“Crowd sourcing,” or “open innovation” – the practice of drawing from resources outside of a corporation to develop new ideas and products – is grabbing the attention of big companies on the hunt for their next level of growth. So-called open innovation portals are cropping up everywhere and there are countless books on the topic. Still, companies serious about innovation need to reconsider opening the door to ‘open innovation’ and stop following the crowd. Here’s why:
Companies fail to realize that generating ideas is not the problem. In fact, developing numerous ideas just makes any business challenge that much more challenging. If nothing else, after spending time generating the additional ideas, you’ll need to sift through to determine the best one. It’s much better to start with a clear understanding of the need you’re trying to solve. Success starts and ends with meeting those customer needs.
Companies need to adopt a strict process of innovation. In order to guarantee success, firms must develop criteria to determine if an idea is the right idea and discard it if it is a bad idea. If your solution to innovation is simply to tap additional resources to create more ideas, then the only thing you will find is a higher failure rate.
It’s a common perception that markets change very quickly. But this is simply not the case. The actual customer need or job that needs to be performed is very stable. It’s the delivery vehicle that changes. Take the music distribution industry, for example. Hundreds of years ago music was shared across parties by pen and paper which years later evolved to records, tapes, CDs and MP3s. The platform in which music is delivered changed drastically over time, but the general job function – how do I get music from one place to the next – remained consistent.
Open innovation is not necessarily bad and more ideas are not necessarily good, but the key is to develop and deliver products, services and solutions that meet customer needs.
I can’t help wonder if outcome driven innovation might be an ideal mate for open innovation. With ODI, you have systematically cataloged user needs and prioritized them. You know where the value can be created. Wouldn’t that give a company better targets for anyone to shoot ideas at? The rationale of using open innovation is to find the best solutions from a larger pool of available technology. I don’t understand why a company would have to choose between one and the other.
If companies understood what they needed to develop to create value and someone outside of the organization already has developed the technology, why wouldn’t they choose an open innovation policy?
JThomson: I think you are right. Combing ODI with open innovation is possible because you could use open innovation at the idea generation stage to search for new ideas to address the underserved jobs and outcomes. But the problem is using open innovation on its own, without knowing what the criteria are to judge whether or not an idea will be valuable (i.e. whether it will satisfy unmet customer needs).
It seems to us that open innovation doesn’t address the root cause on its own. The cause of innovation and growth failure is not lack of ideas. We believe it is a lack of accurate understanding of markets (jobs) and customer needs (outcomes) and a failure to quantify and prioritize which markets and needs represent attractive opportunities for growth (i.e. which are underserved, appropriately served and over-served). It is relatively easy to generate ideas when the opportunities are quantified before the idea generation work starts.