Your newsletter on applied creativity, imagination, ideas and innovation in
Wednesday, 1 December 2010
Hello and welcome to another issue of Report 103, your twice-monthly newsletter
on creativity, imagination, ideas and innovation in business.
As always, if you have news about creativity, imagination, ideas, or innovation
please feel free to forward it to me for potential inclusion in Report103. Your
comments and feedback are also always welcome.
Information on unsubscribing, archives, reprinting articles, etc can be found
at the end of this newsletter.
OPEN INNOVATION’S COMMON ISSUES AND POTENTIAL ROADBLOCKS
By Dr. Brian Glassman & Dr. Abram Walton
Note: You can download a PDF
version of this article here
To start, open innovation has three different core uses all of which are very
effective. Many companies pick one core use for open innovation even though
all three are possible simultaneously. The core uses are: generating ideas for
new products or services, solving technically vexing problems, or performing
co-development of new products or services. The following examples exemplify
the employment of these practices.
Generating ideas for new products or services. Top management at Proctor
& Gamble realized the number of new product ideas needed in order to
continue growth at the expected rate placed an untenable burden on their
R&D departments. Their solution? Supplement internal R&D with an
open innovation model sourcing new product ideas from the entire world.
Solve technical problems that are vexing or too complex to be solved internally.
The specialty-card maker, Hallmark, saw the future of cards as being more
interactive and fun. An internal champion moved to develop musical cards,
but Hallmark did not have the internal technical expertise to create or
even manufacture these cards. Using an open innovation model Hallmark found
a technical partner and worked with them to develop the ideal technology
for their low cost audio card series.
Co-development of difficult products, services, processes, technologies,
etc. Boeing Company uses large-scale partnerships to bring together complex
components and systems, from jet engines to cockpit electronics, to create
their next generation of jet aircrafts. These partnerships allow Boeing
to combine their development resources and capabilities with that of other
best in class suppliers, while simultaneously spreading financial burdens
and risks among their development partners.
Issues & Potential Roadblocks to Open Innovation
The following section lists the major (as currently identified) downsides and
roadblocks to open innovation. This list is short, but it represents up-to-date
knowledge taken from top books, articles, and leading practitioners.
As with most programs, internal buy-in is necessary for continued success; however,
full internal buy-in is not necessary to start an open innovation program. Dr.
Philip Kotter’s articles on change management discuss creating a guiding
coalition with people passionate about the proposed change. Dr. Kotter recommends
using quick wins to prove the value of the change throughout the company. In
simple applications open innovation can be applied to a single project. Then
after the project is successful, its results can be used as proof to motivate
other managers to join the efforts. Actually, this is exactly what an executive
at Sealed Air used to push open innovation throughout his company.
Establishing Trust with your Open Innovation Partners
In most cases open innovation partners are small entities; for them “large
businesses” are both innately scary and untrustworthy. Companies pursuing
open innovation need to develop a reputation as a “trusted partner”
and be seen as a viable path to market. Staples Corporation is a great example
of how to engage small partners. To reach out to inventor groups, Staples sponsored
events and openly discussed small entities’ intellectual property rights.
To ensure trust was built and maintained, Staples actively managed these new
relationships through open communication.
Companies can increase their trust with the open innovation partners by being
honest, avoiding activities that can be construed as leveraging their size and
power, and by avoiding overly aggressive negotiations.
Trust is also built through prompt and clear communications. Providing open
access to all open innovation officers is a must. Proctor & Gamble worked
to establish trust via keeping partners up-to-date on developments; one month
without an email or phone call is un-acceptable. Lastly, legal contracts are
only brought in after a confirmed understanding of many issues is reached (like
IP ownership). Many firms suggest that to encourage innovation and increase
the number and quality of ideas generated, that lawyers be excluded from initial
Intellectual property (IP) ownership is one of the most complex problem areas
within open innovation mainly because it can be so central to the future success
of a project. Corporate lawyers know this and always err on the side of full
ownership and limited disclosure for any IP generated with outside partners.
However, open innovation does not mesh with their perspective because open innovation
requires a fair split of IP ownership based on myriad measures, be them: contributed
capital, contributed time and resources, the vital nature of a partner’s
capabilities, etc. Remember, open innovation is a partnership and both parties
must be fairly rewarded for their inputs. Often some degree of IP ownership
or joint ownership is enough to bring a strong partner onboard. There are two
general blocks related to IP and they are the:
a) Corporate lawyer blocks
b) IP category blocks
Corporate Lawyer Blocks
The core beliefs of corporate lawyers conflict with the open innovations partnership
model. A Philips Lighting’s executive suggested not bringing any lawyers
into the agreement process until both parties reach a common oral agreement.
