Yesterday I participated in a Twitter® chat with Prof. Henry Chesbrough, hosted by Stefan Lindegaard. As the author of the 2003 seminal book Open Innovation, Chesbrough is perhaps the most prominent proponent of collaborative R&D. The focus of the Twitter chat was Chesbrough’s new open services innovation research. I enjoyed interacting with him (and the other participants) via this fast-paced format and thank him and Stefan for the opportunity.
For those of you who weren’t there, below is a “transcript” of several of the interactions—this isn’t everything, just what resonated with me. Note that I’ve made very minor edits and did a little reordering to enhance the readability of the discussion.
Chesbrough began with the following introduction to open innovation (OI):
There are two parts to the Open Innovation model. The first is outside-in, bringing external ideas into your business. The second is inside-out, taking unused internal ideas and technologies outside to other businesses. The advice differs for each.
- For outside-in, my first advice is to open up inside before opening up outside. Later he added: Idea management is an example of opening up inside first. Software helps companies track better internal innovations as well.
- For inside-out, my advice is to look for ideas that are stuck inside, and frustrated people inside, and look to get them outside.
(Note: Consider my cooking metaphor for open innovation.)
An issue for outside-in is congestion in a company’s R&D pipeline. If you add more in to a congested line, no more comes out!
Should you start with OI when you have a congested R&D pipeline? Or wait?
Let me define congestion. When companies have their people overloaded on existing projects, adding new project just clogs things up. You need to address the congestion, in order to get the benefit from outside in open innovation.
When do you know that you have a congested pipeline?
When people are overworked and burning out; when projects are chronically late. These are two signs.
Most companies already have this situation. How should they approach it with regards to OI?
Cancelling low priority projects frees up resources and attention for outside in open innovation projects. Just adding work doesn’t.
Should companies begin with an analysis and organization of their IP portfolio before beginning OI? (Note: Actually, this was my question)
It should be part of the process of employing OI. (Note: For more on portfolio screening, see our insights on technology evaluation.)
R&D directors are key to this. They got to their position by doing “closed innovation” How do you change them?
R&D directors need to share in the benefits of OI, not only the costs. Praising them for external sources of ideas really helps. Some companies change their incentive systems so that external sources are treated equally with internal ones. Change always creates winners and losers. You want to co-opt the losers if you can, and isolate them if you can’t. I also advise companies to experiment at small scale before launching at large scale. You can learn fast, spend little. (Note: See our insights on best practices for collaborative R&D.)
What if R&D people are the enemy of open innovation? What to do? Others – any input on this?
Most companies want to win in the market. If OI is shown to help win, that creates buy-in from previously opposed people. You have to start under the radar, build up a track record, before you ask for lots of resources. (Note: My Fuentek colleague on the chat also chimed in with: Need to help them understand. See Net’s UAP paper. Thanks, Nancy!)
OI results are reported as successes – per Tolstoy, what about people unhappy about OI? What about the failures?
We definitely need more failure cases in studying OI, to tell us the limits, and how to improve. Companies don’t like to talk though.
On intermediaries, are they worth the effort?
Intermediaries often are worth it. They have learned a lot from working with hundreds of companies. When intermediaries are too expensive, reach out to local universities as a source of new thinking. Hire a student for the summer. (Note: See our insights on internship programs.)
Moving to the specific topic of open services innovation (OSI):
Is it harder to innovate services compared with tangible products? How can open innovation help on this?
Services innovation is different from products, maybe not harder. But customer is more central, and what results is an experience. How OI helps in services is both outside-in and inside-out. Both processes invite others to innovate with you. Later he added: OI in services borrows a lot from user-guided innovation. (Note: I’ve blogged about the importance of the customer in open innovation quite a bit.)
Perhaps service innovation is harder than product innovation because of the lack of knowledge on how to do this?
We do know less about services innovation, and services are also less tangible than products. Later he added: Many companies treat services as a backwater. These companies need to elevate the status of services inside the company. (Note: You might appreciate Laura Schoppe’s post on the topic of open services innovation.)
What is the same when it comes to open innovation on services/products?
Products ultimately deliver an experience as well, just like services.
Can you elaborate on your experiences with service innovation?
I offer a number of company examples in Open Services Innovation: IBM, Xerox, GE Engines, El Bulli restaurant, even a sailing club. (Note: He discussed the Xerox example in a video.)
What are the key elements needed for creating value on services?
To create value in services, need to know the customer, need to be open to outsiders, need to create a platform to integrate in & out.
What’s 1st step for company going open services innovation (aka Xerox sells copies)? (Note: This was a Fuentek question)
Put prices on services, don’t bundle them in with products for free.
How do you measure (quarterly to multiyear) the success of open innovation, managing costs and returns?
Measuring results of OI and OSI is challenging. Accounting systems don’t track services as well as products, think of work-in-process. Need to link key OI activities to company revenues and costs, and show the impact of OI on those. Also need to look at assets required. OI often leverages outside assets, so less investment needed to innovate. (Note: Although not solely about open innovation, our paper “How’d We Do: Establishing Useful Technology Transfer Metrics” might be of interest.)
Can you suggest good resources on services innovation? One could be Peer Insight. Others?
For those with an academic bent, Springer published an academic volume: Handbook of Services Science by Maglio, Kielisszewski and Spohrer. Tough read, but good ideas.
And finally, looking at the big picture:
How can open-mindedness be encouraged?
Think of all the useful knowledge all over the world; and humility is the beginning of wisdom.
How can experimentation be encouraged?
Create culture of “fail early and often” vs. punishing failure.
Saying that it all comes down to the people and how we foster or discourage their ideas is a nice ending. This chat has sparked lots of ideas, and you’ll be seeing more in upcoming blogs from me. You also may want to check out the Symbiotic Innovation section of this blog – there are some strong overlaps in concepts that might interest you. (Here’s an intro to Symbiotic Innovation if you need it.)
If you attended the chat, what was your favorite tweet?
Editor’s note: Fuentek now offers a webinar on implementing open innovation.