There are four popular approaches to open innovation: public suggestion schemes, innovation competitions; outsourcing and publicly funded projects. Two of these approaches are effective. One is not. One can be.
1. Idea competitions
Idea competitions are effective because it allows a firm to broadcast a very specific business need and allows experts, who have the wherewithal to solve the problem innovatively, to do so. Suggestions can easily be evaluated according to relevant criteria and the most suitable ideas selected and implemented. Meanwhile, irrelevant ideas are not submitted.
There are now a handful of different firms offering managed idea competitions – a demonstration of the effectiveness of this approach. Indeed, even idea management software allows clients to create competitions.
2. Outsourcing
Because publicizing specific business needs in an open forum like an idea competition might provide too much information to competitors or simply because the firms in question are uncomfortable using a public forum for open innovation, many companies outsource elements of innovation to trusted third parties, such as small firms specializing in developing specialized innovative technologies.
In these cases, the outsourced firms are not merely generating ideas, they are going much further, typically providing comprehensive concepts often complete with business plans, prototypes and more.
The advantage to such an arrangement is that it facilitates a higher level of sharing of information between the two firms, intellectual property rights can be clarified from the beginning and the company seeking outside innovation can be assured of confidentiality. The downside, is that the group looking into the problem is necessarily restricted and thus there may not be the breadth of knowledge, experience and creativity that would be available in a more public forum.
3. Publicly-funded projects
A lesser known, but well established, means for open innovation is publicly funded projects. The European Commission has been funding research and development projects for more than 50 years and since 1984 has been launching regular Framework Programmes which, to simplify greatly, are legal documents that precede periodic Calls for Proposals. In a Call for Proposals, a consortium of organizations may submit an innovative proposal that responds to one of the action lines. If successful, the consortium receives funding (typically 50%) to implement the project.
Partner companies collaborate to develop the project and provide deliverables along the way. Results must be publicized and certain kinds of projects are expected to develop commercialized products or services.
Nevertheless, some very good work comes out of Framework projects and billions of Euros are given away to companies for carrying out their innovative research and development under the program.
Likewise, other governments offer grants which encourage innovative collaboration to develop research and development projects. And many non-profits, such as the Gates Foundation and the Rockefeller Foundation, offer grants to collaborative teams comprising more than one organization.
4. Open suggestion schemes
An open suggestion scheme is the application of so-called web 2.0 technologies to those suggestion boxes which were seen in hotels 30 or 40 years ago. Rather than putting an idea in a box and wonder whether or not anyone would act on it, we can now put our ideas on a public idea sharing web site and wonder whether or not anyone will act on it.
Of course, on the public web, other members of the public can vote on our ideas and add comments – something that never happened in the old suggestion boxes. But absurdly low implementation rates and experience of suggestion schemes inside large companies suggests that our ideas still stands a very low chance of ever being implemented.
This is important to bear in mind if you are considering an open suggestion scheme for your firm. Generally, in firms, during setting up internal suggestion schemes using web based tools, the schemes inevitably fail after 12-18 months for essentially the same reason: a lot of dissimilar ideas are submitted, processing all of these ideas is highly resource consuming and because suggestion schemes do not align idea generation with strategy or any relevant business needs, there is a very high rejection rate.
If suggestion schemes fail so frequently in closed innovation initiatives, there is no reason to believe they will fare any better when the public is invited to use them, thus increasing levels of usage substantially, without making the back-end any more efficient!
1. Idea competitions
Idea competitions are effective because it allows a firm to broadcast a very specific business need and allows experts, who have the wherewithal to solve the problem innovatively, to do so. Suggestions can easily be evaluated according to relevant criteria and the most suitable ideas selected and implemented. Meanwhile, irrelevant ideas are not submitted.
There are now a handful of different firms offering managed idea competitions – a demonstration of the effectiveness of this approach. Indeed, even idea management software allows clients to create competitions.
2. Outsourcing
Because publicizing specific business needs in an open forum like an idea competition might provide too much information to competitors or simply because the firms in question are uncomfortable using a public forum for open innovation, many companies outsource elements of innovation to trusted third parties, such as small firms specializing in developing specialized innovative technologies.
In these cases, the outsourced firms are not merely generating ideas, they are going much further, typically providing comprehensive concepts often complete with business plans, prototypes and more.
The advantage to such an arrangement is that it facilitates a higher level of sharing of information between the two firms, intellectual property rights can be clarified from the beginning and the company seeking outside innovation can be assured of confidentiality. The downside, is that the group looking into the problem is necessarily restricted and thus there may not be the breadth of knowledge, experience and creativity that would be available in a more public forum.
3. Publicly-funded projects
A lesser known, but well established, means for open innovation is publicly funded projects. The European Commission has been funding research and development projects for more than 50 years and since 1984 has been launching regular Framework Programmes which, to simplify greatly, are legal documents that precede periodic Calls for Proposals. In a Call for Proposals, a consortium of organizations may submit an innovative proposal that responds to one of the action lines. If successful, the consortium receives funding (typically 50%) to implement the project.
Partner companies collaborate to develop the project and provide deliverables along the way. Results must be publicized and certain kinds of projects are expected to develop commercialized products or services.
Nevertheless, some very good work comes out of Framework projects and billions of Euros are given away to companies for carrying out their innovative research and development under the program.
Likewise, other governments offer grants which encourage innovative collaboration to develop research and development projects. And many non-profits, such as the Gates Foundation and the Rockefeller Foundation, offer grants to collaborative teams comprising more than one organization.
4. Open suggestion schemes
An open suggestion scheme is the application of so-called web 2.0 technologies to those suggestion boxes which were seen in hotels 30 or 40 years ago. Rather than putting an idea in a box and wonder whether or not anyone would act on it, we can now put our ideas on a public idea sharing web site and wonder whether or not anyone will act on it.
Of course, on the public web, other members of the public can vote on our ideas and add comments – something that never happened in the old suggestion boxes. But absurdly low implementation rates and experience of suggestion schemes inside large companies suggests that our ideas still stands a very low chance of ever being implemented.
This is important to bear in mind if you are considering an open suggestion scheme for your firm. Generally, in firms, during setting up internal suggestion schemes using web based tools, the schemes inevitably fail after 12-18 months for essentially the same reason: a lot of dissimilar ideas are submitted, processing all of these ideas is highly resource consuming and because suggestion schemes do not align idea generation with strategy or any relevant business needs, there is a very high rejection rate.
If suggestion schemes fail so frequently in closed innovation initiatives, there is no reason to believe they will fare any better when the public is invited to use them, thus increasing levels of usage substantially, without making the back-end any more efficient!