Figure 2.1 The Participant Journey—From Stranger to Trusted Partner
Competition has been shown to be useful up to a certain point and no further, but cooperation, which is the thing we must strive for today, begins where competition leaves off.
—Franklin D. Roosevelt
The smartphone. The organizations that make them are competing for one of the greatest prizes of our time—access to 6 billion phone subscribers. There’s never been a competition quite like this before. For our discussion, the battle for the smartphone market presents a unique opportunity to explore how competition and cooperation coexist. If we are to benefit from crowdstorm processes, we need to understand how working with outside talent will challenge a number of established norms for brand, confidentiality, and intellectual property strategies.
The advertising for one of the best-known smartphones, Apple’s iPhone, has followed a clear arc.1 When the iPhone was first launched in 2007, Apple introduced customers to the main features—calls, e-mail, music, and web browsing. But one year later, they switched the focus to applications (or apps) that can be run on the phone to give it new capabilities. Ads about apps demonstrated the many, many, many ways in which the iPhone can become much more than a phone: Apps let customers read a restaurant review, an MRI, or a book, fix a bookshelf, find a cab, or split a restaurant bill, find a hostel, and translate speech into a foreign language.
Why is this so important?
People who did not work for Apple created all of these apps.
Apps reveal how Apple is a supercompetitor as well as a formidable collaborator. Apple created processes that enabled developers to easily make use of the iPhone’s new hardware and software. Many of us might have seen Apple’s customer events; however, an equally impressive communications and support platform exists for app developers—from large annual events and developer outreach programs to enabling software, tools, and support forums. Most companies would be hard pressed to provide these types of resources to their own employees—let alone outsiders.
In 2012, Apple let it be known that they had paid $4 billion to app developers and created 210,000 jobs related to the “App Economy”2 in the United States. These jobs went to the various people involved in the creation of apps, such as developers and designers. Globally, Apple has about 60,000 employees. Therefore, the additional 210,000 Americans alone is a dramatic addition to the Apple team—Apple is no longer just a company, it is an ecosystem that depends on outside talent. This ecosystem has helped Apple create new iPhone experiences and new reasons for potential buyers to choose their product over their competitors’.
A look at Apple’s biggest rival reveals a similar approach. Google leads a global ecosystem of large organizations—hardware and software makers that make Android phones. Google also leans heavily on outside app developers to make Android phones more valuable. In fact, this massive ecosystem of developer talent is what sets Apple and Google apart from the fast fading, previous generation of mobile phone leaders—Microsoft, Nokia, and Research in Motion.
But this is just the beginning of the story, because Apple and Google rely on an additional outside ecosystem of talent for another critical part of their businesses.
At the core of both of their phone operating systems, Google and Apple depend on the work of open source software developers. This is software that is dependent on contributors beyond the employees at either company. Unlike the explicit business contracts between app store developers and Apple or Google, open source relies on bartering and collaboration, with the end product, source material or blueprints, and documentation available at no cost to the public.
In other words, the developers for each of our phones’ applications work on their own apps. Many of them receive a share from the sale of these apps. However, for the invisible software functions on which both Apple and Google depend, global groups of developers have toiled to create code that is free to anyone and subject to certain restrictions depending on the specific licensing agreements. The core pieces for the Android operating system are derived from the Linux operating system; for Apple, it is a package of open source products called Darwin. Over the years, people have used, tested, and improved this software and made it available for others to use—for free. At the same time, Google and Apple depend on this software, which is created in an open, cooperative environment alongside their various proprietary and closely held tools.
Apple and Google depend on the efforts of outside talent in the form of apps and open source software. At the same time, they are very focused on access to and control of intellectual property.
For all the collaboration, there should be no confusion about ownership. Developers get to use phenomenal resources from Google and Apple—global marketing, development tools, e-commerce, and analytics—things that most of the developers could never afford themselves.
In fact, the ecosystem is built on the back of patent libraries that cover hardware and software inventions. In some cases, certain parties pay fees to one another to use these elements. But in the current competitive environment, there is a battle raging in courtrooms around the world to settle the question of who is improperly using various hardware and software elements. The consequences are severe; in Germany, for example, if an organization is found to infringe on another organization’s patent, their devices can be immediately removed from trade fairs, and their ongoing sales blocked.
