2,920 crowdsourcing and crowdfunding sites
Research firm Forrester recently conducted a study – sponsored by open innovation company Innocentive – that polled 229 open innovation decision makers. Of those, only 17% described their open innovation initiatives as “mature,” while the great majority figured that their endeavors were “experimental,” or “emerging and expanding.”
I spoke with a handful of open innovation leaders and found the path to expansion and eventual maturity lies in the potential of collaboration and building like-minded and motivated communities of problem solvers.
In late 2010, Andrew Witty, CEO of pharmaceuticals giant GlaxoSmithKline, called on his peers in the pharmaceuticals industry to foster a more creative environment in the research and development process, and foreshadowed a rise in “innovative partnerships” among scientists. Witty’s words were more than an educated guess: a year and a half later, GlaxoSmithKline announced an open innovation partnership with the University of Cambridge.
Witty’s primary reason for the partnerships was straightforward: they “spread risk with lower up-front costs.” Indeed, pharmaceutical companies are increasingly reaching out to universities and research institutes – Berg Pharma and Merck, for example, recently announced their own research partnerships. These collaborations reflect a warming up to the idea of open innovation, a concept that, in the simplest terms, means expanding the R&D department outside of a company’s own four walls.
At first, the concept may seem strange. For decades, the standard practice has been to keep all research in-house, protecting new technology with patents. This has been especially true in industries that rely heavily on technological advances and pour money into R&D to stay ahead of the competition – healthcare, computing and electronics, and auto. In today’s world of distributed knowledge, however, companies are beginning to realize that outside resources can be extremely valuable – thus their attempts to access this pool of untapped knowledge. The slow economic recovery and competition from abroad has only increased the need to innovate smarter and explore new options.
In his 2006 book Open Business Models: How to Thrive in the New Innovation Landscape, Henry Chesbrough describes a rising field of companies who specialize in innovation. He calls these companies “innovation intermediaries.” There are many kinds of intermediaries, from agents to intellectual property marketplaces. While the field is still relatively new – most innovation intermediaries got their start with the rise of the web – it is beginning to mature. No longer are companies looking for just an online bulletin board to put up their requests for proposals. Innovation intermediaries are becoming wiser, and new trends are emerging in the field.
One of the challenges Chesbrough – who coined the term ‘open innovation’ – identified for intermediaries is creating a vibrant two-sided market, in which both customers and solvers have a variety of options to fulfill their needs. Intermediaries are figuring out novel ways of doing this, mainly through focusing on niche markets. ChallengePost, which runs the U.S. federal government’s Challenge.gov platform as well as software competitions for private firms, focuses only on projects that can benefit society.
“We only do meaningful things,” Brian Koles, business development manager at ChallengePost, told Crowdsourcing.org. “And we do have pretty stringent standards. If you come along and we don’t feel like what you’re doing is going to make the world better in some way, we’re not going to do it.”
Sometimes this takes some creative marketing. For Samsung’s Smart TV challenge, “We framed it as a way to empower you to do more with your television,” Koles explained. “It could just be the Apps for TV [challenge], or it could be the Free the TV challenge. If you phrase it as Free the TV, you make people realize the change they’re making. We’ve built a solver community in which people trust us to bring them interesting, meaningful, lucrative competitions that they can enter, win, and do good.”
The pool of skilled, interested solvers is appealing to companies and non-profits, and the marketing benefits of helping solve social problems through open innovation make ChallengePost an appealing intermediary.
TopCoder, a company that focuses on software solutions, builds value for its community of solvers by focusing not only on the ‘work’ aspect, but also on the other benefits of the platform.
“We started out as a place for developers (and now others) to play, learn, and communicate with each other and added work later,” said Jim McKeown, TopCoder’s director of marketing communications. “The Community knows this is our cultural DNA and not window dressing – we depend on the members to build and enhance the entire platform and tools themselves to meet their needs and expectations, as well as those of our customers.”
TopCoder encourages self-improvement and exploration of new ideas in order to get community members to stay close to one another and feed each other – and those around them – new ideas.
