Christopher W. Miller
Innovation Focus
G. Anne Orban
Innovation Focus
Becky Partida
American Productivity and Quality Center
Andrea Stroud
American Productivity and Quality Center
Paige Leavitt
On Behalf of American Productivity and Quality Center*
The practice of Open Innovation has migrated quickly across all economic sectors into manufacturing; service-based industries including insurance, banking, and professional services; and is even starting to be seen in government groups.
Recent advances in technology, competitive landscapes, and social media have presented both drivers and opportunities for open collaboration. From enabling entrepreneurs in developing countries to develop mobile medicine and alternative energy sources, the potential opportunities and their impacts are astounding. As always, companies effectively leading the innovation curve will have a significant competitive advantage.
Open Innovation (OI) requires the right network and the right mechanisms to integrate and expedite vetting new ideas. It is crucial that companies understand the tools, structures, and best practices available today and know how to create value from an OI investment.
In 2012 and 2013, the nonprofit research organization the American Productivity and Quality Center (APQC) examined the practices of successful companies and reported on the full set of benchmarking study results in Open Innovation: Enhancing Idea Generation Through Collaboration (2013).
The APQC questionnaire focused on organizational processes and practices for Open Innovation, as well as asked questions to provide a deeper understanding of each organization's drivers of performance and the links between those drivers and measures of performance. The questionnaire was divided into four sections: Strategy, Operating the Innovation Ecosystem, Evaluating Success, and Organization Overview.
APQC found 11 best practices regarding OI strategies, roles, processes, measures, and change management activities. It also found five common enablers that provide the foundation for successful OI efforts. This chapter presents these key findings illustrated by examples from best practices of Amway, British Telecommunications plc, and Cisco Systems Inc.
Open Innovation in best-practice organizations has moved beyond basic idea screening of external sources to now use a large variety of tools and techniques. Ideas come from consumers and vendors, companies and groups that work along the same value chain, and a much larger, less definable base of innovators. This requires a forward- and wide-reaching strategy.
Amway considers innovation strategically as a combination of creativity, the potential value to the business, and strategic fit. Its Open Innovation model focuses on establishing well-defined needs, building external networks, and finding and evaluating technology.
For innovation strategy at British Telecommunications (BT), the company taps multiple sources through different mechanisms. Strategy and the portfolio drive an innovation agenda that involves external/Open Innovation with partners, as well as co-creation with customers, bottom-up innovation with employees, a centralized research program, and joint projects with academia.
Cisco's innovation strategy is, simply stated, to build, buy, and partner. The company builds products and solutions, partners with innovative companies, and acquires new technologies and companies.
Although there is no single best way to implement and manage Open Innovation, APQC found a number of best practices consistent across these leading companies in the categories of strategy, roles, processes, and measurement and improvement, specifically:
STRATEGIES
ROLES
PROCESSES
MEASUREMENT AND IMPROVEMENT
To increase the number of high-quality ideas sourced and generated, as well as to increase the speed of Open Innovation, the best-practice organizations APQC studied also embrace certain enabling practices, processes, and tools.
THE APQC STUDY IDENTIFIED FIVE KEY ENABLERS
To thrive, an organization's Open Innovation initiatives should be needs-based and closely tied to the organization's strategy. Rather than throwing open the doors and accepting all unsolicited ideas, best-practice organizations focus their OI initiatives on areas of the business that have specific needs. This ensures that new innovations acquired by these organizations remain relevant to the business enterprise.
In addition to maintaining a focus on addressing the needs of the business, the best-practice organizations ensure that OI efforts align with organizational strategy. This means that organizations look for innovation opportunities in adjacent markets that expand the business without moving in a radically different direction. The best-practice organizations also set clear expectations on the value that must come from new innovations. So as not to miss out on unanticipated adjacencies, advanced Open Innovation practices employ a review process at the strategic level.
