Many consultants and gurus claim to have "the blackbox" for innovation. It is one thing to say, but an entirely different thing to make innovation work and to make money doing it.
This Post is written by one who knows how difficult innovation is . . . Having worked inside large corporations and small, I've seen how rare it is for all the resources inside a large corporation to move in the right direction at the right time, and, how rarely really good ideas in small, entrepreneurial companies make it to market.
This Post is about recognizing Open Innovation as a good idea but challenged and a proposal on how to make it better . . . The premise behind Open Innovation is to combine the resources of the big organizations with the resourcefulness of the entrepreneurial organisations to help the cream rise to the top and accelerate innovation. There are obvious hurdles. Big corporations are inherently afraid of change and entrepreneurs, legitimately, don't trust big corporations.
To help Open Innovation overcome these hurdles, we contribute our experience managing the creative process to define the criteria for Open Innovation success and a plan of action.
Criteria for Open Innovation Success
When the Mission is not to "exploit" one's expertise, but offer a new and unique solution to a customer problem.
Most so-called innovation discussions today - in both large and entrepreneurial organisations - use the word "exploit" in the mission statement. I understand why. Corporation sit on vast amounts of untapped, dormant assets - technology, content, data, customers, raw materials, employees, etc. Entrepreneurs fall in love, for example, with what they know technology could do. But that's no place to start innovation. Successful, sustainable brands did not get there with a vision to exploit an existing asset or expertise. Capitalizing on technology, lower raw material costs, popularity among customers, or labor didn't happen until after they were successful. The brand names with value today started and continue to focus on solving the customer's problem.
The Creative Process needs Order to solve the Customer's Problem.
Few have experienced managing the creative process successfully. Training at Leo Burnett and learning about the creative process in other contexts gives me some reason and experience to have insights into the creative process and how to make money managing it. I rarely hear an innovation expert talk about the need for order. Not to eliminate conflict. But to disarm individual conflicts of interests, so they can focus on solving the customer's conflict.
Conflict, or the need for resolving it, is often cited when talking about creativity in storytelling, music composition, acting, and innovation in business. In innovation, resolving customer conflict is what sparks new solutions.
But there's less understanding of the "order" needed to manage multiple cross-functional individuals in a creative process to resolve conflict. Think about it though. We all notice certain people can turn a negative into a positive better than others in life. Often these people cope well because they have a source of "order" in their lives. For some it is faith, for others it is a family support system, etc. The miracle of spontaneous improvisation among a Jazz quintet (thinking about Miles Davis' classic album, Kinda Blue, recorded in the first take) can only happen because they start playing in the same key and timing. ( A metaphor John Kao applies to business in "Jamming.")
Order is established when the terms for each individual stakeholder's contribution are realistic.
The customer is a stakeholder. They contribute the financing to support the long term operation of the innovation. If it isn't clear the customer will pay for it, innovation success is dubious.
When realistic about what the solution must perform to merit the customer payment, the Mission will steer the dynamic, often rough creative process on course. There's more confidence that there's enough to go around to attract a high quality innovation team. Each individual on the innovation team can confidently "riff" independently, the creativity is more vigorous, selling ideas isn't awkward, execution and results are more likely to exceed expectations. The creative process has integrity, increasing the chance that the innovation has sustainability.
For example, it took a lot of cross-functional people to realize an idea at Burnett - creative, media, production, promotion, client salesforce, research, traffic, PR, etc. When there was plenty of money to go around in the agency business, creativity flourished. But when the profits got tight and individuals weren't confident their personal interests were being met, less time and energy were focused on the customer.
The Hurdles to Meeting the Criteria for Success. . . There are two hurdles to overcome. One is being honest about what customers pay for. The other is minimizing the number of stakeholders so there is enough to go around.
First, it is harder to find the "truth" because the amount of information is exploding.
The instinct is to simplify. There are two extreme examples. One is to homogenize information for mass consumption which risks reducing creativity to the lowest common denominator. The other is to limit information and influences to those which reinforce what a person already thinks. An example of the latter is shared in a video presentation by Eli Pariser about his new book "The Filter Bubble." He discusses how GOOGLE is "personalizing" information to echo what's interested you in the past to increase the chances you will "click." The result is that when you think you have the "whole picture" you really don't!
Second, the number of "links" in the value chain are multiplying exponentially, but the end user isn't paying more for the process.
At one time the creative industry could afford to give talent job security, creating order in personal lives. With each layoff, more and more individuals are freelancing, adding to the number of links. Financial risk is being pushed down to the individual. When individuals are instinctively in a mode of self-interest, they are on the defensive. Even if they say they care about the customer first, it is difficult to care more about the customer than your own financial security.
To maximize the chance that there is "enough to go around," it is critical to minimize the number of links in the value chain by identifying what roles are really needed.
Although you may not know exactly how much a consumer will pay early in the creative process, you can control how much it will cost to deliver what is worth paying for.
