of a commercially available snow blower may make innovative modifications to it for increased throughput, using odds and ends such as zip ties rather than professional design and manufacturing tools. Users might be willing to share their innovations with manufacturers for free because they would benefit from their modifications being incorporated professionally into future versions of the product.17 Like “Product Platforming,” this strategy tends to be limited to incremental innovations.18

Each strategy’s implementation is defined by design variables—for example, whether a financial prize is offered or who retains intellectual property rights. It should be noted that it is possible to change design variables within an open innovation strategy without changing the overarching strategy itself. For example, a monetary prize and some IP protection could be offered in the context of a “Challenge/Contest/Game,” as in the case of the Ansari X Prize, or there could be a non-monetary prize and no IP protection, but in both cases it would still be a Challenge/Contest/Game.

Figure 4 illustrates how the choice of design variables affects the implementation of a strategy. Objectives are not typically considered design variables, but they are included here to aid in determining which strategy to pursue. “Recurrence model” refers to whether the approach is a one-time effort, recurring, or tiered (as in the example of FANG, discussed in chapter 3 below). The “Number of winners” matters because it may speak to the nature and complexity of the goal advertised by the sponsors. Is it a contest that is so difficult that no one wins? Is the concept of a winner even applicable? Considering the “Audience (number of participants or number of competitors)” as a design variable may mean modifying the implementation with respect to marketing efforts, platform capacity, resources allocated, or type of platform.

As for the other variables shown, there may be no “IP Protection Offered,” full protection if the IP was developed independently (“yes”), or partial protection (“medium”), which is less than the full protection that would have been afforded had the idea been developed independently and which generally manifests in the form of a royalty-free, non-exclusive license for the sponsoring organization. This analysis uses this coarse granularity, as it is sufficient to understand the impact on instances of open technology innovation strategies in this context.19

The “Commitment/investment required to participate” is, in essence, a measure of the resource barrier to entry for an innovator. An approach could require anything from a paragraph write-up of an idea that takes an individual no more than a few hours to complete to a multi-year commitment by a well-funded team or the construction of a physical prototype. This speaks as well to “Team size”: can an individual participate alone, or is a team needed? How large a team? Does it require a large consortium to collaborate as a single team? The decision may be left to the participants or may be stipulated by the sponsors.

Two variables are prize-specific. The “Prize offered” could be a monetary prize or nothing more than a T-shirt for participating. The variable may not capture reputational or intangible rewards. For example, simply being listed as a high scorer in Topcoder or Foldit may be a “prize” since such recognition is considered a high honor in certain communities. There may be multiple prizes or different prizes, depending on how a participant finishes—that is, in which “place” (“Prize distribution”).

Finally, there may be requirements that stipulate whether or how the participation is limited—for instance, whether it is only for students or individuals generally or, whether, as in some cases, companies are eligible (“Participant”).

As one can imagine, there are thousands of possible variations to each open innovation strategy given these design variables. In fact, for figure 4 those variations number 26,244 within each strategy.

In the “bubble chart” in figure 5 I apply the taxonomy to the examples shown in table 1. A large bold font and large solid circle represent design choices that are more frequently used than others. A small font without a circle represents where current implementations of this strategy have not made this design choice or where such a choice is rare; these are design choices that may not yet have been explored. For example, one design choice not yet explored is in the VC Arm strategy design variable for commitment/investment required by the participants. Equity investments come with vesting terms that require the start-up founders to stay committed to the company for a specified period of time, usually years. The taxonomy highlights that VC arms could consider an alternate approach where investments could be made in efforts that last a shorter amount of time and require less of a commitment by potential participants.

The framework of design variables in figure 5 does not distinguish one strategy from another, so the taxonomy has been further developed using the systems engineering method of functional decomposition. Functional decomposition is a tool used in systems engineering wherein a complex system or process is broken down into smaller parts. As applied here, first, the innovation process was decomposed into its functions: selecting the problem, generating the ideas, commercializing/productizing the innovation, financing the innovation, facilitating, and selecting the solution/idea to be financed or commercialized. Next, each function was attributed to the party that performs the function. Figure 6 applies this functional decomposition to the open innovation strategies, showing that the functional steps are the same across strategies and that the distinguishing characteristic among the strategies is the party that performs each functional step. The figure shows, as a baseline, the traditional closed internal R&D strategy in the U.S. commercial sector (bottom row).

