As was depicted in Figure 22, network collaboration refers to Open Innovation on a peer or even a competitor level. Whereas the supplier/outsourced approach refers to organisations working together with the same end product in mind, network collaboration involves joining forces and alignment in pursuit of a much broader goal – even between competing organisations.
Added to this category is the inclusion of inputs from sources outside the supply and value chains – the input gained from individuals or organisations not party to the inner workings of the organisation. These inputs can be gained via electronic channels, which have been especially created for these situations, as discussed in the following two examples of organisations deploying this principle in their businesses.
4.4.4.1
The Big Blue opens up
An example of network collaboration is IBM and its open-source software activities.
There has always been rivalry between IBM and the Apache web-server software (which is open- source), until 1998 when IBM decided to abandon its own efforts and rather support the Apache movement. At this point in time Apache accounted for more than 50% of all web-server software, while IBM had less than 1% market share.
Instead of battling over a larger market share, the “Big Blue”, as IBM is referred to, joined forces with the Apache Software Foundation, and on 22 June 1998 IBM announced that it would support the Apache server on all its new products, instead of wasting valuable resources trying to attain a larger market share with its own web-server software.
This movement led to IBM realising the potential of supporting the open-source software movement. The other well-known open-source phenomenon, Linux, caught the attention of IBM during the latter part of 1998.
Linux, which is an open-source computer operating system (OS), is distributed under the GNU general public licence. This licence stipulates that any person can obtain, alter and redistribute the operating system, as long as recognition is given to the original creators.
In the same sense that IBM realised they were wasting their efforts on web-server software, they realised that the struggle to create a new operating system (after the failure attempt of their OS/2 product) was a waste of resources. Instead, IBM opted to support and pre-install Linux on all their new commercial systems.
Thus, in 1999, IBM formed a Linux development group, which specialised in the further development of the Linux OS. It was soon realised that the brand respect surrounding the “Big Blue” title meant very little to the individuals who create and maintain Linux. It was therefore decided that the IBM employees who participated in the Linux project had to communicate using exactly the same methods as the global base of Linux contributors – bulletin boards, e-mail and instant messaging.
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Tapscott and Williams (2008) suggest that IBM invests about $1 million on an annual basis in the Linux partnership, while receiving a benefit worth $1 billion in saved research and development costs – a great investment that is not only advantageous to IBM and the Linux community, but has also left an irreparable dent in the competitors’ operating business (Microsoft and Sun).
This serves as an example as to how a company reached out to its peers, who were in fact the competitors in the OS market. The differences were put aside, and the IBM and Linux community are now working towards a unified goal with beneficial results to all parties involved.
4.4.4.2
E-Bay for intellectuals
The idea of sharing proprietary knowledge with a myriad strangers, including industry peers, competitors and even suppliers, is a new and unfamiliar concept. This was also the finding made in the workplace: a study done by Walsh and Hong in 1998 revealed that only 14% of experimental biologists were willing to share their knowledge and findings (Walsh & Hong, 2003).
Since then, there has been a new tendency to share, join forces and collaborate – for the greater good and unified goal within various industries. A turning point example hereof was the statement by former US president Bill Clinton in 2000 concerning the Human Genome Project (HGP). Clinton announced in March 2000 that the genome sequence should be made public for all to benefit from – regardless of the $3 billion price tag of the decade-long research project.
Today this open, collaborative phenomenon has been extended to produce services like the intellectual e-Bays of the new interconnected world. Tapscott and Williams (2008) refer to these services as “Ideagoras”.
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(i) Case example: Innocentive
The most well-known example of an Ideagora is Innocentive (www.innocentive.com). This web-based organisation was started in 2001 by the pharmaceutical company Eli Lilly to provide a platform for Eli Lilly’s R&D department to post unsolvable research problems. It has since become an independently run entity, with more than 175 000 individuals (called “solvers”) offering their problem-solving services to the various organisations seeking solutions to problems (called “seekers”).
Figure 34 - Innocentive’s home page
[www.innocentive.com]
Solvers can submit possible solutions to problems (challenges) posted by seekers, in the hopes of being financially rewarded by the seeker if the seeker were to determine the solution plausible.
