THE BLOG

Lessons from water and lemons: Open Innovation

27/01/2015 11:52 GMT | Updated 29/03/2015 10:59 BST

Elementary

There was a time when people believed that cholera was transmitted through the air. This belief was very strongly held, even when the evidence was overwhelming that it was transmitted through water, and many people died unnecessarily as a result. The same thing happened with scurvy, a disease common to sailors. It took several hundred years and many hundreds of thousands of deaths before it was accepted that a diet rich in vitamin C prevented the disease. It seems utterly inconceivable now, yet this is what happened.

Medicine is not the only area where very intelligent people refuse to face the evidence in front of them of an alternative perspective.

Forced open

Probably the best known writer on business strategy is Michael Porter, whose five forces have driven business strategy for decades. Just as technology has changed the way people interact with each other, the way they learn and play and the way consumers shop, so too has it changed how business is done. The world in which Porter's theories worked so well has changed. These days, a lot of attention is being given to open innovation. In essence, open innovation is about working together with expertise within and outside the business and transforming the collective knowledge into innovations which are then exploited. The challenge for all those involved is working out how to extract value.

Will you won't you?

The opportunity open innovation brings is in allowing firms both small and large to generate innovations in ways hitherto impossible. Just as with cholera and scurvy, today's business leaders need to embrace new ways of doing business in order to survive. History tells us a great many won't. It was almost seven years ago that Gary Hamel (another very influential figure in business strategy) wrote his prescient article on the need for strategy innovation.

The paradox is we are told endlessly in business and management journals about the need for more innovation developed at a faster rate and deployed more effectively. We also know from the evidence that well over half of new products don't make it beyond two years and most innovations don't generate a return worthy of the investment made. The message seems to be clear - waste a lot of resources achieving very little and driving minimal or no return. Businesses need to find a way of being more effective at innovation.

How?

There are some indications of how open innovation can help us improve our new product development strike rate. For example, the way customers take products and adapt and use them (rather than how we intended them to be used) is something that we actively exploit. Think of it like the pathways on housing estates. The designers and architects may have planned where the footpaths should go, but take a look where people actually walk and the unofficial paths created across areas of grass demonstrate how the users would like it to be. You can either fight it by putting up signs saying "don't walk on the grass" or you can work with the users to get the paths into the right place in the first instance.

In the same way technology allows us the opportunity to get far more involved in the development process. For example, a friend recently supported a 'Kickstarter' project for the development of a new way of testing performance. Emails would drop into his inbox telling him about progress and also from time to time asking of the options shown which design did he prefer? Or, on another occasion, whether he would like to be able to take aspects of the product apart or not. This was a classic example of involving the consumer in open innovation to develop the new product. 'Big Data' is another way in which we can gain better insights into where value might lie through innovation.

Who?

Think about the people you work with. There are colleagues in the business with whom you work every day and then there is probably a network of outside experts you use from time to time. It may well be that you have worked with the occasional outside experts for longer than anybody in your current organisation! Given this, is your team those people in your present company or those external to the business who have supported you the longest? The answer is both. The challenge is how you work with all of them to create value through innovation. You can extend this further to include customers and suppliers. Sometimes the best opportunities for value do not come from the product itself but what sits around it such as better deployment of social media tools.

Problems, problems, problems...

Open innovation is not without its challenges. There are the classics like 'not invented here' syndrome that kills great ideas dead. Others include how an organisation avoids being de-skilled to the benefit of others whilst getting nothing in return. There are issues over loss of control as well as who has the right to do what. 'Big Data' - an incredibly popular topic at the moment - has its own fair share of problems too as Google found out when it erroneously predicted a flu epidemic would be twice as widespread as more traditional methods were estimating.

It's here

The open innovation trend is well established. High profile examples like the Linux operating system and the strong uptake by pharmaceutical companies of open innovation approaches have shown it to be both effective at developing new products and also a tactical move in business strategy. The evidence emerging from the research is that it is spreading across all industries and becoming more commonplace in ever smaller businesses.

Will you?

This article began with a discussion of people's belief, in the 1800s, that cholera was spread through the air. Dr John Snow, a physician, visited Soho, London and mapped the incidences of cholera and found that they clustered around a water-pump. He had the pump disabled by removing the handle and so contributed to halting this source of the deadly disease. This event was a turning point in controlling cholera and is considered the founding point in the science of epidemiology.

For progress to occur, the future needs to be different from the past and there has to be a change in the way in which we do things. Whether it be cholera, scurvy or business strategy, the biggest challenge of all is letting go of the old order of things and embracing a very different future. Will you?

Dominic Irvine & Dr John Wilson © 2015 All rights asserted