We should not confuse the desire for control and ownership with the benefits of cooperation with outside talent. Apple and Google care deeply about intellectual property ownership; it is critical to their businesses. Yet the desire of many organizations to control intellectual property leads them to see collaboration and cooperation as off limits. Our hope is that the examples of Apple and Google demonstrate that nothing could be further from the truth.
While juries and judges might decide intellectual property rights, there is another very influential system to consider—the court of public opinion.
We use our phones to perform countless tasks—message and check-in and update statuses and search and browse and share. These various activities impact brands in a very important way. Brands used to have the upper hand in controlling what was being said about them: TV and newspaper ads, billboards, and various types of sponsorships, to name a few. These channels gave brands control over their messaging; using these platforms, brands could own how they wanted people to see and think of their brands. But in recent years, social networks have powered new connections that have shifted the ability to own and control the message from brand to customer.
In 2012, the consumer research firm Nielsen found that 92 percent of consumers around the globe said they trusted recommendations from friends above all other forms of advertising. This is 20 percent more than the percentage in 2007. Similarly, when Nielsen asked about online consumer reviews, 70 percent of those surveyed said they trusted these sources—up 15 percent from the 2007 numbers. What else changed between 2007 and 2012? We changed how we connected online when we rapidly embraced social tools like Facebook, Twitter, and Instagram. While brands continue to project carefully crafted images, these images are increasingly formed by what others are saying about them.
It is interesting that, according to the annual Brandz survey,3 Apple and Google are among the world’s most valuable brands—with Apple ranked number one and Google number three (behind IBM). At minimum, this large-scale work with outside talent has not put the brands at risk. If anything, the additional stakeholders are likely contributing to the success of the brand. Recall the shift in Apple TV ads? The experiences shown in these ads became part of the Apple brand. Outside stakeholders are literally helping Apple to build their brand.
But Apple and Google get more than products, services, and positive messaging from their community of collaborators. They get to gather constant feedback in the form of reviews (from many of us)—not only about the specific apps, but also about which ones we’re using most or least. This feedback loop allows Google and Apple to constantly understand shifting needs and preferences and adjust the hardware and software they provide to developers—from better camera hardware (as photo sharing rapidly expands in popularity) to better graphics for gaming (gaming categories dominate in popularity).
Apple and Google show that the need for access to IP is not at odds with working with outside talent—nor is the creation of a strong, valuable brand. But there is a final concern—confidentiality.
Google and Apple use media outlets to stoke speculation about how new devices will look, or what specific features they might include. Industry watchers and media alike engage in this ongoing game. On the one hand, we know that this has value because of the ways in which this information is shared and distributed.
But this is also an important way to counter the leaking of confidential information. Someone might obtain a photo of a soon-to-be-released Apple device. Apple has shown that it will go to great legal lengths to combat this type of leaking. But the company is also able to stimulate speculation to divert attention from rumors that may carry some truth. So, even when confidential information leaks, it can be hidden among any number of speculative news articles, blog posts, or images.
Of course, this says nothing of the strict confidences within the ecosystem. Participants understand that betraying confidential information comes with a cost. It might be hard to sue an independent developer for damages, but there is a real consequence to being excluded from collaboration opportunities.
In short, Apple and Google offer numerous examples that reconcile the benefits of working with outside talent with the core needs for control over IP, brand, and information. Let’s see how we can apply this to crowdstorming.
Jeffrey Phillips, the author of Relentless Innovation,4 introduced the idea of ships versus castles to describe how organizations might think about moving between two distinct strategies—one focused on working with and protecting internal resources and the other on looking beyond the borders of the organization.
Phillips summarizes how organizations create castles to defend specific areas, like harbors or important roadways. They’re designed to be easy to defend, as attackers have to overcome significant obstacles to penetrate them. The best way to improve castles is to build bigger and higher walls. These enable organizations to discourage those who would attack, and help organizations be selective about who they allow in. Of course, castles have a significant limitation: they cannot move.