The functional decomposition is also applied to traditional U.S. government contracting (second row from bottom of fig. 6)—specifically most military branches for large defense contractors, as well as small businesses through the Small Business Innovation Research (SBIR) program (as discussed in chapter 2 below). The government is generally responsible for problem selection. Contractors propose ideas, and their proposals must show evidence that they are able to commercialize the idea or technology successfully. The government selects and finances the project with the assistance of an acquisition agency.

It is in the context of functional decomposition that crowdfunding warrants a bit more explanation as an open innovation strategy. Unlike other strategies, it does not open up who is generating ideas but rather opens up other functional areas of the process—for example, modulating the investor sources rather than the innovator pool—to create more opportunities for innovation. In the end crowdfunding expands the innovation pipeline by bringing people into the process; that fact alone makes it an open innovation strategy. Had these additional people not been brought in, certain innovations may not have been realized and certain problems may have been left unsolved.

Each strategy can have openness at each functional step. Crowdfunding has openness at “financing the innovation” and, relatedly, at “selecting the solution/idea to be financed or commercialized,” and it has the highest degree of openness at these steps because anyone can finance the innovation or select the solution/idea by financing it and making it possible to be commercialized.

Within crowdfunding two sub-strategies are differentiated according to the party performing the function of commercialization: in some cases the participant/loanee performs this function, whereas in others it is the facilitator. Perhaps a third sub-strategy still to be explored by existing crowdfunding platforms is to have an altogether different party perform the function of commercialization.

Degrees of Openness

It becomes apparent through this investigation that the term “open innovation” itself may be somewhat of a misnomer since many so-called “open” strategies can be and are applied in “closed” environments as well, such as through internal innovation contests limited to a company’s employees. This suggests that open technology innovation strategies are really about the points and degrees of openness incorporated into their implementation.

With respect to the U.S. government, the traditional contracting process shown in figure 6 is arguably already more “open” than traditional U.S. commercial-sector R&D because participation by companies that are not government entities is invited through government contracting. However, government contracting has been locked into a single open innovation strategy for many years. The difference between a given open innovation strategy and traditional U.S. government contracting is the way in which the strategy innovates on the traditional contracting approach. Understanding this opens a pathway for traditional government contracting to adopt different open innovation strategies.

Government Forays into Open Technology Innovation

For the United States to maintain its global position of technological superiority, the government’s technology innovation strategies must evolve. One way this evolution is occurring is through experimentation with open innovation, although this is in the early stages of adoption as the U.S. government initiates varying levels of open innovation with varying degrees of success. Table 2 is a representative list of examples of open technology innovation pursued by the U.S. government in recent years. It includes both platforms and instances that leverage platforms.20

Table 2. Representative examples of open technology innovation strategies pursued by the U.S. government

NeedipeDIA (the platform)	Public and classified versions of a website where Defense Intelligence Agency (DIA) end users post latest mission needs.
NeedipeDIA need: Prevent Strategic Surprise	A posted need on NeedipeDIA seeking methods and tools to build upon its warning apparatus.
Challenge.gov (the platform)	Platform for the U.S. government to post challenges. Postings are open for roughly three months with rewards up to $500,000.
DARPA Grand Challenge/ DARPA Urban Challenge	A series of challenges starting in 2004 with a $2 million prize to develop driverless cars that can complete an off-road and urban course.
DARPA Robotics Challenge	Building off of DARPA Urban Challenge, this instance seeks to spur development of semi-autonomous robots.
FANG	Three-tiered challenge to test DARPA tools and construct an amphibious vehicle; first and only U.S. government open innovation program seeking to tackle classified requirements and data.
DARPA Shredder Challenge	One-time challenge in 2011 to reconstruct shredded paper for a $50,000 prize.
ONR MMOWGLI	Online multiplayer game used by the U.S. Navy Office of Naval Research (ONR) and other U.S. government agencies to perform online war games to study various problems and hypothetical scenarios.
DARPA Cyber Fast Track	Accelerated proposal process for cyber-related projects.
In-Q-Tel (IQT)	Nonprofit VC arm of the CIA to equip CIA and other agencies with the latest in information technology. About twelve investments a year.
Red Planet Capital	Nonprofit VC arm of NASA to promote private-sector participation; no longer operating.
OnPoint Technologies, also known as AVCI	Nonprofit VC arm of the U.S. Army. A handful of investments per year.

