What I know about collaborative innovation
- 22 April 2016
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Dr Kevin McFarthing leads Innovation Fixer, a company set up to aid innovation management and open innovation. He has wide-ranging experience in life sciences and at FMCG firms including Reckitt Benckiser (RB). Here, he gives his view on getting collaborative innovation right.
What is open innovation?
Open innovation is a process that works in two ways. Henry Chesbrough, the American academic who popularised the term, looked at it in terms of bringing technical expertise and new capabilities into the company, but also as a way of sharing the business’s capabilities – licensing things out that aren’t being used.
It gives firms the ability to profit from assets they are using sub-optimally, or to boost their ability to enter areas where their skills aren’t well developed.
It took off in the 2000s at Procter & Gamble (P&G), where AG Lafley, the CEO, wanted to boost the flow of innovation. He said he wanted at least 50% of ideas to come from outside the company. Since then other firms, such as Reckitt Benckiser and Unilever, have taken a similar approach – Unilever now wants 70% of ideas to be influenced from outside and P&G has upped the target.
Can you share some examples of successful collaborations?
What P&G, RB and Unilever are doing is open innovation on the project and product side. It’s resulted in many achievements, such as Swiffer, a big success in the US that was discovered in Japan.
A lot of companies also use their consumers to put forward new ideas and new options. Lego has done fantastic work with this, engaging groups called AFOLs (Adult Fans Of Lego) and encouraging them to put forward new proposals on specially created websites. If 10,000 people support the proposal, the brand will commit to making the product.
Other companies work very closely with their suppliers. If the innovation comes off, the supplier is generating new business with the customer. The customer has more products to take to the consumer, who has greater choice. Everyone benefits.
Early examples of this took a classic transactional approach, but there’s now an understanding it needs to be more collaborative. You need to give suppliers an indication of what your consumers are looking for, and use their resources to come up with solutions based on their expertise. Nestle, for example, started a programme called ‘Sharing is Winning’, around collaborating with their suppliers on the basis of mutual benefit.
There’s also the kind of collaboration that requires input from a lot of different experts. The Air Wick range from RB, for example, needed to combine knowledge from fragrance companies, electrical experts, aesthetic design experts, functional design experts – RB had to assemble a consortium of complementary skills to deliver for the consumer.
Contrast that approach with Apple – from one view, it does a lot of open innovation through platforms such as the app store, where anyone can participate. However, its normal approach is that Apple controls everything. It is notoriously secretive about product design.
Apple is, of course, extraordinarily successful, but it begs the question – how successful could it be if it collaborated? If you go to Apple now with a product, it won’t take it on board. But the paradox is that the creation of the original iPod was a truly collaborative process, orchestrated by Apple but using technology drawn from different sources.
What are the pitfalls of soliciting collaboration?
Nobody ever bought a product because it said ‘developed with internal R&D’ on the label. Companies should be source-agnostic about ideas. On the other hand, there is a cultural challenge, as people can feel that the firm is seeking outside input because they aren’t creative enough. This misperception needs to be addressed internally.
Companies also worry about diluting their intellectual property or giving it away for nothing. It’s important to arrange the legal side up front – for example, who will have ownership of the product of the collaboration?
There are risks, of course, but like everything else in life you have to balance the risks against the benefits.
What are the first steps you recommend for companies considering open innovation?
The mistake some companies make is to do a crowdsourcing exercise, get underwhelming results, and say this method of collaborating doesn’t work
To avoid this, the first question to ask is why they want to use open innovation. Organisations that succeed start by answering this question in strategic terms. For example, P&G knew it wanted to boost its innovation from outside. and Dutch chemicals company Royal DSM has looked at open innovation as a way to develop emerging business areas that can be turned into separate businesses by 2020.
Next, there’s the question of whether to approach the general public (naive crowds) or go to groups of experts. Deciding on this depends what you want to find out. An idea for a product name is something that the public can really help with, but if you’re looking to solve a tech problem there’s no point. Companies like InnoCentive and NineSigma will assemble crowds of experts to do this. There’s even a US company called YourEncore that has a large network of retired scientists on offer to solve problems.
Quite often these people, with all their knowledge, can take a lateral look at an issue and find new solutions.
Once the organisation is ready to proceed on the project, it needs to be in a collaborative mindset – getting away from a transactional mode makes everyone more likely to succeed.Back to all
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