Ships, on the other hand, enable a number of new capabilities—exploration, trade, and projecting power to areas beyond the castle-dwellers’ reach. However, ships have their own weaknesses. They can be defeated by castles’ firepower, they may encounter a larger number of ships, or they may become lost at sea. Ships are also more costly to operate, since they require ongoing refurbishment, a specially trained crew, and a range that’s limited by the supplies they can carry with them or their ability to trade.
Phillips uses this analogy to explain how many organizations’ traditional mindset has been based on the castle mentality. They are designed to defend internal knowledge like confidential information and intellectual property. This limits their access to the opportunities outside the castle. Phillips therefore argues that developing an approach to access new knowledge and talent—the way a ship brings back new ideas and insights to its homeport—prepares the way for innovation, new strategic initiatives, and continued competiveness. The challenge lies in balancing the risks and benefits of ships and castles.
We can take this analogy further. Castles and ships also represent the ways in which organizations deal with their brands. A company will often use the castle approach to defend their brand, keeping it safe from outsiders by limiting interactions to just a few transactions. Organizations that take a ship approach look for opportunities to interact with stakeholders because they see a business benefit in getting new information that can improve the brand. However, they have to deal with the risk of being overrun—losing control of communication about the brand. In many ways this is the contrast between marketing strategies from a decade ago versus the ship strategies embodied by social media marketing.
It is clear that Apple and Google have found a way to benefit from the strengths of both approaches. While it’s clear that not all organizations are in their position, these two companies can help guide others in assessing how to strike a balance between ships and castles. Table 2.1 highlights some of the benefits and drawbacks that organizations need to explore when considering how to use outside stakeholders and what the impact will be on disclosing information and managing the use of and access to intellectual property.
Table 2.1 Intellectual Property (IP) and Communications—Strategies and Implications
| Castle | Ship |
| Employees | Outside Stakeholders |
|
|
| BUT | BUT |
|
|
| Hide Information | Share Information |
|
|
| BUT | BUT |
|
|
| Own IP | Access IP |
|
|
| BUT | BUT |
|
|
In the following sections, we will look at ways in which other organizations have explored these trade-offs.
During the 1990s, P&G employees referred to the organization as the Kremlin in Cincinnati because of its closed approach to innovation, confidentiality, and intellectual property management. The image reinforces the very castle-like mentality of the time, when just 15 percent of its innovation came from outside the company. But fast-forward to 2012, and the percentage of innovation that came from outside had grown to over 50 percent. P&G’s management repositioned itself during those years. Management evolved from applying an internal, defensive innovation strategy to one that focused on accessing IP from external resources—and P&G did so in order to accelerate their product innovation and problem solving ability. In short, P&G opted to include a ship strategy, too. Since then, P&G has worked successfully with more than 1,000 external companies and individuals to innovate and solve problems.
P&G reached a very important conclusion: if the company wanted to bring more new products (and services) to market, they would need to go beyond the current approach of using solely internal resources. They understood that they were in the business of solving their customers’ problems and that there were many people who might be able to help. As former P&G CEO A.G. Lafley describes in his 2008 book The Game-Changer, “P&G opened up. [We were] known for [preferring] to do everything in-house, [but then] we began to seek out innovation from any and all sources, inside and outside the company. Innovation is all about connections, so we get everyone we can involved: P&Gers past and present; consumers and customers; suppliers; a wide range of ‘connect-and-develop’ partners; even competitors. The more connections, the more ideas; the more ideas, the more solutions. And because what gets measured gets managed, I established a goal that half of new product and technology innovations come from outside P&G. We are already beyond that figure, compared to 15 percent in 2000.”5
This is a powerful and significant acknowledgment—and precisely what Google and Apple understand—in a world far away from detergents, dental care, deodorants, and dusters. From this initial understanding came the development of the necessary components to put this strategy into motion.
One of the first big questions was about intellectual property: ideas are great, so how is P&G going to access and use these ideas? The answer to this question is clearly outlined on P&G’s “Connect and Develop” site.6 If you have an idea, you need to be able to demonstrate to P&G that they are able to purchase this idea either in the form of a patent or some existing product or service.