Amway has a focused OI effort in that 80 to 90 percent of the innovations it sources from external groups are based on specific needs identified by the organization. This provides some freedom for the organization to pursue additional innovations while keeping a primary focus on the strategic needs of the business. In practice, when searching for new innovations, Amway creates a technology profile, which is a detailed description of a technology or solution that Amway is seeking. These profiles include:
Amway shares these profiles both within the organization and with potential partners to accurately communicate what the organization is looking for and to quickly filter through potential innovations.
Cisco Systems' emerging technologies group seeks new innovations in markets adjacent to Cisco's current businesses and in areas in which other parts of the organization are not investing. It focuses on the value that these new innovations can generate for the organization overall. However, the organization's revenue goal in expanding is an ambitious one: its emerging technologies group has a mission to cultivate new businesses with billion-dollar revenue potential. It set this goal because of the amount of revenue needed to make an impact on overall revenue for an organization the size of Cisco. The organization also seeks to generate value for the enterprise by seeking innovations that provide growth opportunities for Cisco's foundation and other businesses.
BT's Open Innovation initiative focuses primarily on addressing needs within the organization for new service offerings to repackage and distribute to its customers. Its centralized innovation group communicates with senior managers to identify needs from the organization's business units. The centralized innovation group can then research external organizations that BT may partner with to address the organization's need.
Best-practice organizations collaborate with a wide variety of external groups for innovation. What separates the best from the rest is openness to suggestions from external sources.
Amway's network for Open Innovation includes points along its value chain such as manufacturers, suppliers, retailers, and customers in addition to its internal business units. The network also includes consultants, academics, and Amway's scientific advisory board as well as government laboratories, startups, and even its competitors.
For example, Amway uses scientific advisory boards to identify and locate bleeding-edge technologies that are of interest to the organization. Many of the board members from academia have brought promising startups to the attention of Amway's OI team. Amway also looks to foreign governments for introductions to innovative organizations.
BT's strategic focus is on licensing and adapting existing technologies rather than investing in technology development. To do that, BT works with a variety of internal and external groups to source innovations.
BT focuses on licensing and adapting existing technologies rather than investing in technology development. The creation of BT's Dolby Voice audio conferencing service is an example of this. Rather than develop the technology within BT, the organization invested in an adaptation of an existing BT service.
BT uses internal as well as external resources for innovation. Employees are involved in what BT calls bottom-up innovation, which is organized by its new idea scheme and My Customer Challenge Cup. Customers are identified as potential sources for innovation and the Hothouse Events and Customer Showcases help develop the potential for partnered customer innovation. BT's internal research program is a source of new patents for innovation and BT also has joint research partnerships with academic institutions. In addition, BT scouts on a global basis looking for external innovation partners who have prototypes and trials for new technology applications.
Best-practice organizations in this study have positioned themselves to have access to and manage collaborative relationships. This involves encouraging personal interaction rather than depending solely on electronic communication with Open Innovation partners. The high-touch aspect of relationship development is as important to these organizations as the high-tech developments obtained through Open Innovation.
Cisco originated in Silicon Valley and has grown through the acquisition of startup companies in that area. Staff from these companies are retained after the acquisition and often become involved in incubation teams that develop new ideas for expanding the business. These teams are small and have limited resources in order to mimic the startup environment, but they also have the safety and security of a large organization.
The Cisco culture encourages collaboration among employees. The most effective Cisco employees have a wide network of contacts within the organization. This enables them to learn from each other, draw on the best ideas, and quickly overcome obstacles in idea development.
BT's scouting group primarily acts in Silicon Valley because of its concentration of innovative companies. However, they also search for potential innovation partners in London, Israel, the Boston area, and Asia. BT's scouting group also maintains contact with other areas of the business to both learn more about business unit innovation needs and to present potential innovation partners to BT staff.
BT's Applied Technology Centre interacts with internal customers by providing rapid prototyping services. The staff of the Applied Technology Centre translates an idea into early-stage visualizations or working prototypes so that BT business unit staff can quickly understand potential customer experience and benefit. Working prototypes also provide a better idea of the technical feasibility of a concept and build confidence within the business units for a particular offering.