Notable in table 2 are NeedipeDIA and Challenge.gov, both platforms on which government agencies solicit ideas from a wide body of participants. These platforms, which have been online only for a few years, are generally considered successful. NeedipeDIA links back to traditional U.S. government contracting forums for participants to submit ideas. Challenge.gov works similarly to Innocentive (described above) and related platforms. The list also includes instances of one-time and recurring open innovation “challenges” to give a fuller sense of the variety of approaches the U.S. government has pursued. Let’s look at these examples in more detail.

DARPA has initiated a number of prize-based competitions of varying scope and length. The DARPA Grand Challenges include 2004 and 2005 challenges, as well as the 2007 Urban Challenge, 2012 Robotics Challenge, and 2013 FANG Challenge. Each of these involved $1+ million awards. In contrast, the smaller-scale DARPA Shredder Challenge had a $50,000 prize.21 Another DARPA challenge with a similar prize ($40,000) was the Network/Red Balloon Challenge in 2009. In this challenge, in one day teams had to locate ten red balloons placed across the United States. The winning team from MIT leveraged a unique incentive structure to encourage participants from around the country to join the team and help find the balloons.

The Massive Multiplayer Online War Game Leveraging the Internet (MMOWGLI) is an online platform established by the ONR to facilitate the war-gaming process. This platform is dramatically different from the above DARPA challenge examples. The objective is to obtain actionable scenarios for the U. S. Navy to use to change its strategies. The platform is online, and much of the data collected during the execution of the game is openly available. However, the “defense”-oriented games are generally blocked from public access.

Cyber Fast Track (CFT) was a unique DARPA program that encouraged individuals and small businesses in the cyber community to work with the U.S. government. In 2010 DARPA hired a prominent hacker to lead the program, Peiter Zatko, known by his hacker name, Mudge. The program was an experiment in leveraging creative contracting vehicles to encourage new participants and reduce contracting time. Mudge said, “DARPA isn’t an open organization. We were looking for a new way to work with people.”22 DARPA awarded over one hundred contracts in under two years and achieved a “mean of 7 days for approval.”23 This was achieved through the use of an intermediary, as discussed further in chapter 4 below.

The U.S. government appears to be following the U.S. commercial sector in the choice of design variables related to open innovation approaches. For example, the government application of the VC-arm strategy mirrors that in the commercial sector. In-Q-Tel is the vc arm of the CIA. The CIA was the first agency to use the VC-arm strategy. This strategy was mirrored by AVCI–OnPoint Technologies and Red Planet capital. U.S. government implementations of the VC-arm strategy have not significantly innovated on the model as implemented in the U.S. commercial sector. A large part of the U.S. government’s justification for forming In-Q-Tel, OnPoint Technologies, and Red Planet Capital was to mimic the successes of strategic VC arms in the U.S. commercial sector.24 This is further illustrated by the mirrored functional decomposition analysis, shown in figure 7.

When Chesbrough coined the term “open innovation” in 2003, he defined it in a private-sector context.25 The general trend with the U.S. government has been to pursue open innovation approaches only after they have been leveraged successfully in the private sector. Crowdfunding is a good example; it is still relatively new and in formative stages in the U.S. commercial sector, and there are no substantive examples of the government’s employing the approach—but it cannot be ruled out.

Imagine the U.S. government inviting the public to propose ideas/projects to a crowdfunding platform for projects relevant to multiple government departments and agencies. The involvement of multiple government entities could keep each one’s individual contribution to the overall funding of a project relatively small, with the potential for circumventing some of the contractual and bureaucratic hurdles associated with traditional acquisition processes. A government agency might be incentivized to contribute some of its budget to an initiative because it sees the innovation as having specific value for its agency mission or objectives. Further, specific incentives could be established to influence innovators’ designs.

Still, as attractive as this imagined scenario might be, successful application of these innovation strategies in the U.S. government R&D context could face a challenge that does not exist in the commercial sector: security. The unique characteristics of secure U.S. government R&D environments may constrain or impede open technology innovation, thereby hampering the government’s ability to enable, accelerate, and enhance innovation in areas of importance to national security.

Chapter 2 explores this security and secrecy in detail.