By insisting on IP ownership, P&G greatly simplifies the process of determining how they will ultimately use an idea. Global patent systems provide a way to legally protect inventions and ideas that become intellectual property (IP). These inventions and ideas then share traits similar to other types of property from homes to software. IP is an asset that companies can sell, rent (license), finance, and so on.
Beginning over 10 years ago, P&G publicly and repeatedly announced that they were looking outside the organization for ideas. Nowadays, they describe in some detail the type of help they are looking for. For example, one of P&G’s needs is as follows: “Awareness Tracking of New Products Using Unstructured Data.” In other words, P&G wants to track levels of awareness through the first year of product launch. On the one hand, one might argue that this reveals too much about P&G’s marketing strategy. On the flip side, what is the benefit if P&G can find an improved solution? Previously this type of strategy might have been seen as confidential. No longer. The ship is more valuable than the castle (or the Kremlin).
And there are other types of interesting disclosures; P&G also shares some very big strategic goals. They have posted the following on their “Futureworks” site: “We are interested in disruptive technologies or business models in our strategic areas of interest including Health & Well-Being (products, diagnostics, and services), Franchising, and Information-Based Services that improve the lives of the world’s consumers.” In a world where everyone is a competitor, it might seem like a tremendous risk to clearly articulate areas of strategic import in this way. But it is also a world where potential collaborators might have just what you need—and the business upside outweighs the risk of sharing confidential information. Though P&G’s competitors may well infer their intentions, P&G’s time-to-market need for problem solving takes precedence.
But competitors do not understand this need in relation to P&G’s other strategic priorities, nor do they understand how far along P&G is in the development cycle. They see many ships, but how are they to know which ones are most important to P&G? In addition, how likely is it that competitors have the internal resources to respond to the help P&G is seeking? Some of the biggest organizations in the world are already looking outside; what are the chances that competitors can respond with their internal resources? Odds are they’re going to have to take the same approach—and P&G is far ahead in terms of communicating needs and having a process to work with outside talent.
P&G and all of the organizations we cover in this book have one important thing in common. They communicate clearly to everyone inside the organization that success is no longer linked only to what they create inside, but also what comes from outside. It is hard for us to overstate the importance of this sentiment. It is relatively easy to set values when creating a new organization, since the people who join at that point are consciously buying into a specific view of the world. However, it is something else entirely to ask people to change what they already believe—to move from castles to ships, from the stability of land to the more unpredictable seas.
Therefore, someone (or a group of people) had to make the case for change in all of these organizations. This is likely to be the first task for many organizations: convincing leadership to make it safe to go outside and explore the possibilities of “proudly found elsewhere.” What comes next is understanding how to engage with people and ideas from elsewhere.
In all of the crowdstorming processes we discuss, participants move through a journey that takes them from complete stranger to various levels of trust. Figure 2.1 shows some of the stages of this journey.
Figure 2.1 The Participant Journey—From Stranger to Trusted Partner
At the start of the journey, prospective participants need, at a minimum, to be aware of what organizations are trying to achieve. They also need to understand what it might be like to enter into a working relationship with an organization—compensation for one thing, but also a sense of whether this is a task where they can be successful.
Finally, once they have decided to participate, they will consider the fairness of the terms. Once they have the experience of working together, they have the potential to be strong advocates for others to join the process, in much the same way full-time employees refer new employees.
Organizations have developed many approaches for exchanging information. On the one end is marketing—focusing on what messages the organization needs to share with customers. On the other end are controlled exchanges with partners or prospective partners, like Non-Disclosure Agreements (NDAs) and Employment Agreements. However, whether an organization can reasonably rely upon confidentiality depends very much on whom you are asking to keep a secret. In simple terms, parties keep information confidential by promising to do so. Friends, family, organizations, and governments agree to keep secrets every single day. Yet the probability that they will keep their promise is a function of leverage. For example, how valuable is the friendship? As a smartphone developer, can I afford to be outside the Apple Ecosystem?