Organizations with more mature OI efforts are recognizing that there are alternatives to ownership of the intellectual property. Data collected by APQC for this study indicate that an organization's approach to intellectual property ownership tends to reflect its level of experience and maturity with Open Innovation. For best-practice organizations, intellectual property considerations do not inhibit consideration of an innovation. For organizations in an industry with technology that frequently changes, intellectual property is less critical because of the rate of technological change. In these industries the need to move quickly on innovations drives how intellectual property is handled.
Universities have become much more flexible in creating licensing agreements that allow different arrangements such as providing corporate partners with exclusivity rights within a certain industry or for a given period of time.
Cisco's approach to intellectual property originating through its OI efforts varies depending on the source. When Cisco wants to own the intellectual property, it will often acquire companies with the IP it wants. For intellectual property submitted for I-Prize (the organization's external innovation challenge), Cisco, in partnership with its lawyers, has evolved its approach to intellectual property. Initially the organization sought to own all intellectual property submitted, but now it looks at submitted ideas with the possibility of licensing selected ideas in the future. When it does license technology from I-Prize, Cisco does not always seek exclusivity. It has adopted this strategy to ensure that it can execute new ideas as quickly as possible and so that external groups will feel comfortable contributing ideas.
Cisco also recognizes that many entrepreneurs seek it out for development of an idea because they do not have the funding necessary to bring an idea to market themselves. Refraining from exclusivity can encourage these individuals to partner with Cisco, benefiting both parties.
When BT works with existing or potential partners in its hothouse events (three-day, competitive innovation events), BT executes agreements with these parties that specify the intellectual property that existed prior to the hothouse. These agreements indicate that new intellectual property developed during the hothouse belongs to BT, but this can vary if a partner is being paid to participate in the event or if the resulting idea is an improvement on existing technology owned by the partner.
Best-practice organizations in this study (median annual revenue of $17 billion), keep their Open Innovation groups relatively small. It is most typical to find 25 or fewer employees in OI groups. Only a few large organizations have 26 to 50 employees in their OI groups.
One benefit of having a dedicated group for Open Innovation is clear ownership of Open Innovation that enables an organization to execute OI strategy with agility, direction, and continuity. Although an OI group may work closely with others in an organization, it works best when it maintains accountability for all OI initiatives.
In best-practice organizations, these dedicated groups act as facilitators that connect business units with potential sources of innovation. A collateral benefit of dedicated OI teams is that other business units can adapt and use the tools and resources that OI teams develop.
Located within Cisco's development organization, the emerging technologies group has a business incubation program for new technologies, which supports the organization in entering into new markets. The group also partners with the organization's corporate development group to scout for technologies and startups in new areas. The business incubation program also serves in an advisory, consulting, and support capacity to Cisco's internal startups.
Amway's OI team is located within the organization's broader R&D function. It was designed to be a place for ideas to incubate and grow, with less emphasis on aggressive timelines and more on flexibility. This team focuses on longer-term projects that may provide Amway with more value than the incremental innovation on which the organization had previously focused.
Best-practice organizations look for specific skill sets when staffing their Open Innovation teams. The employees sought for these teams tend not to be new hires to the organization because of the need for OI team members to know the organization well enough to facilitate collaboration, identify needs, and enact change. Best-practice organizations look for the skill sets of a traditional R&D employee with an ability to work with others in the organization to identify and communicate innovation needs. They may also look for individuals with an entrepreneurial mindset to help ensure that innovation teams can work creatively and quickly with limited resources. Some best-practice organizations have also identified deal-making skills as critical for success to help ensure a win-win approach to working with an innovation partner.
BT has developed a set of criteria for the staff members in its centralized innovation group. All members must have enough experience with technology to articulate to other BT employees how new technology features will translate into business benefit. They must also be able to establish relationships with both internal stakeholders and external partners. Open Innovation staff members who work with external partners must have project management skills that include relationship development in addition to the more traditional process skills. They must also be connected within the organization so that they can help keep employees engaged.
At Amway, the OI team is part of the organization's R&D function. Most of the team members are experienced Amway employees with long tenures in product development. The staff members in this team, therefore, have knowledge of both the organization and of its product development process.