“When an individual increases their skill level – in any area – society benefits, including TopCoder,” McKeown continued. This explains why “TopCoder provides detailed feedback from competition submissions, offers extensive practice opportunities and tutorials as well as one of the most professional and respectful forums available.”
Another way the company provides value to its solvers is through the Component Catalog, a market for tools and building blocks. “These are assets created by our community members, and as such they receive compensation when they are used in new applications,” McKeown stated. “We consider the ability to create assets an important aspect for healthy communities, [and] believe that assets provide an opportunity for individuals to create income streams beyond just doing tasks.”
Other innovation intermediaries focus on offering customers and solvers more structure for their open innovation pursuits. Innocentive, for example, offers companies several options when it comes to running challenges.
“We want to own the challenge marketplace,” Steve Bonadio, vice president of marketing, told Crowdsourcing.org. “We [offer] Grand Challenges, which are generally challenges with a very high award, Premium Challenges, which is our bread and butter, and we recently introduced in beta form something that we call a Brainstorm Challenge, which is a self-service challenge that anyone can come, pay over the website, and launch.”
Innocentive provides companies access to a pool of around 260,000 solvers from across the world. 60 percent of the solvers are outside the U.S., and 61 percent have a masters degree or a post-doc. To build this highly educated and eclectic community, Innocentive partnered with research institutions and universities across the world. Currently, however, the trend is to create more custom crowds instead of just large ones. Sometimes, that means going back to within the proverbial ‘four walls’ of the company.
“What we introduced in 2009 was actually a new platform,” Bonadio said. “It is a challenge platform that enables companies to basically run challenges internally. We’ve got big customers like NASA who are using our platform, and they not only run external challenges, but they are also now using our platform to promote collaboration among all of their development centers.”
The ability to create custom crowds and offer the ability to scale up, Bonadio thinks, is going to be an important aspect of what innovation intermediaries are able to do. “You might start a challenge out just within a small group within your organization, and maybe you don’t get a solution,” he explained. “But you learn a little bit more about the problem and how you want to define it, and then you expose that to a bigger audience – maybe it’s all your employees plus your strategic suppliers. And maybe you don’t get an answer there, either. So you recast the challenge with the additional learning from that process, and then you go out to your external network.”
Open innovation platform Chaordix takes a similar approach, according to chief marketing officer Sharon McIntyre. “We’ve learned you have to start small and then adapt,” she told Crowdsourcing.org. “If you have 120,000 people in your loyalty group, let’s not start with 120,000. Let’s pick a particular business objective, something that we can hopefully make a positive impact on right out of the gate, and [find the crowd to match that objective].”
Chaordix focuses on a specific aspect of open innovation: building brand loyalty and affinity amongst a certain group and then looking at innovation. McIntyre says her company was very much inspired by Roberto Verganti’s book Design Driven Innovation: Changing the Rules of Competition by Radically Innovating What Things Mean. As the subtitle implies, Verganti believes in not only listening to consumers to expose market needs, but also inventing markets and products by using emerging technologies.
Chaordix believes that creating customized affinity groups is the best way to encourage radical innovation. “You can do a lot of interesting things with crowdsourcing,” McIntyre explained. “But we found that it was a real challenge getting people to come up with radically differentiated product ideas: in effect, inventing the new iPad. This is very, very difficult to do with a mob of people.
“Where it becomes possible – and that’s really the space we looked at a few years ago – is if you could somehow form affinity groups from that mob,” she continued. “When people have common goals and common interests, they’re really a community. Then you can get some really interesting innovation to happen.”
For a few generations now, business and industry has been cutting costs and increasing speed through mechanization and later through digitization, handing over processes to the machines. Dumping untold resources into the holy grail of technology has been the modus operandi, but not necessarily the smartest way of operating or allocating resources.
Today, to continue to improve and develop new processes, open innovation shows us the need to add more, not fewer, minds to the equation – it reintroduces us to the value of a community.
So as companies carve out increasingly specific market niches, the open innovation field matures. The ability to form engaged communities and to segment those communities into specific groups benefits open innovation customers, solvers, platforms and ultimately, consumers living in actual communities in the real world.