We’ve also recently been adapting to a world of social media—one that allows us to talk more directly with stakeholders across multiple channels. Decisions about what to share and with whom are becoming more routine, thereby prompting organizations to establish more policies around these questions. There is also an emerging pattern for corporations to develop relationships that allow them to move people from the unknown public—where they might be talking to competitors and potential collaborators—to a variety of qualified or trusted statuses, ranging from prospective partners to employees. At each stage, organizations are figuring out what level of detail they can comfortably share to advance a discussion, revealing more detail as relationships evolve to more traditional, trusted statuses.
Some larger organizations don’t need to look outside. With thousands of employees, they already have trusted participants. Existing employment relationships offer the necessary trust and security for sharing detailed information. Much of what we cover with regard to information sharing applies equally well to challenges involving external talent and to challenges designated for employees only. We will also see how writing briefs cleverly can enable even the most guarded organizations to share information with the public and still net tremendous results.
Of course, when working through issues of confidentiality to do crowdstorming, the challenge is to determine how much detail organizations can share at each level to allow them to reach the best people.
In Chapter 1, we described how the Starbucks Betacup asked participants to help them find ways to make paper cups disappear. This presented Starbucks with an opportunity to explain what they were already doing internally and with partners. By sponsoring the Betacup, Starbucks was able to clearly convey their focus on sustainability and their desire to pursue a range of strategies to solve the problem of paper cup waste. This was a case where sharing more detail to reach more stakeholders had a communications and a public relationship benefit, too.
Despite the potentially positive communication aspects of the challenge, Starbucks first had to consider the issue of intellectual property. They were concerned about what might happen if an idea was submitted and they were already working on a similar concept. Would they—could they—be accused of stealing the idea? If they wished to develop the idea, would they be taking a legal risk?
Starbucks solved the problem by using the following method. They required participants to concede up front that Starbucks may have already developed similar ideas—or that Starbucks might develop ideas similar to those participants submitted, even after the challenge.
As it happened, the winning entry further complicated the issue of intellectual property—the idea was not a product innovation but a behavioral change idea. As we described it, every tenth person who came into a Starbucks location with a reusable mug received a free cup of coffee. Each location tracked the project for all to see, encouraging dialogue while customers were waiting in line for coffee—which kept the issue of sustainability at the forefront of all coffee drinkers’ minds on a local basis. Going into the contest, the Betacup did not specify whether the idea needed to be patentable (as P&G does) or if they were simply seeking a design idea (as in our Triple Eight example).
Still, while many ideas can be patented, many cannot. And this sets the stage for perhaps the most complex issue that you will need to discuss and consider within your organization—intellectual property rights.
Let’s revisit our smartphone battle between Google and Apple. In the case of open source software, neither Google nor Apple needed to acquire IP; however, they did need to abide by the rules laid out in various types of open source licensing agreements for accessing and using the software. They also did not need to own apps developed externally to benefit from their functionality—a legal structure that enhanced the appeal of both companies’ operating systems. But, as we saw in our earlier discussion, it was still important to own IP in order to limit what competitors could do.
When Google determined that wireless handheld devices would be an important focus, they bought Motorola’s wireless division, Motorola Mobility, and took ownership of over 17,000 patents, which could help defend against challenges to the Android operating system. Google took advantage of Motorola Mobility’s long history of technology innovations and its large portfolio of IP focused on wireless devices. This is a classic example of a traditional process for acquiring outside IP.
Google, Apple, and P&G are not alone as they search for ways to acquire and access IP. In fact, the intellectual property owners association (IPO) publishes an annual list of the top patent owners for the year.7 Organizations on this list are serious about obtaining and enforcing intellectual property rights. Google was ranked 47th; Motorola Mobility, 101st. But it is interesting to note that some of the organizations succeeding with crowdstorming approaches are also highly ranked IP owners—GE (ranked 11th) and P&G (ranked 88th).
