Open Innovation: The Art of Balanced Co-Creation

Submitted by Shikko Nijland on Fri, 05/23/2014 - 16:13 in
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Faster and more profitable innovations by improving execution in the front end

 

THE OPEN INNOVATION CHALLENGE

Currently there is a lot off buzz going around regarding open innovation. Therefore it might seem a relatively new phenomenon for some people, but open innovation has been around for a while. Henry Chesbrough first coined the academic term in 2003, but underlying concepts such as scientific or academic competitions to establish innovation were already applied for centuries. Using large crowds for generating ideas (e.g. suggestion box) is not new either and dates back to the beginning of last century. Though many components were already applied in some basic form, it was the global rise of web 2.0 that really opened up innovation.

Today most organizations have implemented at least some elements of open innovation, especially in the frond end (ideation and concept phase). This has opened a door to a whole new world, but at the same time many companies seem to struggle to fully exploit the potential benefits. In our Digital Innovation practice we frequently get the following related questions:

  • How can we unlock and connect the right expertise inside and outside our organisation: How can we identify the true experts and mobilize them, how can we interconnect our stakeholders?
  • How can we filter out the best ideas and further detail the concepts: Leveraging the innovative power of the crowd is great, but also provides us with a tsunami of ideas;
  • How can we secure and protect our IP?
  • How can we control the co-creation process, when so many people both inside and outside our organisation are involved?
  • What new technology can we use?

Many of these issues have to do with the co-creation/collaborative aspects of open innovation. Therefore we have decided to devote this entire blog to share our view on how you can improve your return on open innovation by balancing three key drivers of co-creation.

 

THREE DRIVERS OF SUCCESSFUL CO-CREATION

There are libraries filled with management books on what the key drivers are of open innovation and they all have a point. To make it manageable, we have defined three groups of drivers that we have experienced to be equally important for successful co-creation: 1) Process & tools available, 2) Ecosystem and 3) Collaborative environment (figure 1).

Figure 1: Three drivers of co-creation (Innopay, 2014)

 

1. Process and Tools

The first group of drivers has to do with how well the front-end (ideation and concept development) of innovation is organized in terms of structure, roles and responsibilities, processes and tools. This is about how the front-end is connected and integrated with the whole innovation process and is actually enabled and reinforced by a collaborative backbone of crowdsourcing. The (lean) open innovation process model should include aspects such as IP handling, funding, talent recruitment and decision-making. Open innovation should be part of the operating model just as any other function.  Applying advanced co-creation tools with strong algorithm and workflow technology will not only increase the quantity and quality of ideas, but will also increase the speed and acceptance of decision-making.

Best-in-class processes and tools will enable organizations to be better and more cost-effective in co-creation because it will allow them to focus on the most relevant market or technology challenges, whether it concerns incremental or disruptive innovation. Advanced tools also facilitate social collaboration with innovation champions and experts to filter ideas and focus scarce resources on the most promising concepts.

2. Ecosystem

Thanks to Internet our world is becoming a digital economy. However only few people realize what the real revolution has been: the diminishment of the asymmetry of information. Internet enabled us to communicate interactively at relatively limited cost and time, exchanging rich information. This brought all types of external stakeholders such as customers, suppliers, consumers and various communities within reach of your innovation process.

Figure 2: Template open innovation ecosystem matrix (Innopay 2014)

 

The reach and richness of your ecosystem (figure 2) is a decisive success factor in innovation. What is the size and quality of the crowd that you can tap into? How well are you able to interact with them or facilitate the various groups of internal and external stakeholders to interact with each other? Some organizations choose to also have their competitors in their ecosystem. Top innovators are three times as collaborative as the least innovative companies (PWC 2013) and are able to create a truly collaborative ecosystem that connects all groups of stakeholders seamlessly. Having a thought-through ecosystem with optimal reach and richness will enable you to optimize the quantity and quality of ideas.

3. Collaborative environment

You can have the best processes, tools and ecosystem in the world, but if you are not able to mobilize, involve and engage people, you will get nowhere. This driver is about creating and reinforcing the desired collaborative behavior of all members in such a way that you develop an almost self-sustaining innovation ecosystem. This is about involving and mobilizing the right people at levels of the organisation and in your whole ecosystem: sponsors, champions, influencers, and practitioners. Having adequate incentivization, gamification and recognition mechanisms in place has proven to stimulate involvement and engagement. This is not only about getting as much as possible out of your ecosystem, but it is also about what you give back to it and how you facilitate others in your ecosystem to share.

The innovation power of your collective brain is no longer determined by how smart your organisation is, but by how smart your ecosystem is.

 

UNBALANCED CO-CREATION

Most companies grasp the concept of these three drivers, but often still struggle with execution. When looking further into these organisations, we often see an imbalance between the maturity levels of three drivers. There seems to be an almost natural tendency in organisations to primarily focus on developing one of the drivers, instead of developing all three in tandem.

 

Figure 3: Partially or unbalanced co-creation (Innopay 2014)

 

An illustration of how the imbalance between these three co-creation drivers impedes the innovation process will make our case evident:

Company A has a supportive ecosystem with many thousands of potential contributors and everybody is really eager to be involved. The management team invites everybody to come up with his or her greatest ideas. If the company does not have the right process and tool in place, it may find itself flooded by a tsunami of ideas. The situation becomes even worse in case people do not know how to share their ideas or do not receive a response within the promised timeframe. This is very likely to negatively impact their engagement and willingness to contribute the next time.

Company B has invested in a well-designed innovation process and uses one of the most advanced open innovation systems. Management starts launching challenges into their considerable network and is disappointed with the small amount and poor quality of ideas they got in return. People did not collaborate as much as they expected; there was limited activity and unsolicited participation. It turns out that they did not spend sufficient time developing and engaging their internal and external ecosystem.

Company C understands the importance of engaging people and gamification. They initiate a large-scale competition to generate ideas and collectively work on developing new concepts. Unfortunately they also want to keep maximum control over the process and therefore limit the groups of stakeholders and number of participants in the system. This results in an unsatisfactory return of workable ideas and the management decided to kill the initiative altogether.

 

MOVING FROM UNBALANCED TO BALANCED CO-CREATION

In our view organizations need to balance all three drivers of co-creation and improve them simultaneously and consistently. Figure 4 illustrates this notion.

Figure 4: Balanced co-creation (Innopay, 2014)

 

Most organisations learn it the hard way and first get into a precarious situation of unbalanced co-creation resulting in disappointing outcomes and even worse, sometimes in disillusioned ecosystems. In order to turn things around organizations are typically tempted to play their natural strength and push hard on the driver that they feel most comfortable with is very likely to worsen the problem.

We strongly recommend bringing the three drivers in balance preferably in close collaboration with the ecosystem before launching large-scale co-creation initiatives. In the short term this may slow down the process but in the long run this will create a much more robust, self-sustaining and collaborative ecosystem. By applying a balanced way of co-creation you will be able to increase the quantity and quality of ideas, have faster speed to market and higher return of innovation because you are more effective in converting ideas into new products and services.

 

THE ART OF BALANCED CO-CREATION

Simply allocating a significant budget is no fail-safe guarantee for successful (open) innovation. Rather, it seems that as long as solutions are effectively grown and harvested in involved communities, the returns to innovation far outweigh the costs. Three driving factors in successfully structuring the front end of innovation are: Process & tools, Ecosystem and the Collaborative environment.

The challenge is not so much to implement these drivers. The art of co-creation is how to balance them.

 

Shikko Nijland (shikko@innopay.com)

 

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