Interestingly, this same executive was a patent agent and drafted his own partnership
agreements. After drafting, his executive friend in the legal department signed
off on the agreements; hence, his close relationship gave him the required buy-in
from the legal department.
IP Category Blocks
The classes a company’s IP fall into greatly affect its ability to conduct
open innovation. IP can easily be broken up into four classes (see Appendix
A for more details). Companies in IP Class 1 deal with products and services
that have little value in patent protection. Consequently these companies can
operate an open innovation program without much concern for IP blocks.
Companies in IP Class 2 are those that can benefit from patents and trade secrets
but generally do not require them to operate competitively. These companies
should pay some attention to IP but not too much.
Companies in IP Class 3 require IP to compete in their industry; here structured
IP contracts are necessary for all types of open innovation. Gathering ideas
from the open innovation community becomes very difficult because of IP concerns
on both sides. Finally, companies in IP Class 4 are weapons or defense contractors
and can not disclose IP or trade secrets due to national security laws. Gathering
ideas in this context must be done through structured government programs (STTR
& SBIR), and all potential partnerships must be approved by their respective
Open innovation partners are in a sense a supplier, but because they are often
small entities which are frequently untrusting of large companies they often
do not mesh well with large companies’ typical payment processes. The
story below is from an Executive at Sealed Air’s.
‘I was surprised that a huge bottleneck in our open innovation program
was our own accounting department! Having to wait 45 days for payment, several
of our open innovation partners both refused and were unable to complete work
because of their limited funds. I ran around trying to get a check cut to them;
finally I used my own department’s accounts to pay them so their work
could continue. Luckily, later that year accounting made a special process just
for our open innovation partners. This way we could pay within days of their
achieved milestones and keep work flowing.’
Communication is a central capability in finding, evaluating, and working with
open innovation partners. Hence, open innovation requires 1) a set of open communication
channels, 2) people who are communicators and connectors, and 3) an open communications
Firstly, an open innovation program requires a public webpage directory of
your company’s open innovation officers with their direct phone numbers,
emails, and addresses listed freely. Closing contact to your open innovation
officers via unlisted phone numbers, layers of secretaries, voice menu systems,
and spam blocked emails are the best way to dissuade interested outsiders from
contacting you. Further, open innovation web portals, created as a sub-domain,
are a smart and easy way to communicate with open innovation partners.
Secondly, an open innovation officer must be a communicator and connector,
think of the best networkers in your company who are available at any hour,
who love making new connections, and always gets back to you promptly. Do not
pick an introverted engineer who has the ‘black hole email address,’
seems like he never answers his phone, or always excuses himself from failures
in communication because of his workload. Unfortunately, sometimes these introverts
are your best engineers, and except for their lack of networking abilities,
would have otherwise been a top choice. Nonetheless, err on the side of choosing
a networker versus an all-star engineer, as technical problems can usually be
resolved later; whereas, losing potential partners due to lack of communication
is very costly.
Finally, an open innovation department must have a mindset based on a deep
desire to connect and communicate openly with the outside world. They should
also believe that being proper, active, and trustworthy in their communications
is a key to their success.
Clear and Stated Agreement Established at the Beginning of the Relationship
Confusion about IP ownership, contributed resources and time, communication
requirements, and rewards can break the bonds of trust between open innovation
partners. Any of these problems can kill the relationship. When working with
your open innovation partners, establish a clear understanding and agreement
on these vital issues. It is reasonable to spend many hours reaching an oral
agreement on these matters before signing a single paper document. According
to the GE Lighting Executive this “upfront work” is well spent as
it creates stronger bonds with the open innovation partners. Short cutting this
process, even for small partners, will invite failure. Repeat confusion and
breaches of trust could result in others labeling your company as a poor or
untrustworthy open innovation partner.
Clear, Descriptive, and Motivating RFP
RFPs (request for proposals) communicate corporate needs to the open innovation
network. RFPs should contain the usual sections and additionally should provide
information about the opportunity areas and background of the project. The problem
statement should be very clear and provide detailed data and information, like
numbers, values, temperatures, pressures, stresses, desired cost levels, and
so on. Well-written RFPs contain as much information as possible without disclosing
vital trade secrets. Do not worry about disclosing opportunity areas or interest
areas, because with this information in-mind open innovation partners can submit
solutions more relevant to such an opportunity. Remember, RFPs that draw the
submission boundaries too tightly miss the opportunity to catch other relevant
solutions and ideas. Finally, make the RFPs easy to read (ex. put a short summary
at the beginning) and make them attractive so your open innovation partners
are motivated to respond. To further motivate potential partners to spend time
on your proposal, consider including information about possible financial rewards
for fulfilling the RFP.
Large and prominent companies may receive more responses to an RFP than they
can effectively process. In this case, it may be more work examining the proposals
then actually doing the project itself. For very attractive projects, one can
pre-qualify open innovation partners via short questionnaires or internal screening.
