An Approach to Open Innovation
Ten years ago, it was often thought of as taboo for companies to look outside for help. Today, as the business world floods with consolidation, the concept of open innovation is more readily embraced. Consumer goods (CG) companies should approach the idea of innovation by taking a step back and assessing whether they are experts in an area; if not, they will certainly want to marshal external technology resources. If companies are pursuing new technology in their existing product areas, they first should get a feel for the technology landscape to make a strategic decision on what to pursue externally.
Too often external innovation is viewed from the bottom up. Instead, a company should start with the top-line strategy that outlines key priorities and works its way down the pyramid. This strategy needs to identify where the gaps and challenges lay and how to pursue innovation to support the full product portfolio.
KEY ELEMENT
A key element of this strategy is the global technology roadmap. A good technology roadmap should give real-time information on the technology landscape, including what is available both internally and externally, who is doing what and how the technologies interconnect. An external innovation program can then be scoped with the business strategy in mind.
One of the most widely known examples of open innovation is Procter & Gamble's (P&G) Mr. Clean cleaning solution. P&G was continually seeking improvements to the formula's cleaning properties to refresh the product in consumers' minds. What the consumer really wanted, however, was to avoid mopping altogether - or, at least, to not be burdened with the laborious act of conventional mopping. P&G realized that a product was needed to revolutionize the floor-cleaning process. By leveraging external innovation and internal resources across the business, the all-in-one Swiffer WetJet was developed, creating a new market in home-floor care.
In the P&G case, the innovation came from internal R&D collaboration, as well as the input from external innovators -- a classic scenario for open innovation that generally requires a relationship building process. Another tool many CG companies may consider is an established advisory board. Members of such boards can offer expert knowledge and broad perspectives on a single technology issue.
The source for innovation continues to shift from internal only to external also, as a means to boost a company's overall innovation capabilities. It is essential for companies today to be aware of what exists outside their four walls to determine what should be leveraged in-house and what should be pursued elsewhere.
Many companies, especially CG companies, have already built external innovation into their DNA, and are leading the open innovation revolution. In the not too distant future, R&D leaders may be saying, "Hey, let's not forget to look inside as well."
As external innovation further complements internal capabilities, companies need to adjust the way they look at motivation and reward. An internal researcher needs to be rewarded based on "solving the problem" and not just "inventing the solution." This way, the researcher will naturally migrate toward leveraging external innovation in addition to his own original research. Not enough companies are currently putting this type of reward structure in place.
The end-game for CG companies is to never be limited by internal capabilities, but to use the knowledge of the global technology landscape and resources to effectively access external existing technology. Ultimately, companies need to remove the filter of "what can we do internally with our own capabilities?" when making decisions regarding innovation to meet consumer needs. -- PAUL STIROS, President and CEO, Ninesigma Inc.