The following is a summary of some of the ways in which organizations get access to the IP they need—other than creating it themselves:
Given the range of licensing options—as well as the possible variety of ideas that organizations can receive—it is critical that legal departments become part of the crowdstorm process as early as possible. IP strategist Jackie Hutter makes this point when discussing these challenges: she says it is important to integrate legal counsel on the front end of the innovation process in order to minimize time delays and cost run-ups, and to prevent “unfortunate surprises when the lawyer ends up putting the proverbial kibosh on a project due to legal issues that are only found out by the business team when they finally run the idea past their lawyers.”8
Successfully inviting outside groups into situations where IP might be involved (made available for purchase, or created in a joint process) generally involves working with business-minded lawyers who understand the potential upside and are also prepared to explore the available options to manage risk. Hutter concludes that rather than acting as a traffic cop for the business, IP counsel should set forth guard rails within which a business team should drive their innovation processes. As long as the business team stays within this range of activities in their innovation processes, “risks can be managed and surprises avoided.”
It is probably clear to you by now that successfully setting up work with outside talent is going to require conversations with a number of internal stakeholders before you can get going. At a minimum, you will need to meet members of your legal, marketing, and R&D groups. Since castle strategies still tend to dominate the approach to innovation, we offer examples of ship tactics throughout the book. The context above should help with the thorny, practical reality of tackling specific IP, confidentiality, and brand issues when opting for the business benefits offered by crowdstorming with outside talent.
The issues of intellectual property and branding can intersect in strange ways. One need only look at the ongoing interaction between Google and their hardware partners versus Apple. Although Apple recently received a favorable ruling against one of Google’s hardware partners, Samsung, there is a mixed result in the court of public opinion. For Apple fans, this is further affirmation that Apple is an innovator, with the Android simply copying their innovations. Google fans offer a very different argument: that Apple is desperate to slow the competition that has already overtaken the Cupertino company in global market share. While it is unlikely that many organizations will see intellectual property discussions become the source of mainstream media debate, it is worthwhile to note how almost all actions can result in media coverage, or, at a minimum, conversation on the social web.
Therefore, when discussing matters of intellectual property and reaching a broad audience, it is important to consider new issues of fairness. It is one thing to demand tough terms behind closed doors; however, these terms can have negative consequences for the brand when they’re published for the world to see.
As we indicated earlier, a significant part of managing legal risk depends on how you structure the brief—specifically, what you share about what you are trying to do, as well as the terms under which you would like to interact with outsiders. How you ask a broad audience of external talent to work on your challenge is critical in managing risk.
In the next chapter, we look at how organizations have crafted their tasks for an open and virtual audience.
Notes
1. For details see “Apple’s iPhone’s TV Ads: The Complete Campaign,” ADWeek, February 23, 2012 (complete), www.adweek.com/adfreak/apples-iphone-tv-ads-complete-campaign-138229.
2. For details see the Apple website, “Creating Jobs through Innovation,” 2012, www.apple.com/about/job-creation; and “Nielsen: Global Consumers’ Trust in ‘Earned’ Advertising Grows in Importance,” April 10, 2012, www.nielsen.com/us/en/insights/press-room/2012/nielsen-global-consumers-trust-in-earned-advertising-grows.html.
3. For details see “Brandz Top One Hundred: The Most Valuable Global Brands 2012,” www.millwardbrown.com/BrandZ/default.aspx.
4. For details see Jeffrey Phillips, “Paper 24: Innovation Strategy: Ships and Castles,” Change Papers, August 31, 2010, changepapers.org/2010/08/innovation-strategy-%E2%80%93-ships-and-castles; Jeffrey Phillips, Relentless Innovation: What Works, What Doesn’t—And What That Means For Your Business (New York, NY: The McGraw-Hill Companies, 2012).
5. Ram Charan and A. G. Lafley, The Game-Changer: How You Can Drive Revenue and Profit Growth with Innovation (New York, NY: Random House, Inc., Kindle Edition), Kindle Locations 158–162.
6. For details see “Welcome to Connect + Develop,” www.pg.com/connect_develop/index.shtml.
7. For details see Intellectual Property Owners Association, www.ipo.org//AM/Template.cfm?Section=Home.
8. For details see “The Hutter Group LLC, Innovative Strategy,” the thehuttergroup.com.