Then, send out the RFPs to this smaller pool of qualified partners. If no subsequent
proposals meet your requirements widen your pre-qualification criteria or remove
them all together.
Unfocused Open Innovation Programs
Open innovation has many possibilities. It is easy to become unfocused and "go
off in any direction." The success of an open innovation program always
benefits from quick wins. The best way to achieve quick wins is to gather needs
from key company figure heads and create a wish list of clear wins. If you can
meet one of these wishes, you will have gained a strong ally in your efforts
to promote the open innovation program.
First, create a wish list for your core areas of use. Companies using open
innovation to generate ideas would have a wish list consisting of idea interest
areas (like the intersection of advanced antimicrobial metals and air-conditioner
technologies) or opportunity areas which would hold great potential; such as
new coolants for air conditioners, or a new agent that can be applied to any
surface yielding it permanently antimicrobial, such as with COEUS Technologies.
Second, companies using open innovation to solve vexing technical problems
should have wish lists organized by technical problems that, if solved, would
create high value solutions or allow high value products to be created. This
list is organized by highest to lowest value technical problems.
Finally, companies conducting co-development should have wish lists organized
with valuable new capabilities or valuable new resources. So for example, in
air conditioners the ability to integrate the Wi-Fi into the control of an air
conditioner is a valuable new capability.
New research and discoveries on open innovation are constantly emerging; there
is still a lot to learn. For example, researchers are in disagreement as toward
the amount of impact “company culture” can have on open innovation
efforts. Some argue that ‘not invented here syndrome’, being ‘untrusting
of outsiders’ and tight lipped policies against any disclosure block open
innovation, yet others argue those can be quickly changed in-relation to an
open innovation program. Hence, keep searching for new research on knowledge
on open innovation. Nonetheless, be aware of these potentially cultural barriers
within your organization. An awareness and preemptive strategy for incorporating
open innovation practices within an organization can go a long ways towards
If you have any question, you can always email the authors: Brian.Glassman@Gmail.com
Appendix A: IP Classes
An important part of open innovation is understanding what class a company’s
IP may fall into:
IP Class 1 – Typically not patentable; too simple to be a trade secret
IP Class 2 – IP can be important but on average it is not, patents and
trade secrets may be appropriated
IP Class 3 – IP is vital for success, should be patented or kept as a
IP Class 4 – IP legally can not be leaked due to national security concerns;
kept as only a trade secret
Class 1 typically consists of very common categories of new ideas, such as
table cloth designs, footstools, staplers, simple recipes, theories, and books.
This class is generalized as being un-patentable due to most ideas in this category
having been based on information which is public knowledge. More importantly,
companies typically do not seek patents or trade secret protection on this class
of IP because of the limited benefits of doing so. In this class, copyrights
are more predominate from of protecting the exact designs or artistic work,
but like many copyrights, they are easily circumvented.
Class 2 typically consists of companies which do not require patentable inventions
or trade secrets to compete, however if they are created they can be valuable.
Hence, IP should not be ignored but on average these types of patents do not
play a significant role. However, in some cases it may be advantageous to patent
or keep something as a trade secret. A company may desire a new combination
for processed foods, exterior designs of tables, etc., to be patented or at
minimum covered under design patents. A process such as ‘how to create
a specific paint pattern on a boat hull’ may also be valuable as a trade
secret due to its rarity, more so than its ability to keep competitors from
entering the market.
Class 3 consists of patents and trade secrets which are a vital part of success
in a particular industry. Industries such as micro-processors, electronics,
construction equipment, etc., rely on vital patent portfolios and company trade
secrets to maintain their competitive advantages. Gathering ideas/inventions
from open innovation partners must be done carefully and in a calculated manner
to be effective; while this is one of the hardest classes to gather ideas for,
it can still be done effectively.
Class 4 consists of national security-type IP, and pertains mainly to weapons
developers and defense contractors who by law can not patent their technologies
or disclose their information to outside parties due to strict governmental
regulations and associated penalties. All vital information is kept as trade
secrets, and thus contractors are forced to abide by strict national non-disclosure
laws. External idea generation is mostly done in a government managed system
through programs such as STTR or SBIR. Companies can also place their organization
in this class if they can make the case that failure to maintain trade secrets
or proprietary IP would result in an overall company collapse.