When negotiating deals, Amway's OI team members are encouraged to keep the needs of the other party in mind rather than seek to secure only Amway's interests. Staff members are encouraged to consider whether, if the roles were reversed, Amway would sign a proposed deal. If not, staff members must reconsider the deal to ensure that the needs of the other party are met.
Cisco is selective when bringing new team members into its emerging technologies group. Successful staff members have an entrepreneurial background, which enables them to understand how to grow a business. Other successful staff members have backgrounds as strategy consultants, which gives them the ability to think strategically and also approach problems differently. These individuals are also able to influence and convince others to make investments in new ideas.
Best-practice organizations have holistic systems within cultures that embrace innovation. They are clear on their definition of innovation: that innovation encompasses ideas put into action to generate value. Best-practice organizations are successful innovators because they integrate as seamlessly as possible the multiple stages necessary for new product or service development and commercialization.
Best-practice Open Innovation organizations fully implement a formal process for fostering and vetting new ideas to link their innovation processes to execution frameworks so they can quickly get to market. Best-practice organizations also tend to have a strong project management/product development stage-gate process. Effective Stage-Gate™ processes alone are not a differentiator, but they are necessary to compete in today's markets.
Success is more achievable when an organization fully aligns all related processes to reduce cycle time, minimize knowledge loss at transition points, and engage key stakeholders. Leaving out stakeholders can kill an Open Innovation deal quickly. It is important to have appropriate stakeholders involved at relevant steps.
BT uses a concept-to-market (C2M) process that has four stages: idea, proposal, business case, and delivery. BT's open-ended idea stage involves sourcing and filtering ideas from internal and external sources of innovation. BT moves a concept into the proposal stage when it is deemed worthy of consideration for a business case. During the proposal stage the idea is articulated and validated, which can involve conducting early customer trials, co-development with customers, and proof-of-concept development. This stage takes 60 days or fewer to complete. Once the proposal stage is complete and the relevant BT business unit has validated the idea, it can move into the business case development stage. BT then conducts trials of the product or service. These can be small-scale trials that evaluate how the product or service will work or large-scale trials that evaluate how customers will use the product or service. This stage lasts 120 days from business unit validation to customer trial. Once trials are completed and a full business case is developed, the business unit responsible for the technology confirms project approval.
During the delivery stage, BT completes any development necessary to get a quality launch for the new product or service. The process ends with a full commercial launch for the product or service.
BT also has established an accelerated development process called C2M Lite (concept-to-market lite) for ideas that do not need complex validation processes. An idea is selected for acceleration for several reasons: if BT needs to verify that it is not infringing on intellectual property owned by another organization, that it has the security needed for a service to be put through a trial, or that the idea is compatible with mainstream architecture. BT created C2M Lite to facilitate a “fail fast, fail cheap” environment that makes product market trials more efficient. The process involves testing and validating minimum marketable features of potential products and services using early market testing. The results of the testing and validation are then used to support decisions on creating business cases for potential products and services. With the accelerated process, trials can be shortened to 60 to 90 days.
At Amway, a formal, enterprise-wide process guides innovation and can be applied to multiple types of innovation, including business model innovation. The process consists of four distinct phases: technology surveillance, R&D exploration, product development, and business sustaining.
The technology surveillance phase involves identifying ideas and taking them through early concept development. According to Amway, thousands of ideas enter its innovation funnel each year, but only about 150 reach the second phase, R&D exploration.
During R&D exploration, Amway further narrows its portfolio and creates a project proposal and business case for each idea. Ideas are presented to Amway's technology review board at key milestones during R&D exploration, and this group ultimately decides which ideas move forward and receive additional funding.
Approximately 20 to 30 projects each year reach Amway's business case development phase, where they are refined using a formal stage-gate process called idea to market (ITM). During this phase, the project management function creates a project brief, which is a contract among the development groups, Amway's marketing function, and representatives from the markets where the product will be initially launched. The project brief defines each idea further and lays out exact details regarding scope, costs, and the timeline for development and launch. Approximately 10 to 15 projects reach this point each year, 90 percent of which ultimately result in product launches.