According to Tapscott and Williams (2008), included in the seekers-base are 35 of the Fortune 500 companies, paying upwards of $80 000 each towards annual membership fees.
A recent study on Innocentive revealed that of the 166 challenges posted on Innocentive during the duration of the study, 49 were solved – yielding a success rate of 29,5% on problems that were unsolvable by the internal R&D bases of the organisations (Lakhani, Jeppesen, Loshe, & Panetta, 2007).
It is interesting to note that the study revealed that the probability of being a winning solver (i.e. having solved the problem) is significantly and positively correlated with a desire to win the prize and with whether the solver has the intrinsic motivation – like enjoying problem solving and solving tough problems (Lakhani et al., 2007).
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Innocentive (like Idea Bounty) thus specialises in providing (and protecting) the community to which the organisations can pose their unsolvable problems.
Various other Ideagoras, each with its own twist, have become successful in the recent past. Table 3 includes a short description of the most renowned Ideagoras
Table 3 - Other Ideagora service providers
Name Web address Description
Yet2.com www.yet2.com
Yet2 specialises in being an e-marketplace for IP. It is claimed that intangible IP comprises as much as 75% of an organisation’s market value.
It provides a platform for organisations to trade, sell or lease IP which had been researched and created, but is of no use to the organisation.
9 Sigma www.ninesigma.com 9 Sigma is in direct competition with Innocentive. It is claimed that
9 Sigma offers a larger solver base than Innocentive.
YourEncore www.yourencore.com An Ideagora dedicated to retired scientists and engineers, who offer
the competitive advantage of industry experience.
Quirky www.quirky.com
Quirky offers a different service. The entire product development process is opened up. Each stage, from the product’s name to the product’s colour is segmented to be a competition on its own. The competitions for each stage are hosted by Quirky, and the
community members vote for the best proposals for each, while the individual winners will receive a percentage of the profits made from the eventual product.
This is a combination of the Threadless, Idea Bounty and Innocentive offerings.
As another example, Rae refers to the “cross-industry network of leading companies” that makes up the Internet Home Alliance of the Continental Automated Buildings Association (CABA) (Rae, 2008). This diverse group of organisations is working together towards the unified goal of designing the home of the future.
CABA has created the Digital Kitchen Initiative, with organisations as diverse as Whirlpool, Bell, Cisco, Direct Energy and Microsoft working together. The goal of this initiative is to design the kitchen of the future as the nerve centre of the home.
The advantages lie not only in the risk and reward sharing of the various participants, but also in the beneficial differences in viewpoint that they bring to the proverbial kitchen table. Lakhani et al. (2007) found that in the Ideagoras set-up, the further the solver’s field of expertise is from the problem’s focal point, the more likely the problem is to be solved.
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It is also suggested that the more heterogeneous the knowledge base is, the more likely it is that the problem will be solved. Organisations can’t support such a diverse base of expertise and knowledge internally as can be combined in a collaborative environment between various organisations.
Hansen and Birkinshaw (2007) suggest two approaches to building an external network. The first is to develop a solutions network which aims to find solutions to already identified problems. The second approach is a discovery network, the main goal of which is to discover new opportunities to innovate (Hansen & Birkinshaw, 2007).
(ii) Case example: Shell’s Game Changer
Shell, the major Royal Dutch oil company, has been making use of a discovery network since November 1996, although at that time it was only on an internal basis. Their process, called “The Game Changer” has evolved from a project with $20 million in seed money available for radical employee ideas, to an open-for-all portal where ideas can be submitted.
Any individual with a worthwhile idea is invited to give a short, 15-minute presentation about the idea, after which the Game Changer panel decides the fate of the idea. The Game Changer prides itself in the speed of deployment – seed money to the value of $600 000 can be awarded within 8–10 days. This is exactly what is needed to keep up with the pace of innovation.