Unfortunately, being in IP class 3 & 4 greatly limits a company’s
ability to use open innovation to gather ideas from outside entities (core use
number 1). Thus, companies in these classes should look to using open innovation
to solve vexing technical problems, or use open innovation to conduct co-development
to spread risk and lower investment amounts, or use open innovation build new
1.Open-Market Innovation, Darrell K. Rigby, Chris Zook, Havard Business Review
2.Connect and Develop, Larry Huston, Nabil Sakkab, Harvard Business Review Article
3.The Global Brain, Satish Nambisan, Mohanbir Sawhney, Wharton School Publishing,
4.Open Innovation Researching a New Paradigm, Henry Chesbrough, Wim Vanhaverbeke,
Joel West, Oxford press, 2006
5.Open Innovation , Henry Chesbrough 2003, HBR press
6.Interviews conducted at the Front End of Innovation Conference 2010, Dr.
ABOUT THE AUTHORS
Brian Glassman, Ph.D., graduated from the College of Technology at Purdue
University specializing in Innovation Management and Technology Commercialization.
He received his B.S. and M.S. degrees in Mechanical Engineering and a second
M.S. in Engineering Management from Duke University. His research, consulting,
and scholarly interests continue to explore the many facets of Innovation Management
and Technology Commercialization; and he is a passionately-driven entrepreneur.
Brian is very open to questions and can be reached at Brian.Glassman@Gmail.com
Abram Walton, Ph.D. is an Assistant Professor at Purdue University, Anderson,
in Technology Leadership and Innovation. He earned his Ph.D. in Product Lifecycle
Management; engineering management and strategic technology road mapping –
Purdue University; a M.S. in Technology and Strategic Human Resource Management
- Purdue University; and a B.S. in Management Information Systems - Northwest
Nazarene University. Dr. Walton instructs business, leadership, and industrial
technology courses, and consults on strategic technology acquisitions and development.
He also conducts research in Product Lifecycle Management, Lean, Human Resource
and Organizational Development, Educational Technology, Systems Thinking, Leadership,
and Change Management. He has authored and presented papers and book chapters
on Product Lifecycle Management, Metrics Dash-boarding, Educational Technology,
Managerial Authenticity, Climate Change, International Leadership, and Engineering
Management. Abram is very open to questions and can be reached at WaltonA@Purdue.edu
THE WAY OF THE INNOVATION MASTER
A New Book by Jeffrey Baumgartner
My new book, The Way of the Innovation Master, is out today and can
be ordered via our web site on http://www.jpb.com/books/.
The book will be available at Amazon, on-line retailers and bookshops over the
next few weeks. An eBook version will be available very soon.
I am very excited! Let me tell you about the book.
The Way of the Innovation Master comprises three parallel, interspersed and
interrelated cycles. The first is the journey of Jane, a newly appointed CEO
of an ailing company that had once been an innovative start up. Her Journey
is from her company’s corporate headquarters to the Temple of Ideas, a
little known innovation haven atop a mountain somewhere in Southeast Asia. Along
the way, she meets a useful guide (with whom you will be familiar) and a number
of other interesting characters.
The second cycle is a series of dialogues between two old-school company presidents
as they grapple with the issues of adopting an innovation process. Their dialogue
is half modelled on the dialogue of gods in ancient Greek drama and half modelled
on the fiction of P.G. Wodehouse.
The third cycle is a series of lessons, a number of which are based on articles
that started life in this journal. The lessons build up a plan, model and method
for implementing an innovation process in a company like yours.
The three cycles are all interrelated. For instance, Jane’s experiences
in her journey up the mountain foreshadow the lessons to be learned a few pages
The aim of the book is to give you the knowledge you need in order to become
an Innovation Master and lead your firm on a path to success through innovation.
However, it is not the usual, dry business book. Rather it aims to be an enjoyable
read which, I like to think, is rich in the creativity I espouse in this eJournal,
on www.jpb.com and in my life.
The Way of the Innovation Master is available in paperback and eBook formats.
for more information, excerpts and links to purchase.
We’ve redesigned the www.jpb.com web
site to make it more manageable. Now some 15 years old, www.jpb.com holds an
unwieldy collection of web information, images and more. In order to help you
find what you want, we have now divided the site into three main areas: business
products, people products and the read and learn area. This allows business
managers seeking idea management, consulting or training services to access
quickly and easily the information they require. People looking for personal
creativity products and services will be directed to a separate part of the
web site focusing on their needs. And those people who want to read and learn
can go to the bit of the web site that includes Report 103.
Initial feedback has been positive. But I would love to know what you think.
Your feedback on the new design is welcome!
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For more information about Jenni, visit http://www.jpb.com/jenni/index.php
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You can find this and every issue of Report 103 ever written at our archives
Report 103 is a complimentary eJournal from Bwiti bvba of Belgium (a jpb.com
company: http://www.jpb.com). Archives and subscription information can be found
Report 103 is edited by Jeffrey Baumgartner and is published on a monthly basis.
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Contributions and press releases are welcome. Please
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Jeffrey's Book: The Way of the Innovation Master
If you've enjoyed reading Report 103, you will enjoy Jeffrey's book,
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