The business-sustaining phase of Amway's innovation process begins once the product is launched and addresses ongoing evaluation and continuous improvement.
One important observation about Amway's integrated process is that there is an overlapping transition period between phases rather than a sharp handoff. This gradual shift helps team members with critical knowledge ensure that all relevant information is communicated and that the receiving team members have time to absorb the information and preserve continuity in the project.
Cisco's emerging technologies group begins with its team looking for new ideas for new businesses using an Open Innovation approach. The next step is to filter and shape the idea by developing a prototype and a proof of concept to decide if Cisco should make the next level of investment and, like a venture capital firm, invest seed funding to create that new business. During the incubate phase, Cisco has a set of milestones to manage the process to start a business. Cisco brings in the founding team or creates a team and gives it considerable freedom to refine the idea.
One of Cisco's critical success factors is that a member of the business incubation team stays with the startup businesses even when they go to market in the accelerate phase. When entering a new market, Cisco has found that startup teams often lack some of the expertise needed to achieve the scale necessary for a billion-dollar business.
After Cisco's accelerate phase, the emerging technologies group either places the startup into another mainstream business unit or suggests exiting completely. At any time, the emerging technologies group tends to have three to four startups operating. However, Cisco does not expect a 100 percent success rate on these new businesses, and when a project is cancelled, people are redeployed to other projects.
When scouting for new ideas, best-practice organizations focus on both a specific list of needs that they revisit regularly and on broader trends, but still within a defined arena. In the broader type of scouting, designated employees monitor the landscape that is relevant to the organization's future. These scouts gather and share information on emerging trends, upcoming or current threats, new players in the market, and even acquisitions to target. In this broader type of scouting, effectiveness is often enhanced by in-person relationships and access to the tools that help identify and establish new contacts.
BT's external scouting group maintains a set of technologies that BT is interested in (specific) but also looks for technologies that BT could expand into (broad but focused). Each scout researches about 300 companies per year. Staff members often meet with representatives from these external companies to vet their business models and technologies. BT also finds potential partners at conferences, meetings, and networking events and through recommendations from venture capital groups and industry blogs.
BT's scouting group captures data on every company it evaluates and stores the information in a central repository. For each company selected as a potential partner, the scouting group creates a one-page description that can be circulated within BT and presented during a monthly call. The group also maintains documents that discuss broader trends in BT's lines of business.
Senior managers at BT often come to the scouting group with a particular need they want to address with new technologies. Staff members within the scouting group conduct background research to understand what must be addressed by the solution, as well as the key players and trends in the area. Scouts then identify and meet with various companies that may provide a solution for the need, narrow down the group of potential companies to a core group, and present the core group to the senior managers. For every company presented to a senior manager, scouting group staff members have investigated 5 to 10. Once the potential partners have been presented to senior management, the senior managers and scouting staff members discuss the potential impacts of partnering with the companies.
To keep informed of new developments in the telecommunications industry, the scouting group conducts benchmarking with BT's industry peers. Benchmarking allows the group to track new developments among North American telecommunications organizations that can then be applied to BT's European markets.
Amway's Open Innovation team relies heavily on a network of technology scouts who seek potential sources of external innovation to locate technologies meeting Amway's specifications. Over time, the team has improved its scouting practices by learning to look beyond the most obvious sources.
To identify broader trends, Amway's scouts regularly attend academic, technology, and other conferences, as well as tap into the organization's networks. To do their jobs effectively, scouts must have a deep understanding of the fields in which they operate and keep up to date on scientific and technical advancements. This allows them to know which ideas are feasible, which are truly innovative, and which might be adapted to address Amway's needs.
Cisco casts a wide net for breakthrough ideas. The emerging technologies group scouts for ideas by talking to customers and other external parties, scanning for sentiments in employee and external groups, talking to venture capitalists, and following market developments.
Best-practice companies also are leveraging experiential and interactive events, in real time and virtually, for Open Innovation scouting. Some of these events are targeted at the people who work for best-practice organizations, and some combine employees and others external to the company. These events take various forms.