The Game Changer has now evolved to invite all freethinking individuals to submit ideas via their website, or to collaborate via newer (Web 2.0) interfaces, like the Shell Game Changer location in the virtual avatar world of Second Life. Accessibility is of the utmost importance to the Game Changer team, as more ideas mean a higher probability of success.
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Various key findings can be identified from the aforementioned examples:
The level of value in networking is directly related to the number of collaborative partners or the number of challenge solvers. A larger number of participants can thus result in a faster or more accurate solution.
The aim should be to attract participants with a diverse set of knowledge and expertise. As is the case with IBM and Linux, it is wise to focus on core competencies and to find innovations within these areas of expertise. Collaboration on areas that are not at the core of the organisation’s growth is recommended.
The reward to all participating parties or entrants needs to be carefully decided so as to maximise the relevancy and status of the reward.
The barriers to participation have to be minimised. This is why Ideagora services are proving popular. The participating party has to access a single platform to find a myriad exciting, challenging problems.
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4.5 Chapter summary
The objective of this chapter was to create the foundation and understanding of what Open Innovation entails.
This was achieved by firstly providing the formal definitions of the concept. Thereafter it was further illustrated by comparing the concept with that of traditional, Closed Innovation and highlighting the differences between the old and new thinking.
The research progressed to illustrate the different sources from which an organisation can derive Open Innovation input. These sources were then used to introduce real-life examples of organisations already making use of the Open Innovation concept in their daily operations.
It is evident from the literature that Open Innovation will ultimately manifest on an operational level via the new product development (or innovation) process. However, the concept and organisational mindshift should germinate from a strategic management level.
It is only via the drive and motivation from CEO-level input that employees will be convinced to “open- up” and re-evaluate every proposed action on the basis of Open versus Closed Innovation. This visionary drive was foreseen by A G Lafley, the CEO of Procter & Gamble, who challenged his organisation to incorporate 50% “outside input” in all its new products (Tichy, 2009).
The knowledge derived from the investigation of these real-life examples (key findings) will be used in developing the specifications (characteristics) of the Open Innovation models in the following chapter.
defining & development of OI models
5
Chapter 5 focuses on the definition of the five implementable Open Innovation models that were developed. Each model will be given a formal definition, as well a set of criteria (based on the literature and the research done in the previous chapters) which is intended to assist the implementation of each specific model in a realistic context. The culmination of the research done in the previous chapter (practical examples, case studies, the interview with Riley on Idea Bounty) will be used to categorise Open Innovation into and define five implementable models. The allocation of these developed models to the Fugle Innovation Process Model (see Chapter 3) will be done in the following chapter (Chapter 6), based on the characteristics developed for each model in this chapter.
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5.1 Introduction
In this chapter, the focus is on the content of each of the Open Innovation (OI) models discussed in Chapter 4, namely platforming, idea competitions, customer immersion, collaborative product design and development, and innovation networks. The focus will more specifically be on the definition, development and specification of each model’s requirements for effective deployment and usage, as well as the advantages and disadvantages of each.
Since Open Innovation is such a relatively new and academically unexplored topic (according to Fredberg et al., 2008), nearly all theoretical assumptions will be based on research from real-world examples. This is in direct contrast to the normal process of developing the theory first and then applying it in practice. Fredberg et al. (2008) stress the need for a deeper academic understanding of Open Innovation.
Pisano and Verganti (2008) offer a framework for the classification of different Open Innovation models based on the level of openness (participation) and the level of hierarchical control (governance) thereof. This is graphically presented in Figure 35.
Figure 35 - Collaboration framework
[Pisano & Verganti, 2008]
Each of the five Open Innovation models will be placed within the abovementioned framework. When introducing one of these model in their organisation, this should provide the organisation with guidance regarding the levels of governance and participation required.
Together with the collaboration framework depicted in Figure 35, the aim of this chapter will be to categorise and assign each model to the different segments of the Fugle model.
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To reiterate, the following Open Innovation models were developed from the literature: Platforming
Idea competitions Customer immersion
Collaborative product development Innovation networks.
Each of these models will now be defined and their characteristics – the criteria applicable to each, as well as the advantages and disadvantages of each – will be discussed.
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