Surprise - Big Corporations and Entrepreneurs may discover they have different strengths than they think
In a recent article, Malcolm Gladwell concludes that Steve Jobs excels at Application and others the Vision and Invention, but sure looks like its his Vision that determined success in his example.
In "The Creative Myth," published in The New Yorker, May 16, 2011, Malcolm Gladwell tells the story of Steve Jobs going to the XEROX PARC lab where he sees the first "mouse" and then returns to his partners and presents a design spec that goes something like: "Our mouse needs to be manufacturable for less than $15.00 and it needs to not to fail for a couple of years and I want to be able to use it on Formica and my blue jeans."
Gladwell presents a theory proposed by military scholar, Dima Adamsky, that three revolutions are responsible for technology advancement in today's military: (here's how I distill them) Vision, Invention, and Application. The Soviet Union's centralized organizational structure is credited with the Vision. The US's decentralized public private partnership is credited with the Invention. And Israel's constrained resources and constant threat responsible for the Application of the technology.
Gladwell uses this theory to explain why it is a myth that Apple "stole" the personal computer from XEROX. Instead he claims that a professor at Stanford, conceived of the mouse, the PARC lab of XEROX invented a very expensive version of it, and Apple's constrained resources and constant threat inspired the application - the Macintosh.
I would argue that Jobs is the one with the Vision and the Professor had "pre-validated" it. And what if XEROX/PARC had been the one to execute the Invention and the Application. Maybe the brand would still exist and Jobs would never have had to leave Apple.
"With his Macintosh team, Jobs set out to create a machine that would be a triumph not only for the company, but for himself, too. He instilled in his team a sense of creativity and rebellion—its said that he hung a pirate flag in their office (which was in a separate building from the rest of the company) and explained that it was better to be a pirate than to join the Navy. He grew increasingly antagonistic toward Apple's other groups, contributing to the fissure that would eventually lead to him leaving the company." (Gizmodo)
What if the Vision were the domain of the entrepreneur, the Academicians validated it, and the big corporation did the Invention and Application?
What if we could go back and set up the Professor, PARC, and Jobs on the same team with:
- Vision defined and action plan/budget by Steve Jobs, validated by the Professor, to bake in the resourcefulness and urgency of the entrepreneur and the realism of the Professor who has the independence and resources to research all the facts to avoid the "bubble."
- Then XEROX resources execute Invention and Application.
Indeed PARC responded to Malcolm Gladwell's article by pointing out that they learned from this lesson that Jobs vision would have helped them to succeed: "Adding limits or constraints can actually create more – and better – innovations."
But first big corporations need to adopt the criteria for Open Innovation success internally.
The rest of the PARC post reveals that big corporations experimenting with Open Innovation aren't necessarily improving their "batting average" for successful innovation. The PARC post talks about the reasons they have adopted a framework for Open Innovation with outside entrepreneurs.
"Simply put, open innovation institutionalizes and provides an alternative model for the uncharted do-we-or-don’t-we-let-him-in? model of a few decades ago. And why not? Drawing on one another’s strengths is a great way to not only reduce risk, but realize new opportunities, faster.
Instead of each party viewing “the problem from a different perspective” and carving off 'a different piece of the puzzle' (as Gladwell notes), within an open innovation framework, each party can combine their perspectives and share the results of realizing the whole puzzle."
But the PARC post does not report about the success of these projects. Since the number two learning at PARC is that "Success requires failure" I suspect that these projects are still not significantly more likely to make it through the pipeline and get to market. I suspect this is because PARC continues to be a silo, not integrated with the rest of XEROX resources, since the next two learnings are critical of management or defensive:
"3. Operational management often values the cost of a “shovel” over the possibility of a “gold mine."
4. Inventive creativity can’t be measured by spreadsheets."
Consider that today's companies are not one organization, but several silos: some are centralized, others de-centralized, and despite being a large company, some actually have constrained resources and constant threat. For example, the CFO operations are centralized (profit driven), the marketing folks are de-centralized (brand driven), and the sales force has constrained resources and is under constant threat (no new resources and an increasingly fragmented customer base with abundant choices - i.e., competition).
Recommendations . . . validate Open Innovation Readiness with an internal experiment, then engage an entrepreneur to partner.
- Engage a representative of each silo in the corporate silo to participate, with terms for their contributions which eliminate any individual conflict of interest.
- Tap the salesforce as the Proxy for the entrepreneur to develop the Vision and the action plan, since they are the most likely to have "constrained resources and constant threat."
- Validate the Vision and the action plan using the CFO as the proxy for the academician, since they are centralized and least likely to be deceived by the "Bubble"
- If the Vision is a "go", bring in corporate product development resources to the team for the Invention and Application
- The team executes the launch and "sells" to their peers to bring in additional resources as needed to scale.
- Once the corporation has proven it can transcend the siloes, then bring in an entrepeneur and academician to learn how much more value they add at the Vision stage.