Some best-practice organizations sponsor knowledge-sharing events that take employees out of their routines. Although not technically part of the normal workflow, these events address issues that are vital to organizational strategies and priorities. Experiential scouting events include multiday contests involving employees and external partners such as suppliers and customers, global and regional expositions, supplier summits with internal participation, internal technical conferences, and virtual, global innovation competitions. Some of these experiential scouting events are framed by a specific product or service interest. Some events offer prizes.
The employees who participate in these events see them as opportunities to directly contribute to their organizations' innovation and continuous improvement goals. The best-practice organizations in this study extend the practice to include events and contests involving external partners such as suppliers and customers. Contests and events create urgency, help create buzz on social media, strengthen the relationship between the participants by building a sense of fun, and give contributors a benefit for participating (often in the form of prizes, points, or other rewards). They also can influence an organization's culture to be more open.
Further along in the Open Innovation ideation process, some best-practice companies design events to allow customers and other partners to interact with early prototypes and other potential new products or services.
Cisco's I-Prize is a global innovation competition seeking great ideas from outside the company. With senior leader visibility within Cisco, the CEO launched the first I-Prize competition in 2007, and the second time he helped announce the winners. The I-Prize competition has evolved over time. Cisco is now running regional contests in various countries, which helps other entities build their own Open Innovation capabilities.
There are several tangible and intangible benefits to Cisco from the I-Prize contests. The company sees interesting ideas that can leverage its technologies and help build innovation capabilities outside of Cisco. By reading all the submissions, Cisco gets insight into trends and sentiments. These contests also expose Cisco's technologies to contestants and the media, as well as generate sales opportunities. Cisco has gained expertise in managing innovation challenges through its work with the I-Prize. It has acquired experience in framing the problem to solve, targeting the challenge, communicating about the event, finding participants, securing judges, helping people collaborate, and leveraging its own technology. Cisco has found that clearly laying out who is responsible for activities in each phase helps recruit new participants and ensures clarity.
BT holds 40 to 45 hothouses per year, with about half managed by dedicated hothouse staff. Hothouses are three-day competitive events. Hothouse events bring together 80 to 90 individuals from across business units and external groups with an interest in a particular product or service. During a hothouse event participants are split into cross-discipline teams and given a problem to solve. Each team has the technology, data, and files that it needs to develop a solution. Over the three-day period, teams present their work daily to a judging panel of senior executives for the business unit that will own the product or service and, if possible, to customers as well. BT has developed a self-run hothouse kit that allows any business unit to create and run a hothouse on its own. The success rate for hothouses at BT is about 30 to 40 percent. In one successful example, a new product was rolled out to market within 12 months following the hothouse.
Measures allow an organization to gauge the effectiveness of its Open Innovation efforts. These measures must capture organizational interest and tell a compelling story.
BT uses a balanced scorecard approach to its innovation measures and sets both leading and lagging measures for the different stages of the innovation process. The organization recognizes that balancing short-term successes with long-term thinking is a specific challenge when it comes to measuring innovation. BT tracks a range of metrics related to Open Innovation, including:
Measuring the number of ideas across certain milestones or phases is also important because it offers value to individual innovation initiatives.
Cisco's emerging technologies group focuses on building new markets and pushing innovations forward faster. Projects are tracked through rigorous timelines. Cisco uses many different measures depending on the phase the innovation is in. To avoid projects being killed too early, initial measures for startups are not the same as measures used in the core business. However, customer satisfaction and product quality are measured at each stage.
Change rarely occurs within an organization without some cultural resistance. Open Innovation is a change to the way most organizations have conducted research and development. To get employee buy-in, an organization looking to collaborate with external sources has to carefully manage that change. To accomplish that, leaders must encourage buy-in across the organization and address fears that Open Innovation will replace peoples' jobs or reduce their roles.
Amway put forth a great deal of effort in managing change within its organization. When Amway decided to launch its Open Innovation program, the OI team had to find a way to engage senior leadership, managers, and scientists in the product development function. Because Amway was successfully producing new products and growing, many of the organization's members did not understand why there was a push to change existing processes. In order to facilitate change, the OI team created a presentation that promoted the benefits of Open Innovation and highlighted the reasons why Amway needed to make adjustments to its approach. However, changes to Amway's culture could not occur without senior leadership support driving the change. Even though its OI initiatives began at the grassroots level, Amway found that its Open Innovation team had to make a formal case to leadership to ensure that there was ongoing support and funding for the initiative.
AMWAY EXPERIENCED THE FOLLOWING TYPES OF CULTURAL RESISTANCE WHEN IT ROLLED OUT ITS OPEN INNOVATION PROCESSES:
Although Amway's OI team has not overcome all cultural resistance, it has been able to overcome some. Amway has been able to mitigate the challenge “my needs are secret” by creating a technology planning process that forces product development, marketing, and other internal stakeholders to communicate their needs in a clear and concise manner. Amway has also made considerable progress against the “not invented here” challenge as employees have realized the value of bringing in external technologies to create more internal product development work.
Cisco has experienced many challenges with seeking innovation in new markets, and some of the challenges had to be overcome by changing the organization's culture. The following are six challenges that Cisco believes large organizations often struggle with when seeking innovation in new markets, along with descriptions of how Cisco manages those challenges.
To increase the number of high-quality ideas sourced and generated, as well as to increase the speed of Open Innovation, the best-practice organizations embrace certain enabling practices, processes, and tools. Although adoption of these enablers is not in itself a best practice, it furthers the success of OI efforts. The study has identified five enablers.
Enthusiastic and engaged senior leaders play a vital role in enabling successful Open Innovation initiatives and help accelerate a shift in the company's culture toward openness and collaboration. This support goes from speaking about the importance of Open Innovation to actively being a part of the process.
Executive sponsorship helps remove roadblocks and drive participation in OI efforts. This support helps managers spend less time overcoming barriers and more time enhancing innovation productivity. New OI programs often have an R&D manager or director rally people to participate across the organization, as well as help develop internal and external networks.
Cisco has found that having strong senior executives as champions elevates innovation and ensures that it happens. Executives at the most senior level evaluate company-wide innovation, and it is customary for senior leaders to promote new ideation challenges and send out broad communications to drive employee engagement in innovation.
Best-practice organizations reward and recognize idea contributors. A variety of formal and informal methods reward and recognize contributors for their idea submissions. Best-practice organizations often use reward systems that provide mentoring and professional development to idea contributors, as well as time to work on innovative projects of interest.
Cisco has surveyed its engineers to find out what drives them to innovate. The top two incentives are time to work on innovative ideas followed by having that innovation work affect their career in terms of visibility with senior executives and potential promotions. Consequently, the services organization has an innovation catalyst award for significant contributions, which provides individuals with visibility with executives and promotions. This award recognizes initiative, persistence, and the building of skills. Recipients report feeling respected by their peers and being seen as innovative.
BT has multiple ways of recognizing and rewarding idea contributions. BT financially rewards employees who submit original ideas through its new ideas scheme. The company tracks employees who are key players in bringing an idea to launch and rewards them accordingly. By creating such a list, BT has an informal expertise locator of known productive contributors. BT also gives teams that have exceeded efficiency expectations a dedicated percentage of time to devote to innovation. BT structures that time by giving those employees a research question to address.
In addition to rewarding innovative employees, Cisco also rewards external idea contributors. Cisco's global innovation competition rewards idea contributors outside of the organization. The rewards for its I-Prize were initially monetary, but for upcoming regional contests Cisco has planned to offer mentoring and in-kind services (e.g., legal and marketing assistance that will help winners move their companies forward).
For Open Innovation projects, it is important to match the level and type of portfolio management to the innovation and organizational context.
Open Innovation projects, like other projects in an organization, need to be tracked, assigned resources, and guided. Portfolio management involves identifying, prioritizing, managing, and controlling projects, programs, and other related work to achieve strategic business objectives. For OI projects, it is important to match the level and type of portfolio management to the innovation and organizational context.
Amway has a technology review board that prioritizes and aligns projects in its queue and assigns resources. Project summaries are submitted to the technology review board, which then decides whether to allocate funding and resources. The board is made up of R&D middle management, as well as representatives from procurement and marketing when needed.
Additionally, OI teams at Amway use a measure called the technology readiness level to order projects by progress and maturity. Ideas are evaluated based on efficacy/functionality, market assessment, safety and regulatory adherence, intellectual property/exclusivity, and commercial viability.
For Cisco's services organization, there are top-down and bottom-up components to its innovation portfolio. Cisco does not track a directed portfolio for the bottom-up component because the focus is more on employee engagement and customer satisfaction. For its top-down approach, Cisco's targeted innovation is evaluated from an investment perspective by an existing portfolio management process at the services level.
Best-practice organizations initially use tools that they already have available, and their approach evolves as their Open Innovation effort matures. Best-practice organizations focus on clarifying the roles involved and the way the process works to establish criteria for the types of tools needed. Once the process and players are established, then the organization looks for more tools to enhance its OI efforts.
Cisco's approach to tools for innovation focuses on the goals the organization wants to achieve first and then on finding the right tools to help accomplish those goals. To help with idea capture, generation, and evaluation efforts, Cisco has adopted commercially available tools such as Brightidea (www.brightidea.com) and Spigit (www.spigit.com).
To drive engagement in Open Innovation, Cisco has used gamification as a tool for external challenges, although it recently also has been used internally. (Cisco used Spigit as the platform for its second I-Prize because of its prediction market capabilities.) Cisco used gamification to give I-Prize participants points to invest in ideas in a virtual market similar to the stock market (see Chapter 4 for more information about virtual markets). Cisco also allowed participants to select a small percentage of the ideas that would move forward. Idea contributors could then encourage others to rally behind and invest in their ideas so that they could advance to the next round.
Amway put the resources and projects in place and adopted tools to help track them. Amway primarily uses Microsoft SharePoint to track projects and resources and to manage content related to potential technologies. Amway also uses a custom-built technology database.
In best-practice organizations, the role of people and collaboration is more important than the knowledge management tool used to store and access the information for continuous improvement of the OI process. Best-practice organizations use internal collaboration software and staff meetings as vehicles to capture and share failures and lessons learned from Open Innovation.
Amway regularly reevaluates projects to aggressively winnow down its pipeline. The Open Innovation team uses after-action reviews to evaluate which OI efforts worked, which did not work, and why. It documents those evaluations to monitor progress. Amway believes there is something to be learned even when a project is stopped. Projects can also be shelved for a certain period of time and then brought to market at a later time.
Every time Cisco conducts an I-Prize contest, leaders first ask what can be done better or changed from the last iteration. Table 12.1 represents its best practice learnings.
Table 12.1 Cisco's Innovation Challenge Lessons Learned
| Consideration | Best Practices | Cisco's Recommendation |
| Goals |
|
|
| Contest Design |
|
|
| Participant Roles and Desired Behaviors |
|
|
| Executive Stakeholders |
|
|
| Evaluation Criteria |
|
|
| Resources |
|
|
| Marketing Plan |
|
|
| Intellectual Property |
|
|
| Tools |
|
|
As Open Innovation has matured, it has moved from an interest in simple idea screening of external sources to experimenting with a large variety of tools and techniques that target and extract ideas from external sources. Few would disagree that companies serious about market leadership must consider Open Innovation. Yet many organizations have faced the challenges of OI discovery with little concrete evidence of what works. APQC's Open Innovation study shows best practices that others can learn from and apply.
The study shows that the ideation process, like all processes, is a servant body of knowledge. It supports content and does not lead it. Open Innovation is about what you want to do and then the tools and techniques that help people make it happen. So, we learn that in OI process rigor matters and there is a best-practice framework we can adopt.
The practice of Open Innovation will continue to evolve. APQC's Open Innovation study is important as a milestone in helping organizations enhance collaborative processes and effectiveness. Study findings do not provide a definitive answer to what will work for a specific organization. But they do provide an understanding of ideation within Open Innovation at this time.